The farming industry is rife with uncertainties. There’s the weather, demand levels, as well as the ability of commodity brokers to continue trading. Despite affordable USDA farm loans, a need for farm subsidies has been felt. These are given out by the federal government to agricultural businesses in the United States. However, in the absence of reforms, most of these go to the larger farms.
So what are the long-term effects? Here’s how farming subsidies are impacting the agricultural industry.
The Impact of Farming Subsidies
While farming subsidies are intended to help farmers, the current model has several problems including:
- Current subsidies only cover the five crops that provide over 80% of the caloric needs of the world.
- The largest chunk of subsidies goes to just five states.
- Farms producing meat, fruit, and vegetables may only apply for insurance and disaster relief. This may not entirely cover the various use cases where there is a genuine need for intervention.
Thankfully, alternate sources of financing can help ease the financial burden that farmers find themselves with.
Advantages of Farming Subsidies
The biggest advantage of subsidies is protection against inclement weather conditions. Another advantage is helping manage the impact of fluctuating commodity prices. Farmers can be highly susceptible to uncertainties from these market conditions.
There are also macroeconomic concerns. A lot of agricultural produce is exported, exposing the industry to dollar value fluctuation. Farmers constantly take on risk borrowing in springtime and repaying in the fall, once the harvest is sold. Subsidies and USDA farm loans act as a bulwark against predatory commercial lenders.
Disadvantages
A common argument against farming subsidies is that they are similar to regressive taxes. Many feel that the current system of subsidies helps rich farms at the expense of the poor rural farmers. Some of the richest farmers today receive farm subsidies, whereas about 60 percent of farms are bereft of any of the benefits of these subsidies.
Find Additional Support For Your Farm
As experts in the farm financing industry, our loan officers at AgAmerica understand the financial issues that farmers face. Numerous financing options, including USDA farm loans, can help level the playing field. Let us help you find the best financing solution for your farm today.