Thursday night is the night we host a weekly poker game, and the first one to arrive is usually our buddy Scott. Known Scott for years. He's your basic small businessman, owns a convenience store that does pretty well. He has two homes a couple miles from us, and a couple miles apart, one on the lake and one on an 80 acre parcel outside of town. So last night he's here first and we're just shooting the breeze, he and my brother and myself, and he mentions that he had been planting some stuff on his land (I forget exactly what, and it doesn't matter). And this is the conversation that ensued:
Kevin: "You guys doing a garden this year? That's a first."
Scott: "No, the government wanted to pay me to plant this stuff on the back of my property, it's good for the deer or something. So I did. Usually they pay me not to grow stuff, but I had to actually plant something this time."
My jaw hits the floor...
Me: "Wait...the government pays you not to plant stuff? On your property?"
Scott: "Yeah, I get about $60 an acre for my land out there not to farm it."
Me: "Scott, you wouldn't farm that land at gunpoint. Do you even own a tractor? Do you even own a fucking shovel?"
Scott: "Hey, I had to buy a shovel to plant this stuff they wanted me to plant."
Scott bought that 80 acre parcel for one reason - hunting land. He's an avid deer hunter. But the chances of him even considering planting crops are about equal to the chances of Mike Tyson being elected to the Senate. It isn't gonna happen. It never was. And our brilliant government pays him not to do something he wouldn't do if the only alternative was starvation! This is the same government logic that compels them to subsidize tobacco farming, then turn around and sue the tobacco companies for producing a harmful product. Now if you'll excuse me, I have to go put in a grant proposal. I'm asking the government to pay me for not running a marathon.
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Ware Farms has a tobacco allotment which we lease to a fellow who actually grows the stuff on his land. The allotment system limits the total amount grown (supply) so that a reasonable price is gained at auction where there is only so much demand. A small per pound fee, which is paid by the buyers, finances the entire system. No government (taxpayer) money subsidizes tobacco farming or supports the price in any way.
This is like the way the SEC pays for it's operations by collecting a small fee on each sale.
Paying farmers to take their land out of production was another attempt to limit supply, but this has never worked well, since unlike allotments, anyone is free to clear other land for the production of the intended crops.
In addition, better seed stocks, fertilizers, insecticides and improved farming methods have all increased per area yields on the land that remains in production.
Food stuffs follow an inelastic supply curve. Even with a much lower price, people aren't going to eat a lot more potatoes than they already do. When there's a bumper crop, the increase in supply can result in a sale price that is less than the actual cost of production. Spending so much time over seven or eigth months and $30,000 to boot and getting only $20,000 for your efforts is the pits.
This is often used as the classic example of the falacy of generalization, by the way. If one farmer doubles his acreage in wheat, he may expect to make about twice the profit the next year. If every farmer doubled their acreage in wheat, the supply would so outstrip the demand that there would be a net loss for everyone. BW
So? All businesses assume risks about how much demand there will be for their product, and for how much supply their competitors will create. And all businesses face uncertainties about how much product their efforts will yield. And all industries have special rationales about why they are unique and deserve government subsidy, protection, or both. And all industries can find/finance economists to write that there really is such a special rationale, and all industries can find politicians eager to agree. There really is nothing special about agriculture in any of these regards.
Actually Wendell Berry, a neo-Luddite tobacco farmer used up a good portion of an issue of Co-Evolution Quarterly discussing the "subsidation" of tobacco. While it "seems" that no government funds are used, the buyers pass along these costs to the companies who are allowed to write them off as pre-taxable operating expenditures. Thus, we all are in fact subsidizing tobacco growing as well as price controls and worse. For example, the system does not apply to organically grown tobacco(or didn't) because that product would not flow through the same business chain. Nor could a farmer opt out year to year, in Wendell's case, to lay the land fallow or rotate crops to nuture the soils and whatnot, unless the farmer could find another series of farms that would account for the total supply values that had been set for that year. As Perry said: business is business as usual.
Ed...after reading your blog for as long as I have (which isn't all that long) I am really surprised at how surprised you are about this! I mean...it's like the very definition of "government" to do things like this...
This kind of thing has been going on since at least the 1960s--when I became aware of it--and probably for a lot longer than that. It is part of the corporate welfare system, which includes agricultural price supports and what-not. Farmers don't want to admit that they're "welfare queens" that Reagan derided but they are.
I do find it interesting that those who support the Farm subsidies are conservatives, although "federal assistance for all" is traditionally a liberal creed.
Farm subsidies have hurt our food supply, not helped it. The federal government has created inflated food prices, and farmers must abide by federally mandated price controls. Farmers are not allowed to compete in the world market without Uncle Sam getting his chunk. The problem has been going on so long (85 years!) that it would take all of the farmer's to unilaterally protest the controls in order to become independent again, as they should be...
Then, we have the coal and oil companies selling their sludge to farmers and ranchers as "nutritional supplements" to "enhance" the food. The cow hooves melted into our yoghurt shows good cooperation between the federally subsidized cattle ranchers and their dairy cattle friends...
Until 60 years ago, the U.S. was primarily vegetarian. The Department of Agriculture has subsidized meat production since the Depression as a way of alleviating animal suffering due to starvation in that time. The trend to a carnivorous diet has continued although there are now three times as many farm animals in the US as people. Fifty percent of all grain grown in the world goes to feed livestock. (Beef, it's what's for dinner!)
Like the New Deal, farm subsidies have steered us directly into a no-win state of federal dependency... and clogged arteries...