Handouts handover?

... the biggest 10pc of US farm businesses have received three-quarters of farm subsidies

SOMETHING is happening in the US Congress that may have quite profound implications for Australian agriculture.

After a century of handing out vast amounts of taxpayers’ money to farmers, a revolt is occurring. The handouts aren’t about to stop, but it is possible to envisage a future where they might.

At issue is the 2013 Farm Bill, a US$940 billion farm subsidy and food stamp bill that will set farm policy for the next five years and govern US expenditure for ten. A couple of weeks ago the House of Representatives voted 195-234 against the bill, despite it being agreed by Republican and Democratic party negotiators.

In the past, Farm Bills have faced little opposition. Mainly urban Democrats argue they are caring for their constituencies by authorising expenditure on food stamps for welfare recipients. Rural representatives, most of them Republican, believe they are similarly looking after their constituencies by creating a huge, government-funded market for food along with guarantees on commodity prices and subsidised crop insurance.

The losers are the vast majority of taxpayers who foot the bill, along with those arguably more deserving of government assistance who miss out.

The defeat arose because a block of Republicans who want to see the government shrink in size - and balance its budget - voted with a large majority of Democrats who thought the bill spent too little on food stamps.

The latter were also upset at provisions requiring recipients to take a drug test, not be convicted of felony crimes and be subject to work requirements. The price tag for food stamps, incidentally, is a mind-boggling $740 billion and now subsidises one in seven Americans.

The farm support in the bill was also generous.

Farmers would have received subsidies if the price fell to less than 85 per cent of current price support levels, which are historically high. Subsidies to high-income agribusinesses and wealthy "farmers" were maintained.

In recent years the biggest 10pc of farm businesses have received three-quarters of farm subsidies.

Hundreds of millions were earmarked for such indispensables as wood-burning heating systems, sheep and goat herder "marketing" subsidies, price controls on olive oil, and the promotion of "healthy plants". Cheap crop insurance would continue to underwrite farm incomes and it would remain illegal for a dairy producer to negotiate prices directly with a buyer.

The 2008 Farm Bill - worth $640 billion including subsidies for biofuels and nominated by the World Bank as one of three most important contributors to the 2007–2008 world food price crisis - was due to expire last year, but has been extended to 30 September.

Nobody expects the current bill to lapse, as it would mean reversion to 1940s-era price supports including a doubling in milk prices and a 40pc increase in the price of honey, as well as price targets for wheat, rice and cotton far above current market prices.

Sometime before the end of September, therefore, a Farm Bill will pass through Congress.

The question is, will the 'new broom' Republicans who advocate economic responsibility have sufficient influence to wind back industry subsidies? And for that matter, do rural voters care more about out-of-control government spending and debt than they do about farm subsidies?

Various outcomes are possible and it is difficult to know where it will end, particularly from this distance, but it is encouraging that there is now an influential group in Congress willing to tackle farm subsidies as part of reducing the enormous budget deficit.

It would make sense to keep a close watch on US politics for the next few months. From Australia’s perspective, any reduction in support for US farmers is to be welcomed, as are mooted reductions in the EU’s Common Agricultural Policy.

Our farmers are as good as any, but it’s tough when your competitors have a head start.

  • David Leyonhjelm has been an agribusiness consultant for 25 years. He may be contacted at reclaimfreedom@gmail.com
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    READER COMMENTS

    X ag Socialist
    1/07/2013 11:08:20 AM

    Disaster looming for US farmers if Congress takes there one trillion dollar over five year handout away even more courtesy of a seventy year old law will be given. Yep things are changing Dave .
    cmt
    1/07/2013 3:43:01 PM

    All talk. The real story hear is that major world powers like USA continue to provide tax payer funding and support systems to ensure agriculture in USA continues regardless of market movements. On the back of such taxpayer support systems USA Conglomerates like Cargill and ADM are able to buy up control over Australian farmers. It is an international scandal that Australian authorities would support such a subsidy beneficiary to take over a free market Aust organisation like GrainCorp.
    dogsbody
    1/07/2013 4:30:38 PM

    This could actually give some meaning to so called free trade agreements which have never been a level playing field because of these subsidies.i can see the lobbyists from "Big Ag" going into overdrive on this. Only time will tell if Aussie farmers get to compete at a more equitable level, history suggests not.
    Love the country
    1/07/2013 5:36:18 PM

    WA. Is reeling,huge farm debts, no rain in June. In most grain areas,July forecast is grim, wa farmers will need a handout, and that's for food.just wonder now, will it rain again ........
    Deregul8
    1/07/2013 9:07:39 PM

    Unbelievable 'love'! WA farmers begging for food when they have $6 billion of equity in their grower owned co-op CBH! Why would an industry value a bunch of grain silos over and above community and themselves? Confusing and perplexing. Unless you guys wake up and get everyone you know to vote for CBH corporatisation there will be few family farms left in the Wheatbelt and there will be noone to blame for it but yourself.
    Hand out again farmers
    1/07/2013 9:20:47 PM

    Isnt handouts what farmers live for? The Australian taxpayer has subsidized farmers for years and years because they seem to think they are important people. As if...simply a greedy selfserving bunch.
    Deregul8
    2/07/2013 5:55:59 AM

    They are certainly more important than watermelon animal activists whose only contribution to society is going to be expensive meat and MSG filled soybean sausages. I've been reading your anti farmer spam 'hand out' and it is amusing at the least.
    Handouts ??
    2/07/2013 6:11:10 AM

    So Hand Out, Please tell us all what hand outs we are getting, i'm sure as hell not getting any. And farming is the most important job in the world. Just remember, you may need a doctor once a year,but if farmers around the world didn't produce food for you, you die. And don't tell me you would grow your own, you wouldn't even be able to afford the seed on the dole.
    Jen from the bush
    2/07/2013 6:42:43 AM

    Big mouth 'hand out af' I would suggest you list the handouts given to farmers Then list them for mining co. Then list them for yourself- first house grants, family support supplement, dole, rental assistance, bitumen roads, parks, pools, Uni, arenas, police, water+electricity supplied, easy access medical/dental help, ambulances, buses and free schooling. You should get the drift. There is an awful lot going your way. No free schooling/ambulance for me. Drive 800kms for me for anyone hurt/ sick/ needing to see dr fast over dry season only rough roads.
    ecnerwal
    4/07/2013 6:52:03 PM

    I don't believe the Aust Govt can or should try to match the US and Europe in the farm subsidy race. However Aust farmers have had very successful non subsidized, non tax payer funded marketing and coop storage arrangements in the past under which our grain industry flourished for over 65 years. A few years ago in a fit of madness our Federal Govt knifed it to please the USA and boy have the US subsidy beneficiary traders set up to rape our farmers since? Yes. What mugs we are.
    Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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