Research Suggests Farm Subsidies are the Reason Americans Pay Higher Food Prices, Higher Taxes, Ending Small-Scale Farming while Destroying our Ecosystem:

Michael L Ashcraft
Western Governors University

Background:
Over 70 years ago, The Roosevelt administration announced the onset of government farm subsidies as a temporary emergency measure to help farmers earn a certain level of income. Although there have been dramatic efficiency upgrades within the farming industry, little change has been changed made regarding how the government funds farm subsidies. The basic idea of how government subsidies function, the government spends hundreds of millions of dollars to raise farmers incomes by raising the price of certain farm commodities. This increase in price encourages farmers to produce these subsidized commodities in large amounts, while encouraging consumers to buy them in small amounts (Armey, R. K., 1990). The result of producing large amounts while purchased amounts are low creates a surplus. Once a surplus occurs the government spends hundreds of millions of dollars encouraging farmers to discontinue producing the certain commodities, essentially subsidizing farmers not to farm. This policy creates great inefficiency, under the farm law passed in 1985, the Department of Agriculture has paid dairy farmers to kill 1.6 million cows and take five-year vacations from farming. Regulations have been enforced that have led to the squandering of 3 billion oranges, 2 billion lemons and hundreds of millions of pounds of nuts and raisins. It has rewarded crop farmers for leaving idle 61 million acres of farmland—and an area equal to all the territory of Ohio, Indiana and half of Illinois, costing taxpayers $20 billion in taxes and $10 billion in higher food prices (Armey, R. K., 1990).

This research paper investigates how industrial farming has been the cause for many small farms to quit farming altogether or sell their farms to larger farming companies. While the assumption of industrial farming being a more efficient way of farming, this research identifies problems with the sustainability of industrial farming and delves into the true inefficiencies. The research provided in this paper identifies crop yields for industrial farmers and small-scale farmers, while also identifying how government subsidies raise Americans taxes while also creating higher prices, paid for agricultural commodities. Also identified in this research is the affect industrial farming has on the ecosystem, with the large amounts of chemical fertilizers, pesticides and herbicides needed in industrial farming to ensure high crop yield, the subsequent cause of these chemicals is polluted watersheds and genetically altered crops.

End of Small-Scale Farming:
The growth of industrial farming has eroded the base of small-scale farming. Within the U.S. Government the largest agricultural farmers take the majority of subsidy payments. From 1992-2002 more than $76 billion was paid to American farmers, of that the top 10% of all subsidy recipients received 68% of the payout and the top 5% received 55% (Griswold, Slivinski, & Preble, 2006). The top 10% that receive payments are comprised of mostly fortune 500 companies, such as Riceland Foods, Archer Daniels Midland, and International Paper and other companies many do not associate with farming, Caterpillar, Chevron and Electronic Data Systems. From a taxpayer’s perspective, there is no good reason why the federal government

should continue to subsidize farmers or companies, especially those that can remain profitable on their own (Griswold, Slivinski, & Preble, 2006). Government subsidy inflation of farmland value is another reason for the erosion of small-scale farms. The largest single expense for any farmer is his land; this is where farm subsidies have the greatest impact. The more land a farmer has the larger the crop base, the greater the crop base, the larger the subsidy payment, this policy has the effect of paying subsidies to established farmers who own much of their land, while making it more difficult for younger farmers to buy or rent land to farm (Hurst, B., 1995). This is precisely the effect in most industrialized nations; fewer farmers on bigger tracts of land producing a greater share of the total food supply. Farms are using large amounts of the world's nonrenewable fossil fuels and scarce water supplies. About two-thirds of all water used worldwide goes to farming. The average U.S. farm uses 3 kcal of fossil energy to produce 1 kcal of food energy. For beef production, the ratio is 35:1. Processing foods requires lots of energy: 1,800kcal/kg for frozen fruits and vegetables, 16,000kcal/kg for breakfast cereals, and a whopping 18,600kcal/kg for chocolate. Agriculture's bounty is not reaching those most in need. Although meat consumption has doubled since 1950 among the world's richest, the poorest have seen no significant increase. Large farms drive out small ones and undermine rural communities (Adler, T., 2002) Despite this, government subsidies go disproportionately to large farms . The Farmer with declining margins, purchases his neighbors farm and expands or risks being cannibalized himself (Halweil, B., 2000).

Destruction of U.S. Ecosystem:
Industrial farming has also affected the ecosystems by polluting our watersheds and the increased use of chemical fertilizers, herbicides and pesticides has genetically changed our crops. The Environmental protection Agency composed a study that found 72% of all U.S. Rivers and 56% of lakes surveyed suffered from agriculture related pollution (Griswold, Slivinski, & Preble, 2006). For industrial farming to maintain profitability, a farm must practice single-crop planting. Single-crop planting requires increased amounts of fertilizer for the crops to grow, as a farm only produces one type of crop, that crop becomes more susceptible to disease and pest infestations also increasing the amounts of pesticides and herbicides used to maintain a healthy crop. The use of these chemicals pollutes our environment in two main ways, one is that the wasteful application of these chemicals and the fact that crops utilize them inefficiently, causing the majority of the chemicals to end up in surface or ground water due to run-off (Altiere, 1998). Large-scale agriculture systems exhibit a poorly structured grouping of farm components, with almost no relationships between crop enterprises, and among soils, crops and animals (Altiere,
1998). Meaning that if large-scale farms would practice crop rotation each season and utilized composted manure from farm livestock, they could control pest infestation, crop disease and provide nutrients back to the soil in a natural way without applying increased amounts of chemicals. In an article by Altiere, M. (1998) states that until about four decades ago, crop yields in agricultural systems depended mainly on internal resources, recycling of organic matter, built-in biological control mechanisms, and natural rainfall patterns. The safeguard for farmers was to plant more than one crop in a field as insurance against pest outbreaks or severe weather. Crop rotation increases nitrogen input naturally, while growing many types of crops over the years in the same fields suppresses insects, weeds and disease naturally (Altieri, 1998).

Higher Taxes and Higher Prices:
The largest fallacy of government subsidies is the effect on the taxpayers. Taxpayers pay for the subsidies, while paying higher prices to purchase the same crops; they are paying taxes to subsidize. According to the Organization for Economic Cooperation and Development the higher domestic food prices caused by U.S. farm programs, transferred $16.2 billion from American consumers to domestic agricultural producers in 2004 (Griswold, Slivinski, & Preble, 2006). The money paid by U.S. consumers does not include the money set aside within the federal budget each year for payment to agricultural producers . The federal sugar program guarantees domestic

producers of sugar a take of 22.9 cents per pound for beet sugar and 18 cents per pound for cane sugar, while the world spot price for raw cane sugar is currently 10 cents per pound. A study by the general Accounting office in 2000, estimated that Americans paid an extra $1.9 billion a year for sugar due to import quotas alone (Griswold, Slivinski, & Preble, 2006). According to the U.S. International Trade Commission, Americans paid an average of 23 percent higher prices for non-fat dry milk, 37% higher price for cheese and more than double the average for butter between 2000and 2002 (Griswold, Slivinski, & Preble, 2006). The shift of the food dollar away from farmers has compounded by intense concentrations in every link of the food chain—from seed and herbicides to farm finance and retailing. The merger of Phillip-Morris and Nabisco created an empire that collects nearly $0.10 for every U.S. dollar consumers spend on food products. Such a high concentration could prove to be deadly for the bottom-line, allowing agribusiness firms to extract higher prices for the products farmers buy from them, while offering lower prices for the crop they buy from the farmer (Halweil, 2000). As government intervention raises domestic prices for raw materials and other commodities, it imposes higher costs on downstream users in the supply chain. These higher costs mean higher prices for consumers, reduced global competitiveness for American exporters, lower sales, less investment and ultimately fewer employment opportunities (Griswold, Slivinski, & Preble, 2006).

The unsubsidized two-thirds of American agriculture includes more than 200 commodities, and not coincidentally, this segment is among the most profitable for farmers and the most efficient for consumers (Zinsmeister, 1995). Federal farm subsidies actually work against the interest of many farmers. Growers, especially the two-thirds who do not receive subsidy payments, pay a heavy price through lost export opportunities from high trade barriers abroad, as agricultural exporters face average foreign tariffs that are several times higher than the average tariffs on manufactured exports. If global barriers to farm trade were removed, the World Bank estimates, worldwide farm exports would be 74% higher in 2015 than they would be otherwise. American farmers would be the biggest winners: (Griswold, Slivinski, & pebble, 2006).

Comprehensive reform would mean an additional $88 billion in annual U.S. farm exports by 2015 and an additional $28 billion in farm imports, for a net of $60 billion surplus (Griswold, Slivinski, & Preble, 2006). Experience shows that American farmers can thrive in free and open markets. American farmers profitable produce non-subsidized crops without the guarantee of pries or protected markets (Griswold, Slivinski, & Preble, 2006). A farm bill with drastic cuts in subsidies and trade barriers would save U.S. taxpayers and consumers tens of billions of dollars during the next decade while potentially opening markets abroad for tens of billions more in American exports across the economy (Griswold, Slivinski, & Preble, 2006).

Conclusion:
This documentation represents how American government subsidies that were created to help raise farmers’ income, have had dramatically different affects. Research has proven that American consumers pay an absorbent amount of taxes to fund the government subsides, while also paying higher prices for the same commodities they pay taxes to subsidize. Industrial agriculture has also brought with it the use of chemical fertilizers, pesticides and herbicides due to the philosophy of single-crop planting. This singe-crop philosophy is destroying our ecosystem, eroding our soil fertility, adding chemicals to our natural watersheds and genetically modifying our food crops. Our government must cut farm subsidies drastically and force industrial farmers to be better stewards of the land. Solutions would be crop rotation, increased use of natural fertilizers, such as manure or organic compost. These two simple steps would provide natural deterrence to insect and disease while also adding important nutrients back into the soil and ensuring no chemical run-offs ending in our natural watersheds.

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