Agricultural subsidies

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).