|Consumers worldwide are reeling under the price increases for basic food
commodities such as flour and sugar. While families have enjoyed for
decades what was always expected to be an ever-decreasing cost of food,
the expectation that the price decline would continue has been brought
up short recently and threatens confidence in markets around the world.
There are many explanations for why supplies are short and prices are
skyrocketing but it doesn’t take a rocket scientist to know that the
laws of supply and demand always work unless acted upon by an outside
force. The outside force in this situation is the artificial influence
of the U.S. government on what and how much American farmers produce.
Combined with incentives to convert food to fuel (ethanol) is it any
wonder the world agriculture markets are in so much disarray and why
farmers have not responded to higher prices created by shortages?
The National Taxpayers Union has long argued that U.S. price supports
for agriculture are not a justified use of taxpayers money. They explain
that because agri-business is subject to so many ups and downs, the
federal government has attempted to even out farmers’ incomes. For most
of the past century, this has meant various efforts such as direct
payments, loans, and guaranteed prices for crops.
It’s important to remember that government agricultural policy affects
/all/ Americans: taxpayers, consumers, and small businesses as well as
farmers and producers. Here is what the National Taxpayers Union has
said about the current and future direction of federal farm programs:
*Taxpayers: Why is the Government Throwing Good Money After Bad?*
Since passage of the 2002 Farm Bill, direct government payments to
farmers have soared to more than $20 billion per year, up from an
average of $9 billion per year in the early 1990s.
At the individual crop level, the price tags are just as staggering.
Congress’s investigative agency estimates that sugar is one of America’s
most-heavily subsidized industries, at $1.4 billion per year or $500 per
acre. U.S. cotton cost 86 cents per pound to produce in 2002, but was
exported for 37 cents per pound. The difference is made up by U.S.
Paying billions for federal programs that don’t work is hard enough for
Americans to swallow; paying billions more for programs that work
against each other is outrageous. One example is the government’s dairy
policy. First, farmers receive Milk Income Loss Contract payments to
keep producing when prices are low (which means there’s probably an
oversupply of milk in the first place). Then, they can qualify for
government Dairy Price Support buyouts of the extra milk. In other
words, Washington encourages large dairy farms to create the very same
surpluses that the government is stuck with buying and storing!
*Consumers: At the Table or at the Pump, We Feel the Pinch. *
From cheese to canned fruit, federal price supports and protectionist
tariffs can make the processed foods we all buy more difficult to
afford. For some low-income consumers, that means going to the
government for nutrition assistance; other working-class and
moderate-income households have no choice but to tighten their belts.
But government’s agriculture schemes affect consumers in other, less
visible ways. Congress’ Energy Bill provides another round of government
giveaways to promote ethanol fuel, which is mainly derived from corn
(and more recently sugar). Because it can be costly to produce,
transport, and blend with existing gasolines, ethanol rarely makes
economic sense for consumers. In fact, some studies show that ethanol
subsidies and “mandates” requiring its increased use in cars can raise
prices when motorists fill up at the gas station.