A debate on Twitter has helped me clarify my thoughts on agricultural subsidies:
Dr Sarah Taber @SarahTaber_bww: So ... yeah. Sometimes rural land ownership is just an instrument for rich people to extort bribes from taxpayers. "Pay me or I'll ruin your water." And sometimes you just monetize it on the corn platform.
PNW Policy Wonk @PNWwonk: That's literally not how it works. I administer conservation subsidies for a living. This is all bullshit... We contract to fix existing issues on farms. We don't pay people to not release their manure lagoons into the river. We don't work in prevention. We react to existing pollution.
Me: Same thing. Bad behaviour in past = subsidies in the present. I'm all in favour of looking after environment but we have LAWS for that. We don't pay ordinary people for not dumping rubbish on the street, we FINE then for doing so.
PNW Policy Wonk: Your first sentence makes sense. It does not relate to the second sentence at all.
benjamin @benjit14: The elimination or internalisation of costs allows best market allocation of resources. This is why we have rules, regs. laws etc. Letting others pick up the tab isn't good for society or our economy. IMHO.
Wes @lord_0f_land: If the land isn’t sustainably farmable without the manure lagoons, wouldn’t it be better to just directly ban farming on the land in question instead of subsidizing?
PNW Policy Wonk: So, ban all dairies? Come on, guys. I know you guys care about land policy, but stop talking about farming if you don't know anything about it.
Me: No, don't ban all dairies. I like milk and butter and cheese. So I as a consumer should bear the full costs of production, which might include environmental protection costs paid for directly by the farmer.
PNW Policy Wonk: The reason milk has price supports (an extra layer of govt assistance) is because you can't turn a cow's milk production on or off. But you still need to pay to feed and house them. The entire industry would collapse during gluts without support.
benjamin: Cheese is sort of like stored up milk product. I'm sure they could figure all this out without the subsidy. If there is a risk of gluts, there's a futures market for that i.e. insurance.
At this stage, PNW Policy Wonk appears to have abandoned his defence of the indefensible.
He seems to have three lines of argument:
1. We should reward landowners for not breaking the law, or pay for them to rectify earlier breaches, which is clearly nonsense.
2. Farmers and consumers should not bear the full cost of responsible production methods.
We own a home, there are rules against doing certain things, like having noisy parties every night or rearing pigs in the back garden. Our neighbours benefit if we don't do those things and we benefit if our neighbours don't do those things.
We all bought our houses knowing that those are the rules, and so the rules are to our overall mutual benefit. It's the same with factories, there are rules on how they deal with the noise and waste they generate. If anybody breaks the rules, then (hopefully) the 'state' will step in and stop them.
Why does he make the assumption that - unlike homeowners and factory owners - agricultural landowners are basically allowed to do what they want in perpetuity, and that we have to pay them to behave responsibly? That would be like me having noisy parties every night and instead of the local council stopping me, they pay for my house to be fully sound insulated.
Would food prices go up without subsidies? We have a crazy situation where agricultural land owners/farmers get subsidies, but they also pay income tax (and some National Insurance). The numbers are pretty small either way and they probably net off to nothing. So it would be fiscally neutral to scrap the subsidies and just exempt farm profits and farm wages from income tax and National Insurance* - in which case, no reason to assume that food prices would go up.
* Like forestry in the UK - they get very little in the way of subsidies (compared to arable land) for simply owning a forest, but forestry profits are exempt from income tax and corporation tax (wages are still taxable as normal, go figure).
3. Then he segues effortlessly into 'gluts' and underwriting farm incomes, which is a completely different topic.
I don't know why he thinks there are sudden gluts in milk output, because there aren't. Farmers are getting better and better at breeding cows to produce more milk and getting the milk out of them, but that is a long term trend as a result of which prices are falling long term. An individual dairy farmer's output is pretty steady and predictable.
It's arable goods where farmers can only guess how much they will be able to harvest. It is uncertainty right until the end.
It could be brilliant growing weather all season and then pissing it down, frost or drought in the last few days before the harvest and the whole thing is ruined. Just as bad, the farmer harvests pretty much what he expected, but there is a glut elsewhere so prices fall.
From the point of view of the rest of the country (consumers or government), gluts are a very good thing indeed and nothing to worry about. We should be worrying about sudden shortages, not gluts.
From the point of view of farmers, this is a precarious way to live. But in the long run, it averages out, good years and bad years. And relying on the weather is a mug's game anyway, controlling growing conditions is the way to go i.e. greenhouses, poly-tunnels, hydroponics etc (like in the Netherlands or southern Spain).
A grim document
16 hours ago
14 comments:
"Would food prices go up without subsidies?"
Well, all subsidies were suddenly ended in New Zealand many years ago, so it's not difficult to find out.
In any case, AFAICS, the main purpose of subsidies is to enable farmers to produce food at a loss, hence increasing the profits of the supermarkets, who would have to pay more if there were no subsidies.
You're conflating two things which aren't really linked. Environmental regulation exists in this country, lots of it, and farmers have to abide by it or get prosecuted. And yes there are subsidies, but they aren't paid as a bribe for not trashing the environment - thats covered by the laws mentioned above, regardless of subsidy. For example its almost 100% likely that the current regime of farm subsidy will go post Brexit, regardless of what happens there - the one thing just about every politician does agree on is that the UK won't be in the CAP once we 'leave', whatever that looks like. But when the subsidies do go (most likely replaced by some sort of environmental payment scheme) farmers won't be released from the existing swathe of environmental laws. They'll still have to abide by them. So subsidies are not protection money to farmers to stop them releasing slurry into rivers.
I'm intrigued by your idea that consumers should pay the full price of environmental legislation, because this is one of the things they have never done - food imports do not have to abide by UK standards, so UK farmers face an un-even playing field - they have to abide by eco-laws but imports don't so the market price doesn't fully reflect the cost of those UK laws. Consumers can just get cheaper imports if the laws raise the costs for UK producers.
I would hazard a guess that most farmers see subsidy as compensation for this inequality - that imports don't have to be produced to UK standards. I think most farmers would be happy with a regime where there were no subsidies, but imports had to abide by whatever rules UK farmers have to abide by - then the cost of those rules would fall far more on consumers (and voters, as everyone eats). Vote for higher environmental legislation, get higher priced food. As it is, voters can vote for more eco-laws, but still buy cheap foreign food that would not comply with those laws. Its having your cake and eating it. Re-balancing that so that the cost of compliance falls on the consumer as much as the producer would probably allow subsidies to be abolished entirely as the price of food would have to rise and farming would be more profitable.
Interesting that Financial futures markets was created to deal with variations in harvest prices in the USA but is not used by farmers in the UK. Or maybe supermarket contracts amount to something simmilar.
B, no of course they didn't go up. NZ is a food exporting country, they sell abroad for world market prices and sell at home for world market price.
S, well yes and no.
I support the idea of laws that prevent my neighbours having noisy parties every night (land use restriction) and honour them myself. I couldn't care less what people do abroad, or anywhere far away enough that the noise wouldn't affect me.
Apply this logic to environment. The UK can make laws saying that UK farmers can't poison the land, for the benefit of people in the UK. What do we care what farmers do in other countries?
Din, that whole thing puzzles me greatly.
Selling forward only makes sense to a farmer if he fears a glut and falling prices, you've locked in the old higher price for most of your harvest and have a bit of extra left over that you sell for new lower price.
If you sell forward and there is a bad harvest and prices go up, you're doubly fucked. You have to sell what little harvest you have for old lower price and must buy back the shortfall for the new higher price.
"The UK can make laws saying that UK farmers can't poison the land, for the benefit of people in the UK. What do we care what farmers do in other countries?"
Well, its highly hypocritical for one thing. You don't want to live in a country where rivers are polluted by slurry (for example) but don't mind someone else's rivers being so polluted so you can have cheap food.
@S
"Well, its highly hypocritical for one thing. You don't want to live in a country where rivers are polluted by slurry (for example) but don't mind someone else's rivers being so polluted so you can have cheap food."
Agreed - How do you feel about cheap clothes? I bet farmers buy cheap clothes produced in sweatshops the same as everyone else.
The key is choice - you want 'local' food produced to exacting standards. Fine . Pony-up. Have to survive on a limited budget - buy the stuff produced 'unethically.
Ass a consumer you have the choice if you have the information. Bit like the chlorinated chicken argument, really.
S, call it hypocritical if you wish. The UK govt can't legislate for what happens in other countries, we can't influence it, even if we wished we could. Do you really think that subsidising UK landowners will encourage overseas farmers to look after their environment? Methinks not.
Sh, exactly. Cheap clothes is another good example I was keeping in reserve but you beat me to it. Following S's logic, UK clothes manufacturers should be rewarded with taxpayers' £££ for not using child labour or breaching minimum wage laws.
@MW
We can, should and do try to make sure that goods coming in meet our standards as is reasonable.
Reasonable should also reflect the economic status of the country they are coming from. That is, perhaps its unfair/harmful to expect the same standards given their circumstances.
Its in everyones interests that trade happens with as few restrictions as possible. Got to be some red lines though. Animal welfare it one for me, but others might think differently.
"Do you really think that subsidising UK landowners will encourage overseas farmers to look after their environment?"
I'm not saying subsidise farmers, I'm saying consumers should bear the costs of the regulations they vote for. At the moment consumers are being subsidised - they can vote for things they don't have to bear the costs of.
And if foreign producers couldn't export to the UK unless they improved their environmental rules etc, then there would be an incentive for them to do so, wouldn't there?
And I've always said its wrong that UK producers of anything should have to face competition for goods made under far lower environmental and legislative standards than are imposed in the UK. Cheaper wages are one thing, but trashing the environment and harming animals are a different matter. If chucking toxic chemicals in a river is wrong in the UK, its wrong in China or Indonesia too, and we shouldn't accept the goods so produced. Whereas wages are relative - a good wage there will be far less than the UK so they can still compete on price.
Re PNW. Think incentives. PNW is dependent of the subsidy system. And therefore his wages are part of that system. He's on benefits.
BJ, S, in an ideal world, would we have red lines? Of course.
But how do you find out what happens in each farm or factory abroad vis a vis employment rights, animal welfare, pollution? How do you define the cut off points? How do you enforce it?
S: "I'm saying consumers should bear the costs of the regulations they vote for" And that is precisely what I said.
L, what's "PNW"?
PNW Policy Wonk. Your interlocutor.
@MW
We can't expect poorer countries to afford the same standards as here, while they are trying to catch us up. So while we can't inspect every single foreign factor/farm, we can see what rules/regs they have in place and how serious they are about enforcing them.
If we set standards for imported goods, then we should expect our importers to do a reasonable amount of due diligence regarding the up keep of those standards.
Pretty much what we do now I'd have thought.
BenJ. I have a pal who has imported kidswear since the 70's and he and his uk retailers do exactly as you say and have done for years
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