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They Aren’t "Farm Subsidies", But Corporate Welfare!

by AL KREBS

Amidst the continuing controversy over the question of agricultural subsidies there remains one simple fact understandably ignored by the media, repeatedly tolerated by farmers and obviously misapprehended by its neoliberal critics.

Grain farmers don’t trade grain, grain traders trade grain !!!

So when it comes to the subsidy question lets stop this silly rhetoric about “farm” subsidies and call them by their true name: corporate welfare.

As the often quoted Monroe City, Missouri farmer Keith Mudd has so succinctly pointed out in relation to organizations like the Environmental Working Group, who would throw out the baby with the bathwater when it comes to such subsidies,”the truth is that all farmers, regardless of size, must use the subsidy just to raise the value received for their commodity above the cost of production. In most instances, the cost of production is covered and something is left over for living expenses. In practically no instance is anything left over that would be considered a return on investment (land and equity).

“Most problems on the farms of rural American,” Mudd has stressed, “can be traced to one fundamental cause. The underlying problem with farm income is concentration. As our input suppliers and the purchasers of our products consolidate, they acquire market power. This market power is leveraged against the farmer when he sells his crop. . . . Look somewhere else for a scapegoat; it is not the American farmer draining the United States Treasury. The real transfer of wealth is accumulating in Cargill and ADM’s bank accounts.”

Elizabeth Becker, reporting in the September 9 New York Times (“Western Farmers Fear Third-World Challenge to Subsidies”), underscores Mudd’s analysis noting, “In the past decade, industrial-scale farmers have tipped their allegiance decisively toward the Republican Party, which supports the current system. Political contributions from agribusiness jumped from $37 million in 1992 to $53 million in 2002, with the Republicans’ share rising from 56% to 72%, according to figures compiled by the Center for Responsive Politics.

“Those commercial companies were not disappointed when President Bush signed into law last year a new farm policy that increases permanent subsidies by $40 billion a year, even though Mr. [Robert] Zoellick [U.S. Trade Representative] had promised the developing world that subsidies would be cut in this new round of trade talks.”

The end result of such economic inefficiency can be mirrored in the plight of Jerman Amente, a Nazareth, Ethiopian farmer. As the Wall Street Journal’s Roger Thurow recently reported Amente has a regular view of a jarring sight in his country as truck after truck passes by his farm carrying bags of grain from the port of Djibouti, marked in red, white and blue, which contain food aid from the U.S . Such shipments have indeed saved countless lives among the more than 12 million people made destitute by the failure of their fields and pastures.

“We really appreciate it,” the 35-year-old Amente told Thurow. “Yet he says farmers are `sad and discouraged’ that the U.S. government buys surplus grain from American farmers and sends it halfway around the world — one million metric tons already to Ethiopia — instead of first buying what Ethiopians produce. He estimated that at least 100,000 metric tons of corn, wheat, sorghum and beans, still available after local consumers have been supplied, are languishing around the country in warehouses like his, where some of his own grain has sat for eight months.

“But,” as the Journal article notes, “the U.S., the most generous donor, is bound by legislation to send its own homegrown food for aid, rather than spend cash on foreign produce, in all but the most exceptional cases. It is a mandate that supports American farmers, processors and shippers, as well as the world’s hungry. And this system, begun with humanitarian impulses in the era of Herbert Hoover, now is shaped as much by business and political imperatives tied to hunger abroad.”

The media would have us believe that the majority of farmers in the U.S. enthusiastically support such economic madness. In a recent International Trade Daily it was reported that “U.S. farm organizations on September 11 rejected demands being made by developing countries at a World Trade Organization [Cancun] meeting for industrialized countries to substantially reduce domestic support for agriculture without offering any concessions of their own.

“Bob Stallman, president of the American Farm Bureau Federation (AFBF), said that the proposal being circulated by the so-called G-21 group of developing countries, which includes agriculture powerhouses such as Argentina, China, and Brazil, is “not balanced. They want us to give, without giving anything in return,” Stallman said at a news conference.

Yet as one reads on through the 35-paragraph story the AFBF is the only so-called “U.S. farm organization” mentioned in the story. Aside from the fact Stallman’s stand reflects the AFBF’s usual jingoistic policy that is in part earning the U.S. the reputation of being the world’s economic and military bully, his remarks reflects still another betrayal by the AFBF leadership of the best interests of the American farmer.

Until the day comes, however, when its grass roots farm membership along with thousands of other family farmers make it clear to the public, the media and our elected representatives that in most cases the AFBF with its over five million members (there being only some 1.9 million farmers left in this country), is NOT the “voice of American agriculture” the perception of the American farmer, living off the taxpayer dole, will in large part be a negative one.

A far more enlightened and informed farm organization approach to the subsidy question was recently outlined by John Dittrich, Senior Policy Analyst of the American Corn Growers Association (ACGA) and a farmer from Tilden, Nebraska at the WTO ministerial meeting in Cancun.

“We urge all those interested in global food production, global family agriculture, and developing countries to read the groundbreaking research report we have brought to Cancun,” said Dittrich. He pointed to the newly released study, “Rethinking U.S. Agriculture Policy: Changing Course to Secure Farmer Livelihoods Worldwide,” by the Agriculture Policy Analysis Center (APAC), part of the University of Tennessee, a land-grant university.

“This report goes comprehensively to the heart of the ever more contentious trade issues of farm subsidies in developed countries, low world commodity prices, and global poverty.

“We ask the world community to thoughtfully review this research. It concludes that even if the difficult task of negotiating the elimination of global farm subsidies is completed, family-based agriculture will continue to spiral downward as a result of continued low commodity prices,” added Dittrich. “Farmer-oriented policies and international cooperation are the real solutions.”

Professor Daniel G. De La Torre Ugarte, Associate Director of APAC, was also in attendance to provide a detailed presentation of the study. “U.S. policies heavily influence the fate of farmers well beyond our borders. Therefore, policy addressing the needs of U.S. farmers also should recognize our larger global influence,” said De La Torre Ugarte.

“We have found conclusive evidence through our analysis that international trade policies have indeed led the way for the global downward spiral of farm prices and farm income. However, we can also predict with a significant degree of accuracy that the elimination of U.S. farm subsidies without real price-enhancing reform of U.S. policy will destroy our farm and rural economy, and — surprisingly — would perpetuate the problems facing farmers in developing counties rather than alleviate them.

“We offer a blueprint of one example of how U.S. farm policy could be reformed. This is not a farm bill proposal, but an analysis and discussion of one possible solution the serious problems facing farm families and their communities worldwide.” [See Issue #284 “Trade Negotiators Making Changes In Subsidy Levels in Developed Countries While Expecting Strong Benefits For Developing Countries May Be Disappointed With Results”]

APAC’s analysis and blueprint for discussion includes acreage diversion through short-term conservation uses and longer-term acreage reserves, a farmer-owned food security reserve, and price supports as a replacement for the current and expensive policy of direct government subsidies. It also explores the use of non-tradable energy crops as a viable alternative to short and long-term acreage diversion options. Such reform could also save billions of dollars that could be redirected toward expanded conservation and rural development programs so essential to rural America.

Likewise, a delegation from the National Farmers Union (NFU) which also has supported the work of APAC, attended the Cancun meeting. NFU argued that the push to lower commodity prices for the sake of competitiveness doesn’t work. “Food is different,” said, Robert Carlson, head of the organization’s legislative and trade committee. “Supply does not respond enough to low prices and neither does demand. Therefore, all we’re doing by lowering prices is lowering our farm income.”

National Family Farm Coalition’s president George Naylor in joining with farmers and peasants around the world in welcoming the collapse of the WTO talks stresses that while the U.S. government was misrepresenting the interests of family farmers, rural communities, and consumers in their negotiating position at Cancun, enough governments, mostly from poorer countries, stood up for their citizens in rejecting the WTO agreement.

“The collapse of these talks,” the Iowa and soybean farmer emphasized, “is a resounding rejection of the failed cheap commodity policy of the United States and European Union. Cancun will be remembered as the place where those of us who have been getting the shaft from so-called ‘free trade’ policies — protesters in the streets and government negotiators in the convention hall alike — drew the line and said ‘no more!'”

Clearly, until there is a general recognition and awareness by all famers both in the U.S. and throughout the world, that when it comes to the so-called “subsidy” issue in agriculture, they will continue to reap few if any real benefits from a program of the grain trade, by the grain trade and for the grain trade.

AL KREBS is the editor of the Agribusines Examiner, one of our favorite newsletters, where this commentary originally appeared. We encourage all of you to subscribe. He can be reached at: avkrebs@earthlink.net

 

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