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REEVALUATING AGRICULTURAL SUBSIDIES

  

Dec 23, 2016

    

The Wall Street Journal on January 12th devoted an opinion article by James Bovard, author of Attention Deficit Democracy on the magnitude of agricultural subsidies.  He notes that the Congressional Budget Office has projected expenditures of $19 billion on direct and indirect support for specific crops in Fiscal 2017.  Bovard highlights cotton, sugar and peanuts as undeserved recipients. 

  

The U.S. has paid cotton producers in Brazil $750 million over the past six years as a result of a 2002 World Trade Organization ruling proving unfair subsidies to domestic U.S. producers. Over and above the “payoff” to Brazil, U.S. subsidizes cotton production by $1.5 billion annually distorting the price which could be obtained by cotton producers in developing nations.

The system of Import Quotas and Price Supports for the U.S. sugar industry is strongly supported by the Florida lobby is extremely expensive to both the Treasury and consumers. The domestic price of sugar is almost three-fold the international price and has had a negative impact on job creation.

Peanut growers harvest $1 billion annually in subsidies, again based on lobbying which influences political action and distorts free-market economics.

In contrast to agricultural handouts, CHICK-CITE supports Federal and state involvement in market promotion and support programs.  Without direct and indirect funding for organizations such as the USA Poultry and Egg Export Council, broiler, turkey and egg producers would be forced to fund export promotion or abandon certain markets. Without the combined efforts of the USAPEEC and the USDA-FAS, broiler integrators might have to forgo part of the 3.15 million metric tons of broiler exports primarily in the form of leg quarters representing 16.7 percent of projected 2017 production. Turkey exports will attain 290,000 metric tons in 2017 representing 10.3 percent of production. Collectively, exports of shell eggs and egg products will amount to 8.500 million case-equivalents in 2017 representing 3.5 percent of output in an industry which has endured price pressure and negative returns for over nine consecutive months.   

Agricultural support programs are justified to resolve a crisis or address an obvious short-term deviation associated with climatic extremes. Unfortunately programs develop a life of their own and appear to be self-perpetuating. If the incoming Administration is sincerely interested in “draining the swamp” and preventing waste, agricultural support programs including insurance should be critically reevaluated.

It is accepted that the broiler, turkey and to a lesser extent the egg industries receive very indirect government support through the highway and waterways systems maintained by Federal funding,  

along with tax concessions for capital investment and other benefits under the current tax code.   

The three segments of poultry industries do not receive Federal handouts but are obliged to bear both economic and biological risks in a highly regulated environment due to costs inherent to regulations administered by the FDA, EPA and the Departments of Labor, Agriculture and Justice.