BEST POSTS OF 2015: TOP FIVE ANSWERS ON FARM SUBSIDIES

As we head into 2016, we’d like to look back at the best performing posts of 2015.  All week, we’ll repost the articles you liked best!  Enjoy!!

TOP FIVE ANSWERS ON FARM SUBSIDIES

Americans have questions about farm subsidies – and why shouldn’t they?  Americans deserve to understand what their taxes are paying for and why.  So here’s the top five questions we get on a semi regular basis and the best, short answers we can provide.  Do you have more questions on farm subsidies?  Ask away in the comments!

1. Why should tax payer dollars fund farmers anyway?

The government got involved in helping farmers stay afloat because they were interested in food security.  Our country needs to guarantee a safe, affordable, DOMESTIC food supply and not put ourselves in the position to have to import food because American farmers go out of business.  The food security portion of this equation is what makes government payments to farmers different than other businesses or industries that are also reliant on weather or market conditions.

Helping farmers stay in business also supports American rural economies that are built on farming and agriculture.  Without farm subsidies, rural communities would be completely desolate and Americans would be forced to urban areas to find work.  In essence, farm subsidies that keep farmers in business help many more Americans that don’t farm, but live in rural communities.

Illinois, farm, field, farmer, country, scenic

2. I don’t want to pay a farmer to not farm!  That’s not right!

There was a time in our history when farmers were paid to leave their land fallow.  The “set aside” program sought to control supply and increase commodity prices.  But we haven’t done this since the 1990s.  The “set aside” program was unauthorized in the 1996 Farm Bill.

3. I don’t really understand what farm subsidies are paying for then.

Government payments to farmers currently come in the form of subsidized crop insurance.  Because farming relies on the weather and is so unpredictable, farmers must insure their crops or face investing a ton of money to plant a crop only to have Mother Nature ruin their crop and leave them with no income for the year.  Crop insurance protects farmers when this happens.

But private insurance companies find the proposition too risky.  No private company can withstand a weather event like the 2012 drought we experienced here in IL.  So the government subsidizes crop insurance, making it available for farmers and encouraging them to protect themselves.

Farmers do pay a portion of their premium AND what amounts to an average of a 20 percent deductible in the event of a loss.

(Stay tuned for a more in-depth look at crop insurance and what it means to farmers in the near future!)

Marty Marr Family

4. Farmers are small businessmen and should compete in a fair and free market just like all other Americans, without government assistance.

Yes.  And that would be amazing.

But consider that farming is a different business model than most.  In most other small businesses, the business buys inputs at wholesale prices, builds a product or completes a service, and then determines the cost for the product or service based on the input costs.  Farmers do not have this business model.buy wholesale, pay retail

They must buy inputs at retail prices, pray for great weather, and accept whatever commodity price the market dictates for that month and year.  Yes, opportunities exist for farmers to mitigate risk, but they should not and can not be compared to all other small businesses because they do not get to dictate market prices that cover their cost of production.

Also, back to the first point, guaranteeing that we have affordable access to domestic food supply is somewhat different than guaranteeing access to barbershops or photographers.

5. Farmers made so much money last year.  I don’t understand why farm subsidies are still needed or even considered by Congress.

Yes, farmers did have a great year in 2013.  Commodity prices were high because of the low corn supply after the drought, but farmers still grew a lot of corn.  They did well and they didn’t need/use their crop insurance.

But like all American families know, you have good years and you have bad years.  Farmers are well versed at saving money back from the good years like 2013, to pay for the bad years like 2014 (and probably 2015!).  Government subsidized crop insurance is still needed because bad years always happen no matter how good the good years were.

If you’re still curious about farm income, read ARE FARMERS RICH here!

I am very excited to answer your questions about farm subsidies and crop insurance.  Please leave a comment!

Lindsay Mitchell 11/14

Lindsay Mitchell
ICGA/ICMB Marketing Manager

TOP FIVE ANSWERS ON FARM SUBSIDIES

Americans have questions about farm subsidies – and why shouldn’t they?  Americans deserve to understand what their taxes are paying for and why.  So here’s the top five questions we get on a semi regular basis and the best, short answers we can provide.  Do you have more questions on farm subsidies?  Ask away in the comments!

1. Why should tax payer dollars fund farmers anyway?

The government got involved in helping farmers stay afloat because they were interested in food security.  Our country needs to guarantee a safe, affordable, DOMESTIC food supply and not put ourselves in the position to have to import food because American farmers go out of business.  The food security portion of this equation is what makes government payments to farmers different than other businesses or industries that are also reliant on weather or market conditions.

Helping farmers stay in business also supports American rural economies that are built on farming and agriculture.  Without farm subsidies, rural communities would be completely desolate and Americans would be forced to urban areas to find work.  In essence, farm subsidies that keep farmers in business help many more Americans that don’t farm, but live in rural communities.

Illinois, farm, field, farmer, country, scenic

2. I don’t want to pay a farmer to not farm!  That’s not right!

There was a time in our history when farmers were paid to leave their land fallow.  The “set aside” program sought to control supply and increase commodity prices.  But we haven’t done this since the 1990s.  The “set aside” program was unauthorized in the 1996 Farm Bill.

3. I don’t really understand what farm subsidies are paying for then.

Government payments to farmers currently come in the form of subsidized crop insurance.  Because farming relies on the weather and is so unpredictable, farmers must insure their crops or face investing a ton of money to plant a crop only to have Mother Nature ruin their crop and leave them with no income for the year.  Crop insurance protects farmers when this happens.

But private insurance companies find the proposition too risky.  No private company can withstand a weather event like the 2012 drought we experienced here in IL.  So the government subsidizes crop insurance, making it available for farmers and encouraging them to protect themselves.

Farmers do pay a portion of their premium AND what amounts to an average of a 20 percent deductible in the event of a loss.

(Stay tuned for a more in-depth look at crop insurance and what it means to farmers in the near future!)

Marty Marr Family

4. Farmers are small businessmen and should compete in a fair and free market just like all other Americans, without government assistance.

Yes.  And that would be amazing.

But consider that farming is a different business model than most.  In most other small businesses, the business buys inputs at wholesale prices, builds a product or completes a service, and then determines the cost for the product or service based on the input costs.  Farmers do not have this business model.buy wholesale, pay retail

They must buy inputs at retail prices, pray for great weather, and accept whatever commodity price the market dictates for that month and year.  Yes, opportunities exist for farmers to mitigate risk, but they should not and can not be compared to all other small businesses because they do not get to dictate market prices that cover their cost of production.

Also, back to the first point, guaranteeing that we have affordable access to domestic food supply is somewhat different than guaranteeing access to barbershops or photographers.

5. Farmers made so much money last year.  I don’t understand why farm subsidies are still needed or even considered by Congress.

Yes, farmers did have a great year in 2013.  Commodity prices were high because of the low corn supply after the drought, but farmers still grew a lot of corn.  They did well and they didn’t need/use their crop insurance.

But like all American families know, you have good years and you have bad years.  Farmers are well versed at saving money back from the good years like 2013, to pay for the bad years like 2014 (and probably 2015!).  Government subsidized crop insurance is still needed because bad years always happen no matter how good the good years were.

If you’re still curious about farm income, read ARE FARMERS RICH here!

I am very excited to answer your questions about farm subsidies and crop insurance.  Please leave a comment!

Lindsay Mitchell 11/14

Lindsay Mitchell
ICGA/ICMB Marketing Manager

SO, YOU THINK FARMERS ARE RICH?

It is a common misconception, thinking that farmers are big money-makers. Did you know that in 2011, the average total farm household income was $57,067, with the farm income alone being NEGATIVE $2,250? Still think farmers are rich?

Commodity prices are publicly broadcasted, but the input prices are not. It has become more expensive than ever to put seed corn and soybeans in the ground. It cost farmers just at $500 per acre to put the crop in the ground. So, figure they get lucky and sell their corn for $7.00 per bushel. With a yield of 150 bushels to the acre, that would be about $1,000. Take out the $500 for the seed, fertilizers, crop insurance, storage, hired labor, and all things necessary to keep the crop healthy, and the farmer is left with $500 per acre. With that money they have to buy their big pieces of machinery, such as a tractor, planter, or combine. Still think they are rich?

For most farmers, their crop production is their only source of income. So after all the business operations are complete, they have to support their family. With all of that, they do not have the leisure of having the opportunity of calling in sick or just taking the day off. Each day is crucial in their operation so they can be as productive as possible. There is always that possibility that they could lose everything in a matter of days, weeks, or months by wind, fire, or other disaster. Farming is an unbelievably uncertain profession to go into.

Farm subsidies are a very important part of a farmer’s business. What happens if there is a really bad drought? Or a new insect or disease introduced to their area? What if commodity prices are down? The farmer still paid that initial money up front to put the crop in the ground. When the yield is below normal, the government steps in and helps the farmer out. Private companies do not have the means of accommodating the riskiness associated with farming.

The subsidies are not free money, either. The farmers have to put forth a lot of work in order to show that their yields are down. For most programs, there is an average bushel per acre that they have as a standard. Another stipulation is that the farmer cannot enroll in multiple programs. They choose what best fits their needs.

The government is helping out its producers, but that gives a lot of help to the consumers too. Farmers are our source of food, fuel, clothing, basically anything you can think of. Would you rather support the government and our farmers, or rely of the Middle Eastern countries to provide us with our gasoline? The government has to guarantee food security for its citizens. Also, to make sure we can sustain our country and not have to rely on others to support our needs.

Do you still think that farmers are rich? Maybe the farm subsidies are not such a bad deal after all.

Katlyn Pieper
Illinois State University