Introduction - The Nature of the Farm - page 13

made directly to farmers. These payments, based on historical production, are in place for
the years 1996-2002 and are thus “decoupled” from current production decisions. The 1996
bill did not alter the basic structure of the programs for dairy, peanuts, and sugar.
Several other policies are worth noting. Since the 1930s limits have existed on the amount
of government payments any single farm(er) can receive, although there are methods of
avoiding these restrictions (as we note in chapter 9). Farm capital is generally treated more
favorably in the federal tax code than is nonfarm capital. And there have been conservation
programs (Soil Bank, Conservation Reserve) since the 1950s, which pay farmers to take
land out of production. There are other agricultural programs but these do not relate to the
topics we study. 29
In Canada government intervention has been less intrusive and of a slightly differ-
ent form. 30 There have been no systems of target prices and government payments for
grain. Wheat producers, however, must sell their crop through the Canadian Wheat Board
(CWB). 31 Originally established in 1935, the CWB was given monopoly control over Cana-
dian wheat in 1943. The rest of Canada's agriculture tends to be governed by what is called
“supply management” (Schmitz, Furtans, and Baylis 2002). Products such as eggs, milk,
and poultry are influenced by programs that limit imports with quotas and tariffs as well as
domestic production quotas.
Agricultural programs in both countries are substantial in size and appear to be politically
quite stable. In 2000, more than $29 billion in direct payments were made to farmers in the
United States, including $11.6 billion for feed grains, $5.4 billion for wheat, $4 billion for
cotton, and $1.5 billion for disaster assistance. 32 Nearly 34 million acres were enrolled in
the Conservation Reserve Program, which pays farmers to keep formerly arable land out of
production. This is roughly 7 percent of the 430 million acres of cropland (see table 1.1).
According to the U.S. Census of Agriculture, net farm income was $46 billion (income =
$196, expenses = $150) in 1997, which makes government payments the equivalent of more
than half of net farm income. Programs in Canada tend to be less generous to producers than
in the United States, yet they are still substantial. 33
Among agricultural economists, the effects of government policies have been intensively
studied with several areas of focus. One important area in this literature has been how farm
policies affect crop production, including such issues as crop choice, acreage in production,
farm prices, and crop yield. A second focus has been to estimate the deadweight losses of
farm programs and the distribution of their benefits and costs. A third focus has been to
study the political economy of farm programs in order to explain their form, their survival,
and their variation across crops, regions and time. Despite this expansive literature, almost
no analysis of the effects of farm programs on contracts and organization in agricultural
production exists. For example, in the texts we cite here, there is almost no mention of
such possible effects, with the exception of some discussion of the effects of limitations on