3 ms·

> Government subsidies are what enabled the huge agribusinesses to take over the market. That might be so, but that's not what the article discusses. The word

> Government subsidies are what enabled the huge agribusinesses to take over the market. That might be so, but that's not what the article discusses. The word 'subsidies' is only mentioned once, and it's not in a context that supports your assertion. I'm not an expert on farming and I'm not sure if you are either, so I hope I can be forgiven for trusting what's in the article instead of commentors on this thread. If I were to paraphrase what went wrong with american agriculture, based on what's in the article, I'd say that the root cause was a policy change enacted during the Nixon administration: > the farming landscape changed dramatically in the 1970s when President Nixon promoted agribusiness lobbyist Earl “Rusty” Butz to USDA secretary. Butz had a reputation going back to at least the 1950s for lobbying for dramatic modernizations to farming at the expense of small farms. “Adapt or die; resist and perish… The change removed regulations from the FDR era, regulations that were explicitly in place for environmental purposes: > Before Butz, farming practices were ruled by FDR New Deal-era controls on production, when memories of the Dust Bowl and destruction of the land through overproduction were still vivid. > Butz became a pariah to everyone but the big farmers as small farmers went bust under the continual tightening of the efficiency noose > only farms with thousands of cows, that can use their size to cut costs, are able to operate in the black: So, either you go big, and sell your dairy for the lowest possible cost, or no one buys your dairy and you go out of business. when I said "small farms are being outcompeted by large farms", that's what I meant.

supermatt 8y ago
Ive tried to explain this to you, but you clearly aren't interested in the reality. What mechanism allowed these unprofitable farms to grow in order to purchase the smaller farms - where did the money to do this come from? Please consider that they are (without exception) unprofitable and have become proportionally less profitable as time has gone by. You clearly have no understanding of the economics of dairy farming if you think the farmers - large or small - are setting their price, or if their profitability is in some way dictated by how they operate on an agricultural level. Its subsidies, plain and simple. I don't understand your agenda in trying to make this out to be something else. I get that this is an entrepreneurship forum, but this is the exact kind of example we should recognise as destructive - not framing it as good business in any way. EDIT: I should clarify, I'm not suggesting that the owners of large dairy farms are evil. It is the system that is forcing this upon them too. If they didn't do it, they too would go bankrupt. If thats the ideal of "go big or go home", well, there can be only one...
- sonnyblarney 8y ago
  No matt, you have not explained it at all from an economics perspective - in fact, your own stated facts don't support the notion that bigger farms have some kind of leverage from the subsidies over smaller farms. A 'unit subsidy' doesn't at all help larger entities more than smaller ones - there must be some other dynamic at play. A unit subsidy should be the economic equivalent of broadly elevated demand. Either 1) larger farms simply do have some economies of scale, thus flushing out smaller ones - in which case subsidies are not super relevant and this would be happening anyhow or 2) there's some kind of direct advantage the larger producers have in yielding a per-unit subsidy, I can't imagine what that would be, but you seem to have a lot of expertise so perhaps you can elucidate.
  - supermatt 8y ago
    I replied to you regarding this in another thread. In short, its #2. It's to do with volume. By producing a large volume of an unprofitable product you would usually lose more money than someone producing a small volume of an unprofitable product. However, because of the subsidies, this has been reversed, and you now make more money than someone creating a smaller volume. This is exactly how these large farms have been established (they were incorporated to take advantage of these very subsidies), and they have used the large "profits" to further grow. The margins have further reduced, but they are still "profitable" because of the volume.
pdonis 8y ago
> The change removed regulations from the FDR era And substituted new regulations which favored large agribusinesses. The article doesn't go into detail about that part, but it's crucial to understanding why, for example, corn overproduction has led to high fructose corn syrup, ethanol from corn, etc. in the US. The key regulatory change was that, rather than paying farms not to grow corn to keep production limited, the government started subsiziding minimum prices for corn even when the market price would be lower due to a glut in supply. This obviously favored big agribusinesses, who could overproduce corn in far larger quantities than small farms. More discussion here: http://www.pbs.org/independentlens/kingcorn/bushels.html http://www.pbs.org/independentlens/kingcorn/bushels.html

supermatt 8y ago

Ive tried to explain this to you, but you clearly aren't interested in the reality. What mechanism allowed these unprofitable farms to grow in order to purchase the smaller farms - where did the money to do this come from? Please consider that they are (without exception) unprofitable and have become proportionally less profitable as time has gone by. You clearly have no understanding of the economics of dairy farming if you think the farmers - large or small - are setting their price, or if their profitability is in some way dictated by how they operate on an agricultural level. Its subsidies, plain and simple. I don't understand your agenda in trying to make this out to be something else. I get that this is an entrepreneurship forum, but this is the exact kind of example we should recognise as destructive - not framing it as good business in any way. EDIT: I should clarify, I'm not suggesting that the owners of large dairy farms are evil. It is the system that is forcing this upon them too. If they didn't do it, they too would go bankrupt. If thats the ideal of "go big or go home", well, there can be only one...

sonnyblarney 8y ago
No matt, you have not explained it at all from an economics perspective - in fact, your own stated facts don't support the notion that bigger farms have some kind of leverage from the subsidies over smaller farms. A 'unit subsidy' doesn't at all help larger entities more than smaller ones - there must be some other dynamic at play. A unit subsidy should be the economic equivalent of broadly elevated demand. Either 1) larger farms simply do have some economies of scale, thus flushing out smaller ones - in which case subsidies are not super relevant and this would be happening anyhow or 2) there's some kind of direct advantage the larger producers have in yielding a per-unit subsidy, I can't imagine what that would be, but you seem to have a lot of expertise so perhaps you can elucidate.
- supermatt 8y ago
  I replied to you regarding this in another thread. In short, its #2. It's to do with volume. By producing a large volume of an unprofitable product you would usually lose more money than someone producing a small volume of an unprofitable product. However, because of the subsidies, this has been reversed, and you now make more money than someone creating a smaller volume. This is exactly how these large farms have been established (they were incorporated to take advantage of these very subsidies), and they have used the large "profits" to further grow. The margins have further reduced, but they are still "profitable" because of the volume.

pdonis 8y ago

> The change removed regulations from the FDR era And substituted new regulations which favored large agribusinesses. The article doesn't go into detail about that part, but it's crucial to understanding why, for example, corn overproduction has led to high fructose corn syrup, ethanol from corn, etc. in the US. The key regulatory change was that, rather than paying farms not to grow corn to keep production limited, the government started subsiziding minimum prices for corn even when the market price would be lower due to a glut in supply. This obviously favored big agribusinesses, who could overproduce corn in far larger quantities than small farms. More discussion here: http://www.pbs.org/independentlens/kingcorn/bushels.html http://www.pbs.org/independentlens/kingcorn/bushels.html