what are farm subsidies?

Question

what are they and why are they helpful/not helpful to the state of kansas? need a reply asap!!! thanx XP

Answer 1

Farm subsidies are usually either cash payments to farmers who choose to plant certain certain crops, or price supports to allow farmers to maintain their income even when crop prices fall. There are also farm subsidies that pay farmers not to plant their fields, in order to keep overall crop prices up by reducing supply.

Kansas would be a net beneficiary of farm subsidies, since as an agricultural state, the net amount they receive in subsidies should be more than what they pay into the system.

In general, subsidies are a poor way to incentivize people. They encourage behavior that would otherwise not be economically viable, and they redirect resources into inefficient production. If the activity would happen without the subsidy, the government is just making a transfer payment from one group to another, and if the activity would cease or diminish without the subsidy, there are better economic uses for the resources.

Answer 2

Several good answers posted.

The definition is the easy part. A farm subsidy is money spent to support the agricultural sector. This can take many forms, from a direct payment to a farmer, to the government purchasing surplus crops to stabilize market prices.

Whether they are "helpful" or not is a much deeper question and one where there may be legitimate disagreement. As "William N" states, on a micro- level, Kansas would be a net beneficiary, so they bring money into the state and boost the state's economy. Certainly for the farmers who benefit from them, they are helpful. Not all farmers benefit equally, and few benefit greatly from them - farm subsidies in general are not nearly as generous as most people think they are. Direct government payments comprise only about 2 percent of overall farm income. Most farmers don't get anything at all, and of those who do receive payments, the average amount is somewhere around $8,000 per year. Not a goldmine.

They do, however have some power to change outcomes. If, by supporting the income of a farmer during a period of low prices, they may help a farm remain in production, helping to stabilize supply, and reducing the likelihood of a sharp increase in commodity prices that could be the result of farms going out of business and reducing supply, which would result in higher prices when demand returned. In other words, if, over time, they support supply, they would result in lower prices for consumers. This would also be supportive of the greater rural economy. For every $1 of farm-gate production, $3 or $4 in economic activity is generated due to the impact of upstream input activity and downstream processing activity. It doesn't help anyone when farms go under. They also have the power to direct how people farm. Several farm subsidy programs are designed to support environmental conservation in various ways, an example would be an EQIP cost-share payment for a new manure containment system that reduces nutrient pollution in waterways. Crop insurance subsidies work to mitigate the tremendous risk that farmers take when they plant crops, helping them manage their businesses better, and enabling them to borrow money by reducing their collateral risk, which helps them expand and grow.

Critics generally fall into one of three camps: those who think they are inequitably distributed: which could be true, as I said, not all farmers benefit equally (this has less to do with the size of farm than it does with what crops they choose to produce); those who don't think the government should spend the money; a legitimate argument - one could argue against any government spending program; and those who think they distort markets in a negative way; which can also happen. if anything, they would tend to reduce commodity prices over time, saving consumers money, but reducing aggregate farm income. Its not certain this is the case, but its possible.

Answer 3

Farm subsidies are payments made by the government to farmers. These payments are made to keep the price of produce reasonable. If these subsidies weren't paid, then farmers would not make enough money and then they would be forced to find work other than farming, causing a decrease in produce.

Answer 4

From a historic point of view, farm subsidies are welcome only when markets don´t work properly. Producers do have to employ resources thinking of the price reached in the market in the last period or last crop. Crops can be irregular and quantities can vary from one year to the next due to changes of temperatures or seasons. Losses can occur and government aid avoids fluctuations in quantities, prices and stocks. USA, in general, like risks and free markets.