| Ok, here's a way to look at some of these subsidy numbers:
Ok, as a farmer, I start with cost of production per bushel (ERS full costs):
2008 -$3.68. (That's 54% higher costs than 2003, about 9% increase per year.)
Ok on corn a direct payment of 28 cents per bushel (same as 2003) to make up for the loss. (Well, a fraction of that)
2008: $0.28 x historical prog. yield (which might be 80% of real current yield) = $0.23
And then multiply by a percent of the acreage so it's reduced again.
2008: $0.23 x .833 = .19 (it was 85% in 2003, as Jill showed).
Ok, full costs vs income from direct payments.
2008 - $2.68 + $0.19 = - 2.49
So with a 50% rise in costs you get a slightly less in benefits 2008 vs 2003. Theoretically these are the "good" subsidies, "decoupled." (D. Ray: http://agpolicy.utk.edu/weekco... .) You're not "distorting trade." Everyone supports this, right. It's part of WTO philosophy, supported by Bread for the World and the Religious Working Group on the Farm Bill. Of course, that means farmers get the subsidy even on a rare year above costs, like 2008. Green Box? So don't praise it then turn around and bash it? Ok, the idea is that farmers will almost always lose money, (ie. 1981-2006; ie. Ray, lack of price responsiveness) so it's no big deal, right?
Ok Counter Cyclical payments. You only get it when you need it. Bad!!!? Not decoupled. In WTO theory it distorts Trade. (but see Daryll Ray)
How much for corn? If the market price falls below the Target Price you get it, up to the limit.
Ok, remember the full costs above: 2008 - $3.68. Well if the price falls way down to the Target Price, then you get some compensation. Ok, below $3.68 when prices fall you get 19-20 cents to make up for a drop down to the Target price, a drop of over $1.00.
Target Price
2003: $2.60 2008: $2.63 (as costs went up 50%)
You get countercyclical subsidies down to the Loan Rate.
2003: $1.98 2008: $1.95
So the gaps are: 2008: $2.63 - $1.95 = $0.68 subsidy per bushel of corn?
Well, except it's based upon program historic yield (maybe 80%) and acreage rules.
2008 $0.68 x 80%? = $0.54 x .833 = $0.45 (As Jill showed, it was 85% of acreage back in 2003)
So, if prices crash ANOTHER 68 cents (they've already fallen more than $1.00 and you already got a fraction of $0.28), you get about 45 cents as compensation for the free market losses. If they only crash down to, say, $2.65, you get no countercyclical payment.
Ok, subsidy number 3, Loan Deficiency Payments. You only get them if prices fall all the way down to the Loan Rate. Then you get compensated based upon actual yields. If you don't have a yield, (ie. Crop failure) that's a problem.
Ok, but under some conditions, this is still better than the ACRE program, which substitutes for some of these subsidies.
Ok, if prices crash (there's no price floor or supply management to prevent it), then, on the way down you get some subsidies, here and there. I've translated it into per bushel terms, like 2003 or 2008 farming, even though that's not how it's actually calculated.
Here's another way I crunched it a while back:
http://www.iowafarmertoday.com... |
