Farm Bill

The 2007 U.S. Farm Bill passed the House and the Senate on May 15. I knew that the bill had been causing a lot of controversy, but I honestly don't know that much about agricultural economics. I do know, however, that food prices effect all of us- they're up about 5% since the beginning of the year- and that farm bills effect food prices, so I decided to see what I could find out about all this.

First, the good news: the bill increases funding for nutrition programs like food stamps and school lunch assistance that desperately need more funding. So yay! It's a good thing, too, because the 35.5 million Americans who live in food insecure households (households where there isn't always enough money to meet basic food needs) are going to be hit especially hard by rising food prices.

So here's the part that doesn't make any sense: why do the same people who realize it's important to increase funding for food stamps also think it's a good idea to increase subsidies to farmers who are turning record profits? The bill passed by Congress would provide subsidies to farmers who make up to $2.5 million dollars per year. President Bush proposed that the cutoff level be decreased to $200,000. While I am loathe to agree with Bush about anything, I have to say that even without knowing much about economics, the $2.5 million cutoff is absurd. It just doesn't make sense to funnel taxpayer money to big agribusinesses when food prices are so high, right?

It occurred to me that it was possible that farmers aren't the ones benefiting from high food prices. Maybe it's the companies who transport the food, or maybe it's the oil companies making a killing on the gas being used to truck produce around the country. After all, gas prices are up too. So I did a little more investigation, and this is what I found:

• America's net farm income is projected to be about $92 billion in 2008, which is 51% higher than the ten year average; and
• crop receipts are valued 21% higher than last year

Basically, it looks like farmers are benefiting and will continue to benefit from increased food prices. Which isn't to say farmers are evil or anything, but it seems pretty clear that businesses that are making millions in profits don't need government assistance. Bush has threatened to veto the $289 billion bill, but Congress may have the votes to override the veto even if he does. It'll be interesting to see how this plays out.