@ northman
I have only ever met two types of farmers, and I've heard of a third type.
The first type of farmer is naturally on their way out. They are generally older, and when their parents died (probably 20 years ago or more), the farm was left to them. Because it was a well established farm (everything was paid for, both equipment and land) they didn't have to do much to make a living. They are coasting to retirement and may already be semi-retired. They aren't going out of business because they don't have many expenses (at least not expenses that they have to pay for out of their cash flow).
The next group of farmers that I'm personally familiar with is the group that is 50 years old or less and is in it for the long haul. They probably won't fully retire until they are 65 to 70. They push a sharp pencil and they work hard. They are good businessman and they're not going out of business unless something very extreme happens.
The next group of farmers is a group that I've never actually met, but I'm sure they're out there. They work pretty hard, and push a fairly sharp pencil, but they don't allow for things going wrong. Therefore, they are over-extended and will probably find themselves going belly up when the next problem in the ag economy occurs.
As far as I'm aware, there really aren't thousands upon thousands of farmers who would go broke if prices were less. Significant changes in the price of commodities are a part of life for farmers and they have come to expect it. Last year I sold wheat for about $4.80 per bushel. This year even when accounting for basis I can contract my crop for $8.45 a bushel. Sometimes there is a drought or other natural disaster and you don't sell a single bushel no matter what the prices are. We have risk management plans in place that protect us from these events. If government subsidies go away, we will recognize that things are riskier and to protect ourselves we will bid less for land as a part of our risk management plan.
The reality is that most of the farmers who had a poor work ethic or were not very good with numbers went belly up in the late 70's to early 80's. If you know farm history you know that the 70's were the golden era for farmers. Then commodity prices dropped like a rock due to foreign policy issues and the vast majority of the people that made it through that time frame are still farming today.
As far as subsidies making it so that poor farmers can compete with good farmers, all farmers can (and do) take advantage of the same subsidies. The subsidies do not give an unfair advantage to incompetent farmers. If a farmer is still staying afloat, it's because they are competitive with those in their area. It is certainly not because of a subsidy. Like I said, if the subsidies went away, land prices would simply decrease because the established farmers would no longer feel comfortable bidding the same prices for land rentals and purchases.
Let's go about it this way. This year it is expected that farmers in the United States are going to produce about 13 billion bushels of corn. If the subsidies went away (direct and counter-cyclical payments, subsidized crop insurance and the CSP program), I'm convinced we would still have a 13 billion bushel crop next year. The United States is producing as much corn as it possibly can and prices are still so high that farmers can make an extremely good profit without any subsidies.
Agriculture subsidies
I'm the one that posted the original comment about farmers running to town for coffee four times a day.
I didn't really mean to say farmers in general are lazy. Most ARE very hardworking. As a whole though, they are very narrow minded and short sighted. They will make fun of people that try new techniques or crops, and they will be the first one in line to stab their neighbor in the back for a few pennies more per bushel, even if that means selling out the town to ConAgra.
The specific examples I'm thinking of are in the 45-65 range. Most of the twentysomethings I know that farm either don't have their own place, so they follow orders from those that do.
The real problem is that you have farmers that think they are bankers. They want a new pickup every two years. Their wives want to take a cruise to Alaska, and vacation in Europe, and Hawai'i. They want to go to all the football games(or maybe basketball games there in Kansas). These are the guys that are first in line with their hands out.
The really awsome farmers I know are the ones that might go to town once a day. They are still self sufficient and they make a decent living. They might take some subsidies, but generally opt to receive less than they could qualifiy for because they are content with what they have. They started out with a little bit of a head start in the way of inherited wealth and the canny businessmen picked up more as he went along.
I don't think it's wise to talk about doing away with subsidies unless you also plan to weaken the stranglehold the big agribusiness companies have on the nation/world. In the meantime, finding a way to subsidize the smaller producer with the goal of creating more small producers should be the goal of the subsidy programs.
I didn't really mean to say farmers in general are lazy. Most ARE very hardworking. As a whole though, they are very narrow minded and short sighted. They will make fun of people that try new techniques or crops, and they will be the first one in line to stab their neighbor in the back for a few pennies more per bushel, even if that means selling out the town to ConAgra.
The specific examples I'm thinking of are in the 45-65 range. Most of the twentysomethings I know that farm either don't have their own place, so they follow orders from those that do.
The real problem is that you have farmers that think they are bankers. They want a new pickup every two years. Their wives want to take a cruise to Alaska, and vacation in Europe, and Hawai'i. They want to go to all the football games(or maybe basketball games there in Kansas). These are the guys that are first in line with their hands out.
The really awsome farmers I know are the ones that might go to town once a day. They are still self sufficient and they make a decent living. They might take some subsidies, but generally opt to receive less than they could qualifiy for because they are content with what they have. They started out with a little bit of a head start in the way of inherited wealth and the canny businessmen picked up more as he went along.
I don't think it's wise to talk about doing away with subsidies unless you also plan to weaken the stranglehold the big agribusiness companies have on the nation/world. In the meantime, finding a way to subsidize the smaller producer with the goal of creating more small producers should be the goal of the subsidy programs.
@dpilot83 - You're completely right. Forgive me. The whole subject just makes my stomache churn with impotent rage. My experience with the farming community is much more "Slogum House" than "Little House on the Prairie". Prostitution, violence and all.
I realize that my experience is completely anecdotal, but I have seen the way subsidies exacerbate inequality instead of lessening it. Sharp pencils aside, the people that I know that profit the most from subsidies are the most ruthless and corrupt you'll see this side of Wall Street.
I realize that my experience is completely anecdotal, but I have seen the way subsidies exacerbate inequality instead of lessening it. Sharp pencils aside, the people that I know that profit the most from subsidies are the most ruthless and corrupt you'll see this side of Wall Street.
@dpilot, regarding the claim "So the thing that government subsidies really do is artificially increase the value of land."
I think that is only strictly true if you view farmland as a fixed quantity. I think like as dragoncar mentioned earlier that might not be a correct assumption. While the overall amount of land might be constant (ignoring global warming), the amount used for farming isn't necessarily. If subsidies increase the amount a farmer can profitably pay to rent land, then that should correlate with an increase in the amount of land available to all farmers (e.g. from places that used to be garages or where the owner wanted too much money). So in your previous scenario farmers A and B would have both more acres because they bought out a non farmer neighbor (who couldn't pay the new price because she had no subsidy).
Since there's now more farmland, very basic economics would predict more supply leading to lower prices (assuming demand is independent). Of course what with the political process and all interfering already, that might not be the case at all (tariffs, other special interests, etc).
I think that is only strictly true if you view farmland as a fixed quantity. I think like as dragoncar mentioned earlier that might not be a correct assumption. While the overall amount of land might be constant (ignoring global warming), the amount used for farming isn't necessarily. If subsidies increase the amount a farmer can profitably pay to rent land, then that should correlate with an increase in the amount of land available to all farmers (e.g. from places that used to be garages or where the owner wanted too much money). So in your previous scenario farmers A and B would have both more acres because they bought out a non farmer neighbor (who couldn't pay the new price because she had no subsidy).
Since there's now more farmland, very basic economics would predict more supply leading to lower prices (assuming demand is independent). Of course what with the political process and all interfering already, that might not be the case at all (tariffs, other special interests, etc).