It’s a cliché that farm subsidies benefit large farmers at the expense of small farmers. Now along comes Mike Smith of Truth in Food to offer a new way of looking at subsidies. And anything that challenges a cliché is good with me if it’s based on evidence.
As the chart below shows, while it’s true the largest dollar amount of farm subsidies go to the largest farms (as you would expect, since subsidies are typically tied directly to production, and production is tied directly to gross sales), looking at the microeconomic effects of subsidies on individual farms should correctly lead you to an entirely different conclusion.
For 2007 (the most current statistics) farms that received government payments and grossed less than $25,000 per year — that is, the small, part-time darlings of the authentic farming movement for which the Times Food Section reserves its most lavish praise — took in an average 75 percent of the value of the crops they raised in the form of government subsidies. For the smallest farms — those grossing less than $1,000 yearly — the percentage skyrockets to nearly 300 percent. In other words: The smallest farms that took payments from the federal government earned three times more in subsidies than the typical farmer in the size category earned in crop sales.
Compare that to farms grossing more than a million dollars annually. Farms taking government payments in that size group received two pennies in government aid for every dollar the average farm earned from crop sales. And in the largest, giant corporate farm category, that government largesse falls to less than half a percent of gross sales.
A few comments.
1. I am assuming that Mike Smith has his arithmetic right. And his graph is obviously only for farms that receive subsidies. It does not address the concern that many small farms do not get subsidies. It does however suggest that subsidizing small farms is a pricey business. And given the lack of economies of scale that is not too surprising. What is surprising to me is the huge differential between large and small subsidized farms in terms of proportion of subsidy to market value of the food produced.
2. I am strongly of the opinion that we need to seriously consider the economics of small farms before we endorse them. They have rarely been the source of food for large urban populations–and that’s what we have today–and there is surely a reason for that.
A suggestion for starters. Land is expensive, especially around cities. A farmer needs to be able to make enough to pay for that land or to offset the loss of income from investing his money elsewhere if he already owns it. And he or she needs to be able to make enough to live and put the kids through college. That is, the small farms in this example don’t come close to meeting these criteria.
And it’s very hard to see how you could on a small acreage unless you have a very high-value specialty crop. And we can’t live on high-value specialty crops alone.
3. And if you are tempted to write Mike Smith off as part of the agricultural establishment, well, isn’t it worth considering that those of us who have grown up in cities might learn something from those who have who know farming economics first hand. No reason to throw the baby out with the bathwater.
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