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What Are Farm Subsidies?

Malcolm Tatum
By
Updated May 16, 2024
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Farm subsidies are governmental funds allocated for the purpose of encouraging and supporting agricultural efforts within the borders of a given nation. While this type of government subsidies vary from one nation to another, most will include some provisions for smaller family-owned farms that rely on crops as a way of creating a revenue stream that supports the family living on the farm. Many farm subsidies are also granted to commercial farmers who produce larger quantities of crops that are sometimes exported as well as processed for domestic use.

In many nations, farm subsidies are used to help offset factors that undermine the farming effort. This includes subsidies that help to offset losses that occur due to inclement weather that significantly damages crops, drops in market prices that make certain crops unprofitable for a season or two, and even some sort of major disaster, such as a fire that destroys all or most of a cash crop. The limitations on the subsidies are often based on the type of crop that is grown and the size of the farming operation.

There are usually some limitations on what types of crops may be eligible for subsidizing, with commodities like corn, soybeans, and wheat often included in the programs. Other types of commodities are also often eligible for farm subsidies, including peanuts, coffee, and sugarcane. The range of crops that are included in a subsidy program will depend on which crops are actually grown within a given nation and the perceived value of those crops to the overall economy.

Farm subsidies may also be used to encourage farmers to grow crops that are considered necessary but are not particularly profitable. In this scenario, governmental officials overseeing the subsidy program will determine that production of a certain amount of these lesser crops is in the best interests of the nation overall. To that end, the subsidies will serve as incentives for select farmers to grow those crops rather than devote time and resources to growing other crops that are more lucrative.

While farm subsidies are usually aimed at encouraging family and commercial farmers to produce certain crops at specified levels, there are also subsidies designed to discourage farmers from growing one or more crops. This is usually a means of exerting some sort of management over the amount of a specific commodity that is produced during a calendar year, a factor that can often be important to stabilizing the commodities market. By offering the farmer subsidies, it is easier to prevent a glut of a particular commodity on the market, which in turn helps to keep the pricing competitive and allow other farmers to enjoy equitable returns for their efforts.

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Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Discussion Comments

By Fa5t3r — On Oct 01, 2014

@irontoenail - But how much money actually goes towards small farmers like that? Most of it seems to go into the hands of whatever established agribusiness has the best paid lobbyists.

It's all political and it has nothing to do with the good of the country or of small farmers or people who are hoping to start a new life.

I know that it's necessary for some subsidies to exist in order to be competitive with overseas markets, but when they are subsidizing their products as well it all seems rather pointless and tautological.

By irontoenail — On Oct 01, 2014

@bythewell - Subsidies for farms are a complex topic and not one that could be solved hastily. Established subsidies are often necessary for the continuation of a huge amount of jobs and removing them could damage the economy more than it seems on the surface.

They are often also in place in order to make products competitive with overseas markets which is also complex and difficult to meddle with without upsetting a lot of interests.

Besides all that, small farm subsidies do a great deal towards creating income and independence for people who want to get into agriculture. It requires so much capital it can seem impossible for anyone to start a farm these days without them.

By bythewell — On Sep 30, 2014

Farm subsidies can be a terrible idea. Corn is the perfect example. There was a huge surplus of corn at one point because of ridiculous amounts of money being pumped into the industry. It was worth more to the farmers to just grow the corn and dump it than to try and sell it.

Which is why corn has ended up in almost every single thing that Americans eat, either as cornmeal fed to livestock, or as corn syrup used as an additive in processed foods.

Small farm subsidies or short term subsidies certainly have their uses and even subsidies designed to encourage farmers to take a chance on new crops are a good idea. But ongoing subsidies that have no true economic point are doing more harm than good.

Malcolm Tatum

Malcolm Tatum

Writer

Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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