Corn Farmers Have Long Subsidized You, Not the Other Way Around
By Brad Wilson at Feb 23, 2012
Below is the text from a chart showing how corn farmers have subsidized consumers far more than taxpayers have subsidized corn farmers. The standard for the chart is parity, which was the standard for the farm bill from 1942-1952, when no farm commodity subsidies were needed or utilized. Parity represents a fair trade, living wage farm price, not a “minimum wage” price. Price floors were then set at 90% of parity, and the prices achieved averaged close to parity (slightly higher).
(Technical note. The chart compares yearly subsidy amounts with market prices. In order to make comments about that comparison, I also turn Price and Parity Price Figures into total yearly income amounts that can then be compared with yearly subsidy amounts. Those results are in the text, not on the chart. Basically, for that additional analysis, the corn “Price,” “Parity price,” and “Price Floor” amounts (per bushel) have been multiplied by yearly production numbers. Production (in bushels) = Yield (in bushels per acre) X Acres (harvested). In the case of Parity, the text assumes that fewer acres would be harvested as supply reduction on most years in order to effectively achieve the higher “Parity” standard of prices. On average, I lowered acres by 10% per year when calculating Parity, but this 10% reduction is distributed differently over the years. It’s less during the 1970s price spike, in 1996, and since 2007-10, for example. For the years 1953-1995, when we had supply reduction programs, these (10%) reductions are in addition to actual supply reductions, and they become progressively larger over the years. They start at 5% reductions, then go to 10%, 15%, etc. For the years after 1997-2006, when we had no supply reduction programs and market conditions created the lowest prices in history, adjusted for inflation, I typically assume a 20% reduction in supply. These supply assumptions are guesstimates. That interpretation is meant to be illustrative, on the basis of real data plus these assumptions to qualify some of the data. The chart itself shows actual corn market prices, prices plus subsidies, price floors and parity prices, adjusted for inflation with a GDP deflator.)
The chart can be found in my Album of “Farm Bill Slides,” here, or here: http://www.zcommunications.org/albums/276.
How Corn Farmers Subsidized Consumers (Below the Traditional Fair Trade Standard of Parity)
(Chart text. Note: text in parentheses has been added to the chart text. See the chart for arrows between the text and the data. )
(Key: to the 4 lines on the chart.)
Parity: (A “fair trade,” “living wage” corn price, usually the top line, BROWN, which is then multiplied by actual “production” minus about 10%.)
Price Plus Subsidy: (The “Price” figure, below, plus total yearly subsidy amounts. The gap between this RED line and the blue price line shows corn subsidy amounts added on top of Price based income. Subsidy amounts for 1995-2010 come from the Farm Subsidy Database, as presented by the Environmental Working Group, HERE. Subsidy amounts for 1961, the first corn subsidy year, through 1994, are estimates, for corn, subtracted from feedgrains totals, as compiled by USDA, ERS, HERE, and is meant as a rough approximation. The estimates are based upon the year 1995, a year prior to the Freedom to Farm programs, and for which EWG data can be compared to USDA-ERS data.)
Price: yearly average market prices (BLUE)
Price Floor: Government policy level, as enacted by Congress, signed by the President, and perhaps tweaked by the Secretary of Agriculture (YELLOW)
Corn Prices averaged $11.54 per bushel from 1942-1952, above 100% of parity ($10.36).
1947 is the record high corn price, not 2010 or 2011! Reserve supplies are put on the market when prices went above the price ceiling to bring prices back down. (Reserves were ended in 1996.)
1942-1952 = Fair Trade Price Floors, = Food Sovereignty, Farm Justice, as called for by La Via Campesina in their major policy document. NFFC’s Food from Family Farms Act gives this Food Sovereignty today.
Subsidies to corn farmers (between the blue and RED lines, started in 1961, and the total subsidy amount [1933-2010] is about $200 billion [in 2009 dollars]. In contrast, corn reductions below parity, where farmers subsidize consumers, are about $1.3 trillion. The net result: farmers subsidized consumers by more than $1 trillion [2009 $].
Progressive and conservative farm bill activists often CALL FOR SUBSIDY REFORMS
[with zero price floors, like agribusiness wants].
Supply reductions (as needed) are used with price floors to balance supply and demand. There must be enough supply reduction to keep market prices above price floors, which is the problem here.
THE PURPOSE OF THIS CHART is to overcome the mystification we see in information about farm subsidies and farm programs.
Agribusiness corn buyers, and through them, you consumers, got our corn at prices below the fair trade standard of parity, as price floors were lowered by Congress (1953-1995 and then ended (1996-).
Corn farmers Subsidized Consumers (below a fair trade standard) between the blue and brown lines.
Taxpayers subsidized Corn Farmers between the BLUE and RED lines.
EWG’s Farm Subsidy Database shows only the second part.
EWG does not mention the $1 trillion benefits to agribusiness buyers of corn (between the blue and brown lines).
“Subsidy reforms”: Remove the RED line, but leave the yellow line at zero for agribusiness.
Food Sovereignty: Raise the Yellow line to the Brown line with no subsidies needed.
2005 is the record LOW corn price (1866-2010). Decades of low prices caused the food poverty crisis. LDCs are 70% rural and need fair trade farm prices. A return to extreme dumping (1998-2005 prices) is no solution.