Value of Agricultural Subsides

In the wake of the unveiling of Obama’s stimulus package and proposed budget, farmers and agribusinesses across the nation are charged with defending the significance of farm subsidies.

Agricultural subsidies have been a staple in the industry since the 1930s. Responsible for offsetting operation costs for fuel, equipment, fertilizers and seed, as well as setting a price floor for individual markets, many farmers rely on direct payments as both a business tool and a component of overall income.

In a letter regarding Obama’s plan to the chairmen and ranking members of the agriculture and budget committees in both houses of Congress, a collective voice from 39 diverse agriculture organizations stated, “The proposed budget cuts overlook the fact that producers and lenders alike have made long-term business decisions based upon the commitment made by Congress in the five-year farm bill and thus will exacerbate the current credit crisis.”

Subsidies envelop more than 24 commodity goods produced by U.S. farmers including wheat, corn, soybeans, sugar, rice and tobacco. Payments are derived from taxpayer money and allotted to farmers regardless of production and yield amount. (The direct payment for 2008 is 85 percent of the farm’s base acreage for the crop, multiplied by the direct payment yield for the crop, multiplied by the direct payment rate for the crop).

Obama’s plan will phase out direct payments to recipients earning more than $500,000 a year throughout a three-year time span. It also sets a $250,000 cap on any form of direct payment a farmer can receive.

Significant to the subsidy sphere is the Agriculture Act of 1933. Established under President Franklin D. Roosevelt during the Great Depression, this legislation also gave birth to The Commodity Credit Corporation (CCC). The CCC is a government-owned and operated entity that was created to stabilize, support and protect farm income and prices. CCC also helps maintain balanced and adequate supplies of agricultural commodities and aids in their orderly distribution.

Opponents assert that subsidies benefit mega farms, leaving small, family-owned and operated farms by the wayside. Others assert that subsidies have contributed to excess supply of farm products and allow inefficient farms to continue to exist.

"Why should we be sending millions of dollars to the largest corporate farms in the country? That's not what a safety net is for," said Sen. Byron Dorgan, D-N.D.

Proponents of subsidies counter that direct payments are vital to a fluctuating industry and without the financial assistance received from subsidies, farming ventures could cease to exist and the food market would ultimately suffer.

What is your opinion about subsidies? Can farm operators and the food market survive in their absence or are subsidies necessary to regulate a variable industry?

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