Agricultural Subsidies: Time To Start Phasing Out Historically Harmful Policies

Alex Tiller - Wednesday, August 17, 2011

The situation of the agricultural sector in the United States has not been relieved by the government. In fact, government policies have made the problem worse. Subsidies have led farmers to overproduce, without a system to manage the excess crops that are grown. Prices fall, and farmers are left with no choice but to demand more funding - they can’t afford to run their operations based on crop sales alone. The subsidies themselves put a strain on taxpayers; a ripple effect on the overall economy results. In addition, subsidies produce pernicious effects in farmer behavior; there exists a long historical cycle of Congressional support of subsidies to farmers in this country, and plans for future reform are unnerving to the farmers who rely on them. Only a plan to phase out government payments in a staged approach will assure the well being of our existing farmers, while protecting U.S. farm markets from those countries that subsidize their agricultural sectors.

 

Problems with government agricultural policies have been endemic since the early 1930s. Farmers were encouraged to stimulate production and, at the same time, advised to restrict it due to low market demand. US subsidies to agriculture go even farther back, however. The Morrill Act of 1862 was one of the first such programs, and was followed by a barrage of programs such as the Hatch Act of 1887, the Federal Farm Loan Act in 1916, the Agricultural Adjustment Act of 1933, the 1996 Freedom to Farm law, and more recently, the much-contested subsidy laws in 2002 and 2008.

 

Perhaps the most controversial type of subsidy is direct payment to farmers. The amount of money received is calculated by historical figures and not current production. Even if the land isn’t even used for farming anymore, the Department of Agriculture still makes the payment. A report by The Washington Post in 2006 said the department spent over $1 billion in direct payments for non-farmers. Clearly there needs to be reform to some degree here; you don’t even have to agree that the government shouldn’t subsidize farms, to agree that the government shouldn’t spend farm subsidy money on non-farmers.

 

The days of subsidy may be numbered. President Barack Obama has introduced a deficit-reduction plan that includes a proposal to slash $2.5 billion in direct payments to agricultural businesses over the next 10 years. The cap on payments was reduced 25% and the income eligibility of farmers reduced. Still, just two percent of farmers would be affected by the tighter guidelines. In a report by the Center for American Progress, experts in the field say that phasing out the automatic direct payments, adding up to nearly $5 billion every year, can be applied to reducing the deficit. The savings could then be reinvested in programs that encourage the use of renewable energy and energy efficient technologies.

 

The CAP report further suggests that agricultural exports should be boosted using money that is saved, while promoting small business at the same time. A burden on farmers that has existed for so long could be lifted with a carefully orchestrated plan to phase out subsidies. The government could also benefit. An estimated $35 billion could be saved by 2020, most of which could contribute to reducing the deficit. Billions of dollars are also spent on other forms of subsidies, and phasing out direct payments is just one step on the ladder, but at least a step in the right direction. With so many farmers in economic crisis in 2011, it is important that the changes occur in stages in order for them to adjust.

 

Sources:

In Motion Magazine (http://www.inmotionmagazine.com/ra03/rethinking.html)

 CATO Institute (http://www.downsizinggovernment.org/agriculture/subsidies)

 Center for American Progress (http://www.americanprogress.org/issues/2011/04/pdf/ag_subsidies.pdf)



Busy as Bees: How Beekeeping Programs Are Reshaping Hawaiian Agriculture

Alex Tiller - Monday, July 25, 2011

The fragility of the Earth’s ecosystems is appreciated most in ecologically rich places such as Hawaii. Natural wonders stretch across majestic views and are an inspiration to many, but the small things are what make the environment conducive for human survival. Honeybees are often misunderstood creatures; most people that see them just want to avoid the insects so they don’t get stung. But bees are the highway to pollination for many plant and flower species, contributing to their survival, not to mention the beauty and allure of the Hawaiian Islands. Bee hives are natural factories for honey, a delicacy which humans consume worldwide and seem to have an insatiable appetite for. Beekeeping is both a potential career, and a source of economic growth, for Hawaii’s struggling agricultural environment.

 

An example of how lucrative beekeeping can be was recently provided by Dr. Lorna Tsutsumi, who teaches a beekeeping class at the university. Beekeeping, in fact a thriving business on the islands, is taught as a course at the University of Hawaii – Hilo (UH Hilo). When students reported on and photographed a bee colony, they realized that after nine months that 13 bee colonies had expanded from what was originally one. Thus began the Adopt-a-Beehive with Alan Wong project.

 

Inconspicuous dangers lurk for bees, such as mites and other pests. Bee colonies can easily die out if their environment is threatened or invaders such as Little Fire Ants enter their hives. The Adopt-a-Beehive project has become a success story, and the students participating in the program even got to taste their own honey. This very same honey is being added to the menu of Alan Wong’s restaurants in Hawaii, anchored by the formal establishment of the Adopt-a-Beehive with Alan Wong program through UH Hilo and the University of Hawaii Foundation.

 

The university’s College of Agriculture, Forestry, and Natural Resource Management offers two courses in beekeeping. A farm owned by the school is accessible to students who seek a Bachelor’s degree in Agriculture. By joining chef Alan Wong’s program, participants can help support research and development of better beehive practices. They also have the chance to educate the public about how Hawaii needs to sustain its own food production instead of relying on imports. The high prices of imports have raised the costs of living in the state to unacceptably high levels.

 

Potential donors have called the university in support of Dr. Tsutsumi’s beekeeping efforts. For culinary-conscious honey enthusiasts, Alan Wong will be hosting an upcoming Farmer Series Dinner during which honey from the chef’s own adopted beehive will be served. Human consumption doesn’t always have to raise environmental concerns; sometimes it is aided by conservation efforts and a desire to preserve nature’s wonders. Dr. Tsutsumi and Alan Wong’s Adopt-a-Beehive program has addressed both, while raising awareness of educational and agricultural business opportunities in a place where high-priced imports continue to plague the local economy.

 

Could you do something similar with your farm and a local restaurant in your community?

 

Sources:

Alan Wong’s Restaurants (http://www.alanwongs.com/)

University of Hawaii – Hilo (http://hilo.hawaii.edu/academics/cafnrm/lavabee/BeeHiveStandforLFAControl.php)

Adopt-a-Beehive with Alan Wong (http://hilo.hawaii.edu/blog/chancellor/files/2011/06/AW_adopt-a-bee-poster.pdf)

Living Off the Land: Farmers Profit over Housing Industry Boom and Bust

Alex Tiller - Sunday, July 10, 2011

One key to success is to be in the right place at the right time. That is especially true in business, as being in the wrong place at the wrong time can lead to a total loss. Farmers in the past have found themselves on the wrong end of this equation – for example, when land prices are high but commodity prices are low. Other times, farmers have ended up with the sweet end of the stick, Before the housing crisis of 2008, big-name companies took opportunities to buy Chicago area farmland for residential and commercial development. But in 2011, homebuilders cannot profit on land that there is no demand for, so farmers are buying it back at much lower prices than it went for 10 years ago.

 

One good example is the Baltz brothers. Bob and Ed Baltz took a multi-million dollar deal from a developer, in which the brothers sold their 600 acre property in Will County, Illinois, before the bust. The Baltz brothers sold 300 acres of land, averaging $25,000 per acre, near Chicago. They later used that money to purchase 4,000 acres in downstate counties, most of which they rented to other farmers.

 

The reason this has become so easy is because lenders cannot afford payments on the land they purchased a few years ago, when they expected to turn around and redevelop it for a huge profit. Farmland in Shorewood, Illinois that went for $65,000 an acre during the housing peak recently was bought by the Baltz brothers for $14,500 per acre. Utilities had already been built into the area as well, since it was purchased by the village in 2005 and zoned for housing development – so not only did the brothers scoop up prime farmland, the land itself is already developed to an unusual extent.

 

Many non-farmers have tapped into this strategy. While experienced farmers always have an edge, non-farmers can still rent the land to farmers. The return on these investments is satisfactory and future growth is expected. Farmers who keep a savvy eye on the price of land in their regions, and who have a good sense of what the underlying economics will actually support, are in a better position than ever to make smart deals and improve their land base, turning a profit at the same time.

 

Source:

The Olympian (http://www.theolympian.com/2011/06/23/1698973/shrewd-farmers-live-off-the-land.html)

An Organic Farm Demonstrates a Viable Business Model

Alex Tiller - Friday, July 01, 2011

Organic farming has been around in the United States for a while. It began in the 1940s but in recent years it has risen in popularity. The safety of organic food is appealing to many people, as well as the more environmentally sound practices used on these farms. Climate change and global warming are still hot topics of the day – and farmers are leading the way in showing how we can adapt our economy and our technology to new environmental realities. One thing that keeps some traditional farmers from moving to an organic approach has been the age-old question – can we make money at it? More evidence that organic farms can be profitable has been provided by the success of Full Circle Farm, which is now a multi-state organic-produce business.

 

CEO Andrew Stout started Full Circle Farm in 2001 with the help of two friends. In 2003 they expanded their operation to 53 acres, and by 2011, the Washington State-based farm had expanded its direct fruit and vegetable delivery to 16,000 customers in Washington and Idaho. With new distribution centers in Seattle and Anchorage, Alaska, Full Circle Farm is poised to grow their 400-acre operation even more.

 

The biggest multi-million dollar farm business starts with hard work. Stout and his friends worked 12 hours a day to learn everything they could about organic farming, and plan on expanding their operations further. Full Circle Farms works closely with investors and advertisers in order to maintain and expand the business.

 

While there are many Earth-savvy advocates of organic produce, organic production is a business-oriented field. Stout’s work is proof of this. Organic farming as a viable business depends heavily on following the guidelines of the Environmental Protection Agency. A select list of substances can be used to manage crops, and farmers cannot use genetic engineering or anything other than physical, mechanical, or biological methods to control pests, diseases, and weeds. Crop cultivation and rotations are used to sustain soil fertility and nutrients.

 

The growing popularity of organic farming opens potentially lucrative opportunities for farm businesses. With the right forward-looking business attitude, knowledge, and hard work, one can succeed over time. The demand for organic produce has never been higher – Full Circle Farms shows that meeting that demand with solid business fundamentals can lead to outstanding returns.

 

Sources:

The Seattle Times, http://seattletimes.nwsource.com/html/businesstechnology/2015332051_inpersonstout20.html

 

EPA, http://www.epa.gov/agriculture/torg.html#Background