The economics and politics of u s agricultural policy
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The Economics and Politics of U.S. Agricultural Policy . James Dunn Pennsylvania State University. Since 1990, 17% of political contributions from agriculture have come from sugar growers. Sugar is less than 1% of agricultural output. Impact of technological change in agriculture. History.

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The economics and politics of u s agricultural policy

The Economics and Politics of U.S. Agricultural Policy

James Dunn

Pennsylvania State University


The economics and politics of u s agricultural policy
Since 1990, 17% of political contributions from agriculture have come from sugar growers. Sugar is less than 1% of agricultural output


The economics and politics of u s agricultural policy

Impact of technological change in agriculture have come from sugar growers. Sugar is less than 1% of agricultural output


History
History have come from sugar growers. Sugar is less than 1% of agricultural output

  • Started in 1930s as temporary measure

  • Political support remained after depression

  • Farm problems recur regularly

  • Lots of programs – I’ll talk about price and income programs


Economics of agricultural policy
Economics of Agricultural Policy have come from sugar growers. Sugar is less than 1% of agricultural output

  • Idea- raise farm incomes, end farm failures

  • Give one time boost

  • Doesn’t work in long run

  • Doesn’t stop farm exit

  • Subsidize large farms more

  • Subsidize rich at expense of others -average farm family has higher income and much higher wealth than the average US household


Types of policies
Types of Policies have come from sugar growers. Sugar is less than 1% of agricultural output

  • Simple price supports – create surplus that must be purchased and sold at loss – usually exported - expensive

  • Quotas – limit production – make it difficult to expand – quota gains value if sold


Price support
Price support have come from sugar growers. Sugar is less than 1% of agricultural output

Government purchases


Purchases
Purchases have come from sugar growers. Sugar is less than 1% of agricultural output

  • What do you do with the surplus you buy?

  • If you give it away what about the farmers trying to compete with free food?


Quota
Quota have come from sugar growers. Sugar is less than 1% of agricultural output


Capitalization of programs
Capitalization of Programs have come from sugar growers. Sugar is less than 1% of agricultural output

  • Farmers learn program will continue

  • Price of land and cows and other specialized assets reflects value to best farmers

  • Artificially high milk prices drive up prices of cows

  • worst farmers still lose money


Dairy cows
Dairy Cows have come from sugar growers. Sugar is less than 1% of agricultural output

  • If milk price is high, what happens to price of cows?

  • Who will pay the most?

  • Do higher cost farmers make any money?


Rentable quota
Rentable Quota have come from sugar growers. Sugar is less than 1% of agricultural output

  • Who will pay the most to rent the quota?

  • How much will they pay?

  • Who will pay the least rent?

  • How much will they pay?

  • Who makes money?

  • Quota in Canada is $20,000/cow


Cash farm income and government payments
Cash Farm Income and Government Payments have come from sugar growers. Sugar is less than 1% of agricultural output


Agricultural subsidies
Agricultural Subsidies have come from sugar growers. Sugar is less than 1% of agricultural output


Loss of markets
Loss of markets have come from sugar growers. Sugar is less than 1% of agricultural output

  • Price supports reduce competitiveness in international markets, e.g., loss of soybean exports to Brazilian producers

  • Higher prices stimulate substitution by other commodities in consumption, e.g., high fructose corn syrup (sugar)


Some important points
Some important points have come from sugar growers. Sugar is less than 1% of agricultural output

  • Very few farmers

  • House of Representatives based on population – disproportionately urban

  • Senate – two members per state – more rural interests represented

  • Often control of Congress very close

    • in 2008

    • Senate 49-49-2 (independents caucus w/ Dems)

    • House 232 -200 (3 vacant)


Congress now
Congress Now have come from sugar growers. Sugar is less than 1% of agricultural output

  • Senate –

    • 54 Democrats

    • 4

    • 6 Republicans

  • House of Representatives

    • 232 Republicans

    • 200 Democrats

    • 3 vacant


Other points
Other Points have come from sugar growers. Sugar is less than 1% of agricultural output

  • Farmers vote together

  • In a close election farm vote can be very important

  • No one wants to tell farmers no


The coalition
The Coalition have come from sugar growers. Sugar is less than 1% of agricultural output

  • Farmers

  • Consumers

  • Environmentalists

  • Other food sector participants, e.g., fertilizer companies, other agribusiness


2013 senate ag committee white democrat blue republican white both
2013 Senate Ag Committee have come from sugar growers. Sugar is less than 1% of agricultural outputwhite Democrat, blue Republican, white both


Program commodities
Program Commodities have come from sugar growers. Sugar is less than 1% of agricultural output

  • Feed grains – mostly corn

  • Oil seeds – mostly soybeans

  • Wheat

  • Cotton, rice, sugar, peanuts

  • Dairy products

  • Wool, mohair, honey, dry peas

  • 13% of Farm Bill spending


Bio fuels
Bio-Fuels have come from sugar growers. Sugar is less than 1% of agricultural output

  • Subsidies for corn from ethanol

  • Loans for bio-refineries

  • Corn and soybean prices are very high

  • Vegetable oil prices very high

  • Very little savings in petroleum use


The economics and politics of u s agricultural policy

Geographic distribution of government payments as a proportion of gross cash income from farming

Source:USDA

Source: USDA


Policy and gatt
Policy and GATT proportion of gross cash income from farming

  • Small countries walked out in Cancun.


Policy and freer trade
Policy and freer trade proportion of gross cash income from farming

  • Free trade agreement with Australia (January 1, 2005)

  • Duties on most industrial goods eliminated

  • Special treatment for agriculture, especially sugar and dairy products

  • Central American Free Trade Agreement was held up over agriculture (sugar) but passed in 2005

  • NAFTA disputes - many over agriculture (tomatoes, sugar)


Concluding comments
Concluding Comments proportion of gross cash income from farming

  • Not a big success

  • Very costly

  • Extremely important politically – domestically and internationally

  • With close elections – won’t go away –very important in government shutdown