25 February 2009

Farm Subsidies

DH sent me thing VERY interesting link on WHO gets farm subsidies. Here are some California facts:
  • $6.24 billion in subsidies 1995-2006.
  • California ranking: 10 of 50
  • 91 percent of all farmers and ranchers do not collect government subsidy payments in California, according to USDA.
  • Among subsidy recipients, ten percent collected 73 percent of all subsidies amounting to $4.55 billion over 12 years.
  • Recipients in the top 10% averaged $83,692 in annual payments between 1995 and 2006. The bottom 80 percent of the recipients saw only $1,830 on average per year.
The top recipient in California is the Farmers Rice Coop, which received payments totaling $146,174,314 from 1995 through 2006 -- all for growing rice.

You can click around to get data by crop, state, etc...

Bottom Line: Subsidies keep bad farmers in business, divert resources (labor, water, capital and knowledge) to the wrong crops, and weaken agriculture as an economic sector. The only thing they do is reinforce the iron triangle of corruption among agro-businesses, lobbyists and politicians. End the subsidies!

13 comments:

  1. "Very interesting link" indeed !

    The ownership of those receiving subsidies is concentrated in just a few family trusts ...

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  2. One thing to remember is that many of the less savory operations have a fragmented structure that allows them to fly under the radar on the EWGs database. And outside of morbid curiosity, I don't know what good this serves. I can't find out the names and locations of everyone getting disability payments or welfare.
    The truly disgusting thing is that any of the good operators would have made far more money if the subsidies were eliminated. In my case, the subsidies I am alleged to have received went directly to the merchants who bought my crops. Had the subsidies not been present, the merchants would have had to offer me a higher price. The subsidies keep the inefficient in business, depressing prices, which triggers more subsidy...you get it. The support system is a mechanism to shift risk from the producer to the taxpayer. That pleases bankers and landlords. Even if they imposed a hard cap of say, $100,000, what other welfare recipient in the nation gets that much, and how do their means compare with an average farmer?

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  3. California is 10th out of 50 among states receiving the subsidies, but I'd be curious to know how it rates in proportion to other states. I bet the top few are an order of magnitude larger in terms of the absolute total of payments in dollars, and adjusted for total production California probably has a much more favorable subsidy picture.

    In general, California is a specialty crop state in comparison to some of the commodity states, and most of our guys are hacking the market. Now, the charge of WATER subsidies in California is another matter...oops, I didn't say that.

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  4. Philip -- It seems there is a considerable difference between the kind of corporate welfare demonstrated in the EWG report and the kind of "disability and welfare" payments that you say you can't learn more about. The latter are for the most part legitimate safety net payments for those truly in need. The former are not, and certainly belong in the public domain.

    Speaking of corporate welfare, it doesn't all go to corporations. Recall the dustup between Lloyd Carter and a local Fresno Fox-TV reporter reported on by David on Feb. 15? That TV reporter's name is Ashley Ritchie. She's gotten a few bucks from Uncle Sam in connection with her cotton operations.

    http://farm.ewg.org/farm/addrsearch.php?s=yup&stab=CA&city=&zip=&last=ritchie&first=ashley&i=Search+Recipients&fullname=

    Unethical journalism at its worst.

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  5. Jerry, it would be nice to think that there is very little welfare fraud. However, a database that told you your neighbor who loved windsurfing was getting disability payments might be interesting. I am not in favor of either idea, actually.
    I fail to see the benefit of getting so specific with any of these names, except for purposes of harassment or cheap-shot "gotcha" type reporting. These payments are not illegal, they are just idiotic. Larger producers get more because they produce more. Tying these payments to production creates the political fiction that these are really price supports, or attempts to "improve" the markets, not simply welfare payments. Thus, you have a great disparity in payment amounts. Both large and small recipients are equally undeserving.
    Naming names diverts attention away from the overall folly of the farm policy, and on to the movie star or athlete who probably had no idea he was getting government dough. I don't get the "unethical" rap, but I may have missed some nuance since I don't look at TV. Lloyd Carter admitted saying those awful things, and gave a feeble and insincere apology when pressed.

    Anonymous is right; crop subsidies are a fairly minor factor in California agriculture. Midwesterners are stuck on the treadmill of growing only one or two "program" crops because their bankers won't let them diversify, and the government crop insurance program does not encourage it. California long ago learned how to manage risks and build markets, and has a great deal to show for that.

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  6. Rice is the most water-intensive major crop in the world. Why is it being grown in California, a near desert state?

    There is an abundant supply of rice available from places climatically suitable to grow it--Louisiana in the USA and Thailand overseas for instance. These places grow well beyond their domestic capacities and are able to export profitably.

    SO WHY ARE CALIFORNIANS PAYING $146 MILLION IN SUBSIDIES TO CALIFORNIAN RICE GROWERS?

    So $146 million over so many years doesn't amount to much. Tell that to the school teachers being fired right now. I thought we had a budget crisis in this state?

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  7. The rice business in California would do fine (o more likely, better) without the subsidy. The Scandinavian settlers in the Sacramento Valley found they could not grow fruit trees on the flood plain underlain by an impermeable hard pan layer. Such conditions are ideal for rice, so they started growing it. Under such conditions the water consumption of rice is far less than you imagine. The rice "borrows" water for a while (where it serves as wildlife habitat), then it goes back into the river. The area around Marysville and Colusa is no "desert", with 16" annual rainfall and abundant surface water. Go there some time.

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  8. PS: the subsidies are paid by the Feds, not the State.

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  9. Philip – You say you don’t get the “unethical” rap in connection with the fact that Ashley Ritchie has received $355,000 in subsidy payments over a 12 year period. The Society of Professional Journalists has a voluntary code of ethics which includes the following:

    
”Act Independently ----
Journalists should be free of obligation to any interest other than the public's right to know.

Journalists should:
    —Avoid conflicts of interest, real or perceived.
    — Remain free of associations and activities that may compromise integrity or damage credibility.
    — Refuse gifts, favors, fees, free travel and special treatment, and shun secondary employment, political involvement, public office and service in community organizations if they compromise journalistic integrity.
    — Disclose unavoidable conflicts.
    — Be vigilant and courageous about holding those with power accountable.
    — Deny favored treatment to advertisers and special interests and resist their pressure to influence news coverage.
    — Be wary of sources offering information for favors or money; avoid bidding for news.”

    I submit she clearly fails numbers 1 through 4, and is in possible trouble on 6 & 7; we’d need more facts.

    But this is a water blog, not a journalistic ethics blog, so let’s agree to disagree on her ethics and get back to water policy.

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  10. The value of the subsidy is capitalized into the price of the land. Land with a subsidy attached has a higher price than identical land with no subsidy.

    The banks lend money using this land as collateral, and using the value including the subsidy.

    If the subsidy goes away, the land becomes less valuable, and we have yet another segment of the banking industry in the position of holding loans where the amount of the loan is less than the value of the collateral.

    My husband and I farm. It would be great for us if the subsidies went away. We would be able to buy or rent land at a lower price. But, this isn't very likely to happen because of the loss of value to both the banks and the existing landowners.

    By the way, Farmer's Rice Coop is a marketing organization. They didn't get a subsidy for growing rice. The growers put their rice under Commodity Credit Corporation loan. The world market price fell below the loan rate. The government had the option of taking possession of a whole lot of rice or letting FRC redeem the rice at the world market rice instead of the loan rate.

    That is what shows up as the subsidy.

    Also, as a point of information, the direct payment (aka subsidy) is paid to landowners regardless of whether a crop is grown on the land. The idea was to decouple subsidy payments from cropping decisions.

    Christopher, California grows a premium product, medium grain rice. Although this rice can be produced in the South, including Lousiana, because growing conditions are less optimal in the South, the rice grown there has signficant quality problems and is not suitable/desirable for many markets where California rice is sold.

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  11. Ms. Anonymous, you are absolutely right: the insidious mechanism of subsidies inflates land prices and rents (and death taxes, too). Overall farmers are hurt while lenders and absentee landlords benefit. People who are either duped or cynical use the stalking-horse of the "family farmer" to hide behind when boosting the idea.
    Like the home-mortgage deduction and many other nice ideas that become entitlements, nobody has the political courage to take them on. God knows what new ones we will see a-bornin' over the next four years. But we have to start somewhere.
    That's another reason why better water markets can help agriculture. We would have a whole new crop to sell, one with little risk; and, done sensibly, one that might help rather than hurt our local communities. Even the banks and landlords would approve.

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  12. @Anon -- subsidies are capitalized into land values, yes, but the right thing to do is NOT to do nothing, but to phase them out over 10 years, so that the "bubble" (another one to blame on gov't policy) can deflate. Same thing with mortgage interest deductions...

    If CA rice is "better," then CA rice farmers should lobby for an end to subsidies. I haven't seen that happening, but I'd love to be wrong...

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  13. David,

    There was an attempt to phase the subsidies out over a seven year period. That was the 1996 Freedom to Farm Farm Bill. After a few years, there were emergency payments every year.

    Subsequent farm bills have come and gone without even pretending to phase out subsidies.

    So tell me why the rice growers in California would try to phase out subsidies? The subsidy is a payment based on historical production largely independent on what is grown currently. Most ground with rice base is unsuited for profitable production of fruit or veg crops.

    Besides, if one paid a premium to buy land with base attached, why would they try to destroy the value of their asset?

    We don't compete with Louisiana except under rare conditions like 2008 and 2009. For the most part, they produce a different product.

    And like, Phillip, my subsides went to my landlord and the merchants who bought the rice.

    Personally, I would likely be better off it the subsidies went away. I just don't think it will happen in my lifetime.

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