FARM BILL PROJECT, Day 2 support piece -What if there were no farm subsidies?
No one believes Congress will pull the plug on farm subsidies.
But what would happen if lawmakers did end handouts that began nearly 75 years ago during the Great Depression?
Mostly good things, if New Zealand is any example.
New Zealand once subsidized agriculture, mainly dairy farmers and cattle and sheep ranchers, believing that government money was needed to prop up farmers who had to compete against counterparts from other nations that also had generous subsidies.
Faced with an economic crisis, however, New Zealand went cold turkey in 1984, ending subsidies with almost no warning. It remains the only industrialized nation in the world that has completely abandoned farm subsidies.
At first, doom-and-gloom predictions appeared accurate. Farmers organized protests as land values plummeted. Some went out of business. Unemployment rose, and rural business owners suffered as farmers stopped spending money. But hard times didn't last.
Within a few years, New Zealand's rural economy rebounded. Land prices now are higher than ever - an acre of prime farmland costs more in New Zealand than in the United States. Agriculture today accounts for 19 percent of New Zealand's gross domestic product, the value of all goods and services produced in a country. That's an increase of 5 percent since subsidies ended.
"You would find very few people in New Zealand now who would want to go back to a subsidy system," said Brian Chamberlin, former head of Federated Farmers of New Zealand, the equivalent of the Farm Bureau Federation in the United States. "I think what we have proved in New Zealand is that it's much more reliable to depend on the market and your own business acumen than it is to depend on politicians."
New Zealanders made believers out of a group of Illinois farmers who visited the Southern Hemisphere nation last year.
"By the end of the second day, well over half of them were thinking we would really be better off eliminating all subsidies," said Tamara White, who helped organize the trip on behalf of the Illinois Farm Bureau. "It was maybe down to 50-50 that they would say publicly that they would eliminate subsidies. It's a bit similar here when they are with their colleagues. They're more reticent to speak out when they're back home."
White lives in two agricultural worlds. She works as senior director of commodities for the Illinois Farm Bureau, which praised federal lawmakers last July when the House rejected a proposal that would have reduced commodity subsidies and shifted money to conservation programs. That's the sort of approach pushed by the International Food and Agricultural Trade Policy Council, an organization based in Washington, D.C., that advocates free trade and has published papers pointing out the benefits of subsidy-free agriculture. White is treasurer of that organization.
"As a farm bureau staff person, I would tell you an entirely different thing than as a person from the IPC," White said.
Rob Sharkey, who farms in Stark and Bureau counties, said he liked what he saw in New Zealand.
In the United States, the government subsidizes a handful of crops, which ties farmers' hands, Sharkey said. Not so in New Zealand.
“I wish we could get to where we were planting several different crops, instead of just the two powerhouse crops (corn and soybeans)," Sharkey said.
In New Zealand, virtually anyone who is willing to work hard can become a farmer and eventually own land, Sharkey said. But in the United States, government subsidies have helped create an industry that's practically closed to everyone except the rich or heirs of existing farmers.
Sharkey, 33, said he's hoping that high crop prices will last long enough that U.S. farmers can be weaned entirely from subsidies.
"I'm looking at farming, hopefully, another 30 or 40 years," he said. "I don't want to be where we are now at the end of my career. I don't want to be relying on subsidies to make a living like we do now."
Demarcation lines aren't always clear, as evidenced by the IPC's funding sources, which include Monsanto, Archer Daniels Midland, Cargill and other agribusinesses that have profited hugely as U.S. agriculture, thanks in part to subsidies, has become big business rather than a patchwork of small family-owned farms.
Without subsidies that distort the worldwide market price of commodities and discourage agriculture in the developing world, free traders say, the United States would produce fewer commodities. That would encourage other nations to grow more, which would open up new markets for U.S. agribusiness.
"The Monsantos of the world are generally against subsidies," said Chamberlin, a member emeritus of the IPC. "Without subsidies, farming would grow in South America and Africa. That presents big opportunities."
Subsidy supporters argue that farmers need government money even when commodity prices are high because the cost of seed, fertilizer, fuel and other necessities inevitably increases. But Chamberlin said input prices actually went down in New Zealand after subsidies ended.
"The value of the subsidies was factored into what these people charged farmers for those services -- they charge what the market will stand," Chamberlin said. "In the New Zealand situation, when farmers couldn't pay the previous prices, in nearly every instance, they reduced the charges."
In New Zealand, marginal land went out of production when subsidies ended, and the same thing would happen in the United States, Chamberlin predicted. With no subsidies, there wouldn't be as much demand for pesticides, fertilizers and herbicides, he said.
"Growing the right crops in the right place is good for the environment, and it reduces input costs and fuel costs," Chamberlin said.
Besides being much smaller than the United States, New Zealand exports most of the wool, meat and dairy products that are the foundation of its agricultural economy. And it produces little, if any, corn, soybeans, wheat and other commodities that are heavily subsidized and produced by the billions of bushels in the United States.
Chamberlin argues that such differences don't change the bottom line: If New Zealand did it, so can the United States. And with commodity prices high and the U.S. farm bill up for renewal, the timing couldn't be better.
"I think the opportunity to get the government out of farming is staring us in the face," Chamberlin said. "Those of you who are the best in the world at growing grain certainly don't need subsidies. The U.S. is huge in comparison with New Zealand. It's got the potential to be an absolute world leader in demonstrating how to farm without subsidy protection."
But no one is holding their breath.
"Farm bureau members, in general, want to believe they can be very successful and very competitive internationally without subsidies," White said. "But the gut reaction is, there are still subsidies in Europe and Japan. And there are tariffs.
"Until all of those things change, we are not going to budge."
Bruce Rushton of the State Journal-Register can be reached at 217-788-1542 or email@example.com. Matt Buedel of the Peoria Journal Star can be reached at 309-686-3154 or firstname.lastname@example.org.
FIRST FARM BILL
Farm subsidies began in 1933, when 25 percent of Americans lived on farms that were quickly going bankrupt. Financed by a tax on processing commodities, the first farm bill paid farmers for not producing crops to protect land that was fast eroding and to eliminate gluts of crops that had led to low prices. Today, some opponents of farm subsidies often say that President Franklin D. Roosevelt never intended that his New Deal farm program would become permanent. However, Roosevelt in 1935 said otherwise. The Agricultural Adjustment Administration, which administered the subsidy program much as the U.S. Department of Agriculture does today, was more than just an agency created to deal with an economic emergency, Roosevelt said.
“The simplified and more flexible … program of the future can be made to serve the permanent advantage of the producer and consumer,” Roosevelt said. “It can iron out the succession of extreme market gluts and extreme shortages which in the past have alternately wrecked farm income and penalized city people with too-high prices. It can protect the nation’s heritage of soil, help farmers to produce up to the full possibilities of profitable export and give this country the safest possible assurance of abundant food in the years to come.”