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Agricultural Policies and Agribusiness Introduction Governments play a major role in agriculture at the federal level.

Governments have influenced agriculture directly through the following mechanisms; health regulation programs; price support laws and production controls; and the collection and distribution of agricultural statistics. In addition to the general policies of the nation as a whole, agriculture is specifically affected by inflation, unemployment, and foreign policy. Agriculturalists do very little today that is not affected, either directly or indirectly, by government action. Why agricultural policy Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultural product markets. Outcomes can involve, for example, a guaranteed supply level, price stability, product quality, product selection, land use or employment. Agricultural policy outlines the steps that will be taken to reach certain goals in the food and fibre economy. Typically such policies affect the resources, production, and markets related to agricultural products and services. They often are concerned with the safety, consumption, and nutritional value of food. Agricultural policy like most national-level policies is influenced by economic, foreign, and environmental policies and considerations. Agriculture policy concern The major challenges and issues faced by the agricultural/agribusiness industry in most developing countries are:

Marketing challenges and changes in consumer tastes International trading environment: world market conditions, barriers to trade, quarantine and technical barriers, maintenance of global competitiveness and market image, and management of bio security issues affecting imports and the disease status of exports.

Bio security: pests and diseases such as bovine spongiform encephalopathy (BSE), avian influenza, foot and mouth disease, citrus canker, and sugarcane smut.

Infrastructure such as transport, ports, telecommunications, energy and irrigation facilities.

Management skills and labour supply: With increasing requirements for business planning, enhanced market awareness, the use of modern technology such as computers and global positioning systems and better agronomic management, modern farm managers will need to become increasingly skilled. Examples: training of skilled workers, the development of labour hire systems that provide continuity of work in industries with strong seasonal peaks, modern communication tools, investigating market opportunities, researching customer requirements, business planning including financial management, researching the latest farming techniques, risk management skills.

Coordination: a more consistent national strategic agenda for agricultural research and development; more active involvement of research investors in collaboration with research providers developing programs of work; greater coordination of research activities across industries, research organisations and issues; and investment in human capital to ensure a skilled pool of research personnel in the future.

Technology: research, adoption, productivity, genetically modified (GM) crops, investments.

Water: access rights, water trade, providing water for environmental outcomes, assignment of risk in response to reallocation of water from consumptive to environmental use, accounting for the sourcing and allocation of water.

Resource access issues: management of native vegetation, the protection and enhancement of biodiversity, sustainability of productive agricultural resources, landholder responsibilities.

Goals of agricultural policy Maintaining a profitable, viable, efficient, and environmentally safe agricultural production sector capable of meeting demands for food and fibre while providing satisfactory incomes to producers for use of their land, labour, capital, and management. Providing for an efficient, profitable, and dynamic agribusiness sector, including input suppliers and agricultural output sector.

Providing consumers with an abundant, varied and safe supply of food and fibre at the lowest possible cost consistent with other goals. Operating a food and fibre economy within the framework of a democratic society, relying on the free market system as much as possible consistent with other goals. Maintaining and enhancing the competitiveness of the countrys agricultural product in the global market.

Forces that cause policy change Most countries agricultural policies are constantly changing. Major revisions occur every few years, but smaller adjustments are made much more frequently. The following forces may cause changes in policy: Price instability: one major problem faced by producers is instability of prices and incomes. Changes in supply and demand can and do affect farm prices. This is common when government chooses to intervene only a little, or infrequently, in the agricultural sector. Globalization: the cultures, politics, and economies of countries around the world have become more interdependent. This process is referred to as globalisation. Increased globalization requires that all governments consider the effects their actions and policies will have on other countries. Technology: advances in technology have forced changes in agricultural policy, because of increased efficiency in the production of agricultural products and services and increased quality of those products and services. Through various research projects, land grant and agricultural colleges and universities have played and continue to play a significant role in advancing technology. Food safety: most countries are concerned with the safety of their nations food supply. Policies relating to making sure that foods meet the health and safety requirements are consistently being modified to ensure a safe food supply. The presence of certain bacteria such as E.coli, salmonella, listeria and others in food items can lead to an epidemic if there are no policies being enforced by the government to ensure food safety. Environment: agricultural policy is often changed to respond to issues related to the environment. In the past the major concern for most countries was soil conservation. Today, there is continuing concern about water quality in most countries, the use of

pesticides and genetically altered organisms also sparks controversy in many countries. Some believe that future concerns may centre on how agriculture affects air quality. Agricultural industrialization: the multitude of changing conditions in agriculture and food systems may be referred to as agricultural industrialization. Technological advances, the growth of large agribusinesses, the need for supply-chain management, and the effects of corporate ownership, acquisitions, and contraction of agricultural functions all contribute to the industrialization of the agricultural sector. Policy focus in this area is on how the traditional family farm is affected by these sweeping changes. Politics: politics plays a significant role in determining all policies, including agricultural policy. As one might expect, politics also affects which programs are chosen to implement agricultural policy. A common misconception is that farmers have little political influence today. Although is true that in most countries, commercial farms are decreasing in number (and increasing in size), it is also true that farmers, as a minority group, continue to successfully lobby for legislation to benefit them and the agricultural sector in general. Policy Tools Agricultural subsidies: An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to manage the agricultural industry as one part of the various methods a government uses in a mixed economy. The conditions for payment and the reasons for the individual specific subsidies vary with farm product, size of farm, nature of ownership, and country among other factors. Enriching peanut farmers for political purposes, keeping the price of a staple low to keep the poor from rebelling, stabilizing the production of a crop to avoid famine years, encouraging diversification and many other purposes have been suggested as the reason for specific subsidies. Price controls: Price floors or price ceilings set a minimum or maximum price for a product. Price controls encourage more production by a price floor or less production by a price ceiling. Quotas and trade control: These are specific limits and controls. A government can erect trade barriers to limit the quantity of goods imported (in the case of a Quota

Share) or monopolise trade in certain commodities. In communist countries all commodities are monopolised, but there are many examples of non-communist government monopolies: the Swedish government controls the import of all alcoholic beverages and tobacco products, and the French government controls all imports of coal. Discriminatory government and private procurement policies: These are the rules and regulations that discriminate against foreign supplies and are commonly referred to as "Buy British" or "Buy American" policies. Tariff systems: Tariff systems provide either a single rate of duty for each item applicable to all countries, or two or more rates, applicable to different countries or groups of countries. Tariffs are usually grouped into two classifications. Tariffs are used to raise the domestic price of imported products. These barriers give preference to domestic producers. Restrictive customs procedures The rules and regulations for classifying and valuing commodities as a basis for levying import duties can be administered in a way that makes compliance difficult and expensive. Reasons for Governmental Involvement 1. National security: Some argue that nations have an interest in assuring there is sufficient domestic production capability to meet domestic needs in the event of a global supply disruption. Significant dependence on foreign food producers makes a country strategically vulnerable in the event of war, blockade or embargo. Maintaining adequate domestic capability allows for food self-sufficiency that lessens the risk of supply shocks due to geopolitical events. Agricultural policies may be used to support domestic producers as they gain domestic and international market share. This may be a short term way of encouraging an industry until it is large enough to thrive without aid. Or it may be an ongoing subsidy designed to allow a product to compete with or undercut foreign competition. This may produce a net gain for a government despite the cost of interventions because it allows a country to build up an export industry or reduce imports. It also helps to form the nations supply and demand market.

2. Environmental Protection and Land Management: Farm or undeveloped land composes the majority of land in most countries. Policies may encourage some land uses rather than others in the interest of protecting the environment. For instance, subsidies may be given for particular farming methods, forestation, land clearance, or pollution abatement for example 3. Rural poverty and poverty relief: Subsidising farming may encourage people to remain on the land and obtain some income. This might be relevant to a third world country with many peasant farmers, but it may also be a consideration to more developed countries such as Poland. They have a very high unemployment rate, much farmland and retain a large rural population growing food for their own use. Price controls may also be used to assist poor citizens. Many countries have used this method of welfare support as it delivers cheap food to the poorest without the need to assess people to give them financial aid. 4. Fair trade: Some advocate Fair Trade rules to ensure that poor farmers in developing nations that produce crops primarily for export are not exploited or outcompeted which advocates consider a dangerous "race to the bottom" in agricultural labour and safety standards. Opponents point out that most agriculture in developed nations is produced by industrial corporations (agribusiness) which are hardly deserving of sympathy, and that the alternative to exploitation is poverty. 5. Food supply and food safety: Food is a necessity for the survival of people in any society. Throughout history, one can find numerous examples of governments that eventually failed because they could not feed their people. A recent example was the government of the former Soviet Union. In terms of food safety, people trust the government regulatory bodies to ensure that the food is safe to eat. This often leads to the formation of public policies designed to monitor the quality of foods. Arguments against market intervention Dumping of agricultural surpluses In international trade parlance, when a company from country A sells a commodity below the cost of production into country B, this is called "dumping". A number of countries that are signatories to multilateral trade agreements have provisions that prohibit this practice. When rich countries subsidize domestic production, excess output is often given to the developing world as foreign aid. This process eliminates the domestic market for agricultural products in

the developing world, because the products can be obtained for free from western aid agencies. In developing nations where these effects are most severe, small farmers could no longer afford basic inputs and were forced to sell their land. "Consider a farmer in Ghana who used to be able to make a living growing rice. Several years ago, Ghana was able to feed and export their surplus. Now, it imports rice. From where? Developed countries. Why? Because it's cheaper. Even if it costs the rice producer in the developed world much more to produce the rice, he doesn't have to make a profit from his crop. The government pays him to grow it, so he can sell it more cheaply to Ghana than the farmer in Ghana can. And that farmer in Ghana? He can't feed his family anymore." (Lyle Vanclief, Former Canadian Minister of Agriculture [1997-2003]) According to The Institute for Agriculture and Trade Policy, corn, soybeans, cotton, wheat and rice are sold below the cost of production, or dumped. Dumping rates are approximately forty percent for wheat, between twenty-five and thirty percent for corn (maize), approximately thirty percent for soybeans, fifty-seven percent for cotton, and approximately twenty percent for rice. For example, wheat is sold for forty percent below cost. According to Oxfam, "If developed nations eliminated subsidy programs, the export value of agriculture in lesser developed nations would increase by 24 %, plus a further 5.5 % from tariff equilibrium. ... exporters can offer US surpluses for sale at prices around half the cost of production; destroying local agriculture and creating a captive market in the process." Free trade advocates desire the elimination of all market distorting mechanisms (subsidies, tariffs, regulations) and argue that, as with free trade in all areas, this will result in aggregate benefit for all. This position is particularly popular in competitive agricultural exporting nations in both the developed and developing world, some of whom have banded together in the Cairns Group lobby. Canada's Department of Agriculture estimates that developing nations would benefit by about $4 billion annually if subsidies in the developed world were halved. Market Distortions Market interventions may increase the cost to consumers for agricultural products, either via hidden wealth transfers via the government, or increased prices at the consumer level, such as for sugar and peanuts in the US. This has led to market distortions, such as food processors using high fructose corn syrup as a replacement for sugar. High fructose corn syrup may be an unhealthy food additive, and, were sugar prices not inflated by government fiat, sugar might be preferred over high fructose corn syrup in the marketplace.