NCPA - National Center for Policy Analysis

Farm Subsidies Shrink Thanks to Market Forces

July 27, 2011

Land prices are way up and so are bank deposits, as high corn and soybean prices mean local farmers are making the most money in their lives.  An exception to the boom is the local office of the U.S. Agriculture Department.  The reason:  Payments from America's primary farm subsidy program, dating from the 1930s, have stopped here.  Grain prices are far too high to trigger payouts under the program's "price support" formula.  The market, in other words, has done what decades of political wrangling couldn't: slash farm subsidies, says the Wall Street Journal.

  • Though the subsidy payments always ebbed and flowed with crop prices, many economists are convinced that what is happening now is different.
  • A fundamental upward shift in crop prices is creating the real possibility that Midwestern farmers won't ever again qualify for the primary form of farm subsidy.
  • There remain other types of subsidies, which continue to pay out because they aren't linked to market prices.
  • Government checks to farmers have shrunk to about $11 billion annually -- half what they were six years ago.

The bulk of the federal subsidy money flows to farmers who are wealthier than the typical U.S. taxpayer.  The Environmental Working Group, a Washington activist organization that wants subsidy dollars shifted to conservation programs, maintains a database that shows 10 percent of farms getting 74 percent of the federal money.  Small farmers receive smaller payments simply because they work fewer acres, says the Journal.

Source: Ryan C. Henriksen, "Farm Subsidies Shrink," Wall Street Journal, July 25, 2011.

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