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Identifying the Real Winners from U.S. Agricultural Policies
GDAE Working Paper No. 05-07, December 2005

Timothy A. Wise

Who are the real winners from U.S. agricultural policies? It may not be the farmers who receive the billions of dollars in annual farm subsidies.

There is little evidence that farmers as a group are reaping significant gains from current U.S. agricultural subsidy programs, even though they are the direct recipients. Low prices and high costs have left farmers with stagnant or declining net farm incomes. Furthermore, there is little conclusive evidence that the removal of U.S. subsidy payments would significantly reduce production or raise prices, though there is significant disagreement on this point. There is wider agreement that U.S. farm policies contribute significantly to depressed prices for agricultural commodities. Among the beneficiaries of those low prices are the consumers of U.S. grains and oilseeds, among them the concentrated animal feeding operations that now dominate the U.S. livestock industry. These industrial operations get feed that is generally sold at below farmers’ costs of production.

This paper raises two questions for future research, and provides tentative answers. First, would U.S. policies that ensure higher feed prices reduce the incentives toward concentrated feeding operations and tip the economic balance back toward diversified family farmers? Initial research suggests that the economic benefits of current policies to corporate livestock operators are significant and that their reform could contribute to structural change in the farm sector in favor of family farmers. Second, since subsidies to feed are not now treated as highly disciplined input subsidies for livestock operations under World Trade Organization rules, would a more accurate accounting bring U.S. subsidies above the maximum levels allowed in the prevailing Agreement on Agriculture? We present initial calculations that suggest such an accounting change would put the United States over is limit for 2000 and nearly over for 2001.

Agribusiness interests are largely left out of the debates over U.S. agricultural and trade policies. Payments mainly go to farmers, and the WTO negotiations focus principally on disciplining such payments and reducing other forms of agricultural support and protection. Yet the transnational corporations that dominate the agri-food sector are among the most important beneficiaries of policies that lead to low commodity prices by encouraging overproduction. It is important to identify the real winners from U.S. agricultural policies. A closer examination of the benefits to industrial livestock operations would be a good place to start.


“Identifying the Real Winners from U.S. Agricultural Policies” is available online at: http://www.ase.tufts.edu/gdae/Pubs/wp/05-07RealWinnersUSAg.pdf


For more on GDAE’s Globalization and Sustainable Development Program:
http://www.ase.tufts.edu/gdae/policy_research/globalization.html

 

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