NCPA - National Center for Policy Analysis

FARM SUBSIDIES: AN UNNECESSARY FREE LUNCH

June 17, 2004

Farm households have higher incomes and greater wealth than other United States households, so why the need for $180 billion in farm subsidies from Congress? According to the Heritage Foundation, the push for subsidies is based on the perception that family farmers are poor and subject to unpredictable weather and variance in crop prices.

Researchers, however, reveal:

  • In 1999, the average farm household income was $64,437, compared to $54,842 for non-farmers; the largest subsidies are given among those with annual farm sales of more than $250,000.
  • The average net worth of a farm household in 1999 was $563,563 -- significantly higher than the national average of $88,000.
  • Farm households have lower consumption expenditures due to the lower cost of living in rural areas, the lesser need for them to purchase food from other sources, and the deduction of household bills (mortgage, utilities) as business expenses.

Moreover, ninety percent of subsidies go to only five crops (corn, rice, soybeans, wheat and cotton) out of some 400 domestic varieties. Large corporate farms are the biggest beneficiaries:

  • The top subsidy recipient, Rice Foods in Arkansas, received more farm subsidy money than 12 states combined in 2002.
  • Farm subsidies encourage consolidation in the industry as money is used to buy up small farms; hence, the number of U.S. farms has decreased from 7 million to 2 million since 1935, with the average farm size increasing from 150 acres to 500 acres.
  • Many more subsidies go to Fortune 500 companies, wealthy "hobby" farmers, and elected officials (some who sit on the Agricultural Committee); even billionaire Ted Turner has received 38 times more farm subsidies than the median farmer.

Heritage recommends that Congress phase out farm subsidies as originally planned in the 1996 "Freedom to Farm" law, replacing them with a crop insurance to protect farmers from short-term risks. The United States should pressure other countries to drop their farm subsidies as well.

Source: Brian M. Riedl, "Another Year at the Federal Trough: Farm Subsidies for the Rich, Famous and Elected Jumped Again in 2002," Backgrounder 1763, Heritage Foundation, May 24, 2004.

 

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