The US government began giving subsidies to farmers during the 1930s to provide a crucial safety net to small farmers, but they have had some unintended consequences.
While their original goal was to protect family farms against poor growing seasons or price fluctuations, in effect they line the pockets of giant agribusinesses and keep produce prices high.
While some family farms receive subsidies, they disproportionately benefit corporate mega-farms, which are able to buy more land and dominate the market. As the Heritage Foundation has noted, about 75% of larger farms collect subsidies compared to 24% of relatively smaller farms. The massive amount of money that goes to larger farms, in turn, increases demands (and prices) for land and other resources small farmers need.
Farmer Kevin Smith, the co-owner of upstate New York’s Sycamore Farms, recently explained to us how farming subsidies actually kill the market:
When the government subsidizes corn and grain in the Midwest, a farmer can afford to grow 10,000 acres of corn, no matter the demand. All of the corn is pre-contracted and supplemented on the back-end. It would make no sense for a small farmer to try to grow that much corn because you can’t sell that much at market. There is only a fixed amount of materials like seeds and fertiliser in the market. As subsidized farms buy and buy materials (which they can because of the subsidies), resources get scarce and prices go up. The scarcity drives up the cost of materials, but it doesn’t drive up market prices of produce.
According to Smith, the high cost of materials and the stagnant cost of produce make it difficult for small farms to survive, while making corporate agriculture more lucrative. The numbers bear that out.
In 1935, there were approximately 6.8 million farms in the US. By 2000, that number had plummeted to 2.2 million. Today, we’re down to 2.1 million. Meanwhile, the highest income bracket for farms now accounts for 66.4% of US agricultural products sold, up from 47.5% in 2002.