Joe O'Sullivan at The Post reads The Rural Blog and learns that high crop prices and booming land values don't promise a revitalization of small farm towns. Big farms are "decoupling" from the local economy, skipping local middlemen and denying small towns the usual economic multiplier effect. Young people leave to find economic opportunities. Bankers do steady loan business with the big farms, but they struggle to find other business.
This article fits with my May 1 post on how large-scale mechanized agriculture hinders small-town economic growth. It also fits with Mike Knutson's suggestion that small towns need to develop more diverse economic opportunities to bring college students back home with their degrees and talents and house-buying income.
Agriculture is an important industry in South Dakota, but with ownership and production so concentrated, it won't be the kind of community-building economic engine it used to be. Governor Daugaard's small-town specialists will need some creative ideas beyond traditional farm and ranch thinking to give rural communities opportunities to grow.
Thank God for the farm programs or the aggregation of agriculture will accellerate!
Actually, Troy, it's my impression that farm subsidies (if that's what you're referring to) only contribute to the problem, with handouts concentrated at the top.
I'm with Cory on this issue. As a Republican I find a lot of good stuff on this blog.
Troy you make many good points regularly. I prefer your historical analysis. Also I think you provide a depth to many discussions. You are obviously a very thoughtful and caring person.
Limit ag payments to the equivalent of two minimum wage jobs. Huge ag payments destroy rural America as a place to actually live and work.
But, as for local merchants all across the state, I can see paying a 5% premium for local sales, or perhaps even 20%, but finding prices on tools, etc double what is available with simple internet search suggests some real marketing problems in the distribution system to stores.
On the other hand, now and then local prices may be significantly lower for electronic goods than that at Amazon for example.
Mixed bag I guess.
Cory, a few facts:
1) As a percentage of acres planted and value of crop grown, the farm program is significantly skewed to the small farmer. Looking at gross totals are deceiving.
2) There is a further disproportionate benefit to small farmers. The farm program gives certainty of minimal income. This is critical to getting a bank loan for operating capital as well as showing Debt Service Coverage on mortgage debt. It is a fact that small farmers total debt per acre planted/per bushel raised is higher than large operators. Diminish stability of income, many small farmers can't get financing. I know. I was on a bank board (First American Bank and Trust from Madison). The farm program was so much more significant for small farmers loans being approved than large operators.
3) Small farmers get a definite indirect benefit from large farmers participation in the program. Manages levels of production (and thus supply) within certain crops as well as restricting land farmed. This too provides stability to the small farmer to make planting decisions. Take the large farmer out of the program, you have placed the small farmer at a signficant disadvantage.
The irony in all this. I'm a capitalist explaining the benefits of the farm program. I'm not fully committed it is the best solution long-term for the farmer and our food supply as the program is very distorting to the market. What motivates me to respond is people who claim to like big government presenting inaccurate suppositions as if they are facts to advocate for less government involvement in agriculture.
I welcome your coming over to the capitalist side. Just be factual about the status quo.
P.S. If you can show me where my facts are wrong, I'll immediately embrace my capitalist side and advocate the end to the farm program as it currently exists.
From the Environmental Working Group analysis on who actually prospers on farm programs:
"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.
"Next are the "counter-cyclical payments" that go out when crop prices fall below a level set in law by Congress. These payments have declined from about $4 billion in 2005 to $1.2 billion in 2009, because crop prices have been higher than average over those years. That is a savings of about $2.8 billion.
""Market-loss" payments comprise another type of crop subsidy that slows to a trickle when prices are robust but can gush by the billions from the Treasury when prices dip. The last time that happened, farm subsidy costs topped $20 billion in one year.
"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 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.
"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). Taxpayer subsidized crop insurance is available to farmers if their crop is eligible for coverage in their area and provides, at no cost, 50 percent catastrophic coverage to farmers. (In 2008, just four crops–corn, cotton, soybeans, and wheat–accounted for more than two-thirds of total acres enrolled in crop insurance and for the vast majority of subsidies through the commodity programs).
"Small wonder that since 1995, America's public option-only crop insurance program has cost taxpayers $35 billion.
"One thing government subsidies reliably produce, other than ingratitude and a sense of entitlement among their recipients, is a demand for more subsidies. Commodity crop agriculture, for decades now a virtual ward of the federal government by dint of the aforementioned subsidies, offers fresh proof of that maxim each year."
http://farm.ewg.org/summary.php
Interesting, Troy. My antennae are twitching, because I think you're telling me that giving bigger subsidies to bigger farmers is good for smaller farmers, which on face sounds like a trick. That's not factual rebuttal, just gut reaction, based on my assumption that, if we're going to interfere with the market, we should focus on directly helping those who need help rather than banking on trickle-down effects.
I'm reading the following site:
http://www.farmdocdaily.illinois.edu/2011/03/progressive_farm_subsidies.html
It includes a chart that shows a consistent pattern of much bigger payments and a much larger chunk of the overall subsidy pie going to big operations. Now I don't know what dollar figure constitutes a "big" farm: $50K? $100K?
But one column of that chart shows less than 1/4 of the payments going to farms with under $100K in sales. Another column shows that less than 1.4 goes to farms with net cash income under $10K. 7.5% of payments go to farms with net cash income between 0 and $10K; 15.6% of payments went to farms that lost money.
I am intrigued by the economic argument you make, Troy, that investing in wealthy farms benefits poor farmers by stabilizing supply. If I understand correctly, you're saying that subsidies pay big farmers not to plant as much, thus leaving room in the market for small farmers to produce... is that the idea?
But I wonder: if, as you say, small farmers gain disproportionate direct benefit from subsidies (and I'll buy the notion that $5K to stay afloat means much more to a small farmer than $20K to a big farmer), and if the benefit to small farmers of subsidies paid to big farms is only indirect, might we still not get more bang for the buck if we redistributed payments to just those folks making under $10K net or losing money?
By the way, Citizens Against Government Waste (who may be a bit too corporation-friendly to make my friend list) contest the idea that subsidies help small farmers:
"the reality is that the current farm program structure helps the richest farmers get richer, but doesn’t help small farmers stay on the land. It is also costly to taxpayers and raises prices to consumers. By concentrating wealth in the hands of the few, it undermines the economy of rural America. Finally, it interferes with international commerce (which impacts the entire U.S. economy) and hurts poor farmers in developing countries." (http://www.cagw.org/assets/reports/through-the-looking-glass-reports-and-issue-briefs/2007/2007_farm_bill-_issue_brief_1.pdf)
HI Troy, How small a farm are you thinking of? I get the subsidy, but it isn't anywhere near enough to help secure operating credit. My check is a few thousand a year. If my county is declared a disaster area, that aid is more helpful. I find crop insurance a more important resource, and that is partially subsidized.
I don't buy the 5k vs 20k arguement. If I don't recieve my subisidy it won't cause enough harm to make me keep the tractor in the shed. However, $20,000 is half of the average individual's living expense for a year, according to the SD Adult Farm Business Management Program. That has got to make a difference, a person could argue it's like having a part-time job without driving to town.
There is so much irony in the farm program to make everyone's head spin. And, the irony makes the discussion much more complex than the easy bromides that seem to dominate the discussion.
For instance, your reference to the chart. It is wholly accurate but at the same time misleading for the purposes of your premise. It does not tell you the dollar of subsidy relative to acres planted/bushel raised. This is where the disporportionate subisidy of smaller farmers comes in to play.