An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities on international markets. In Economics, a subsidy (also known as a subvention is a form of financial assistance paid to a business or economic sector A farmer is a person who raises living organisms for food or raw materials In Agriculture, agribusiness is a generic term that refers to the various Businesses involved in Food production including Farming, Seed A commodity is anything for which there is demand but which is supplied without qualitative differentiation across a market Examples of such commodities include wheat, feed grains (grain used as fodder, such as maize, sorghum, barley, and oats), cotton, milk, rice, peanuts, sugar, tobacco, and oilseeds such as soybeans. Agricultural (Grains and Food and Fiber Livestock & Meat Energy Precious metals Industrial metals Rare Wheat ( Triticum spp is a worldwide cultivated grass from the Levant area of the Middle East. In Agriculture, fodder or animal feed is any Foodstuff that is used specifically to feed Domesticated Livestock, such as Maize (ˈmeɪz ( Zea mays L. ssp mays) known as corn in some countries is a cereal grain domesticated in Mesoamerica Sorghum is a genus of numerous species of grasses, some of which are raised for grain and many of which are used as Fodder plants either cultivated or as part Barley ( Hordeum vulgare) is an annual Cereal Grain, which serves as a major animal Feed crop, with smaller amounts used for Oats redirects here It may mean either the common cereal oat discussed here or any cultivated or wild species of the Genus Avena. Cotton is a soft staple Fibre that grows around the seeds of the cotton plant ( Gossypium sp Milk is an opaque white liquid produced by the Mammary glands of female Mammals (including Monotremes. Rice is a Cereal foodstuff which forms an important part of the diet of many people worldwide and as such it is a staple food for many The peanut, or Groundnut ( Arachis hypogaea) is a species in the Legume family Fabaceae native to South America, Mexico Sugar is a class of edible Crystalline substances mainly Sucrose, Lactose, and Fructose. Tobacco is an Agricultural product recognized as an addictive drug processed from the fresh Leaves of plants in the genus Nicotiana.

Contents 1 Agricultural subsidies by region 1.1 European Union 1.2 Japan 1.3 New Zealand 1.4 United States 2 Benefits 3 Criticism 4 See also 5 References 6 External links

Agricultural subsidies by region

European Union

Main article: Common Agricultural Policy

See also: Intervention storage

Japan

Main article: Agriculture, forestry, and fishing in Japan

Japan is best known for having agricultural subsidies put on its rice industry, with the reasoning behind such moves being cultural. The Common Agricultural Policy ( CAP) is a system of European Union Agricultural subsidies and programmes Intervention storage is the practice in the European Union of storing quantities of produce with the aim of stabilising markets which began after the creation of the Common Agriculture forestry and fishing form the Primary sector of industry of the Japanese economy, together with the Japanese mining industry, but together

New Zealand

Until the neo-liberal reforms started in 1984 by the Fourth Labour Government, New Zealand farmers enjoyed a high level of subsidies and protectionism. The Fourth Labour Government of New Zealand was the government of New Zealand from 26 July 1984 to 2 November 1990 New Zealand is an Island country in the south-western Pacific Ocean comprising two main landmasses (the North Island and the South Island After these reforms New Zealand had the most open agricultural markets compared with anywhere else in the world.

United States

See also: Agricultural policy of the United States

The U.S. Agricultural Department is required by law (various U.S. farm bills which are passed every few years) to subsidize over two dozen commodities. Agricultural policy of the United States is the governing policy of Agriculture in the United States and is composed primarily of the periodically-renewed federal The US farm bill is the primary agricultural and food policy tool of the Federal government of the United States. Between 1996 and 2002, an average of $16 billion/year was paid by programs authorized by various U.S. farm bills dating back to the Agricultural Adjustment Act of 1933, the Agricultural Act of 1949, and the Commodity Credit Corporation (created in 1933), among others. The US farm bill is the primary agricultural and food policy tool of the Federal government of the United States. The Agricultural Adjustment Act ( enacted May 12, 1933) restricted production during the New Deal by paying farmers to reduce crop area The Agricultural Act of 1949 ( is a United States federal law (7 U The Commodity Credit Corporation, or CCC, is an agency of the U

The beneficiaries of the subsidies have changed as agriculture in the United States has changed. Agriculture is a major industry in the United States and the country is a net exporter of food In the 1930s, about 25% of the country's population resided on the nation's 6,000,000 small farms. By 1997, 157,000 large farms accounted for 72% of farm sales, with only 2% of the U. S. population residing on farms.

The subsidy programs give farmers extra money for their crops, as well as guarantee a price floor. A price floor is a government- or group-imposed limit on how low a price can be charged for a product For instance in the 2002 Farm Bill, for every bushel of wheat sold farmers were paid an extra 52 cents and guaranteed a price of 3. The Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Bill, is the most recent incarnation of U 86 from 2002–03 and 3. 92 from 2004–2007. ^[1] That is, if the price of wheat in 2002 was 3. 80 farmers would get an extra 58 cents per bushel (52 cents plus the $0. 06 price difference).

The following is the subsidies by crop in 2004 in the United States.

Commodity	US Dollars (in Millions)	Percentage of Total
Feed Grains	2,841	35. 4
Upland and ElS Cotton	1,420	17. Cotton is a soft staple Fibre that grows around the seeds of the cotton plant ( Gossypium sp 7
Wheat	1,173	14. Wheat ( Triticum spp is a worldwide cultivated grass from the Levant area of the Middle East. 6
Rice	1,130	14. Rice is a Cereal foodstuff which forms an important part of the diet of many people worldwide and as such it is a staple food for many 1
Soybeans and products	610	7. 6
Dairy	295	3. A dairy is a facility for the extraction and processing of animal Milk &mdashmostly from goats or cows, but also from buffalo, Sheep 7
Peanuts	259	3. The peanut, or Groundnut ( Arachis hypogaea) is a species in the Legume family Fabaceae native to South America, Mexico 2
Sugar	61	0. Sugar is a class of edible Crystalline substances mainly Sucrose, Lactose, and Fructose. 8
Minor Oilseeds	29	0. 4
Tobacco	18	0. Tobacco is an Agricultural product recognized as an addictive drug processed from the fresh Leaves of plants in the genus Nicotiana. 2
Wool and Mohair	12	0. Wool is the fiber derived from the specialized skin cells called follicles of animals in the Caprinae family principally sheep, but the hair of certain species Mohair usually refers to a Silk -like fabric or Yarn made from the Hair of the Angora goat. 1
Vegetable Oil products	11	0. 1
Honey	3	0. Honey is a sweet and Viscous fluid produced by Honey bees (and some other species and derived from the nectar of Flowers According to the 0
Other Crops	160	2. 0
Total	8,022	100

Source USDA 2006 Fiscal Year Budget^[2]

Benefits

The majority of the arguments in favor of agricultural subsidies are based largely on social and cultural values. Farm subsidies have the effect of transferring income from the general tax payers to farm owners. There is a common perception in many countries that farmers are among the hard working poor, thus there is often public support for using tax dollars to supplement farmers' incomes. (In most developed countries however, the majority of farm owners are not poor, and many are quite wealthy. Also, in many cases farm subsidies benefit rich farmers at least as much, and sometimes significantly more than poor farmers. )

It is also argued in some countries that without support from government, domestic farmers would not be able to compete with foreign imports. Removing subsidies would therefore drive domestic farmers out of business, leaving the country with a much smaller (or possibly non existent) agriculture industry. The loss of the domestic farming industry is often seen as undesirable on a variety of grounds, including increases in (short term) unemployment, and the loss of a traditional cultural way of life. A country that is unable to domestically produce enough food to feed its people, may also be more vulnerable to trade pressure.

Depending on the nature of the subsidies, agricultural subsidies may have the effect of increasing agricultural production and/or driving down domestic food prices. This means domestic producers would pay less for their food. It can not be argued that this makes consumers in general better off, since it was their own taxes that paid for the subsidies in the first place (see below). However, it may benefit certain consumers in particular. Compared with wealthier individuals, poor people generally pay a smaller proportion of their income in taxes, and they generally spend a larger proportion of their income on food. Thus lower food prices, financed through tax revenues, will provide larger benefits for the poor than for the wealthy. In this respect, agriculture subsidies could be considered a (very indirect) means of transferring wealth to lower income individuals. As noted below though, the net effects on national income are likely to be negative, and this would not generally be considered an efficient way of transferring money to the poor.

Agricultural subsidies, resulting in lower food prices, and domestic overproduction, can also provide benefits for the poor in other ways. In the 1960s, President Lyndon B. Johnson made food surpluses a weapon in the war on poverty. The War on Poverty is the name for legislation first introduced by United States President Lyndon B Since then, food has been donated to poor urban areas in the United States. Also, both critics and proponents of the WTO have noted that export subsidies, by driving down the price of commodities, can provide cheap food for consumers in developing countries. ^[3][4] In other cases though, export subsidies from developed countries can drive third world farmers out of business, or lower the prices they can receive for their crops, which will ultimately increase poverty in developing countries.

Some proponents of agricultural subsidies argue that they are necessary because of the fluctuating nature of the agricultural industry. Domestic crop yield can fluctuate considerably depending on the local weather. In Agriculture, crop yield (also known as "agricultural output" is not only a measure of the Yield of cereal per unit area of land under cultivation International crop prices also fluctuate considerably depending on weather and other factors affecting crop yields in foreign countries. As a result of these fluctuations in production levels and prices, there could be very large variations in farm revenues between years. Price support and income guarantees can help to smooth farmers' income over time and ensure that farmers are not required to maintain a hefty float from year to year in order to maintain a consistent income. Critics note, though, that there are other ways of smoothing income (such as insurance programs and the futures market) that do not rely on substantial government financial support. A futures exchange is a central financial exchange where people can trade standardized Futures contracts; that is a contract to buy specific quantities of a Commodity

Criticism

One criticism of subsidy comes from proponents advocating the economic theory of the free market, stating that subsidies are against the principles of free and fair trade. For example, poor store owners do not receive relief from the market and therefore neither should poor farmers. Furthermore, justification of subsidies from the uncertain nature of the weather can be countered by considering that many other areas of economy experience equivalent risks for which the free market does provide solutions (for example, insurance).

Critics of agricultural subsidies argue further that they promote poverty in developing countries by artificially driving down world crop prices. Poverty (also called penury) is deprivation of common necessities that determine the quality of life including food clothing shelter and safe Drinking water, and Developing countries are countries that haven't reached Western-style standards of democratic government free market economy industrialization social programs and human rights guaranties ^[5] Agriculture is one of the few areas where developing countries have a comparative advantage, but low crop prices encourage developing countries to be dependent buyers of food from wealthy countries. In international trade the principle of comparative advantage refers to the fact that although one country may have an absolute disadvantage with another value can be created for both So local farmers, instead of improving the agricultural and economic self-sufficiency of their home country, are instead forced out of the market and perhaps even off their land. Agricultural subsidies often are a common stumbling block in trade negotiations. In 2006, talks at the Doha round of WTO trade negotiations stalled because the US refused to cut subsidies to a level where other countries' non-subsidized exports would have been competitive. The Doha Development Round is the current trade-negotiation round of the World Trade Organization (WTO which commenced in November 2001 ^[6]

Economists strongly rebuke the benefits of reduced retail prices derived from subsidizing over-production. If the government were to subsidize car manufacturers to produce more cars then this would indeed lower the showroom price but it would be the consumer's own money collected through tax that would be used to fund the over-production. Even worse, subsidies are a deadweight loss to the welfare in the aggregate economy due to the misallocation of production spending caused by the price distortion in agricultural products. In Economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium Quality of life is the degree of well-being felt by an individual or group of people Also, in the hypothetical case that lower retail costs would outweigh the additional production costs, the manufacturers would simply lower their prices themselves until they are at a point of maximum profitability.

Others argue that the artificially low prices resulting from subsidies create incentives for mis-allocation resources, such as replacing healthier cane sugar with cheap corn syrup,^[7] replacing grasses for grazing cattle with cheaper cattle corn,^[8] and using corn as automotive fuel instead of food. Sugarcane ( Saccharum) is a genus of 6 to 37 species (depending on taxonomic interpretation of tall perennial grasses (family Poaceae tribe Andropogoneae Corn syrup is a Syrup, made using Cornstarch as a feedstock and composed mainly of Glucose. Corn ethanol is Ethanol produced from Corn as a Biomass through industrial fermentation chemical processing and distillation ^[9]

In America, critics also argue that agricultural subsidies go mostly to the biggest farms who need subsidization the least. Research from Brian M. Riedl at the Heritage Foundation showed that nearly three quarters of subsidy money goes to the top 10% of recipients. ^[10] Thus, the large farms, which are the most profitable because they have economies of scale, receive the most money. The discrepancy is only widening. Since 1990, payments to large farms have nearly tripled, while payments to small farms have remained constant. ^[11] Brian M. Riedl argues that the subsidy money is helping large farms buy out small farms. "Specifically, large farms are using their massive federal subsidies to purchase small farms and consolidate the agriculture industry. As they buy up smaller farms, not only are these large farms able to capitalize further on economies of scale and become more profitable, but they also become eligible for even more federal subsidies—which they can use to buy even more small farms. "^[12] Critics also note that, in America, over 90% of money goes to staple crops of corn, wheat, soybeans and rice while growers of other crops get shut out completely. Maize (ˈmeɪz ( Zea mays L. ssp mays) known as corn in some countries is a cereal grain domesticated in Mesoamerica Wheat ( Triticum spp is a worldwide cultivated grass from the Levant area of the Middle East. Rice is a Cereal foodstuff which forms an important part of the diet of many people worldwide and as such it is a staple food for many In Europe, for instance the Common Agricultural Policy has provisions encourage local varieties and pays out subsidies based upon total area and not production. The Common Agricultural Policy ( CAP) is a system of European Union Agricultural subsidies and programmes Although, in fairness, research has shown that small farms receive more payments in relation to value of their crops than big farms. ^[13]

Subsidies are often given in conjunction with strict laws reducing their benefit to farmers. For example, UK farmers have difficulty competing with Argentinian farmers, not only with higher labor costs, but with enforced meat traceability overheads from the same government.

See also

• 2007 U.S. Farm Bill
• Agricultural policy
• Price support
• Food price crisis
• Farm Commodity Programs: A Short Primer, a Congressional Research Service Report for Congress, June 20, 2002. The Food Conservation and Energy Act of 2008 (, also known as the 2007 U Agricultural policy describes a set of laws relating to domestic Agriculture and imports of foreign agricultural products In Economics, a price support may be either a Subsidy or a Price control, both with the intended effect of keeping the market Price of a good The years 2007–2008 saw dramatic rises in world food prices creating a global crisis and causing political and economical instability and social unrest in The Congressional Research Service (CRS is the Public policy research arm of the United States Congress. Events 451 - Battle of Chalons: Flavius Aetius ' defeats Attila the Hun. See also 2002 (disambiguation Year 2002 ( MMII) was a Common year starting on Tuesday of the Gregorian calendar.

References

External links

• Rethinking the Export-Import Bank by Aaron Lukas and Ian Vásquez
• Steel Trap: How Subsidies and Protectionism Weaken the U.S. Steel Industry
• Why Congress Should Repeal Sugar Subsidy
• Ten Reasons to Cut Farm Subsidies by Chris Edwards
• Should the United States Cut Its Farm Subsidies? - Daniel Griswold, director of the Cato Institute’s Center for Trade Policy Studies, and Bob Young, chief economist for the American Farm Bureau, debate whether the United States should be subsidizing its farmers
• Farm Security: The mohair of the dog that bites you - Comedy writer Dave Barry on farm subsidies
• You Are What You Grow - Article on farm subsidies from The New York Times. Ian Vásquez is director of the Cato Institute 's Center for Global Liberty and Prosperity Daniel T Griswold is director of the Cato Institute 's Center for Trade Policy Studies David "Dave" Barry (born July 3, 1947) is a bestselling American author and Pulitzer Prize -winning columnist who wrote a nationally
• Kick All Agricultural Subsidies (kickAAS) - a campaign run by The Guardian newspaper in the UK
• Ripe for Reform: Six Good Reasons to Reduce U.S. Farm Subsidies and Trade Barriers by Daniel Griswold, Stephen Slivinski, and Christopher Preble (September 5, 2005). The Guardian (until 1959 The Manchester Guardian) is a British Newspaper owned by the Guardian Media Group. Daniel T Griswold is director of the Cato Institute 's Center for Trade Policy Studies Stephen Slivinski is the director of Budget studies at the Cato Institute. Events 1590 - Alexander Farnese 's army forces Henry IV of France to raise the siege of Paris. Year 2005 ( MMV) was a Common year starting on Saturday (link displays full calendar of the Gregorian calendar.
• Still at the Federal Trough: Farm Subsidies for the Rich and Famous Shattered Records in 2001- a paper presented by The Heritage Foundation arguing that farm subsidies are corporate welfare and do not benefit small family farms. The Heritage Foundation is an American conservative Think tank.
• Environmental Working Group's Farm Subsidy Database

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