Ag Subsidies, Farmer Protests, and the U.S. Farm Bill
In a conversation with some of HMI’s Certified Educators from around the world, I realized how much the U.S. can learn about our policies and agricultural subsidies from lessons learned in other countries. It would serve us well to look outside the box we’ve gotten ourselves into within the context of the U.S. Farm Bill. Please read through my comments about the European farmer protests and subsidy challenges to John King‘s and Brian Wehlburg‘s comments below about the cautionary tales from New Zealand and Zimbabwe.
In regards to the European Farmer Protests, here are some critical facts to consider as noted in the web article links below. While U.S. farmers are not yet stirred up to the same degree, the situation in Europe is not that different from the U.S. in many ways.
A lot of it the unrest is driven by lobbyists for large agribusiness. In Europe there is pressure to reduce the environmental regulations related to farm payments. This happens every time there is any perceived “attack” on what has been historically allowed such as GMOs, all pesticides allowed, no limit on fertilizer overuse, etc.
Despite the news that farms have been seized there is no evidence this has happened and stories like these are used to incite more farmer protests and add more chaos to an already chaotic mix.
Interestingly, farm profits are actually better than the last few years in most places, but two major problems have come up:The fixed costs have gradually creeped up, resulting in fragile farms
The grain fed CAFO animal operations are in trouble, due to higher grain prices
The EU Common Agricultural Policy (CAP) (or subsidy) system is, of course, the primary area of concern. Here are some interesting facts:
European farmers get a lot of subsidies that are paid regardless of production, which can be about 50-60% of farm income. So, these policies have resulted in a situation where the market prices do not cover production costs.
Most of the subsidies are area-based (size) and a lot of it is tied to payments for environmental action (cover crops, balanced fertilization, leaving biodiversity strips, etc.). A third of the EU’s budget, €386.7 billion euros between 2021 and 2027 of taxpayer money, goes to farmers and the top 20% of producers get 80% of the subsidies. Thus, these subsidies are actually causing more small farms to go out of business (much like in the U.S.).
With the new CAP, some basic agricultural common-sense rules were put in as conditionality for getting the payments (such as crop rotation, not leaving soil bare for the most erosion risky times, etc). Now there is push back against this conditionality, as the markets have adapted to the subsidies (excess production, low grain prices) and some farmers who have been unwilling to adapt for decades see the subsidy system as automatic income.
While there are 9 million farmers in the EU (compared to the 1.9 million farmers in the U.S.), they also face the same pressure from consumers who assume that all agriculture is bad for the environment. Resistance to ecological farming practices by farmers (especially to earn subsidies) only encourages such beliefs from the public and makes such subsidies more tenuous. It also puts more farmers at risk as they short-sightedly think these subsidies can last forever and prop up landscapes that are not resilient.
For more information regarding these topics, visit these websites:
https://www.birdlife.org/news/2024/02/01/the-real-deal-behind-europes-farmer-protests
https://www.politico.eu/article/europe-farmer-protest-russia-war-propaganda
https://www.politico.eu/article/france-far-right-farmers-outrage-power-europe-eu-election-agriculture
https://www.politico.eu/article/ursula-von-der-leyen-germany-afd-russia-scandal-voice-of-europe
Surviving and Learning From the New Zealand Farm Crisis
By John King
At the time of the New Zealand Farm Crisis (in the 1980s), New Zealand went from the most regulated economy in the Organization for Economic & Cooperation Development (OECD) to free-market overnight (beyond that of the USA) resulting in an influx of foreign currency exacerbating high inflation and unemployment. Investors shifted their money to stock markets as land values had plummeted a third earlier in the decade with some farmers struggling to remain above 30% equity. Interest rates climbed to 23% and second mortgages were up to 38%. Agricultural prices dropped below the cost of production because of the worldwide recession.
That coincided with four major simultaneous events affecting agriculture;
Wool price crash, especially strong wool
Shift from fat to lean lamb
Sudden availability of cheap urea
Switch to corporate sponsored research
It’s believed some 8,000 farmers walked off their land, which would be at least 15% of the farming community, many in debt from developing their properties during the production bubble. There are no figures on suicides and other negative social outcomes from these events. During the next 10 years these circumstances promoted intensive pastoral dairying and horticulture over other agricultural enterprises resulting in significant environmental pollution problems emerging over the next 30 years. The problem here was the cold turkey approach instead of a wind down over time to allow rural communities to adjust.
Removal of subsidies resulted in more environmental problems because farmers had to dig their way out of debt by mining natural capital, there were no alternatives. It allowed the NZ government to pay down debt which also involved corporatising and selling off its ministries and assets. Like everywhere, farmers here now are facing increasing compliance costs (overheads, particularly inescapables) and enduring declining prices for sheep meat and strong wool.
It’s agricultural institutions that struggle with change. Farmers do adapt faster but many ideas are not promoted. To give an example, I was on a dairy property where annual fertiliser use dropped from 120 tonne to 35 and milk production increased by 30%. The farmer simply puts water soluble fertilisers in water and applies nature’s principle of little and often, instead of industry standard of 2 applications per year. But don’t expect this farmer to ever be recognised for his discoveries. Why?
No fertiliser company would ever promote farmers whose purchases drop by 70%.
No bank will ever promote a farmer whose farm working expenses are below 50 cents in the dollar (because they’ll be mining soil fertility).
The extension arm of the dairy industry, DairyNZ, would never promote a farm having less than 50% of pasture in ryegrass (this farmer had every weed in his pasture except seaweed and I don’t say that with certainty).
No regional council would promote a farmer running 4.7cows/ha as the promoted ideal across New Zealand is closer to 3, preferably 2.
Even Quorum Sense, the New Zealand regenerative farming community won’t promote this farmer because he doesn’t sow multi-species pastures, apply biological brews or uses regenerative grazing practices.
Allan Savory has been jumping up and down on his hat for a while about institutional stupidity. I wonder how much of the protests are due to policies of one size fits all? Many farmers have environmental solutions that are more appropriate for their situations than rigid policies recognise, let alone embrace. As Graeme Hand asks, how do we even get permission to put an idea forward that is beyond the beliefs of those who have power?
Lessons from Zimbabwe
By Brian Wehlburg
John King’s discussion of the New Zealand economic crisis highlights the importance of building a healthy resilient environment and community to ride the ups and downs. Good that the New Zealand government pulled it up before having to print 100 trillion-dollar notes like Zimbabwe!!
Image Attribution: Reserve Bank of Zimbabwe, Public domain, via Wikimedia Commons
Click here for more information about the historical and continuing Zimbabwean economic crisis.
Brian also notes: “As a contributor to this, I need to put in a an update. Just ran a webinar yesterday with a professor who interviewed New Zealand farmers in the 1990s about these experiences. The numbers of farmers walking of the land mentioned here are over-exaggerated, the reality was much, much less. Those figures were what the farmers’ union was suggesting at the time but farmers entrenched and many stayed on their properties finding ways to bide time till the crisis was over. The strategies to survive banker tactics to force farm sales were varied and some ingenious. The whole situation diversified what New Zealand farmers produced, how they marketed their products as well as how they financed their businesses. It created a hatred for the professional community that still exists to this day. There are some similar circumstances occurring now as New Zealand emerges from the Covid lockdowns.”
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