St. Louis Today | By Keith Mudd | December 11, 2001
Recently a great deal has been written and Web pages have been developed calling attention to subsidy payments to farmers and landowners. While farm subsidies, on the surface, look like transfer payments to farmers and landowners, they are actually corporate subsidies for agribusiness conglomerates like Cargill and Archer Daniels Midland.
This farm commodity program can be compared to the minimum wage. The federal minimum wage law sets a floor on payments by employers to workers. Suppose Congress changed this program and permitted business owners to pay whatever they wanted for a wage while requiring the worker to collect from the U.S. Treasury the disparity between the minimum wage and what his/her employer pays. In this example who is being subsidized? While the worker still earns the minimum wage, the employer is being subsidized because he receives the benefit.
The farm program functions much the same way. The support price of corn is less than $2 a bushel. The same price a bushel of corn sold for 30 years ago! But Cargill and ADM each purchased millions of bushels of corn this past fall for less than the support price because they have no competition. In the past, the farm program caused big agribusiness to pay at least the minimum price. Now, the farmer collects the difference between the support price and the Cargill/ADM price from the taxpayers. Big agribusiness receives the benefit.
Much has been written about the cost of a farm program. It is usually the intention of the writer to sway public opinion against this costly program that pays farmers when the prices of their commodities are below a predetermined price. Recently the idea of taking part of this money and diverting it to other uses such as conservation is being viewed as an alternative. Spending money on conservation is a necessity, conserving our soil and protecting our water are top priorities for every farmer. The problem is that conservation is an entirely different issue from farm subsidies.
The Environmental Working Group argues that most of the subsidies go to the largest of farmers, who in turn use it to buy out their smaller neighbors. The truth is that all farmers, regardless of size, must use the subsidy just to raise the value received for their commodity above the cost of production. In most instances, the cost of production is covered and something is left over for living expenses. In practically no instance is anything left over that would be considered a return on investment (land and equity).
As margins shrink, volume must increase to maintain a viable operation. As farm sizes have increased, smaller farmers often quit and seek off-farm employment rather than take on the additional risk to expand. In some cases, the smaller farmers are not financially able to take additional risk. If the Environmental Working Group's theory is correct, higher prices will cause the same results.
Regardless of where the income comes from, larger farmers will have the funds to buy out smaller neighbors. Therefore, it is not the subsidy that allows the larger farmers to buy out their smaller neighbor, it is the system. If Cargill and ADM had to pay for our production, the subsidy would not be necessary. If commodity prices were higher, farmers would make money from farming, would be less inclined to quit and would reduce the opportunity to expand farm size.
Most problems on the farms of rural American can be traced to one fundamental cause. The underlying problem with farm income is concentration. As our input suppliers and the purchasers of our products consolidate, they acquire market power. This market power is leveraged against the farmer when he sells his crop. As an example, our current corn stocks as a percentage of use, in other words our leftovers, are at levels that would have been rewarded with $3 a bushel corn. But corn sells for less than $2 a bushel. Cargill and ADM have no serious competition in the marketplace and the government is willing to make up the difference in this minimum price scheme.
Look somewhere else for a scapegoat; it is not the American farmer draining the United States Treasury. The real transfer of wealth is accumulating in Cargill and ADM's bank accounts.
COMMENTARY \Keith Mudd is a farmer near Monroe City, Mo.St. Louis Today:
