What Is the Point of Agricultural Subsidies?

Every five to six years on average, new legislation is introduced and passed through the U.S. Congress to subsidize farmers and agricultural products. These bills provide benefits such as cash, minimum prices, and crop insurance programs.

Most academic economists and policy analysts oppose agricultural subsidies, but that seems to have little impact on the continuous transfer of taxpayer money to farmers.

Scope of Farm Subsidies

These bills tend to be massive. President Donald Trump signed the $867 billion Agriculture Improvement Act into law on Dec. 20, 2018.  From 1962 to 2019, farm income stabilization programs averaged $13.2 billion. These subsidies target wheat, rice, soybeans, oats, barley, sorghum, minor oilseeds, peanuts, corn, and cotton.

Marketing loans set minimum prices for crops, encouraging overproduction beyond market demands for the aforementioned products as well as honey, chickpeas, wool, and mohair.

Other subsidies include counter-cyclical payments for crops, conservation subsidies that pay farmers to not grow crops, USDA farm insurance programs, special crop disaster assistance programs, and taxpayer-funded agricultural research.

Reasons for Farm Subsidies

Before the Industrial Revolution, nearly all of the workforce was employed in farm labor. In 1790, for example, 90% of all working Americans were farm owners or worked on farms. Understandably, farmers were seen as economically crucial. Additionally, politicians got elected by being friends to the farmers.

Wealthy farmers have been successful in lobbying for government favors throughout history. Some subsidies existed in the U.S. before the Great Depression, but most modern programs date to the 1930s. It was thought that propping up farm prices would keep farmers from going bankrupt; the net result made food more expensive for people struggling to afford it.

Political economists note that subsidies tend to never go away through a phenomenon called public choice theory; essentially, wealthy farmers have more incentive to fight for subsidies than consumers do to fight against them. 

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Congressional Research Service. "What Is the Farm Bill?" Page 1.

  2. Robert Whaples. "Do Economists Agree on Anything? Yes!" Page 1.

  3. Congressional Research Service. "What Is the Farm Bill," Page 5.

  4. U.S. Congress. "Agriculture Improvement Act of 2018."

  5. Office of Management and Budget. "Historical Tables." Download Table 3.2—Outlays by Function and Subfunction: 1962-2025."

  6. U.S. Department of Agriculture. "Title I: Crop Commodity Program Provisions After Enactment of the Agriculture Improvement Act of 2018."

  7. U.S. Department of Agriculture. "Marketing Assistance Loans and Loan Deficiency Payments."

  8. U.S. Department of Agriculture. "Average Crop Revenue Election (ACRE Program Backgrounder," Page 1.

  9. U.S. Department of Agriculture. "Conservation Programs."

  10. U.S. Department of Agriculture. "Crop and Livestock Insurance."

  11. U.S. Department of Agriculture. "Noninsured Crop Disaster Assistance Program."

  12. U.S. Department of Agriculture. "Agricultural Research Service."

  13. U.S. Department of Agriculture. "The Story of U.S. Agricultural Estimates," Page 1.

  14. Federal Reserve Bank of Minneapolis. "Farm Bills and Farmers: The Effects of Subsidies over Time."

  15. Foundation for Economic Education. "Why You Vote for Corn Syrup Even Though It Might Be Killing You."

  16. The Library of Economics and Liberty. "Public Choice."