The Bright Side of Farm Subsidies

“Agriculture is one of the last successful manufacturing industries that the United States has, and our agricultural products are something the whole world wants,” said Preston. “For an economy to do well, you must produce or build something. Agriculture does just that and it creates lasting value. Most all farm profits go straight back into the local community. We continue to invest in our futures and the futures of our children and grandchildren by building infrastructure. It seems very silly to attack the one economical segment that lets us compete in the global economy.”

With everyone wanting to reduce the budget deficit and come out of the recession, much attention has lately been focused on subsidies, especially farm subsidies. The arguments I have heard against supplementing farm income is that farmers are getting too rich and keeping commodity prices low contribute to obesity.

Working for the agricultural industry for several years, my canned answer on subsidies has always been, “we need to make sure farmers stay in business.” If a farmer cannot survive natural disasters from weather or pests, or prices that do not pay their bills, they will go out of business. That farm land and food production will likely be gone forever. Our growing population cannot afford to have fewer farmers producing our food.

I will be honest, while that answer seemed simple enough I admit I don’t know a whole lot about farm subsidy programs. I do know, however, that sending my hard earned tax dollars to farmer is something I can feel really good about, compared to the many other federal budget items.

My curiosity led me to some pretty interesting facts which made me even more confused about why some politicians in Washington think eliminating farm subsidies will help the budget deficit.

Did you know that the total United States Department of Agriculture budget for 2010 was 1.48% of the total federal budget? Only a fifth of that currently goes to farm support payments. Our farmers receive less than a third of a percent of the total budget. How will eliminating those programs make a dent in our spending?

I also talked with agricultural economists and one of my favorite farmers on this subject to perfect my new answer on why farm subsidies are important. Here are some things that Richard Preston, a first-generation grain farmer from Glendale, Ky., says about farm assistance. By the way, he left a career in science to pursue a love of farming. He has a PhD in theoretical chemistry, attended Berkley and Yale, and worked as a laser physicist at Los Alamos. So you could say he is a pretty smart guy.

“Direct payments have a positive effect on the value of land,” said Preston. “If they are eliminated, not only will it lower enterprise assets, but will affect the local government which relies on value-based property taxes to operate. Lowering asset values does not sound like a good thing if you want to come out of a recession.”

More important to farmers is crop insurance programs.

“If those risk management programs were reduced or eliminated, I believe it would send our food production system into chaos,” said Preston. “Lending organizations would not be willing to provide capital to farmers without crop insurance, and modern farming requires incredible input costs.

“I have a mid-sized farm, about 2,000 acres, and it costs me about $1 million to operate each year. Last year, I had a bad crop, but my neighbor 5 miles away had a good crop. Without insurance, I would not have been able to continue doing business.”

“There is a huge amount of volatility and risk in farming. Making sure that the costs of food production are more stable leads to more stable food prices.

“Agriculture is one of the last successful manufacturing industries that the United States has, and our agricultural products are something the whole world wants,” said Preston. “For an economy to do well, you must produce or build something. Agriculture does just that and it creates lasting value. Most all farm profits go straight back into the local community. We continue to invest in our futures and the futures of our children and grandchildren by building infrastructure. It seems very silly to attack the one economical segment that lets us compete in the global economy.”

Thank you, Richard!

I know there are many opposing viewpoints to subsidies (not just farm subsidies) and if you are interested in getting another viewpoint, feel free to go find it. Again, this is probably one of the few places where I can feel good about sending my hard-earned tax dollars go.

So, the new, more educated, answer to why we subsidize our farmers is this:

“Farm support programs not only keep farmers in business, but also help maintain land values, stabilize food prices, and improve local, rural economies. Removing these programs will not only affect our food supply, but society as a whole.”

“Support payments to farmers represent less than one half of a percent of the total federal budget, yet agriculture is responsible for one-sixth of our nation’s economy While wanting to get rid of ‘subsidies’ may be the popular thing to do in Washington right now, I don’t see how reducing farm programs will have a big impact on the overall budget.”