An agricultural policy or agricultural subsidy is an incentive to engage in
a particular form of agriculture.
Most agricultural policy or subsidy has purposes other than profit. A very
strong evidence for this is that huge amounts of excess food are often
disposed of very cheaply, e.g. by export to developing nations as foreign
aid, or as part of local food bank or food stamp programs. Agricultural
economics studies these 'other purposes' to see what insights they provide
into economics, and to help set such policies in the context of a larger
economy in which most activity is not agricultural.
A key stated goal of agricultural subsidies is food self-suffiency to
prevent the shock of rapid price rises in essential groceries. To submit the
entire food supply of a nation to the whims of commodity markets is
considered a poor idea. Another goal is to improve biosecurity by minimizing
the amount of overall organic material imported, e.g. recent United States
Food and Drug Administration rules applied to foreign exporters of food to the US.
Another stated goal is to encourage organic farming and precision
agriculture, often combined in the idea of the "garden economy". When the
USSR was unable to feed itself it was often observed that over half of the
local food supply was coming from small private gardens growing native
varieties with organic means, despite the fact that the government had done
everything in its power to discourage such small-scale organic entrepreneurs.
However, many political observers argue that the true purpose of
agricultural subsidies is in the end to protect farmers so that they will
continue to vote for the politicians that vote for these subsidies. Many
economists regard farm subsidies as objectionable because they cause the
economy to be less efficient than they would otherwise be, the primary
beneficiaries of these subsidies are large corporations who do not deserve
much sympathy, and that these subsidies prevent farmers in the third world
from competing in local and export markets, thereby creating third world poverty.
Most green economists argue that such measures ought to be strongly
encouraged, and so consider agricultural policy that exempts small gardens
and greenhouses from regulations to be desirable, especially if produce is
consumed locally. They argue for tax, tariff and trade rules to exempt such
production for local use, especially family farm or farm co-op production,
and strongly deny that agricultural and industrial policy should be linked,
or should be subject to the same law. One rationale is that local production
of organic produce by families in their own gardens for their own
consumption is not taxed or regulated, and that little or no use of the
energy-and-land-intensive transport system, or energy-and-labor intensive
regulation system is required for these same people to sell the same product
Rules for rural land ownership typically affect both agricultural policy and
family farms. Some economists, e.g. Hernando de Soto, Joseph Stiglitz, argue
that comprehensive land reform is more likely than any amount of tax, tariff
and trade system, and more likely than any specifically agricultural policy,
to improve life in developing nations.
Immigration policy in some developed nations has exceptions specifically to
enable agricultural policy, e.g. migrant farm workers in Canada and the US.
The United States has almost ended farm subsidies several times, most
recently with the enactment of the "Freedom to Farm" act, which was intended
to provide diminishing payments to farmers over a period of years in lieu of
price supports and production subsidies. It was supplanted in 2002 by new
legislation that contained direct subsidies and countercyclical payments
designed to limit the effects of poor prices and yields in bad years. Grain
crops are most heavily subsidized.
Another major U.S. subsidy program is the "conservation reserve program"
(CRP) which pays producers to take marginal land out of production. In
addition, there are major regulatory frameworks that have environmental,
safety, and food quality goals.
Other, more subtle measures enacted by the states and local governments
affect farming, such as zoning and tax policy.
Since imported/exported agricultural produce is mostly traded and entirely
priced on commodity markets, but presents special biosafety and biosecurity
risks, there is a strong bias in all agricultural markets to compromise
safety to achieve low prices.
Two initiatives in global trade tend to focus clearly on changing nations'
* safe trade rules to encourage organic farming and self-reliance, led by
opponents of genetically modified food and monoculture, e.g.
* fair trade rules to ensure that poor farmers in underdeveloped nations
that produce crops primarily for export are not exploited to put local
farmers in developing nations out of work - which advocates consider a
dangerous "race to the bottom" in agricultural labor and safety
standards. Opponents point out that most agriculture in developed
nations is produced by industrial corporations (or "agribusiness")
which are hardly deserving of sympathy, and that the alternative to
exploitation is poverty.
Plans to reduce or remove agricultural subsidies have led often to violent
confrontations even in developed nations, e.g. very often in France. The
issue is very politically loaded and there are strong constituencies both
for and against agricultural reforms.