Farm Subsidies to be Cut?

There has been some talk recently of cutting farm subsidies among the many other programs to see reductions in spending. For example, see this New York Times article.

Before anyone gets too excited about this, let me point out a couple of things: (1) it's not a surprise the farm subsidies might be reduced, (2) the proposed cuts are not necessarily that deep, and (3) what really matters is the long-term. Let me discuss each of these in turn.

I. First, it's not really much of a surprise the farm subsidies might be cut, for two reasons. One obvious reason is the current budget-cutting rhetoric that seems pervasive in Washington (and much of the rest of the US) right now. When recipients of subsidies are portrayed as "corporate farms" as they are in this article, then public support for farm subsidies decreases dramatically.

(By contrast, when subsidy recipients are portrayed as "family farmers," then public support actually quite high for subsidies. Which characterization of farm subsidies is correct? To some extent, both are. Certainly, many "family farmers" receive subsidies. But, in 2007, the richest 3% of farms/farmers received 32% of all direct payments, and the richest 9% of farms/farmers received 54% of all direct payments that year. Yet, some of the largest farms and biggest recipients of subsidies are indeed "family farms" -- that is, farms owned by families as opposed to corporations.)

The other reason that farm subsidies may be cut is because farm prices are high. Corn prices in the US reached over $6/bushel in April 2011. From 2000 to 2007, the price of corn in April averaged about $2.32/bushel. Wheat prices in the US reached $8.18/bushel. From 2000 to 2007, the price of wheat in April averaged about $3.45/bushel.

With prices reaching historic highs, government payments are less central to the income of farmers. Consequently, farmers and farm organizations may see government payments as less important and may expend fewer political resources protecting subsidies. Farm subsidies, then, are politically vulnerable. Importantly, though, this political vulnerability is a result of the particular political and economic context, which can and will change in the future.

II. Second, I would like to point out that the proposed cuts mentioned in the article may sound like large cuts -- $30 billion -- but this needs to be clarified and put into context.

Note, first of all, that the article states that this cut is over ten years, which means that the average annual cut would be $3 billion. While that is a sizable cut, it's still useful to know that between 2000 and 2007, government payments to farmers averaged about $17.5 billion per year and totaled about $140 billion.

In 2007, government payments to farmers totaled about $11.9 billion, according to the Economic Research Service of the USDA. A reduction of $3 billion would amount to a cut of about 25%, which is significant. But, at times I get the impression that people think farm subsidies will be cut altogether. My point is that subsidies will not likely disappear even under proposals such as Ryan's discussed in the NYT article.

III. Third, and finally, I want to point out that cutting farm subsidies in the near future does not necessarily mean that farm subsidies will permanently disappear.

This situation reminds me of the context in which the 1996 FAIR Act passed: prices were high, Republicans controlled the House and Senate, and cutting the budget became a central political focus.

And indeed, government payments to farmers were slashed in the 1996 farm bill. (See my book for a detailed discussion of the FAIR Act.) Within a few years, however, prices began to fall. By 2000, government payments to farmers increased significantly. Thus, the cuts in subsidies were temporary.

By contrast, the FAIR Act made one change that demonstrated much greater longevity: eliminating production controls, which put restrictions on what farmers could grow in terms of crops and acreage.

What was the difference between these two policies (income supports vs. production controls)? A significant political coalition in agriculture emerged to support eliminating production controls. For example, many organizations representing the interests of corn farmers pushed for this change. With such support, production controls have not returned -- regardless of price fluctuations.

The elimination of subsidies did not have the same support in agriculture. So, when prices fell in the late 1990s, there was a significant push to increase farm subsidies.

Will subsidies be cut? Perhaps. Will those cuts be permanent? Probably not.

Bernstein & Byres Award

The editors of the Journal of Agrarian Change recently announced the winner of the Bernstein & Byres Award: Me! (Go to the link and scroll down the page, then you'll see the announcement.)

This award goes to the best JAC article of the year. (This year, the prize goes to the best article in 2009.)

"The articles are judged on: (a) their quality as works of political economy; (b) their analytical
power; (c) their originality; and (d) the quality of evidence presented and its deployment."

Here is the cite and link for my article: "TheVanishing Free Market:The Formation and Spread of the British and US Food Regimes," Journal of Agrarian Change, 9(3): 315–44. (Just go to the link and scroll down a bit, then look at the PDF link.)

To see the editors' comments about the prize and my paper, look here. (Again, just scroll down and look at the PDF link.)

Aside from the self-promotion (but isn't this whole blog about self-promotion?), noting the recognition of this article is appropriate here and now as I begin to turn my attention to food crises in the world economy.

This article on food regimes discusses some of the fundamental processes that underlie the creation of the international food regime -- that is, the rules and institutions that govern the production, distribution, and price of food in the world economy.

Anyway, take a look if you have a moment. You can also download the article and brief comment for free -- that's what winning an award does for you. . .

Rising Food Prices

As you have probably heard, world food prices have been rising.

In fact, the Food and Agriculture Organization shows that food prices have been increasing steadily since last June. The FAO has tracked food prices with its Food Price Index since 1990. Over the past four years, food prices have exhibited significant instability. They peaked in June 2008, during the most recent food crisis.

More recently, however, food prices rose even higher in December 2010. But prices apparently have yet to peak, as "Global food prices have reached their highest point in 20 years" in February, according to the AP article linked above.

Food is essential individually and socially. A decrease in food security (the availability of food in a country, and the people’s access to that food) can contribute to political instability. Take, for example, food riots in Tunisia and Algeria in January.

Recognizing the fundamental importance of food -- individually, politically, socially, etc. -- makes it imperative to explore some of the factors contributing to the rise in food prices.

Over the next several weeks, I will explore some of the factors behind rising food prices.

Returning Slowly

It's been a long time, so let me try to get back into this slowly (which is better than not at all).

I saw a Long John Silvers commercial last night advertising "Pacific Shrimp." Is this in reaction to the Deepwater Horizon oil spill? (That is, we don't serve shrimp from the Gulf.) Or, is it just a coincidence?

I guess I just don't follow shrimp ads much -- so maybe "Pacific Shrimp" is a delicacy or something (found only at fastfood restaurants?).

Shirley Sherrod, the Media, and Racism and the USDA

Okay, it's been a long time as usual. But, recent politics are calling to me to make a post of some kind. The media has quite thoroughly covered the Shirley Sherrod affair. So, I won't spend much time on it. I do think that it's worthwhile to put a few links up regarding Sherrod, the media coverage, and especially the links between racism and the USDA.

This is a very good synopsis of the Sherrod affair and media coverage:
Rachel Maddow.

And, this is interesting look at some of the right-leaning media response:
Beck.

Most importantly, though, this link shares some insights about the (recent) history of racism and the USDA:
Facing South.

More posts coming soon.

Listen to the Interview

If you weren't able to hear my interview on KSPC radio in southern California but want to, then you can listen to it here.

A Radio Interview

I had an phone interview today with Tony Abraham for "Uproot," which is a program that airs on KSPC radio in southern California. The interview is suppose to air this Sunday (May 16) evening. The website lists the program in the 5-7pm time-slot, Pacific time.

The interview is about 20-25 minutes long, and focuses on my book. It's only the second radio interview I've ever given, so you'll have to forgive any errors or irritating speech habits. (The first interview I did was about 10 years ago, and I think I really stunk that one up... I think I did better this time, but we'll see.)