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Farm subsidies are federal government funds paid to U.S. agribusinesses. They help reduce the risk farmers endure from the weather, commodities brokers, and disruptions in demand. But they have evolved to become very complex. As a result, only large producers can take advantage of them.
Farm subsidies are federal government funds paid to U.S. agribusinesses. They help reduce the risk farmers endure from the weather, commodities brokers, and disruptions in demand. Out of all the crops that farmers grow, the government only subsidizes five of them. They are corn, soybeans, wheat, cotton, and rice.
Government intervention, through agricultural subsidies, interferes with the price mechanism which would normally determine commodity prices, often creating crop overproduction and market discrimination. Subsidies are also an inefficient use of taxpayer's money.
The government protects farmers against fluctuations in prices, revenues, and yields. However, agriculture is no riskier than many other industries, and it does not need an array of federal subsidies. Farm subsidies are costly to taxpayers, but they also harm the economy and the environment.
The study recommended, in conclusion, that we slowly phase out both the commodity payment and crop insurance subsidies all together. Fair Farms supports agricultural subsidies that relate to conservation of farmland, as well as those that are targeted to smaller-scale, diversified, and low-income farmers.
Advantages of subsidies Enables greater social efficiency. Consumers end up paying the socially efficient price which includes the external benefit. If you subsidize public transport, it will encourage people to drive less, and reduce their negative externalities.
Disadvantages of Subsidies This is because lowered prices can lead to a sudden rise in demand that many producers may find very hard to meet. Ultimately, it can lead to very high demand that causes an increase in prices.
The biggest problem is that the value of subsidies, including protection from real estate taxes, is capitalized into higher farmland prices. If a farmer can get $1 million in subsidies, the value of the farmland increases by $15 to $20 million.
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