21 March 2000
THE question fron “JTS”, Why farm subsidies and not other industries? is worthy of an answer!
As you are obviously aware, there is no simple answer to this situation, but I have a few observations which may be part of such an answer.
Land is a major part of any farming activity, whether arable or livestock-based, and it is a limited resource.
The different types of farming all attract different levels of revenue and cost, some being more lucrative than others.
In the majority of cases I would expect farmers to prefer the highest reward for their work and thus it would be reasonable to expect them to want to farm products with the highest return for the resources available in terms of land available and cost of wasting assets – machinery, time,
available, capital etc.
I trust that everyone agrees, so far.
However, if every farmer chose to produce whatever product was providing the highest return of the day, I suspect that we would rapidly run short of such a wide variety of produce.
The price of these products would rapidly drop due to oversupply, and farmers would then try to move on to the next product which provided a high return, and so on.
This would also result in produce with a low financial return being ignored.
To counter this effect it is necessary to compile data on population levels, public taste, nutritional requirements, land availability, capital requirements, and so on.
Using this data, it is then possible to
- Make some determination of the product requirements of the population.
- Determine what levels of return are going to be on the required products.
The next problem is to ensure that these products are available in the quantities required.
This means discouraging oversupply of high financial-return produce and encouraging supply of low financial-return products.
The easiest way to manage this is to introduce penalties and rewards by means of legislation and subsidies.
Governments, not only the British government, attempt to manage the most effective use of one the nations most valuable and limited resources – land (which tends to reduce annually, especially on an island), using this method.
This is obviously not the complete answer, but without subsidies many products would probably not be produced until the market price was sufficiently high to encourage farmers to produce them and at any one time there would be products that simply would not be produced because the returns would not be as high as that of other products, under normal market conditions.
It is also important to remember that as an island this country is much smaller in terms of available land than some of its European counterparts and its ability to supply its own population is limited.
Do we want to be at the mercy of other countries for our food supply? Or do we want to continue to provide a relatively wide choice of products?
There are other issues on which someone else may wish to comment.