FARMING THE MAILBOX: U.S. FEDERAL AND STATE SUBSIDIES TO AGRICULTURE

OTTAWA, Nov. 24 /CNW/ - In his latest report on U.S. farm support being released today, Peter Clark, president of Grey, Clark, Shih and Associates Limited., found that U.S. federal, state and local governments continue to subsidize their agriculture industries with a labyrinth of programs that are conservatively estimated at over US$180 billion in 2009 and representing well more than half of total U.S. farm gate revenues of US$290 billion. 

Grey, Clark, Shih and Associates Limited (GCS) has been analyzing U.S. farm subsidy programs since 1986 and have prepared four such reports for the Dairy Farmers of Canada since 1990.  This report is the latest update. It focuses on changes introduced by the 2008 Farm Bill.

"The U.S. continues to provide massive - sometimes underreported to the World Trade Organization - support at the federal, state and local government level to U.S. agriculture," said Mr. Clark. "U.S. dairy producers are among the principal beneficiaries of this support through a complex web of direct support and indirect programs and measures."

Indirect support to U.S. dairy production comes through infrastructure such as irrigation, services, and general program benefits including export credits, nutrition, food aid and loan and guarantee loan programs.  In addition, there are very substantial pass through benefits from feed grain production to livestock that benefit dairy cattle and dairy production. 

In total, the report found that the value of U.S. Department of Agriculture programs to the U.S. agriculture industry was US$180.8 billion in 2009.  Dairy's roughly 10.7% share of U.S. agricultural sales, equates to benefits of some US$19.3 billion to U.S. dairy farmers.

"We estimate that the total direct and indirect benefit to U.S. dairy production through U.S. federal, state and local programs in fiscal year 2009 was US$12.00 per hundred weight (cwt) of milk produced or C$31.11 per hectoliter," said Mr. Clark.

That includes the aggregate program levels of the U.S. Department of Agriculture programmes, irrigation infrastructure support and unreported below market price-cost water and power for irrigation systems as well as the ever expanding biomass energy incentive.

We estimate that this support represents C$31.11 per hectoliter in 2009.  That is significantly higher than the previous Farm Bill (2002) which estimated support on similar basis at C$25.90/hl for FY 2003.

In summary, the subsidies to U.S. dairy producers are essentially equivalent to revenue the industry receives from the market place.  This generous support enables U.S. producers to sell below their fully absorbed cost of production by insulating them from the need to earn a profit from the market.  The support also permits insulation from international price pressures.

Mr. Clark pointed out that the study was about all agricultural support, and is not limited to dairy subsidies.  "Overall, USDA like the E.U. provide support to U.S. agriculture which is production and trade distorting," he explained.   

"Rampant, misclassified and unreported domestic support is the root cause of the impasse in the Doha Round and the overwhelming reason that meaningful negotiations will not be re-engaged for years," Mr. Clark said.  Further, unless these subsidies are disciplined and reduced, everything is certainly not on the table in the negotiations of the Trans-Pacific Partnership (TPP) and the Canada-E.U. Comprehensive Economic and Trade Agreement (CETA).

The 2008 Farm Bill was not disciplined by refinement of the WTO rules.  Nor will these undecided initiatives influence CAP Reform in Europe.  While 'decoupled' support payments were supposed to make the world fairer, they made it worse and we will see much more of what is claimed to be decoupled or green."

A précis is included and the full report is available online at www.greyclark.com or on CD. For more information, please call Mr. Clark at 613-238-7743.

For further information:

Peter Clark
613-238-7743
[email protected]