Americans have questions about farm subsidies – and why shouldn’t they? Americans deserve to understand what their taxes are paying for and why. So here’s the top five questions we get on a semi regular basis and the best, short answers we can provide. Do you have more questions on farm subsidies? Ask away in the comments!
1. Why should tax payer dollars fund farmers anyway?
The government got involved in helping farmers stay afloat because they were interested in food security. Our country needs to guarantee a safe, affordable, DOMESTIC food supply and not put ourselves in the position to have to import food because American farmers go out of business. The food security portion of this equation is what makes government payments to farmers different than other businesses or industries that are also reliant on weather or market conditions.
Helping farmers stay in business also supports American rural economies that are built on farming and agriculture. Without farm subsidies, rural communities would be completely desolate and Americans would be forced to urban areas to find work. In essence, farm subsidies that keep farmers in business help many more Americans that don’t farm, but live in rural communities.
2. I don’t want to pay a farmer to not farm! That’s not right!
There was a time in our history when farmers were paid to leave their land fallow. The “set aside” program sought to control supply and increase commodity prices. But we haven’t done this since the 1990s. The “set aside” program was unauthorized in the 1996 Farm Bill.
3. I don’t really understand what farm subsidies are paying for then.
Government payments to farmers currently come in the form of subsidized crop insurance. Because farming relies on the weather and is so unpredictable, farmers must insure their crops or face investing a ton of money to plant a crop only to have Mother Nature ruin their crop and leave them with no income for the year. Crop insurance protects farmers when this happens.
But private insurance companies find the proposition too risky. No private company can withstand a weather event like the 2012 drought we experienced here in IL. So the government subsidizes crop insurance, making it available for farmers and encouraging them to protect themselves.
Farmers do pay a portion of their premium AND what amounts to an average of a 20 percent deductible in the event of a loss.
(Stay tuned for a more in-depth look at crop insurance and what it means to farmers in the near future!)
4. Farmers are small businessmen and should compete in a fair and free market just like all other Americans, without government assistance.
Yes. And that would be amazing.
But consider that farming is a different business model than most. In most other small businesses, the business buys inputs at wholesale prices, builds a product or completes a service, and then determines the cost for the product or service based on the input costs. Farmers do not have this business model.
They must buy inputs at retail prices, pray for great weather, and accept whatever commodity price the market dictates for that month and year. Yes, opportunities exist for farmers to mitigate risk, but they should not and can not be compared to all other small businesses because they do not get to dictate market prices that cover their cost of production.
Also, back to the first point, guaranteeing that we have affordable access to domestic food supply is somewhat different than guaranteeing access to barbershops or photographers.
5. Farmers made so much money last year. I don’t understand why farm subsidies are still needed or even considered by Congress.
Yes, farmers did have a great year in 2013. Commodity prices were high because of the low corn supply after the drought, but farmers still grew a lot of corn. They did well and they didn’t need/use their crop insurance.
But like all American families know, you have good years and you have bad years. Farmers are well versed at saving money back from the good years like 2013, to pay for the bad years like 2014 (and probably 2015!). Government subsidized crop insurance is still needed because bad years always happen no matter how good the good years were.
If you’re still curious about farm income, read ARE FARMERS RICH here!
I am very excited to answer your questions about farm subsidies and crop insurance. Please leave a comment!
ICGA/ICMB Marketing Manager