March 1st, 2012

Did you realize that at lest 25% of the Budget for the Department of Agriculture will be dished out in cash subsidies for farmers and the owners of farmland from the 2012 Federal Budget, conservatively speaking that is over $30.5 billion big ones. Of course the actual cash outlay will depend on market prices for crops, the level of disaster payments, and other factors it is the other that really bothers some detractors from this Federal Give-Way program, just as it the owners of the farmland, huge corporations mostly associated with the oil industries or some other mega-corporation. I have a deep place in my heart for the small farmer, and yet in too many situations to count, the small farmer benefits little from the farm subsidy program. Numbers are throw about that tell us that more than 800,000 farmers and landowners receive subsidies, with a small footnote that says, payments are heavily tilted toward the large producers, Amen! There are four types of payment programs in effect today: 1) Direct or fixed payments based on historical cropping patterns on a fixed number of enrolled acres and NOT linked to the operators current decisions on what to produce and when to market farm output.

2) Payments that depend on current market prices for enrolled

commodities in other words payments that are comprised of countercyclical actions, along with loan deficiency payments, marketing loan gains, and certificate gains. 3) Conservation program payments, mostly made from the Conservation Reserve Program, Environmental Quality Incentives Program, and the

Conservation Security Program (all-together usually runs around 85 to 90% of all conservation payments made to farmers and their landowners). 4) Other payments that include those made by emergency and disaster relief programs, and milk programs, peanut and tobacco buyout programs and other miscellaneous programs.

Payment records 2000/2009

In addition to routine cash subsidies, the USDA provides subsidized crop insurance, marketing support, and other services to farm businesses. It also performs extensive agricultural research and collects statistical data for the industry, whereas these indirect subsidies and services will cost the Taxpayer around $5-$7 billion in 2012. Putting the estimated farm program at around $37 to $42 billion for 2012. Which by-the-way will still leave the USDA $82.4 billion in their budget, where the subsidy program accounts for approximately 32%. To my surprise, my belief being that the subsidy program for agriculture was a product of the dust-bowl (1930-1936), that was caused by severe drought along with extensive farming devoid of crop rotation, fallow fields, and cover

crops to prevent wind erosion, actually has been around since the passage of the Morrill Act of 1862, which established land-grant colleges.

Following the Morrill Act was the Hatch Act of 1887 that funded agricultural research, and by the Smith-Lever Act of 1914, which funded agricultural education. And it was in 1916 when the Federal Farm Loan Act created the cooperative land banks to provide loans to farmers, today it is the Farm Credit System having a 50-State network with assets of over $90 billion. Regardless albeit they were small in amounts subsidies into the 1920s, with the USDAs primary focus being producing statistics, funding research, and responding to problems such as pest infestations, the demand for direct subsidies increased. The Agricultural Marketing Act in 1929 created the Federal Farm Board, which attempted to increase commodity prices by stockpiling production, after wasting $500 million, the 1st (of many) major farm boondoggles was abolished in 1933. A bunch of farm subsides were brought on board during the 1930s, starting with the Agricultural Adjustment Act of 1933, and during the New Deal years there were added commodity price supports and production controls, marketing order to limit competition, import barriers and crop insurance. Although many features of farm programs have changed over the past sevendecades, the central planning philosophy behind them has NOT. While many

other industries have been deregulated, agricultural policies remain in the past, despite the high-cost and ongoing economic destruction caused by the programs. During the Reagan administration it was proposed that major cuts were due in the farm subsidy program, unfortunately farm finances were in some pretty tough shape, this prompted Congress to increase farm support and NOT reduce it. Albeit agriculture subsidies have never made economic sense, it has been since the 1930s that farmers have resisted reductions in their subsidies, and in more than one way have held sway over Congress. Even though it is true the farmers represent a smaller share of our population today than in the 1930s, the farm lobby (mega-corporations) is still as strong as ever, the largest multinational corporation dipping into the subsidy barrel is Cargill Inc1, which has operations in 66 countries, employing 144,000 world-wide, and had $116.6 billion in revenues last year, where 25% of all grain exports, 22% of all domestic meat production, and all the eggs in MacDonalds pass through their plants, and it is the only producer of Alberger process salt (used in fast food and prepared food industries) it is a private corporation that if it were public would be number 13 on the Fortune 500 list. Sucking off the US Taxpayer. In this, we find the farm-state legislators dragging in the urban-state legislators (either you keep away from my subsidy program or I wont vote for your new airport project, or some other such bargaining chip), these farm-state legislators are always on the march to increase subsidies in their agriculture bills for such programs like Food Stamps. The round-robin methods of our legislatures are famous when it comes to increasing environmental subsidies, where a great many legislators have more than a direct interest in increasing the USDAs budget, whereas it is usually a cold-day in you know where do they come to the defense of the Taxpayer. In 1996 (Bill Clinton), Congress (Republicans both houses) finally enacted some pro-market agricultural reforms under the Freedom to Farm law, which allowed the farmers greater flexibility in their planting decisions and move toward a greater reliance on market supply and demand. However, the law did NOT end up cutting subsidies, as the Congressional expanded
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http://www.organicconsumers.org/ofgu/lionsshare121304.cfm

support in a series of large supplemental farm bills in the large 1990s, in other words a big show in one hand, while the other hand was slipping big bucks out of the other, they bragged that the subsidies would only run out the door at $47 billion between 1996 and 2002, in reality they ended up dishing out $121 billionthe game was afoot! Under GWB, he and Congress agreed to farm legislation that in-part reversed the reforms of 1996, whereas the 2002 law increased projected subsidy payments by 74% over ten-years, in addition to adding new crops to the rolls along with creating a new price-guarantee plan called the countercyclical program. In 2008, Congress again stepped forward and overrode a Presidential veto to enact farm legislation that extended supports and created new subsidy programs, whereas the legislation added a permanent disaster programs for areas often hit by adverse conditions, and it added a revenue protection program designed to lock in 2008s high commodity prices. It also increased the aid to producers of specialty crops, such as fruits and vegetables, with various programs. No price lockin for Salmon of course! In addition to these additional programs, the bill added a new Sugar-toEthanol program under which the Government buys excess imported sugar that might put decrease the price of the over-inflated price of domestic sugar prices. It supplemented over 85% of domestic sugar growers, along with allowing the Government to sell-off excess sugar to Ethanol Producers at a loss, in other words they take Taxpayer money buy the sugar and then sell it at a loss to private Ethanol producers, yet the Ethanol producers turn around and sell their product at a higher rate than regular fossil fuels. In all this it is more than fair to label the agricultural program a Federal Welfare System for farm businesses, which in all accounts is a costly program pushed on the American Taxpayer, along with distorting the economy. Ironically as the subsidies induce farmers to overproduce, which pushes down prices and creates more political demands for more subsidies, where the subsidies inflate land prices in rural America. The subsidies themselves as they flow from the Banks of the Potomac, blind the farmers from innovating, cutting costs, diversifying their land use, and other actions needed to prosper

in a competitive marketplace in other words, they are directly opposite to the free market system. As far back as 1932, members of our nations Congress have known this, whereas one member said, hundreds of millions a year (are dished out by the USDA) to stimulate the production of farm products by every method, from irrigating waste lands to loaming and even giving money to farmers, and simultaneously advising them that there is no adequate market for their crops, and that they should restrict production. This same attitude has been the same for decades, except that subsidies have increased from hundreds of millions up to the billions.

Where do the subsides go?

Types of Farm Subsidies:

1) Direct Payments cash subsides for producers of 10-crops, wheat, corn,

sorghum, barley, oats, cotton, rice, soybeans, minor oilseeds, and

peanuts.

The last three were added in the 2002 farm law.

Direct

Payments are based on a historical measure of a farms acres used for the production and are NOT related to current production or prices. Established in 1996, they were meant to be transitional, a way to wean farmers from old-fashion price guarantee programs, didnt happen that way, today they are the largest source of subsidies costing the Taxpayer (on average) more than $5 billion per year. Keep-in-mind that a substantial amount is paid to the landowners of land that is NO longer used for farming, in other words it is noted that records show that between 2000 and 2006 (for example) that the USDA shelled out $1.3 billion in direct payments to people who dont farm. Such as in Texas where a lot of the land is now used for suburban housing, yet the landowners continue to receive Federal Farm Subsidies.

2) Marketing Loans A price-support program that has been part of the Farm
Subsidy system since the New Deal era, originally just a short-term loan program it has morphed into a program paying out large subsidies by paying guaranteed minimum prices for crops. By itself and composition it encourages over-production by setting a floor on crop prices and in effect reducing the price variability that would otherwise face producers in the market. It covers the same crops as in the direct subsidy program, in addition to wool, mohair, honey, dry peas, lentils and chickpeas all introduced in the 2002 farm law its payments average from $1 billion to $7 billion yearly. How it mainly works, farmers take non-recourse loans from the USDA using their crops as collateral, this allows the farmers to default on these loans without a penalty. In the past if market prices fell below target levels, farmers kept their loans and forfeited their low-value crop to the Government. In other words you and I were stuck paying the loan (taxpayers) and the associated cost of storing crop stockpiles, today most marketing loan subsidies are in the form of loan deficiency payments which permits the farmers to bypass the loan process and simply receive a subsidy payment, with an alternative where the farmers can receive marketing loan gains, under which farmers can repay their USDA loans at preferential rates. Albeit farmers DONT receive subsidies from the marketing loan program unless

crop prices are low, they have become experts at gaming the system to maximize their subsidies every year, where they lock in high government benefits when seasonal prices are low, and then sell their crops when market prices improve so in reality the growers reap benefits even in the good years, the practice has become so much part of our farming village that farmers hit their knees daily praying for market prices to drop so they can capture a larger subsidy.

3) Countercyclical Payments The 1996 did move us away from the

traditional price guarantee subsidies, yet the 2002 Farm Bill reversed course and embraced them with the addition of the countercyclical program where the program covers the same ten commodities as the direct payment program, and the 2008 Farm Bill added dry peas, lentils and chickpeas in recent years this program has cost the Taxpayer between $1 billion and $4 billion yearly. It too is tied to a measure of historical production, whereas the marketing loan program is tied to current production in other words this program has a more stable amount of money being shelled on the doors of the USA.

4) Conservation Subsidies this program shells out some $3 billion each

year, and not to fisherman, it is the largest conservation subsidy program in the Conservation Reserve Program (CRP), which was created in 1985 to idle millions of acres of farmland. Under CRP farmers are paid NOT to grow crops, but to cultivate ground cover such as grass or trees on retired acres. A tremendously large share of land idle under the CRP is owned by retired farmers, thus one does not even have to a working farmer to receive these subsidies. Added in the 2002 Farm Bill was the Conservation Security Program, which responds to the damage caused by overproduction on marginal land, which is only encouraged or exacerbated (50 cent word), by the Federal Subsidiesyou want to reduce over-production eliminate the subsidy.

5) Insurance the Risk Management Agency (RMA) runs the USDAs farm
insurance programs, where both yield and revenue insurance are available to farmers to protect against adverse weather, pests, and low market prices. The RMA describes its mission as helping farmers

manage their business risks through effective, market-based risk management solutions. It has an annual outlay of about $4 billion, employs about 550 people, having activities that are far from MARKET BASED. There are 16-private companies that sell Federal Crop Insurance, which receive Federal Subsidies for their administrative costs and insurance risks, they operate like a cartel, earning excess profits from the high premiums they charge. The get-away-with-that because the Government (taxpayers) provides large subsidies for Insurance premiums, so that the farmers only pay about 33% of the full cost of their policies, remember the large landowners like Cargill Inc they enjoy this benefit also. This cartel like structure operating today was made clear in 2005, when under lobbying pressure from the Insurance Companies, where Congress de-railed an attempt by a company to offer discount insurance policies to farmers in other words there are 16 and 16 only in this round-robin of under the rug crooks. Henry Waxman (D-CA) criticized the USDAs program in 2007 when he was the Chairman of the House Oversight and Government Reform Committee, when he said the USDAs insurance program was a textbook example of waste, fraud, and abuse of Federal spendingover $8 billion in taxpayer funds have been squandered in excess payment to insurers and other middlemen.

6) Disaster Aid Congress has repeatedly expanded crop insurance

programs to reduce farmers dependence on emergency bailout, whereas the insurance subsidies and emergency bailouts have grown in cost, after just about any sort of crop damage where Congress leaps in to declare a disaster and hand out millions of buck to the farmers, whether of NOT particular farmers actually sustained substantial damage. found It has been that farmers often get paid twice by the Government, once in

subsidized insurance and then again in disaster assistance. The 2008 Farm Bill has a costly new PERMANENT disaster program, intended to reduce ad-hoc emergency relief. Included are products NOT covered by Federal Insurance, such as aquaculture, mushrooms, Christmas Trees, ginseng, and turf grass, which now have their own special Non-Insurer Crop Disaster Assistance Program.

7) Export Subsidies The USDA runs a range of programs to aid farmers and food companies in their Foreign Sales, where the Market Access Program shells out $200 million yearly to producers in support of activities such as advertising campaigns. Some of those who benefit, Distilled Spirits Council, Pet Food Institute, Association of Brewers, Popcorn Board, Wine Industry, and Welchs Food, where is the Alaska Salmon Industry (dont make me laugh Salmon is a real food). In addition to this lucrative give-away is another Program, the Foreign Market Development program, that shells out $35 million yearly to groups such as the American Peanut Council, the Cotton Council International, and the Mohair Council of America. 8) Agricultural Research and Statistics most American industries fund their own research and development (R&D) programs, with the agricultural industry being the notable exception. The USDA pushes out its door every year around $3 billion on research, statistical information, and economic studies. They fund research in 108 various locations and provide subsidies to the 50-states for research and education such as how to correctly eat chickpeas.

Why

is

it

we

should seriously consider going away with Farm Subsidies? Farm Subsidies Redistribute Wealth they transfer taxpayer dollars to a small group of fairly well-off farm businesses and landowners, whereas the average income of farm households is 22% higher than the average

income from US Households, when they began in the 1930s farmincome was 50% lower than US Household incomes. Every politician worth his ilk argues about the plight of the small farmer, yet during the past decade the largest 10% of the recipients are routed to the largest farms, which amounts to about 72% of all subsidy payments in recent years. Whereas numerous large corporations, and even some wellknown celebrities receive farm subsidies, in this it is the landowners, not the tenant farmers or farm workers who benefit from subsidies. Farm Subsidies Damage the Economy the long arm of management from the Federal Government in the agricultural sector is very unique in American Industry, where in most industries, market prices balance supply and demand, profit levels signal investment opportunities, market downturns lead to cost cutting, and entrepreneurs innovate to provide better products at lower prices. All these market mechanisms are blunted or non-existent in the Government controlled agricultural arena as a direct result, Federal agricultural policies produce substantial deadweight losses and reduce US incomes. In addition they result in over-production, overuse of marginal farmland, and land price inflation, which is another direct result of subsidies being capitalized into land values. In the measured world they create less efficient planting, induce excess borrowing by farmers, cause insufficient attention to cost control, and result in less market innovation. All this tied to the fact that the policies work against the claimed goals of Congress, a good example being the claim that members of Congress say they support small farms, whereas in reality the large farms receive the largest subsidies, which in turn gives them financing clout to buy up the smaller farms. In 2005 the Congressional Budget Office (CBO), released a study that had examined the repeal of the US and Foreign agricultural subsides and trade barriers, they found that all the studies they reviewed showed that both the US and global economies wound gain from the repeal of subsidies and trade barriers. Farm Programs are Prone to Scandal like most Federal subsidy programs, Farm programs are subject to bureaucratic inefficiencies, recipient

fraud, and Congressional pork-barrel politics.

The Government

Accountability Office (GAO) found that as much as half a billion dollars in Farm Subsidies are paid improperly or fraudulently each year, where farmers (primarily the big guys) create complex legal structures to get around legal subsidy limits, along with many farmers who decide not to pay back their USDA loans, another small example that it was no great surprise in 2001 when the GAO found that more than $2 billion in farm loans were delinquent. Congress and the USDA shell out payments willy-nilly for farm emergencies where disaster payments often go to farmers who have not need for them, and in many cases have NOT even asked for themand it is a well know fact that some who ask have NOT experienced damage. One glaring example of the USDAs ineptitude is the Powdered Milk Scandal in 2003 where they decided to give some of its massive stockpile of powdered milt to cattle ranchers for feed after a drought, where large quantities were diverted to other uses, allowing speculators to earn large profits at the Taxpayers expense, and riding along with that is the biggest scandal of them all is that the Congressional Agricultural Committees being loaded with members who are active farmers and farmland owners who have a direct financial stake whenever Congress votes to increase subsidies conflict of interest, only other industry that gets away with this is the banking industry. Farm Subsides Damage US Trade Relations Global stability and US Security are enhanced when less developed countries achieve stronger economic growth, there is no greater Democracy than an individual with a full stomach and a couple of bucks in their wallet. American can increase the likelihood of this transformation by its reduction of trade barriers, however, the US and European farm subsidies and agricultural import barriers are a major hurdle to achieving global trading. US Sugar Protectionism for example benefits only a small group of US growers, who through your Congressional members are blocking a broader free trade with the Americas one in particular Cuba. The WTO estimates that even a 33% drop in all tariffs around the world would boost global output by $686 billion, including $164 billion for the

US. Trade liberalization would boost the EXPORTS of US goods that are competitive on world markets, including many agricultural products unfortunately our Farm Subsidies and Protections stand in the way. Farm Programs Damage the Environment our Farm policies damage the natural environment in many ways, where subsidy programs cause over-production, which sucks in marginal land, similarly trade barriers induce agricultural production on land that is less naturally productive. As a result, marginal lands that might otherwise be use for parks or forests are locked into farm use because Farm Subsidy payments get capitalized into higher prices for land. In addition, subsidies induce excessive use of fertilizers and pesticides, whereas producers in land regions that have better soils and climates tend to use LESS fertilizers and pesticides, then those who farm marginal land because of the subsidies they received. We all know the results of excessive use of chemicals on the land, and what they do to our rivers, creeks, lakes and the surrounding water table. Florida sugar is a great example, where large areas of wetlands have been converted to cane sugar production, unfortunately the phosphorous in fertilizer used by the sugar farmers has done substantial damage to the Everglades now farming, like any other industry, can cause NEGATIVE environmental effects, but our Federal Subsidy Programs are only exacerbating (50 cent word again) the problem. Federal subsidies for irrigation have always been a cause of environmental concern, where the Bureau of Reclamation runs a vast water empire in the Western United States, which sells water to Farmers at a fraction of the going market rate, where the resulting overuse (coupled with inefficient irrigation systems and methods) will eventually lead to a water crisis in the regions affected. On February 29th, 2012 the House approved an ambitious California water bill that favors Farmers, splits the State and slams some tremendous pressure on the Senate. The Republican-controlled House put their stamp of approval (246-175) on legislation that would lengthen irrigation contracts, over-ride state law and boost deliveries to farms south of the Sacramento-San Joaquin Delta in equal importance replaces one San Joaquin River restoration plan with an

inferior one. Rep Devin Nunes (R-Visalia) said, Flushing water into San Francisco Bay is NOT helping to recover species, and people are suffering needlessly, our water bill gives reliability, not only to the Farms but to the environment. Now if youve never driving I-5 south from San Francisco to LA, youve never seen the open faced canals that transport the water south, where in the Summer months more is lost to evaporation than finally makes it to the households and farmers in the region, yet during the five-hour debate in the House the inefficiency of the system was solved by tapping more water from the North and flushing it out on the mega-corporate farms in the valley. No matter the politics, even thought Rep John Garamendi (D-Walnut Grove) remarked that, Its a power grab, and its an imposition of the Federal Government over the State. It faces an uncertain future, as Dem Senators Feinstein and Boxer oppose the legislation, as does the Brown administration in Sacramento, along with the Obama administration threatening a veto. Which leads directly back to the

Republicans in the House loading the gun at a run for the voters in the Valley, yelling at the top of their campaigning lungs that the Democrats are denying America the right to inexpensive veggies. Mark my words! Agriculture Would Survive without Subsidies there is no doubt that it is normal for people to fear economic change, albeit most industries have been radically reformed in recent decades, with POSITIVE results, including the airline, trucking, telecommunications, automotive, and energy industries. If Farm Subsidies were ended, and agriculture markets deregulated and open to entrepreneurs, (like more insurance companies selling crop insurance with creative policies) farming would change, different crops would be planted (based on real demand), land usage would change, albeit some farms would go bankrupt just as it happens in the normal business world. At the end of the day a stronger and innovative industry would emerge, one that is geared to supply and demand, not some fictional supply and demand creative by lobbyists in Washington D.C. You must realize that the producers of most US agricultural commodities do NOT receive regular subsidies from the Federal Government, in fact

Federal Subsidies only account for 36% of US Farm Production, while commodities that generally survive without subsides, like meats, poultry, fruits, and vegetables, which account for 64% motor along without any Federal subsistence and outside of the coddled Farming industry other operations prosper without being sheltered by the Government or secure in the knowledge that if they dont make the bottom line the Government will step in every year and make sure they will. It is another fact that a great many of our Farm households are much more diversified than twenty or thirty years ago making them able to deal with market fluctuations whereas a large percentage earn more and more of their income from non-farm sources, thereby creating financial stability. The USDA figures show that only 38% of Farm households consider farming their primary occupation. An example of ending Farm Subsidies can be seen in New Zealand, which is 4X more dependent on farming than the US they ended in 1984 under fierce protest, yet their farm productivity, profitability and output have shot through the ceiling that what was once imposed on the farms. Their farmers have cut costs, diversified their land use, Data from the increased the non-farm income, and created and developed niche markets where one example is their kiwifruit. Organization for Economic Cooperation and Development entity shows that their farm subsidies in New Zealand represent just 1% of the value of farm production, which compares to 11% in the US albeit today New Zealands primary farm organization loudly proclaims that they thoroughly de-bunked the myth that the farming sector CANNOT prosper without Government subsidies, a myth that needs to be addressed here in the United States of American, with vigor!