TCS Daily


Mr. President, End this Farm Subsidy Boondoggle

By Amanda France - February 27, 2009 12:00 AM

Before taking office, President Barack Obama pledged to cut government waste: "We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness." Yet after signing the $410 billion omnibus (the largest annual increase in 30 years) on top of the gargantuan $787 billion spending package with questionable items to "stimulate" the economy, it seems like what is bleeding is that promise's credibility.

Yet the President still has an opportunity to redeem himself on spending by following through with his $2 trillion federal cost-cutting promise. In his first address to the joint session of Congress, Obama named farm subsidy programs as a top candidate for the chopping block. The Commodity Credit Corporation (CCC) is the Agriculture Department agency responsible for administering subsidy programs, notorious for funding large agribusiness.

This wasn't the first time the President singled out the CCC for excess. In November, Obama criticized the CCC's gross misallocation of $49 million in farm subsidies to farmers who were ineligible for the program because they earned more than $2.5 million per year. Despite such gross mismanagement, the CCC will receive $1 billion as part of the stimulus package and more than $3 billion in the omnibus—on top of its annual $12 billion budget.

The CCC is a New Deal relic, created in 1933 to support the then-struggling farm industry. At the height of the Great Depression, the average farmer earned only half the income of the average American household. To stabilize farm income and prices, the CCC offered subsidies in the form of direct payments, countercyclical payments, price support programs, as well as conservation programs.

Direct and countercyclical payments are used alternatively to compensate farmers for producing crops depending on market demand. When crop prices are low, the price support program enables farmers to use their crops as collateral for non recourse loans from the USDA, without the risk of default. To counteract overuse, conservation programs pay farmers for not producing crops on their land.

As farmers become richer, more efficient, and fewer, the continued relevancy of the CCC is questionable. Yet the CCC's expenditures continue to grow today despite the wealth of American agriculture. In 2005 the average farm household earned 26 percent higher income than the average American household.

Moreover, the majority of CCC subsidies are collected by large agribusiness firms. Over the past decade, 75 percent of the $177 billion in total subsidy payments was collected by the top 10 percent of subsidy recipients. This largesse not only wastes Americans' tax dollars, it inflates the price they pay for food.

Agricultural subsidies often have a regressive effect not only on domestic but international economies as well. Protectionist subsidies create barriers to trade for less developed countries that rely most heavily on agriculture as a means of development. U.S. farm subsidies often encourage excessive crop production by artificially boosting demand. Overproduction skews world prices, which helps stifle economic development by making it difficult for developing countries to enter the market and remain competitive. The International Monetary Fund estimates that the elimination of farm subsidies could add $100 billion to global welfare.

Overproduction can also increase pollution and overuse of land. Excessive production can degrade farmland, which then requires the use of added pesticides and fertilizers to remain agriculturally viable. According to the World Resources Institute, agriculture is the biggest source of pollution in U.S. rivers and lakes. Overproduction also results in the development of marginal farmland, causing loss of habitat and other natural resources.

The CCC has outlived any purpose it may once have had. The continued subsidization of the US farm industry comes at the expense of the environment, consumers, and producers in developing countries. These costs are too high to continue.

As the financial crisis deepens, the destabilizing effect of subsidies needs to be reexamined. If President Obama is ever to make up for the current spending spree, he must confront and eliminate boondoggles like the Commodity Credit Corporation.


Amanda France is a research associate at the Competitive Enterprise Institute.
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75 Comments

All true but...
...Obama clearly has established the pattern that what matters is politics, economics be damned.

So, what this is really about is taking welfare going to Red states and using it to pour even more welfare on the Blue states instead.

The fact that clearly wasteful subsidies are being eliminated is just conveniently coincidental icing on the top.

FDR was exactly the same way folks. All this has happened before.

The good news is that so far he has been pretty amateurish
He's using up credibility at a very fast rate because his moves are lacking in subtlety. Breaking the promise of transparency (posting bills on the internet for a few days) for instance was a mistake. The fumbled appointments another mistake, actually a series of mistakes. The transparent lie about no earmarks was yet another.

Putting his credibilty on the line re ag subsidies was another mistake. Like all presidents he will find that ending a government program is near impossible and costs lots of political goodwill because, as with all govt programs, the few recipients care a lot more about the concentrated bucks they get than the taxpayers care about the dilute bucks they pay.



Au contraire
"Breaking the promise of transparency (posting bills on the internet for a few days) for instance was a mistake. The fumbled appointments another mistake, actually a series of mistakes. The transparent lie about no earmarks was yet another."

Nobody cares. "Nobody" being defined as the vast majority of non-news junkie 'Joe Sixpac' proles that outvote 10:1 anyone else who does make it their business to care enough to be informed on those very issues.

Its a tough and bitter pill to swallow. Even I sometimes see some glimmer of hope out there. But then I am reminded of the Typical Obama Voter as exemplified by Peggy "If I help him, he's gonna help me!" Joseph:

http://www.youtube.com/watch?v=P36x8rTb3jI

"as with all govt programs, the few recipients care a lot more about the concentrated bucks they get than the taxpayers care about the dilute bucks they pay."

On that, I think you are dead on the money. But he's God, ya know? The Messiah. The One. And since he has no effective political opposition to stop him, he'll get away with a lot more than conventional thinking dictates he will. It will be interesting if the Sheople rise up and vote in Republican control of Congress in 2012 or not as a result. If not, we're screwed.

How come the Bush Republicans didn't do it?
This is one of those rare occasions where I agree with the TCS opinion. Farm subsidies in the present climate are nothing but bad. Whether it's the ethanol scam or artfully designed supports that erode free trade, they distort the markets. And not in a good way.

The Bush Republicans had six years when they enjoyed Total Control.. 2001 through 2006. Why didn't they do something to end price supports then?

No argument re the Republicans, rather a quibble
"The Bush Republicans had six years when they enjoyed Total Control.. 2001 through 2006. Why didn't they do something to end price supports then?"

Their control was a lot less total during that period than Obama enjoys now; but their failure to even try to act to cut government was in large measure what cost them the recent election.

Don't get too comfortable Roy, the pendulum will swing back.

Almost all farm subsidies in any environment are bad, as are almost all other subsidies. The government simply isn't very good at decisionmaking and managing such things for a whole complex of reasons. Almost all large corporations are also not very good at decisionmaking as well for structural reasons.

The system is (I hope and believe) more robust than you seem to think
Obama will move the economy a couple of pawls of the ratchet and will then bog down. Better that he's clumsy about it, which he seems to be. A lot of Democrats in tough districts are already getting hesitent.

In 2010 the bills will be starting to come due and the Repubs will rebound so as to be able to slow him. By 2012 inflation will be the news.

The pendulum will swing back, & Republicans AGAIN will do NOTHING. Its philosophy, not parties that
determine the “fate” of a society.

And the TWO dominant philosophies of today are “Force” and “Faith”.

Correction and Extension to the above post of mine; replace NOTHING with LITTLE in subject
The pendulum will swing back, & Republicans AGAIN will do LITTLE. Its philosophy, not parties that determine the “fate” of a society.

And the dominant philosophy of today is "Faith" in the “Force” of Government to achieve positive ends at societal-level.

Only the "ends" are different for the parties, not the means.

And there is lot of overlapping in the ends too. Only the "recipients" are different for the overlapping ends.

Who gets the blame
"Their control was a lot less total during that period than Obama enjoys now; but their failure to even try to act to cut government was in large measure what cost them the recent election."

Not so. Republican control over the six years I cite was absolute and immovable. They had virtually no opposition from Democrats, other than from Paul Wellstone. And he conveniently met the kind of end so many unpopular politicians do.

Republicans did things their way in those years. So the world Obama inherited was the world they made for us. A world in which the deregulated financial structure ended up being almost completely undermined and destroyed.

It has happened before. Global Crossing, Long Term Capital Management, the Asian Meltdown, the S&L Crisis... were all those the fault of the Democrats? As I recall, no. Those were bipartisan affairs at best. The hedge fund managers that influence both parties were behind the global scams that were perpetrated.

But you're right. If Obama screws things up, the Ds will be out of office in the next cycle. That's why the Republicans, now apparently led by Rush Limbaugh, will be trying so hard to make him fail. Or at least make it look like his policies and not the sand they throw into the wheels are behind the failure.

And I like your last paragraph.

The bulk of the 'stimulus' spending starts in 2010 and onwards
...and that isn't by accident.

He's going to buy his way to winning elections, like politicians in Mexico and the Philippines do. Then the currency crashes afterwards.

BUT...you are onto something I think regarding how people are waking up. I hope I'm wrong. But history backs me up (FDR running the country with 19% average unemployment for almost ten years and getting away with it), unfortunately.

Because it is welfare for Red States, Roy. (as previously noted) EOM
.

Roy's take on history is flawed (as usual)
"Not so. Republican control over the six years I cite was absolute and immovable. They had virtually no opposition from Democrats, other than from Paul Wellstone."

Really? Then what about the Dem filibusters and blocking of judicial appointments? What about the Dems demanding equal representation on the committees in the Senate.

You're full of it, Roy.

Cone one roy
Check the numbers. By 2001 the dems had learned the minority party game, they had been playing it long enough to work it well and they were pissed. The republicans never were any good at being the majority party and after accomplishing most of their "Contract with America" stuff they began to fizzle.
Barack has a far stronger single-party situation than any Republican in history has ever had. If he screws it up there is no one else to blame!

You better check the record, during the Bush years the Reps did not do it their way, the Dems were very good at blocking and getting some of what they wanted at every turn.

Please, at least be honest in the easily checkable parts of your postings. The numbers alone call you an unabashed liar on this.

Sounds easy but it isn't
I live in farm country and I talk to farmers about this all the time. Most hate the damn government programs, but can't live without them in a voltile market. A proper plan would end the Conservation Reserve Program (CRP) first while making it so the EPA has no jursidiction over private owned property (CRP is as much an EPA program as it is a Farm Bill brogram) and offer some one-time money to help farmers get that land back into production. It should also find a way to encourage the growing of different crops to allow for more diversity in the voltile market.

After a couple of years of this you go after price supports over a couple of year span. Done right, the entire farm bill is taken apart (over say 4-6 years) without causing a big round of farm bankruptcies.

No matter what you do you will have to find a way to offer disaster insurance to keep the small guys from going under every time there is a negative weather situation (flood or severe drought) or the prices drop through the floor. It will have to be written such that miss-management is not encouraged.

One note, the corporate farm is an illusion. I've never seen one. Yes, some big corporations do own farms and meat producing facilities (Tyson, ADM) but they are the minority. Just because some guy formed a corporation for tax and liability concerns and owns 5,000 acres of wheat land, does not make it a big "Corporate" farm. The guy probably grows and average of 120,000 bushels of wheat on a rotated 3,000 acres at an average expense of $125-$175 per acre. That is an average cost of $375,000-$525,000 a year to farm the land (seed, fuel and consumables). If wheat is $5 a bushel he makes $100,000 before taxes and other non-farming expenses; he might take home $40,000-$50,000 a year. But, if the yeild is down and he only grows 90,000 bushels then he could go in the hole $75,000 and, at best, make enough to pay his property taxes. If the price is $4 a bushel on the 120,000 average, he could go in debt $45,000 or make a few bucks, again it depends. We are talking big money, but small profit margins most of the time. (There is always that crazy year where you have a perfect growing season and the prices are way up and you hit it perfect on consumables; that year can net a farmer $500,000; almost enough to buy a new tractor and combine; until the tax man takes his share that is!)

There is very little the farmer has control of; not commodity prices, not the weather, not the railroad shipping rates. He can try and read the conditions and set the level he will use of various consumables to expected weather, pest and growing conditions; he can decide what to plant, when to plant and when to harvest; he can decide what equipment to use and when to buy it. That is about the level of his control.

A common bumper sticker around here is "My wife is a nurse (teacher) so she can support my farming habit" or "I don't need to gamble, I farm!" And there is a lot of truth to both sayings.

The idea that this guy is somehow too big to take part in farm bill programs is stupid.

Yes, get the real national and international corporations off the government breast, that would be a good start to reducing farm related spending and 99% of farmers would be all for that. Yes, help reasonably wean the farmers off the subsidies; a large majority are also for that. But don't just cut them off at the knees and think no one will get hurt, and hurt bad; that is stupid.

Hmmm...found some articles that agree with you
Democratic Revolt May Slow Obama Agenda

http://www.cqpolitics.com/cq-assets/eap/static/dem-revolt1.html

And...

Democrats Pull D.C. Voting Rights Act

http://www.humanevents.com/article.php?print=yes&id=30931

From serfs to entrepreneurs

Farmers need to vertically integrate and take control of their products. A co-op started to process beans (http://www.sdsbp.com/current.htm) in SD.

Dairies in NE produce their own products, like great ice cream. There is even a water buffalo herd in VT making yogurt.

There is Angus brand beef and even an organic beef producer, Dakota Beef.

I think it is the subsidies that slow this process and keep the farmers under control.

Farmers need to become entrepreneurs and shed their serfdom.

no one else to blame
He will never admit he is to blame anymore than you ever admit you are wrong. He'll continue to blame Bush forever, just like everybody else with BDS.

Back up your assertion
That Republican control of Congress was absolute during 2001-2006 is beyond dispute.

"Really? Then what about the Dem filibusters and blocking of judicial appointments? What about the Dems demanding equal representation on the committees in the Senate."

Name a piece of important legislation that was blocked during those years. They all sailed through the House, as I recall, 214-213 or 217-215. Name a single judicial appointment, other than the ridiculous Harriet Myers whom Republicans didn't even support, that was blocked.

There was no opposition to the Republican game plan. None.

Here I cone
I assume you mean "come on".

Maybe I just wasn't watching. Maybe you could list for me the important Democrat-sponsored legislation that got passed during those years.

NOW he tells us
Odd. I must have missed your admission that what we've been practising is welfare capitalism.

I agree. You and I agree.

A very well informed post
Thank you, pauled. You've raised your end of the debate immeasurably by resorting to factual observation in support of your thesis. An unexpected treat.

I'll offer you a treat. Those pesky farm supports? They were all started by an actual socialist, the kind that no longer exists in American politics. Henry Wallace, back when he was Ag Secretary. They were enacted in haste. We are now repenting at leisure.

But on to the control of agriculture by large corporations. Even when it's the small subs who glean the fruits of the subsidy program, the Big Boys benefit. Under modern CAFO operations (the feedlot system) the subs contract out to biggies like Smithfield Foods or Tyson, or Wampler Foods (those are the turkey people).

Under the terms of the contract you buy the building from your principal. Then you buy the chicks. Then you buy the feed. And the medicine, and all the other inputs. You resell the birds back to them at a preset price. The price is so low you barely make a living after making all your payments. It's much like the "independent" trucking industry, where you are actually indentured to your principals.

What better way to get government money than to hire a K Street lawyer to write up a subsidy provision that gives your subs thirty cents a bird. That means you can pay them each thirty cents less and they'll still buy onto your package.

And you can buy your way into Congress with this bill revision at a cost lower than a penny on the dollar, for lobbying expenses. That's a lot of bang for the bribery buck.

If the subsidies stopped, the big guys would have to pay the little ones more for their produce. I expect it works in much the same way with corn, wheat and soy.

Look at what happened to farm subsidies once the Bush Gang got into office. Socialism was never held in such high regard.

Are we in agreement? Or does it just seem like it?

How the business works
"There is very little the farmer has control of; not commodity prices, not the weather, not the railroad shipping rates. He can try and read the conditions and set the level he will use of various consumables to expected weather, pest and growing conditions; he can decide what to plant, when to plant and when to harvest; he can decide what equipment to use and when to buy it. That is about the level of his control."

Yup. The farmers assume all the risk (other than what the gamblers take on).. while the elevators, the train lines, the distributors and suppliers, the wholesalers and all the heavily capitalized parts of the ag sector reap all the gains by setting prices. The only variable in the mix is the size of the harvest and the price offered to the farmer.

This has been going on since the mid-19th century, and is the reason the Grange got started.

a water buffalo herd in VT making yogurt.
I thought Ayn Rand died some years back. Now I find that she is still writing. Did Wesley Mouch start that herd?

I feel like Michael Corleone
Every time I get into an exchange with Roy Bean it ends with him making and persisting in preposterous assertions and with me determined not to let him pull me back in again. And yet he always does.

The worst part is that I can't really blame him. He is what he is.

Woodstock Water Buffalo
http://www.bufaladivermont.com/

I was joking marjon but now I see that truth is indeed stranger than fiction
That buffalo farm is no doubt a real business serving real customers; but it's web page write-ups could have come right out of Wesley Mouch's mouth.

???
I only stated it in the very first post on this particular article's comment forum.

Here: http://www.tcsdaily.com/discussionForum.aspx?fldIdTopic=9694&fldIdMsg=99427

You know the answer already.
"The Bush Republicans had six years when they enjoyed Total Control.. 2001 through 2006. Why didn't they do something to end price supports then?"

Because Bush was not truly conservative. He may have been more conservative than his democratic opponents (at least on social issues, like abortion, etc.) and he hit some conservative talking points (like cutting taxes capital gains taxes) but he was far from your traditional "small government" conservative. If his Leave No Child Behind program and other "government as hero" expenditures (like billions of US taxpayer dollars for Aid to Africa!) were not enough to clue you in on that, his unabashed support for government bailouts in his final months ought to have made it abundantly clear.

And yes, many Republicans share the blame. They supported him simply because he was in power, and they found it easier to ride his coat-tails when their party was in power than to stand up to their party leadership on matters of principal.

It's funny now, watching those Republicans who towed the party line when Bush was in power, now trying to paint themselves as the "true" limited government fiscal conservatives. Where were your convictions when Bush was turning the Republican Party into the party of big spending "compassionate conservatism"?

One example:
When Hurricane Katrina hit, I didn't hear any Republicans stand up on "small government" principals and say something like "This is not a problem that you should be looking to the federal government to solve. The federal government was not created for storm chasing. It was created for a specific set of purposes - primarily justice, and national security - and repairing your flood damaged house does not qualify." Instead, I saw Bush rushing in, trying to look like a hero (and failing at that).

Questions about risk tolerance and farming.
I agree that farming is one of the riskiest businesses around. And as you said, the most important variables (like weather) are out of the farmers control.

But don't we have free market ways of dealing with risk? Insurance is one. Isn't another the futures market, which allows farmers to sell tomorrow's crop at a set price today, effectively shifting the lions share of the risk onto the shoulders of risk-tolerant investors?

I'm not trying to argue against your points, just trying to understand the big picture a little better.

In my (farming illiterate) mind, the risks fall into two categories - yield risk, and price risk. Yield risks affect your yield (bushels of grain per acre, for example). Price risks affect how much you can sell each bushel for (market price, cost of transportation, storage, etc.) Price risks, it would seem, could be mitigated by futures markets. It doesn't seem to me that government is needed for this. I would imagine that yield risk is trickier. I would suspect that little could be done about these, because if you have no product to sell, stable prices do you no good.

So, perhaps a little education would be in order - how do government subsidy programs help farmers deal with these two types of risk?

The subsidies do not help the farmer.
They help the consumer.

Note a few months ago when there was fear food prices were getting too high because all the corn was being used for alcohol, the hue and cry was to cut prices for the consumer.

Farm subsidies are there to keep those who love farming on the farm working as serfs.

I had no idea
Thanks. I read very slowly, so hadn't yet gotten to the first comment in the thread.

" ...Obama clearly has established the pattern that what matters is politics, economics be damned."

That insidious dastard! Imagine! Here we've been, trying to perpetuate a polity based on party warfare, and this guy comes along trying to promote unity! Who does he think he is?

And trying to solve our financial morass by government action! What's he trying to do, make the Republicans look bad?

I can't get over this. Thanks for bringing it to our attention.

A return to our ideals
Thanks for a provocative answer. But it brings to mind the question: if Bush was no small government Republican, who has ever been?

Certainly not Ron Reagan. He was the first president in our history on whose watch the national debt doubled. It was due to the usual, (a) a forced decline in revenues brought on by a misplaced trust in the Laffer curve, combined with (b) an abrupt increase in spending.

I guess we'd have to go back to Calvin Coolidge to find the kind of guy you wish we had.

If Katrina had hit on his watch, he'd be fiddling while Rome burned. Even though only the federal government would have had pockets deep enough to mitigate a disaster on such a scale, Cal would have just said "Sorry folks. None a my business. Good luck with that."

Instead, Mr Bush showed his compassionate conservatism by militarizing the response, and ordering the National Guard to come in to order the survivors out of their homes at gunpoint. Subsequently impounding them in formaldehyde-tainted trailers, situated off in remote DP camps out on the flats.

Think of all the money we'd have saved just by telling that unlucky bunch to shove off! Buncha losers.

Yes I'm a conehead
But no-child-left-behind comes to mind. Bush gets a lot of the credit/blame for this one but you better look up who was all involved writing and sponsoring it. If you look you will find Ted Kennedy and a number of other Democrats.

And the dems managed to "earmark" a lot of things into bills that were not backed by Republicans. They were also, as I noted before, pretty good at blocking, filibustering, and delaying.

No, Republicans did not get much "their way" as you claim as the numbers were always too close for the Republicans to run over the Democrat minority.

It doesn't take long to google up several other bills with a Democrat flavor that got through.

they try and you just named a few of hundreds of ways they use
A farmer around here has three patents and has all three in production. His ideas will save time, fuel and reduce fertilizer consumption.

A group of farmers are working together to grow oil seeds for bio-diesel and two others have built the bio-diesel facility.

Yes, farm subsidies (mainly government backed insurance) is hurting some efforts as you have to prove viability and have a yeild record to get the insurance. The guys growing oil seeds are taking a big chance; if they lose the crop for any reason they will take a big loss as they are unable to get crop insurance on the oil seeds. There are many ways the government programs hurt the farmers ability to diversify and that another reason why it will take a weaning period to end the farm programs responsibly.

Yes it is
But it is unlikely a real viable business. We have ostrich farms, lama ranches, yak ranches and numerous hybrids around here. The only one that has any real success is the bison and bison-cow hybrids.

To answer both posts
It largely depends on side of the aisle you are on; small area "ranch" production (commercial birds like turkeys and chickens, pork, and a few others) is more likely to operate this way in the mid-west and south.

There are no big chicken operations around here and pigs are still sold at auction like cows, sheep and horses. The same with the farmers, some crops (like malt barley) are great money makers for the farmer who can get a contract with one of the big beer brewers, feed barley sells for around $100 a ton most years.

As I noted, most farmers I know hate the farm programs but see little benefit in not participating. I'm all for ending the farm programs and so are the vast majority of the farmers I know; but it has to done over time and has to begin with ending government regulation and programs like CRP.

Let's see if I can help at all
Risk 1 - weather
This risk takes several forms, late cold and snow can shorten the growing season (though rare, I have seen it snow in July here and late may or early june snows are even more common) severe flooding can destroy the crops as can drought. These are general weather patterns that affect a large area and prices will usually come up a bit to reflect the loss of millions of bushels in the market.
But localized severe thunder storms, with accompanying heavy rain, hail or tornados do not affect the general marked but can completely wipe out a crop. Insurance is available, but it is very expensive if you try to get insurance higher than the average yield (government back insurance) and without the federal crop insurance program you will find all insurance rise to something near the cost prohibitive level.
Imagine this - you bought a farm and all the goodies with it (house, outbuildings and equipment) on a large enough piece of land to make a real go if it (around 5,000 acres around here). The price tag was a very reasonable $2.5 million. You now have a $170,000 a year payment, fixed expenses of another $100,000 a year and variable expenses (certified seed, herbicide, pesticide, fertilizer, fuel, machinery parts, ect) of between $250,000 and $500,000. Those variable costs are the only real control you have on your income. This is a "dryland farm" (no irrigation) and 20-year average yeild is 40 bushels an acre. You need to gross a minimum of $520,000 a year to break even (which includes no money for living expenses or help) but more likely you will need closer to $600,000. You need to rotate crops so 3,000 to 3,500 acres is all you can plant in a given year. You need to gross about $150 an acre to meet that need (more like $175 in an average year). At average yeild you need about $4-$4.50 price. You might be able to get that on the futures market, maybe even a little better than that, but the price often rises in nov.-Dec. after harvest; the median is $5.50-$6.

Price
Now here's the kicker - If you consistantly produce 14% protien or higher with good gluten and drop numbers you can get $7 on the futures market, but those things depend on growing conditions and if you have a futures contract you lose it if your crop doesn't meet those standards. Then you are back selling on the regular market. The futures market is often more risky than the regular day markets.

How the wheat farmer does it
Most get past the purchase expense by using the LLC corporation model so the kids can inherit without the cumbersome death taxes. Few people buy a farm cold. Next, they insure only at their expenses level plus a few thousand for living expense. That keeps the insurance cost down while insuring they can make their expenses and payments as survive to the next year. Most of the time this is ona government backed, yeild based insurance plan. Next, the do everything they can to manage yeild. Finally the sell part of their crop on contract (futures) and bin the rest for later sale. When the price is up, they sell.

Many years they will yeild 30-40 bushels per acre. Most years will be 35-50. Every decade or so the planets align just right and you will get a 60-100 bushel bumper crop. Prices aren't usually so volitile that they hurt a bumper crop year. That big year will usually mean it is time for a new tractor or combine.

By the way, that good year is often one where you see more thunderstorms; so the guy with the new tractor is the one who didn't get hailed out.

So why do it at all? Presently the farm programs will often keep even an inept farmer in business. But, even without it, it can be a good life. The guy who doesn't have any mortgage payment can net over $100,000 a year on an average year, $1/2 million to $1 million in a very good year and all for about three months of real work. Play your cards right and you can live pretty well.

that is not entirely true
Yes, there is some truth; even a lot of truth, to the help for the consumer. In reality, in the global economy, it depends on which subsidies you are talking about.

Price supports allow U.S. farmers to sell their product on the global market. A bushel of wheat costs the average farmer between $3.50 and $4.50 to produce. The actual price of wheat on the open market has actually been below $2 in the not too distant past (last 10-15 years).

Conservation Reserve Program (CRP) - This has actually been the destruction of the rural town, especially those in wheat country. The number of acres taken out of production is huge, even if it is on 10%-15% of the total. The loss in equipment and consumables sales put most small town implement dealerships out of business in the 90s. Still, it provided steady income on lower producing land. It also provided steady income to many farmers who put a portion of their land in CRP. the laundry list of ways this program has been used, and abused to the detriment of local economies, is too numerous to mention.

Insurance - The government offers an inexpensive insurance tied to proven yield. The problem with it is that farmers are tied to the proven crop and don't often have the ability to experiment much. (CRP payments are also tied to proven yield)

Disaster payments and all the other programs (cyclic and counter-cyclic, NAP, etc) are too numerous and complex to get into here. Many of these could be dropped or changed without a business-wide effect.

But I do not know any "serf" farmers. It is a pretty good life for most, even with the farm programs. I don't know a farmer who doesn't have a gross worth of over $1 million. In fact, most I know have savings and investment capital in the $200,000 and up range even with the failing stock market. All this for three or four months of hard work and long days every year. A few I know are out-and-out millionaires (though they are the minority). And most hate the vast majority of government programs (but most approve of the insurance and disaster programs).

You talking to me?
I'm one of the few here who will readily admit when I'm wrong. I don't know what you are referring to, but it probably wasn't me.

"keeping inept farmers in business"
Government subsidies do that in all sectors, not just in agric. It is one of the main reasons why the government shouldn't do it. Another would be because it's considered immoral by some to steal money from one person and give it to an enept one. But government do that all the time because they are.....immoral.

I also like your comment about 'play your cards right'. This is exactly what all government programs do, they reward guys who can 'game the system' like that. And it's ruining the country.

At the heart of it
All of my posts are about ending subsidies, but doing it sensably. Using the chainsaw is going to do irreparable harm where a couple of surgeries should leave the patient in better shape than before.

Depends on the market.
They cater to Italians.

"While the water buffalos did not originate in Italy, the milk of the water buffalo has produced a unique and rich cheese product. The buffalo mozzarella cheese product has a status as a geographic indication, since it is produced locally in seven provinces in Central-Southern Italy. Unfortunately producers from other regions of the world have attempted to copy the cheese by producing bland imitations, or by mimicking and combining it with the milk of cows. This case study will provide clarification around the origin, production, and trade protection of this delicious delicacy."

http://www.american.edu/ted/mozzarella.htm

If the government would allow dairies to sell raw milk, they would find solid local market.

That is what farmers need to learn how to do, sell products their customers want.

Oportunity costs
Why take a risk on a non-subsided product?

I milked cows for 10 years from age 9 to 18 so I understand how confining subsidies can be. It was like being on welfare.

When in the next dairy cow slaughter?
I hear there are too many cows again.

And there is a GOOD REASON why it must be done the way you suggest; Newton’s 1st Law applied to Man
You must be knowing that Newton’s First Law of Motion is also known as the Law of Inertia.

Man is mostly a creature of habit. This doesn’t mean he is an automation. It only means that the more accustomed each man is to a specific routine (both PHYSICAL and MENTAL), the more difficult it is to call upon his Volition (and Free Will) to take a different path. And, since each man eventually dies in a few decades, many people may not achieve the goals they set for themselves, EVEN if they change course. This is more so, the later in life that the change starts.

Too many people in our society, are too accustomed to Government as a provider of “good”, instead of “our” agent for punishing the “bad”.

That’s why, we need a Political Leadership that expounds clearly the Goal (A Government restricted to ONLY punishing Rights’ violators based on pre-declared Objective Standards) and then explains why it cannot be achieved overnight and why it must be achieved in gradual steps.

The value of a philosophy is independent of the political affiliation of the philosopher
>“…if Bush was no small government Republican, who has ever been?... Certainly not Ron Reagan…I guess we'd have to go back to Calvin Coolidge to find the kind of guy you wish we had.”

If we are looking for “a return to our ideals”…how about George Washington? Or James Madison? Why limit your search to recent Republicans?

Besides, why do you care what their party affiliation was? Good ideals are good ideals, and bad ideals are bad ideals, whether championed by Democrats, Republicans, or Whigs. Right? Or does your dislike of Republicans color your view of ideology?

>“If Katrina had hit on his (Calvin Coolidge's) watch, he'd be fiddling while Rome burned. Even though only the federal government would have had pockets deep enough to mitigate a disaster on such a scale, Cal would have just said "Sorry folks. None a my business. Good luck with that."”

Correction – replace “only the government would have had pockets deep enough” with “only the government would have fingers long enough and strong enough to reach into enough pockets”

As for your guess at Cal’s estimation of what is and isn’t his business, I guess I would have to agree with Cal. The president’s job description is found in the Constitution, Article II, if you’re interested. I see nothing in there about providing home insurance to selected populations at taxpayer expense.

>“Think of all the money we'd have saved just by telling that unlucky bunch to shove off! Buncha losers.”

When the Chicago Fire burned one third of the city to the ground in 1871, the city quickly rebuilt, with private investment, and no federal aid. In 1900, a hurricane obliterated the thriving port city of Galveston Texas. No federal aid was provided. When San Francisco was ravaged by earthquake and fire in 1906, the federal government sent one million dollars in aid, while insurance companies paid approximately 250 million in damages. I’m not holding these disasters up as models of how things should be handled – there really is no good way to handle them. I’m simply pointing out that without federal aid, valuable real estate WILL be re-developed, if it makes economic sense to do so. In comparison, with federal aid, taxpayers assume the financial risks, and developers and owners take on high risk endeavors that do not make true economic sense. Hence, New Orleans will be rebuilt, once again below sea level. And next time, it will be assumed, with valid precedent, that the federal government (you and me) will pay for the losses. (Remind me again, which group is the “Buncha losers”?)

For my personal edification...
Thanks. It's nice to have somebody who can not only give his opinion - there is plenty of that here, myself included - but back it up with real world experience and figures.

So, while I have you on the line, explain to me a bit more about futures. My simplified understanding was simply that you are buying (or selling) tomorrow's crop at a fixed price today. But apparently there is much more to it than that.

>"If you consistantly produce 14% protien or higher with good gluten and drop numbers you can get $7 on the futures market, but those things depend on growing conditions and if you have a futures contract you lose it if your crop doesn't meet those standards. Then you are back selling on the regular market. The futures market is often more risky than the regular day markets."

I thought the reason you sold futures was to reduce your exposure to fluctuating prices? Am I way off? And how do you lose your futures contract? What conditions are included? Please excuse my ignorance.

niche markets only help a few
It is one reason that most farmers don't butt all their eggs (wheat, corn, chickens) in that basket. While the water buffalo works for a few to sell cheese to to italians and Italian restaurants, there isn't enough demad there for 20,000 daries to go into full production in that market.

The ostrich ranches, for example, originally did well as there is a niche market for their meat (mostly on the west coast I believe), their hide (ostrich skin boots) and for their eggs (mostly decorative). Those who got in later had no market and drove prices below basic costs. The same has happened with most of these niche market operations.

The fact is that most farmers/ranchers in my area do diversify, but keep most of their operation in the commody with the best and longest track record. Cattle, pigs, sheep, wheat, barley. They are also actively involved in "value added" products (a local pasta plant, bio-diesel plant, beef jerky operation, etc.). A few get involved in these niche products, and the majority get burned, so they don't ge too deeply involved.

"That is what farmers need to learn how to do, sell products their customers want."

You are kidding. You don't want bread, pasta, meat, potatoes, rice, flour, sugar, vegetable oil, produce, nuts, breakfast cereal, eggs, milk, cheese, or anything else anyone eats?

You are comparing "hobby" farms or small scale opertions to the people who actually provide 85% of everything you get in a grocery store. with the hobby farms I agree, I would even go further and say they need to provide something to customers local, or at least close by, as shipping can be a profit killer.

We sold our milk to Frigo
They gave us a better deal than LoL, but we had to meet higher quality standards.

Farmer's should contract directly with producers for quality products.

Stop Pauled
"All this for three or four months of hard work and long days every year."

You'll have school teachers quitting their 8 month jobs and moving back to the farms. Better to have city folk continue to believe that Old MacDonald is still getting up before dawn every day to milk the cows or deliver the lambs, or remove the unnecessary parts from the male piglets, or whatever.

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