Farm Subsidies Distort Foreign Markets, Promote Crop Overproduction, Report Says

by LaTrina Antoine

Source: Bloomberg BNA

Domestic farm subsidies in the House and Senate-passed farm bills would disrupt international markets and contribute to the overproduction of crops, according to a National Center for Policy Analysis (NCPA) report Aug. 7.

The report, “U.S. Agricultural Subsidies Harm Environment, Taxpayers and the Poor,” argued that higher subsidies, such as increased crop insurance payouts and price supports to domestic farmers, proposed in the House farm bill (H.R. 2642) and the Senate farm bill (S. 954) would limit the ability of farmers in developing countries to sell goods in the United States. The report also said increased subsidies could result in overproduction and lead to environmental degradation.

“In the end unless you reduce overall subsidies, you won’t improve the ability of farmers in developing countries to sell their crops abroad,” Sterling Burnett, a senior fellow at NCPA, told BNA Aug. 7.

According to a report from the Congressional Research Service (CRS) released July 19, approximately three-fourths of the 10 year, $44 billion to 47 billion in savings associated with the proposed elimination of current farm programs would be used to offset the cost of revising farm programs, adding permanent disaster assistance and enhancing crop insurance in both bills.

The House passed the Federal Agriculture Reform and Risk Management Act of 2013 (H.R. 2624) June 11 (134 DER A-35, 7/12/13).

The Senate approved the Agriculture Farm, Foods, and Jobs Act of 2013 (S. 954) June 10 (112 DER 2, 6/11/13)

Legislative negotiations to authorize final farm policies are still pending. Current farm policy will expire Sept. 30.

Bills Increase Government Spending

The farm bills shift government spending from a direct form of payment, such as commodity payments based on historical acreage or yield, to an indirect form of payment, crop insuance subsidies, Burnett said.

The Senate farm bill would increase crop insurance by $5 billion, and the House farm bill would increase the insurance by $9 billion over a 10-year period, the CRS report said.

“There is no other industry that gets a government bailout when prices are lower than expected,” Burnett said.