Insightful interview with Dan Sumner, ag economist, in keeping with the latest Doha round, and the moves by the India/Brazil-led G20 to have the EU, U.S. eliminate a few of these farm subsidies
Freakonomics – New York Times Blog

Q: Are there any good arguments that support farm subsidies? If so, to what extent and in what manner may they be justified?A: No.

My longer answer is here.

I look at a dozen suggested rationales for farm programs and reject them all except the last one — which is we(the U.S) have farm programs because we have had them for 75 years and people are afraid of even thinking about a world without subsidies.

Q: There seems to be some amount of talk that biofuel mandates have contributed to food inflation here and food crises in other parts of the world. How much responsibility, if any, do you think the government holds for those problems because of the mandate? Should it be repealed?

A: No question, biofuels have contributed significantly to farm commodity price increases. The range of a plausible estimate of the share of increase due to use of farm resources for biofuels ranges from 10 or 15 percent to 50 percent or more, depending on the precise time period considered, the commodity (corn or rice or wheat), and whether one is apportioning the total impact across suggested drivers.

Factors affecting recent commodity price increases include:

1. Biofuels policy in (a) the U.S.; (b) Europe and elsewhere.
2. Supply shocks due to weather or pests.
3. Reductions in E.U. production subsidy.
4. Demand growth in China, India, and other fast-expanding poor countries.
5. Export controls in places such as Thailand, India, etc.
6. Import expansion policies and stockpiling in the Philippines, etc.
7. Oil price shocks that increase costs of farm production and distribution.
8. Mistaken speculators who will lose money.
9. Hedge funds and other financial traders who are pouring money into commodities because stocks, bonds, and real estate look so lousy; and
10. Oil price shocks that increases the demand for biofuels.

Q: I’ve read Jeffrey Sachs’s
opinion that ending farm subsidies in the U.S. and Europe won’t have
much effect on poorer countries, as the main beneficiaries will be
high- and moderate-income countries with reasonably efficient
agriculture industries like Australia, New Zealand, and Argentina. Will
these countries see a much greater benefit from the end of European and
American farm subsidies than African countries for example?

A: To benefit from higher prices a farmer has to
have something to sell. Many farms in Africa are not really connected
much to the global markets. (That is not true for cotton.) Also, on a
national basis many African countries are net importers of farm
products and would pay more if subsidies ended.

There is no question that big gainers from ending subsidies would be
places like Brazil, Argentina (unless their government destroys their
productive agriculture), and others. For cotton, parts of Africa are
competitive net exporters and would gain substantially as we show in
our Oxfam paper.

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