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05-07 "Identifying the Real Winners from U.S. Agricultural Policies"

  • Timothy A. Wise

In this paper, we argue that advocates for new U.S. agricultural trade policies should consider refocusing their campaigns on the corporate livestock sector rather than farmers. There is little evidence that farmers as a group are reaping significant gains from current U.S. agricultural subsidy programs, even though they are the direct recipients. Low prices and high costs have left farmers with stagnant or declining net farm incomes. Furthermore, there is little conclusive evidence that the removal of U.S. subsidy payments would significantly reduce production or raise prices, though there is significant disagreement on this point. There is wider agreement that U.S. farm policies contribute significantly to depressed prices for agricultural commodities. Among the beneficiaries of those low prices are the consumers of U.S. grains and oilseeds, notably the concentrated animal feeding operations that now dominate the U.S. livestock industry. These industrial operations get feed that is generally sold at below farmers’ costs of production. We raise two questions for future research, and provide tentative answers. First, would U.S. policies that ensure higher feed prices reduce the incentives toward concentrated feeding operations and tip the economic balance back toward diversified family farmers? Initial research suggests that the economic benefits of current policies to corporate livestock operators are significant and that their reform could contribute to structural change in the farm sector in favor of family farmers. Second, since subsidies to feed are not now treated as highly disciplined input subsidies for livestock operations under World Trade Organization rules, would a more accurate accounting bring U.S. subsidies above the maximum levels allowed in the prevailing Agreement on Agriculture? We present initial calculations that suggest such an accounting change would put the United States over is limit for 2000 and nearly over for 2001.

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Paper provided by GDAE, Tufts University in its series GDAE Working Papers with number 05-07.

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Handle: RePEc:dae:daepap:05-07
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  1. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economics Reports 33971, United States Department of Agriculture, Economic Research Service.
  2. Adams, Gary M. & Young, Linda M., 1998. "Structural Developments In The U.S. Grains Subsector," Economic Harmonization in the Canadian\U.S.\Mexican Grain-Livestock Subsector; Proceedings of the 4th Agricultural and Food Policy Systems... 1998 16768, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
  3. Timothy A. Wise, . "04-02 "The Paradox of Agricultural Subsidies: Measurement Issues, Agricultural Dumping, and Policy Reform"," GDAE Working Papers 04-02, GDAE, Tufts University.
  4. Skaggs, Rhonda K. & Falk, Constance L., 1998. "Market And Welfare Effects Of Livestock Feed Subsidies In Southeastern New Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(02), December.
  5. Marion Desquilbet & Hervé Guyomard, 2002. "Taxes and Subsidies in Vertically Related Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1033-1041.
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