Tag Archives: subsidies
Farm Subsidies: A Welfare Program For Agribusiness
t’s one of the most widely reviled federal programs. So why is Congress fighting to save farm subsidies? By The Week Staff | August 10, 2013 Most farmers are wealthier than the average American, with a household income of $87,289 in 2011 — 29 percent higher than the $67,677 average for all U.S. households Why is the farm bill so controversial? Critics contend that the subsidies it hands out are wasteful, illogical, and counterproductive — a welfare program for millionaires and giant agribusinesses. Over the last decade, the farm bill has cost taxpayers more than $168 billion. In theory, the program uses loans, price supports, and payments to protect family farmers from the fickle fluctuations of weather, price, and economic conditions, so that their businesses remain stable and Americans are ensured a steady supply of affordable food. In practice, the program keeps food prices high, costing consumers billions, while funneling most of its aid to giant agribusinesses and wealthy farmers. About 75 percent of total subsidies go to the biggest 10 percent of farming companies, including Riceland Foods Inc., Pilgrims Pride Corp., and Archer Daniels Midland. Among the “farmers” who get federal subsidies are Bruce Springsteen (who leases land to an organic farmer), Jon Bon Jovi (who owns bee colonies), former President Jimmy Carter, and billionaire media mogul Ted Turner. “The typical farmer has literally millions of dollars of wealth,” said Dan Sumner, an agricultural economist at the University of California, Davis. What about the average farmer? He’s doing pretty well too. Despite droughts and high temperatures, farmers have enjoyed record crop-production levels and prices, as well as double-digit increases to the value of their land for the third year in a row in 2013. In fact, most farmers are wealthier than the average American, with a household income of $87,289 in 2011 — 29 percent higher than the $67,677 average for all U.S. households. And yet many still get taxpayer dollars to protect their incomes. In fact, the farm bill pays some farmers not to grow crops — in order to avoid oversupply that would drive food prices down for the rest of us. “Only an evil genius could have dreamed this up,” said Scott Faber, vice president for governmental affairs at the Environmental Working Group. How did the program start? Subsidies originated during the Great Depression and the Dust Bowl catastrophe of the 1930s, when there was a genuine fear that the nation’s agricultural sector was on the brink of collapse. At that time, about a quarter of the country’s population lived in rural areas, and tens of thousands of American families found themselves literally in danger of “losing the farm.” So President Roosevelt pushed through the Agricultural Adjustment Act, which pegged crop prices to their historic highs and introduced the policy of paying farmers not to produce. It was supposed to be a “temporary solution to deal with an emergency,” as Secretary of Agriculture Henry Wallace put it. But in 1949 the Agricultural Act was made permanent, and — more than six decades later — a version of that same legislation still exists today. Why not reform the program? Congress tried that in 1996, with the Freedom to Farm Act, which removed price supports and grain management in an attempt to let the free market dictate prices. That reform didn’t last long. As commodity prices fell and farmers began to complain, lawmakers caved in and introduced several new programs that continue today. They include the much-criticized “direct payments” to farmers — checks written regardless of market conditions or the farmer’s crop yields — and the controversial crop insurance program, which critics say has encouraged widespread fraud. In that program, taxpayers pick up 62 percent of any farmer’s insurance premiums and help fund payouts if a claim for crop damage is made. Why not kill subsidies altogether? Politics. The farm lobby has immense power in Washington, thanks to its generous contributions to congressional campaigns and political parties, and to the large number of legislators from farm states — most of them Republican. Democrats have also traditionally supported the farm bill because it contains food stamp funding. This year, that partnership broke down, when House Republicans passed a version of the farm bill that strips the legislation of its food stamp provisions for the first time since 1973. President Obama responded by threatening to veto any legislation that doesn’t include food stamp funding. At the moment, the situation is at a stalemate. What’s likely to happen? A deal will probably get cut that will keep farm subsidies fairly intact. The House version of the bill, in fact, contains some of the most generous farm spending in history: While ending direct payments, the legislation channels $8.9 billion into an expanded crop insurance program, which already ballooned from $1.5 billion in 2002 to $7.4 billion by 2011. In the House bill, moreover, the farm subsidies that used to expire every five years are made permanent. “It’s hard to understand how anyone in the House who calls himself a conservative could support this, but many did,” said Chris Chocola, president of the free-market-oriented Club for Growth. “They’re locking in historically high commodity prices at taxpayer expense.” New York City’s ‘farmers’ New Yorkers wouldn’t know it, but they live in a city of farmers. Over the last decade, the farm bill has paid out millions of dollars in subsidies to more than 1,500 city residents — 374 on the plush Upper East Side alone. They aren’t receiving payments for farms in the city, but for property they own elsewhere. Recipients include Mark F. Rockefeller, a fourth-generation heir of the famous family who was paid $342,634 to not farm from 2001 to 2011, so that his land in Idaho could return to its natural state. Other top New York farmers include a managing director at Wells Fargo bank, and a neurologist in Queens. “Payments are going to people in Manhattan who simply have invested in farmland and are about as far away from farmers as one could imagine,” said Craig Cox, senior vice president for agriculture and natural resources at the Environmental Working Group. “That should really make people wonder what on earth has happened to the farm program.” Continue reading
Are Subsidies for Bioenergy Necessary?
By Kolby Hoagland | August 02, 2013 When subsidies are discussed in the media there is often a negative connotation behind their assessment. Politicians face constant scrutiny for approving “government handouts” that are alleged to be unnecessary and wasteful. The bioenergy sector has numerous subsidies that it utilizes to better compete with the fossil fuel sector, which have a far longer run as mature industries and also receive considerable subsidies of their own . Today’s DataPoints looks at what happens when a subsidy is removed, reinstated… removed again, and reinstated again and that might give us insight into their need for the healthy growth of our industry. Over the last four years, the biodiesel industry has experienced an intermittently implamented $1 dollar per gallon blender’s tax credit from the federal government to that is meant to spark growth. In spite of the on again/ off again incentive, the biodiesel industry remains relatively healthy, even eclipsing the one billion gallons per year production mandate set by the EPA . The chart below shows monthly biodiesel production in the U.S. from Jan of 2009 to May of this year with the periods that the blender’s credit was allowed lapse. After the credit was first allowed to lapse in 2010, production decreased considerably and remained low. During the second lapse in 2012, production was up and down even reaching production milestones. There is not a clear trend on whether the subsidy is necessary from this simple analysis. To better understand the production swings and how much they were caused by the expiration of the subsidy, I reached out to Ron Kotrba from Biodiesel Magazine . Ron explained that 2010 was a complex time for biodiesel markets not only because of the lapse in the credit. The delayed implementation of RFS2, which did not occur until mid-2010, and the 2009 enactment of import tariffs by the EU caused further disruption to U.S. production beyond the loss of the federal credit during 2010. The reaction by producers to the loss of the credit in 2012 further supports the notion that the credit alone does not kill or keep the industry alive. During this second lapse of the credit in 2012, biodiesel production rose to record setting heights, peaking at 100 million gallons in May, a monthly level only reached three times previously. Production levels in 2010 and 2012, while the credit had lapsed, were not similar enough to draw illuminate conclusions of the potential need for the credit to keep the biodiesel industry alive. There is little doubt that the biodiesel blender’s $1 per gallon tax credit and other bioenergy subsidies spur production. Yet, whether the subsidy is needed for the survival of the industry is far more complex in its answer given the numerous influences on energy markets. However, if we look to the fossil fuel sector to help us anwer whether subsidies for bioenergy are necessary, the answer is inherently ‘yes,’ subsidies should be a permanent part of the funding structure for the long-term health and growth of the bioenergy industry. Continue reading
EU ‘Millionaire’ Farm Subsidies Likely To Stay
21 June 2013 EU ‘millionaire’ farm subsidies likely to stay By Roger Harrabin Environment analyst Stuart Meeson says subsidies enable farmers to meet the growing world demand for food Stuart Meeson is a rather happy farmer. It looks as though the 1m-euro subsidy for the farm he manages in Lincolnshire will remain intact under current EU reform plans. The European Commission wanted to cap single farm payment subsidies at 300,000 euros (£257,000; $397,000) a year, but governments led by the UK and Germany are reported to have crushed that proposal. Big farmers are often the most efficient, they said, and should not be penalised for that. The UK and Germany have many big farms, efficient at producing food intensively, and the big landowners are a powerful lobby in both countries. In contrast, France has many small, traditional farms, often less efficient. It is the latest blow to the Commission’s plans, as its master scheme to radically reform the Common Agricultural Policy approaches an endgame, with key negotiations in Luxembourg next week. It is already clear that the Commission’s original proposals for “greening” the CAP – forcing farmers to earn 30% of their subsidies by protecting the environment – have been heavily watered down after resistance from big farmers. The Commission wanted farmers to safeguard pasture land, diversify crops and leave 7% of farmland for wildlife. Paler shade of green? Irish Agriculture Minister Simon Coveney, who is steering the talks, told me compromises would be needed to seal a deal, but environmentalists complain that it is again the environment that seems to have been compromised. The latest proposal from the Irish presidency suggests that a single tree in a field should qualify for the same subsidy as 200sq m (2,153 sq ft) of crop land left for wildlife. David Baldock from the Institute for European Environmental Policy told me: “Given the widespread presence of trees and hedges in several parts of Europe, it would appear likely that farmers over large areas would have to do nothing at all to qualify for their greening payment. This seems pretty outrageous, since it is meant to be a new initiative and a major change in the CAP.” It also seems that a proposal to pay farmers twice under different budget headings for the same environmental practices remains on the negotiating table. A spokesman for the Commission diplomatically said: “There is a risk of a dangerous dilution of greening. We remain optimistic that a political deal is still feasible before the end of the month.” Time is running out. The parameters of the overall budget have already been set by heads of state, with an overall cut of about 12% in the agriculture budget. Diverse land use West Yeo Farm, Devon: Will EU subsidies continue to safeguard rare habitats? The talks really matter to farmers and the countryside. I visited two farms in the UK to gauge reaction. In Lincolnshire, Stuart Meeson was cautiously optimistic. The farm he runs on behalf of a major local landowner is highly productive and profitable. He says he manages between 5% and 7% of the land for wildlife, especially to encourage grey partridges for shooting. Without the 1m-euro payments he would be tempted to put even more land into food production, he says. “We employ an awful lot of people in the area. As a farming company we need to produce food competitively for the world market. With an ever-growing population for the world, if we are going to feed it, we need some subsidies which are applied to virtually all countries.” But does he really need 1m euros a year? That remains to be decided. At the other end of the spectrum is the 29-hectare (71-acre) West Yeo Farm near Tiverton in Devon. It receives 15,000 euros a year, half of it for encouraging wildlife. The farmer, Kate Palmer, has reinstated a stretch of culm grassland, a habitat unique to the West Country, thanks to the presence of a soft sooty coal in the soil. It is grazed when the flowers are over by a herd of rare-breed Ruby Red Devon cattle. “I really believe the public is prepared to pay subsidies to keep farmland like this for our grandchildren,” she said, among the ragged robin and marsh orchids. “The farming organisations don’t seem to represent farms like ours, they seem only to be interested in the intensive farmers who have taken away our wildlife.” So how green will the greening of the CAP really be? The “trialogue” of MEPs, ministers and Commission will be wrestling over it from Monday to Wednesday. Doubtless if a deal is done it will be declared a triumph, but the details may not emerge until Thursday. Continue reading
