If you pay farmers not to grow crops, doesn't that actually make food more expensive by reducing supplies? Aren't the farm programs responding to political pressure from farm states that want higher crop prices?
I'm sure it's all more complicated than this, but maybe you could explain.
Sorry for the delay, I was working on presenting a short, concise answer. Let’s see how I did.
DancesWithBolsheviks asked if the government had any good reason to be involved with agriculture. The short answer is a resounding NO! It’s more complicated than that, of course, so I’ll address that after answering Wideminded’s question, because that answer lays the groundwork.
Wideminded asked, paraphrasing, “doesn’t paying farmers NOT to grow crops reduce supplies and increase prices?”.
That’s very true, it does. Feed stuffs, such as corn, respond to supply/demand very well, and quickly.
Rather than presenting it as the “paying farmers not to grow crops”, it is more accurate to say “paying farmers to control their production”. Phrasing it that way is not a ploy to slip something by the reader, but rather it helps understand what happens with the farm programs because it’s an accurate description of what actually happens.
One of the big threats facing American farmers each year is the threat over production, and the resulting low prices. However, the government can safely counting on the farmer trying to produce as much grain as he possibly can.
Farmers who are part of the farm program, and there probably isn’t a single farmer left who isn’t, can receive payment only if they agree to limit how many acres they plant to each crop, and further parts of the program have limits on how many bushels per acre receive ‘credit’ towards further subsidies. For example, if the government will provide subsidies for, say 80 bushels per acre. If the farmer grows 140 bushels, he’s on his own on that last 60. That’s a good thing for him if prices are high, not good if they are low.
Since government involvement in all phases of production and sales means prices probably aren’t normally going to go really high, and thus the incentive to produce that extra 60 bushels is reduced, the farmer limits his efforts and inputs accordingly.
Since the government can count on the farmer to produce as much as he can, all the government has to do is develop a target crop size to make sure there is enough crops to provide the correct amount of food so that the supply/demand ends up with the desired price at the supermarket. Each year the program is tweaked to adjust for all the variables, anticipated weather, disease, imports/exports, changing demands etc.
That’s a very, very rough view of how both the upper and lower limits of production are nailed down.
Imagine a herd of race horses, all of whom have one desire, to run as fast as they can.
All the riders need to do is pull on the reigns, no need for a whip. , (witness the huge increase in corn production as a result of ethanol, at least 35% in the last couple of years) That’s the American farmer, together with his problem, and the consumers benefit.
Back to DancesWithBolsheviks question about government involvement.
The problem of overproduction is real. Allowed free reign, and a reasonable profit incentive, agriculture production would jump 10% to 50% nearly overnight and cause financial ruin for everyone involved in agriculture. Ruin would spread from the farmers, to the tens of thousands who produce equipment at Deere & Co., and elsewhere, the hundreds of thousand who depend one THOSE people for a living etc.
Because of the danger of overproduction, some sort of production governor is needed. Unfortunately, over the years, that governor has been the federal government, and they have been able to manipulate all of this so that the cost of food is never an issue at the ballot box.
Some industries have developed their own governor, car makers, sugar producers, for example. (We pay at least twice what we should for sugar, possibly 3x) Farmers are so independent there isn’t going to be a farmer controlled food supply anytime soon. However, one of the side effects of the farm programs is that is slowly starving the farmers off the farm, with dwindling numbers each year.
With enormous yield increases just around the corner, that exodus is likely to accelerate, leaving American with just a few tens of thousand of farmers. At some point it’s possible that a farmer controlled governor of food production could very well begin to form.
That’s uncharted territory for us. DancesWithBolsheviks, be careful what you wish for.
A somewhat related question: Have you ever wondered why the American farmer has such a unique problem as overproduction, and the rest of the world has exactly the opposite problem? Russia, with arguably equal or better food production than we have is only recently been able to produce enough food. In Zimbabwe, the ‘bread basket’ of Africa millions are on the verge of starvation.
God has blessed all of us immeasurably. Never in the entire history of the world has such a small number of people produced so much food for so many people. Our production capabilities are so high that we can even throw production assets away with ‘natural foods’. We can ‘burn’ our foodstuffs to power our SUVs, and STILL have too much food.