Farm Subsidies 101

Whether the topic is obesity, climate change or even the budget deficit, there are few debates these days when U.S. farm policy doesn’t get mentioned. One popular recommendation to fix our farm policy is slashing payments to farmers entirely, or redirecting that money into other programs. Proponents of this approach claim it would encourage farmers to shift to crops other than corn or soybeans and would protect the environment. It’s an appealing concept — save money and stop promoting industrial agriculture at the same time. The problem is, when it comes to the food system, it’s never quite that simple. 

Farm programs were developed to provide a safety net for farmers to blunt the effects of wild price swings that are unique to agriculture. While the demand for food remains fairly steady, the supply of food is vulnerable to droughts, floods, pests or unusually good seasons with high yields. All of these factors can create volatility in the price farmers are paid for their crops. Other factors, like the increasing consolidation in agriculture, which has led to fewer buyers at every step of the food chain, have further complicated the market that farmers sell into and make it harder for them to get a fair price for their crops. 

Individual farmers often respond to low crop prices by planting more acres of the crop, which then increases the supply and drives prices lower. Well-designed farm programs can moderate price volatility and stabilize farm incomes by creating a floor for crop prices, stopping the cycle of overproduction. But our current farm programs do nothing to stop the downward spiral of crop prices and the resulting overproduction by farmers trying to make up for low prices with higher volume. Farm program payments are not the main reason that U.S. farmers grow lots of corn and soybeans. Farmers plant crops that are in demand by the largest buyers — graintrading companies like Cargill and Archer Daniels Midland, meatpackers and feedlots that feed corn and soybeans to livestock, and food manufacturers that use soybeans and corn in processed foods. The buyers of these crops are the real beneficiaries of farm payments, because government payments to farmers allow these buyers to pay less for the crops that are their raw materials.

Ending farm programs won’t fix the problems in our food supply. Making farm programs work better could.