Recently Virginia Tech students enrolled in the Agricultural Financial Management course taught by Dr. David Kohl were asked to participate in an informal discussion regarding Government supports to agriculture. The university course has approximately 120 students from majors including Agricultural and Applied Economics, Animal and Poultry Sciences, Crop and Soil Environmental Sciences, Horticulture, Dairy Science, General Engineering, Interdisciplinary Studies, Agricultural Education, Biology, Human Development, Art, Finance and Accounting and Information Systems. It is a diverse group this semester.
While reviewing trends of agriculture and finance, the class learned that in 2002, government subsidies accounted for approximately 50 percent of total farm income in the U.S. Students were asked to think of arguments both supporting and opposing the controversial issue.
Supporters of government subsidies to agriculture argued that subsidies are essential to preserving smaller, family-oriented farms and the communities where they are located. The governmental assistance keeps farmers in business and if done away with, many would lose their jobs. Local communities would suffer economically as farming plays an integral role in many rural areas.
Students also pointed out that retail prices would soar and that the United States would most likely become more dependent on imports without subsidies, thus creating food safety and national security concerns. Arguments were made that the aid allows farmers to invest more time and money into technology to improve their operations. In conclusion, supporters discussed the uncertainty of weather and the variability of prices involved in agriculture. Subsidies "level out" the ups and downs of incomes and allow the farms to survive through the bad years.
Students opposed to government subsidies towards agriculture argued that without subsidies farmers would have more incentive and interest in management of their farms. It was also suggested that some younger generation farmers are drawn away from the farm because of the lack of a challenge that is present when the farm is bailed out with farm program payments. Students suggested that farmers become dependent on the subsidies and thus have no incentive to improve, and that farm efficiency would rise without the aid. Another concern with government assistance is the potential for the misappropriations of funds, in which the majority of funds are allocated to larger high-income farms. Subsidizing larger farms could drive smaller farms out of business. They also discussed how providing subsidies to American agriculture somewhat violates terms of free trade. Government payments to agriculture discourage importers because prices in the U.S stay lower than international prices.
The agricultural financial management course offered at Virginia Tech allows students the opportunity to learn about farm finance and business issues that will help them to be good agricultural managers in the future. Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
This online exclusive is brought to you by The Corn and Soybean Digest