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"Farm economics!"
Commentary:
Subsidies help grain cartel much more than farmers
By Keith
Mudd 12/11/2001
05:57 AM Recently a
great deal has been written and Web pages have been developed calling attention
to subsidy payments to farmers and landowners. While farm subsidies, on the
surface, look like transfer payments to farmers and landowners, they are
actually corporate subsidies for agribusiness conglomerates like Cargill and
Archer Daniels Midland. This farm
commodity program can be compared to the minimum wage. The federal minimum wage
law sets a floor on payments by employers to workers. Suppose Congress changed
this program and permitted business owners to pay whatever they wanted for a
wage while requiring the worker to collect from the U.S. Treasury the disparity
between the minimum wage and what his/her employer pays. In this example who is
being subsidized? While the worker still earns the minimum wage, the employer is
being subsidized because he receives the benefit. The choice
is not between paying subsidies to farmers, or forcing grain purchasers to pay
over the market rate. People who
oppose farm subsidies want them abolished altogether, and buyers to pay the
market rate. The farm
program functions much the same way. The support price of corn is less than $2 a
bushel. The same price a bushel of corn sold for 30 years ago! But Cargill and
ADM each purchased millions of bushels of corn this past fall for less than the
support price because they have no competition.
In the past,
the farm program caused big agribusiness to pay at least the minimum price. Now,
the farmer collects the difference between the support price and the Cargill/ADM
price from the taxpayers. Big agribusiness receives the benefit.
Much has
been written about the cost of a farm program. It is usually the intention of
the writer to sway public opinion against this costly program that pays farmers
when the prices of their commodities are below a predetermined price. Recently
the idea of taking part of this money and diverting it to other uses such as
conservation is being viewed as an alternative. Spending money on conservation
is a necessity, conserving our soil and protecting our water are top priorities
for every farmer. The problem is that conservation is an entirely different
issue from farm subsidies.
The
Environmental Working Group argues that most of the subsidies go to the largest
of farmers, who in turn use it to buy out their smaller neighbors. The truth is
that all farmers, regardless of size, must use the subsidy just to raise the
value received for their commodity above the cost of production. In most
instances, the cost of production is covered and something is left over for
living expenses. In practically no instance is anything left over that would be
considered a return on investment (land and equity). As margins
shrink, volume must increase to maintain a viable operation. As farm sizes have
increased, smaller farmers often quit and seek off-farm employment rather than
take on the additional risk to expand. In some cases, the smaller farmers are
not financially able to take additional risk. If the Environmental Working
Group's theory is correct, higher prices will cause the same results. Regardless
of where the income comes from, larger farmers will have the funds to buy out
smaller neighbors. Therefore, it is not the subsidy that allows the larger
farmers to buy out their smaller neighbor, it is the system. If Cargill and ADM
had to pay for our production, the subsidy would not be necessary. If commodity
prices were higher, farmers would make money from farming, would be less
inclined to quit and would reduce the opportunity to expand farm size. Most
problems on the farms of rural American can be traced to one fundamental cause.
The underlying problem with farm income is concentration. As our input suppliers
and the purchasers of our products consolidate, they acquire market power. This
market power is leveraged against the farmer when he sells his crop. As an
example, our current corn stocks as a percentage of use, in other words our
leftovers, are at levels that would have been rewarded with $3 a bushel corn.
But corn sells for less than $2 a bushel. Cargill and ADM have no serious
competition in the marketplace and the government is willing to make up the
difference in this minimum price scheme. Look somewhere else for a scapegoat; it is not the American farmer draining the United States Treasury. The real transfer of wealth is accumulating in Cargill and ADM's bank account. Keith Mudd
is a farmer near Monroe City, Mo.
Jim Thornton |
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