To Plant or not to Plant, Economics, College Term Papers.com


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Back to Subjects - Economics

To Plant or not to Plant

To Plant or not to Plant “One of the glories of American farm policy is that, whenever you think it cannot get any loonier, it promptly finds a way of doing so (United 31).” This is an accurate statement when referring to farming guidelines over the past few decades. Through the years, U.S. farmers have faced a tremendous amount of hardships whether dealing with fluctuating prices or declining incomes. What’s worse is that many of these hardships can be traced to the ever growing, not to mention fickle, legislation enacted by Congress. Farmers have always been aware of the risks involved in agricultural production. However, these risks have grown recently and farmers are being pulled out from under their blankets of family tradition in order to deal with a failing industry. Since the Agricultural Adjustment Act of 1933, the U.S. government has been subsidizing agriculture. There have been many arguments in order to justify this large government spending. First of all, advocates contend that farmers are at the mercy of the market whereas they cannot control product price as those they buy goods and machinery from do. Therefore, they are at a large disadvantage because of their pure competition status. Secondly, farmers must deal with nature’s disasters such as droughts and floods whereas most other industries don’t have this problem and therefore don’t need government help to stay afloat (Brue 655). From these concerns stemmed the parity concept, which basically stated that prices received by farmers for their goods and prices they paid for another’s goods should remain proportionate and/or constant. Whatever a farmer paid for something as compared to the value of what he got in return should remain steady regardless of market factors. The benefits of this to the farmer can be understood when looking at prices paid and received by farmers in 1999. While prices paid increased by 14 times, prices received increased by only seven (Brue 656). Another form of subsidy provided by the government was something known as price supports. This was a minimum price for goods set above average so that farmers could maintain a stable income despite market demand. Although farmers benefited from price supports, it created a loss to the consumer. They were paying a higher price while consuming less of the product. This resulted in a product surplus. Farmers supplied more than the consumer was willing to buy, therefore forcing the government to purchase the leftovers so that the price support could work. Because of this extra spending, social losses arose. Taxes increased in order to finance the government’s buying of the surplus, not to mention, government administrative costs went up to fund additional workers that put these subsidies into effect (Brue 558). Aside from additional taxes and government costs, many criticisms surfaced compelling existing subsidies to be questioned. This included, but was not limited to, the fact that price supports caused farmers to stay in agriculture who otherwise would have left for a more profitable business, and that government subsidies have traditionally benefited only those farmers producing large quantities and earning big bucks. In 1996, “the 6 percent of all farms with sales of $250,000 or more received 46 percent of all direct government subsidies (Brue 660).” This clearly shows the argument that subsidy payments destroy any chance for the poor farmer to receive substantial aid from the government. In 1996, Congress enacted the Freedom to Farm Act. This new law ended price supports for wheat, corn, barley, oats, sorghum, rye, cotton, and rice (Brue 662). It changed the policy of supporting crop prices to weaning farmers from government assistance (Wirtz 1). The objective of this legislation was to allow farmers to plant what they wanted, as much as they wanted. This provided the farmer with a tool for responding to changing crop prices. He could control the farm’s output in order to meet market demand (Brue 662). One of the provisions of the Freedom to Farm Act was transition payment. This was done to ease farmers away from government dependency at less of a financial shock. It set a schedule of fixed payments depending on a farmer’s acreage that would gradually decline over seven years. Another provision to the act gave farmers the power to switch between alternative crops. If farmer x was selling corn but the demand for wheat began to grow, farmer x could then switch his production to wheat in order to take advantage of wheat’s higher price. However, this advantage may not hold up in the long run. While looking at the series of events for a long run adjustment, it can be seen that pattern will run as follows: 1) Increase in demand for wheat. 2) Existing farms gain profits. 3) Entry of more farms into the wheat industry (provision of Freedom Act). 4) As more farms enter, supply curve shifts to the right decreasing economic profit and price of wheat. 5) Income of all wheat farmers will be reduced. Although this provision would provide for a wider variety of products and crop prices, farmers would be adversely affected in the long run scheme. Although the origins and causes for the enactment of the Freedom to Farm act are vital to its understanding, it can be said that its effects on farmers and consumers alike are essentially more important. Government is continuously trying to improve their farming policy and form new legislation to enhance their services to the public. They can better do this by studying the effects of their past decisions. Over the past five years, the U.S. has experienced the worst farm crisis since the Great Depression (Williams 8). Although in 1997 it seemed as though things were going well, 1998 came through with plummeting prices for grain and many other farm products. “Alas, farmers had already planted too many of the “profitable” crops, creating huge surpluses and sending prices even lower (United 32).” The lower farm revenues brought great distress throughout the plains while calling for repeals on the Freedom to Farm Act (Brue 663). The government responded by supplying emergency aid and “temporary” price supports out of the seven-year transition program. Recently, “the House of Representatives passed a farm bill approving the payment of $173 billion over the next ten years (roughly $70 billion more than had been budgeted for) (United 31).” Ironically, the government is now back to subsidizing the farming industry at costs much higher to the taxpayer. However, this time it is too late for many who have already lost their homes, land, and lives, as they know them to be. The Freedom to Farm Act has evolved to the Freedom to Fail Act for many farmers across the country (Wirtz 2). Many stay because they have nowhere else to go. Others stay out of sheer stubbornness and family pride. Some are smarter and urge their children to flee while they can. One father said, “There’s no reason for the kids to stay. Even they can see why we’re pushing them off. There’s no need in the world for farmers (Williams 9).” Although the after-effects of the Freedom to Farm Act have produced better crop prices for consumers, for farmers, it has been devastating. In the United States today, the suicide rate among farmers is now three times that of the national average (Williams 10). Farm stress hotlines have been set up and suicide watches created amongst friends. Local farmers call each other every day to check in and talk about their fears (Williams 9). Anecdotes about farmer suicides have emerged. “There was the rancher in North Dakota who shot himself and his last ten cows after a recent blizzard. Other farmers walk in front of combines, trying to make their deaths appear accidental so their families can receive life insurance benefits (Williams 10).” These tales are now a reality for those struggling in the farming industry. No one could have predicted these effects caused by the Freedom to Farm Act of 1996 however, it is now evident that we need to keep the American farmer afloat through subsidizing programs and price control. After all, “the ‘family farm’ is a fundamental U.S. institution and should be nurtured as a way of life (Brue 656).” For farmers this means it’s time to pull the blanket of family tradition back up, trust that the government will tuck you in, and hit the snooze button. Bibliography: References Brue, Stanley L., and Campbell R. McConnell. Economics: Principles, Problems, and Policies. New York, NY: McGraw-Hill/Irwin, 2002. “United States: Just plant dollars; Farm policy.” The Economist 361.8243 (2001): 31-32. Williams, Florence. “Farmed out.” The New Republic 221.7 (1999): 8-10. Wirtz, Ronald A. “Farm crisis: Here we go again?.” Fedgazette 11.4 (1999):1-3.

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