As I understand it, the argument is that government subsidies have driven
down the price of agricultural commodities and (concomitantly) the price of
food so far that many farmers can no longer make a living off the land.
Generally speaking, federal agricultural policy does *not* reduce commodity
prices; it raises them. I do agree, though, that price and income
regulation plays a very significant role in blowing small farmers out of
the market and off the farm.
There is a failure to distinguish between *price-reducing* incentive
payments and the price-enhancing troika of mechanisms known as (1) price
support through nonrecourse loans, (2) income support through deficiency
payments, and (3) supply management through acreage reduction, conservation
reserve, and naked antiproduction measures. Direct incentive payments as
such are quite rare; with the death of the wool, mohair, and honey
programs, they will be even scarcer. The mechanism lives on in the guise
of export enhancement -- that's right, subsidies to ship U.S. commodities
abroad using fossil-fueled vessels. Price-reducing mechanisms do exist
under federal law, but they blast farm incomes in foreign countries.
Because these farmers don't vote, the only real restraints on export
enhancement are international pressure (GATT, NAFTA, etc.) and fiscal
watchdogs who dislike the amount of direct federal spending.
Price-based income support, on the other hand, is quite popular. First,
the government sets a support price by lending funds secured only by the
value of an expected crop. If the market price is below the loan rate, the
farmer simply defaults, and the Commodity Credit Corporation takes title.
If the market price is higher, the farmer sells, repays the loan, and
pockets the difference.
But there is usually a separate mechanism for supplementing farm incomes.
The AgSec may declare a target price for, say, wheat. If the eventual
market price or loan rate per bushel (whichever is higher) falls below
the target price, all farmers participating in the wheat program will
receive a deficiency payment covering the difference. There are some
modest acreage retirement and environmental compliance requirements, but
the basic idea is allow participating farmers to characterize their overall
income as the product of their labor -- and not as a welfare payment, which
is why many farmers opposed "decoupling" as a reform that would make the
real nature of federal income support too obvious to deny.
Together, these mechanisms encourage so much live-for-today production that
the largest commercial farmers flood the market with program commodities.
That's why the federal government spends so much time and taxpayer money
devising creative supply management strategies -- tobacco acreage
allotments, peanut marketing quotas, the Conservation Reserve Program, to
name just a few. This is the element of federal farm policy that is most
often mocked as "paying farmers not to farm." If successful, this last
step gets taxpayers to spend huge amounts to suppress commodity supplies,
which in turn relieves the pressure on the nonrecourse loan and deficiency
payment initiatives but also raises food prices. Is it any wonder that the
"hunger lobby" of the 1960s and 1970s -- mostly urban, Northeastern members
of Congress -- insisted on food stamp legislation as the price for their
continued acquiescence in the conventional price-and-income programs?
So how does all this blow farmers off the land? To state the case
(over)simply: Federal farm policy rewards production at all costs.
Because each year's participation is based on the previous year's acreage
committed to a program crop, program farmers can't afford to rotate crops.
To make up the shortfall in soil nutrients, they turn to chemical
fertilizers. To enhance yield -- remember, each bushel harvested means
additional deficiency payments -- they apply chemical pesticides. Targeted
and capped payments, for reasons far too complicated to explain concisely,
do not keep the bulk of federal payments from flowing into the hands of the
largest, most industrialized farmers in the United States.
Of course, wholesale repeal of the Agricultural Act of 1949 would expose
farm prices and farm incomes to the vagaries of the commodity markets. The
farms likeliest to survive such violent swings in market prices are the
largest, the ones that are most thoroughly integrated into the
agribusiness/processing sectors of the food delivery system. Smaller farms
can survive, primarily by submitting to vertical coordination and top-down
management by seed companies and/or forward contractors. To borrow animal
farming analogies for just a moment, the former model characterizes hog
production, while the latter characterizes the poultry industry.
Either way you look at it, bigness wins. For my part, if bigness has to
win, I'd rather trust the market to discipline the terms by which
agribusiness feeds the masses than rely on the government to figure this
monstrosity out. I feel, on balance, that my consumer dollars land with
greater impact in corporate boardrooms than my votes do in congressional
offices. Perhaps not this past Tuesday, but the long-run trend will likely
bear me out.
Moral: If you really want to restore small-scale farming, you must restore
small-scale consumption and small-scale personal ambition. Now there's a
daunting chore, one that makes price-and-income farm policy look like
child's play by comparison. "Man is conceived in sin and born in
corruption. From the stench of the didie to the stink of the shroud, there
is always something." Greed will rule as long as this earth spins. Sad,
perhaps, but undeniably true.
Regards,
Jim Chen
Associate Professor of Law
University of Minnesota Law School
229 19th Avenue South
Minneapolis, MN 55455
voice: (612) 625-4839
fax: (612) 625-2011