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Old 06-18-2018, 12:52 PM
1,025 posts, read 558,839 times
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Can a group member please explain or link me to an explanation of the current method for federal price supports of agricultural commodities?

I've been browsing through the 1946 – 1952 volume of Truman's autobiographies and I read his too brief explanation of the then Secretary of Agriculture Charles Brannan's proposed price support method. I understood his reasoning for pegging all other of farm those commodities to the price of corn. I currently don't wish to discuss that reasoning.

I'm interested in his goal to provide payments sufficient for smaller sized farms rather than providing for large-scale agricultural “factories”.
How could the federal government administer those payments to prevent large landowners from sub-dividing their acreage in manners as to qualify each sub-division to its full extent of federal benefits? Isn't in comparatively simple to conceal commercial association between individual landowners or individual enterprises leasing or owning farmland?
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Old 06-18-2018, 06:45 PM
Location: Florida
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Just shut the whole subsidy thing down. Agriculture is a business and should rise and fall like any other business.
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Old 06-18-2018, 09:33 PM
Location: Old Bellevue, WA
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Here's a link for you. As expected, it gets to be pretty complicated. From the link: "The U.S. Department of Agriculture (USDA) runs more than 60 direct and indirect aid programs for farmers...."

There are also programs like the ethanol mandates, which are not directly a subsidy, but are effectively just that.

These appear to be the two main items pertaining to price supports:

2. Agriculture Risk Coverage (ARC). This program pays subsidies to farmers if their revenue per acre, or alternately their county's revenue per acre, falls below a benchmark or guaranteed level. Generally, the lower the prices and revenues, the larger the subsidies. The program covers more than 20 crops, from wheat and corn to chickpeas and mustard seed. ARC subsidies fluctuate, but they were $3.7 billion in 2017.[SIZE=2]17[/SIZE]

3. Price Loss Coverage (PLC). This program pays subsidies to farmers on the basis of the national average price of a crop compared to the crop's reference price set by Congress. The larger the fall in a crop's national price below its reference price, the larger the payout to farmers. Since reference prices are set high, payouts are likely. The program covers more than 20 crops, and payments were $3.2 billion in 2017.

So for (2) if the revenue per acre falls below a certain level (set by Congress) the gov't makes up the shortfall. For (3) if the price falls below a certain level, again the gov't pays the farmers to make up the shortfall.

I agree that the subsidies should be eliminated. I have an uncle who is a farmer in the mid-west. He is worth millions. I don't know if he is a 1%er, but he's close. He used to buy his kids (my cousins) a new car each and every year.
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Old 06-18-2018, 09:35 PM
Location: Old Bellevue, WA
18,794 posts, read 13,576,329 times
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An interesting side note is that (3) is a similar concept to the minimum wage. Low wage workers face the exact same situation as farmers in a low price environment. Wage rates are just the price of labor. In the case of the minimum wage, gov't just sets a fiat minimum level, and makes it illegal to hire beneath that level. According to most economists, this method ends up hurting those whom it's supposed to help (the workers).

In the case of farm price supports, the market price is allowed to float up and down. But if it goes below the minimum, as decreed by gov't, the taxpayer makes up the difference to the farmers. This does positively help those whom it intends to help (the farmers). If gov't just set a fiat minimum, with no subsidy, the farmers would lose sales if the price were allowed to drop to the minimum level, but no more.

The difference is that the minimum wage is a sham proposal from politicos who are either ignorant of economics or dishonest. The farm price supports are designed by a well-organized farm lobby to positively help their constituents, namely the farmers.
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