Become A Friend

Enter your email address:

Delivered by FeedBurner

Add to Google

This form does not yet contain any fields.
    « New Data: Greece Slides Into Even Deeper Recession | Main | Washington Post Exposé: "Top Secret America" »
    Wednesday
    Aug112010

    US Farming Subsidies:Cost US Taxpayers Billions, Drive Developing World Into More Poverty & Support Corporate Farms

    The US has been criticized by the international community for decades for heavily subsidizing agriculture, which drives the prices of commodities to artificially low levels making it harder, if not impossible for farmers from the developing world to compete with the US exports. It has long been argued that the farming subsidies used by the West, especially the US, the EU and Japan have cost billions of dollars in lost revenue to the developing world, driving those nations into even deeper poverty.

    Cotton Fields, Image Source: USDA

    US farmers who benefit from the subsidies and are assured a minimum floor price for their crops as well as additional government payment, can sell their crops at such low prices in the global markets, that in order to match that price, farmers in the countries without such government backing have to take a huge loss.

    The Western governments' subsidized agriculture effectively drives farmers in poorer countries out of business and forces those countries to buy food from the Western countries, because it is cheaper than the food produced in their own country. This cycle of supply and demand ensures that there is always market for commodities from the developed world in the developing world.

    Nicholas Kristof wrote an interesting article in the NYT in July 2002, in which he says: "The U.S., Europe and Japan spend $350 billion each year on agricultural subsidies (seven times as much as global aid to poor countries), and this money creates gluts that lower commodity prices and erode the living standard of the world's poorest people. "These subsidies are crippling Africa's chance to export its way out of poverty," said James Wolfensohn, the World Bank president, in a speech last month. 

    Mark Malloch Brown, the head of the United Nations Development Program, estimates that these farm subsidies cost poor countries about $50 billion a year in lost agricultural exports. By coincidence, that's about the same as the total of rich countries' aid to poor countries, so we take back with our left hand every cent we give with our right. "It's holding down the prosperity of very poor people in Africa and elsewhere for very narrow, selfish interests of their own," Mr. Malloch Brown says of the rich world's agricultural policy."

    The DDR (Doha Development Round), a WTO sponsored initiative of trade agreement aimed at eliminating global trade barriers, which has been in negotiations since 2001, has been stalled indefinitely mainly due to refusal by the US, the EU and Japan, to modify their farming subsidies, while the developing nations like China, Brazil, India, and South Africa are fiercely opposed to the agricultural subsidies of the West. 

    Just as recently as June 17, the US reached a settlement with Brazil, over it's disputed subsidized cotton program. Brazil has been fighting with the US at the WTO for years, arguing that the cotton subsidies provided by the US government make the playing field uneven and unfair for other nations to trade in the global markets. According to a federal government report, just since year 2000, the US farm subsidies for cotton production have averaged $3.5 billion per year. The WTO ruled in favor of Brazil in 2002, and again in 2007. The US lost another appeal in 2008, prompting it to finally settle this case in June by agreeing to pay almost half a billion $$ to Brazil, over the next several years. 

    Not only have the US farming subsidies cost the rest of the world a fortune, it's utility within the country is dubious as well. Washington DC based EWG (Environmental Working Group) provides extensive data on the subject which indicates that the subsidies benefit only a small portion of the farming community in the US with big corporate farms being the biggest beneficiaries. Case in point: the agricultural business that received the single highest subsidy ($3,983,921) from the USDA (US Department of Agriculture) in the year 2009 is not a 'small farm in need of economic assistance from the government', but the American Peanut Marketing Association (APMA). 

    Ken Cook of EWG explains: "Washington paid out a quarter of a trillion dollars in federal farm subsidies between 1995 and 2009, but to characterize the programs as either a "big government" bailout or another form of welfare would be manifestly unfair – to bailouts and welfare. 

    With the passage of the 2007 energy bill and 2008 farm bill, Congress has managed to devise an interlocking maze of subsidies that, taken together, force taxpayers to spend billions of dollars no matter what the condition of the farm economy. First off are the so-called "direct payments" that go out to farmers and landowners even if crop prices and farm profits are setting record highs–and most such records have been set in the past few years–or even if the recipient plants no crop at all. Direct payments have averaged around $5 billion per year since 2005.

    The cost to taxpayers of yet another subsidy subsystem, the federal crop insurance program, mushroomed from $2.7 billion in 2005 to $7.3 billion in 2009, precisely because (crop) prices were high. The cost of crop insurance goes up as crop prices increase because the government's premium subsidies, and its subsidies to crop insurance companies for administrative and operation costs, are tied to the cost of policies–and policy expenses rise with crop prices. And since it is taxpayers who pay a good portion of crop insurance claims, the costs we incur for any crop losses climb along with crop prices.

    The USDA Headquarters In DC, Image Source: Wiki

    Even after the bitterly contested new health insurance reforms eventually take effect, most crops could fairly be said to have better coverage than many people in this country–and it's single-payer coverage, at that (the single payer, taxpayer, being you). Small wonder that since 1995, America's public option-only crop insurance program has cost taxpayers $35 billion.

    EWG began its research and computer analysis on what has become the Farm Subsidy Database some 17 years ago with the goal of to answering a simple question: who is receiving the money? When the database first went online, in 2004, it left no confusion about where the bulk of the billions in taxpayer subsidies went: to the wealthiest and largest farm operations in the country.  

    And let there be no mistake: while some critics may argue that farm subsidies should be eliminated altogether, EWG has always maintained that they have a place, should be focused on small to mid-sized farming operations with demonstrated economic need, and should have limits to prevent large farms from accumulating such a disproportionate share of the benefits. 

    Nor does it make any sense to expect struggling farmers in developing countries to compete against both our farmers and our treasury to scrape together a living in globalized commodity markets. 

    From 1995-2009 the largest and wealthiest top 10 percent of farm program recipients received 74 percent of all farm subsidies with an average total payment over 15 years of $445,127 per recipient – hardly a safety net for small struggling farmers. The bottom 80 percent of farmers received an average total payment of just $8,682 per recipient. 

    Despite claims of reform, many of the top subsidy recipients in this (year's) update are the same operations we've seen before. Six of the top 10 recipients of commodity payments in 2009 were also in the top 20 in both 2007 and 2008. Of the top 20, 8 were in the list all three years, and 3 more were in 2009 and one other year. In contrast to the public fury over billion-dollar bailouts of Wall Street banks, all 20 top recipients in 2009 received more than $1 million each, several with multi-million-dollar hauls. And this is only one year's worth of corporate handouts that have gone on for decades.

    Three of these repeat offenders did quite well in 2009. California's SJR Farms received $2,069,453, Louisiana's Balmoral Farming Partnership received $1,910,834 and Arizona's Gila River Farms received $1,711,444. Federal subsidies flow to a favored few crops as well as a favored few farmers. Over seventy percent ($170 billion over 15 years) of farm subsidies supported the production of just five crops: corn, wheat, cotton, rice and soybean. Just four of those same favored five: corn, wheat, cotton, and soybean accounted for over 70 percent ($25 billion over 15 years) of the cost of crop insurance.

    The vast majority of farm subsidies go to raw material for our industrialized food system, not the foods we actually eat. Even less money goes to support the production of the fruits and vegetables that are the foundation of a healthy diet.

    In 2009, a full 60 percent of farm subsidies flowed to States represented by Senators serving on the Senate Committee on Agriculture, Nutrition, and Forestry. Congressional Districts represented on the House Committee on Agriculture received 37 percent of all farm subsidies that year. Members representing four out of the top five Districts in terms of farm subsidies serve on the House Agriculture Committee. Is it any wonder it is an uphill climb to reform farm subsidies? Ten states, Texas, Iowa, Illinois, Kansas, Minnesota, North Dakota, Nebraska, California, South Dakota and Missouri, accounted for 56 percent of total subsidies in 2009."

    Many economists and other experts have long argued against the farming subsidies and have asked the government to scrap and or reform these subsidies, but the political will to stand up to the powerful farming lobby is in short supply in DC. 

    ~ Gauri

    Reader Comments

    There are no comments for this journal entry. To create a new comment, use the form below.

    PostPost a New Comment

    Enter your information below to add a new comment.

    My response is on my own website »
    Author Email (optional):
    Author URL (optional):
    Post:
     
    All HTML will be escaped. Hyperlinks will be created for URLs automatically.