Rachel Laudan

Another way to look at farm subsidies

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.

Some facts the Times missed in its simple analysis

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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7 thoughts on “Another way to look at farm subsidies

    1. Rachel Laudan Post author

      I don’t have specific references. But I am thinking of examples such as the fresh shiitake mushroom farms that were created around (I think) Tokyo. Nearby urban market prepared to pay high prices, lots of mushrooms to a log. Great for the farmers in the right spot and for the consumers but a niche activity. I think some of the organic farms or gardens being created (again I think) in Milpa Alta come in the same category.

  1. Pingback: Food for Thought: 11 March 2011 | Kensington Kitchen

  2. schmemily

    Hi Rachel! I am really enjoyed your blog. I found it in a search for critical thinking about food–I am an educated (though poor, alas) American, and as such have read Michael Pollan and so on … and I want to know more, to explore the other side, and really understand food production better.

    So anyway, I clicked over to Truth in Food and read a bit. I found the “about” page vague, which seemed odd to me … then I googled. TIF’s “about” page mentions farmers, mechanics, scholars, and philosophers, but Mike Smith is actually a marketer, not a scholar or philosopher (or farmer). In this light, Truth in Food seems less an intellectual exercise and more a shill for big ag. This all would trouble me very little if Smith were not posing as an independent authority.

    1. Rachel Laudan Post author

      Emily, thanks for the comment. And I really appreciate that you want to explore the other side. Yes, Mike Smith, whom I have known by email for many years, is, well, I’ve always thought of him as working for agricultural journals. And I believe he is a farmer’s son.

      I’m beginning to get a bit worried by the reaction to anyone who does not post up front all their credentials as being a shill. I’ve seen this applied to several people I respect recently. (a) does everyone arguing against big agriculture always post all their relevant credentials, all the groups who support them? And (b) does the fact that someone is associated with big agriculture automatically mean they are unqualified and lack objectivity? I don’t think so. My reading is that there are very few people in big agriculture who are satisfied with the status quo.

  3. Mike Smith

    For Kensington Kitchen:
    The vertical axis is calculated by dividing the average farm payment for farms that received gov’t support in the class by the average farm sales per farm in the class, times 100. (The inner journalist in me does not care for unnecessary repetition between headline and axis labels.)
    In other words, the average farm receiving government payments in the class that sold less than $1000 in farm products per year collected three times more in government payments than the average farmer in the class made by selling farm products.

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