18/09/2017
What is Agricultural subsidy?
An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities. Examples of such commodities include: Cassava, maize, sorghum, cotton, rice, sugarcane, and meat products such as beef, pork, lamb and fishes.
A subsidy is a benefit given by the government to groups or individuals, usually in the form of a cash payment, equipment supply or a tax reduction. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public.
Advantages of Agricultural Subsidy
1. Reduce Agricultural Imports
Farming is a tedious and inconvenient occupation, and not many people like to work on a farm. But the population is growing and their need for food is growing as well. If a country such as the United States lack farm products (because there are no more farmers or farms no longer provide sufficient food supply), it needs to import agricultural products from somewhere else. Imported products are often more expensive than locally produced ones. By providing agricultural subsidies, more people are encouraged to farm, which leads to more locally grown agricultural produce and less imports.
2. Stabilize Agricultural Infrastructure
Any financial aid to farmers helps in the purchase or funding of farming equipment and technology, as well as in developing infrastructure required to facilitate the transport of agricultural produce from farm to market (end user). Some farmers cannot afford the purchase or upkeep of farm infrastructure especially those that need hefty capitalization.
3. Provide Steady Income to Farmers
Regardless of the economy, farmers are assured of steady income through the help of agricultural subsidies. Farmers often experience losses over natural and manmade disasters such as drought, hurricane, and wildfire. Some farmers do not yield enough to realize a profit because they lack the funds for the farm’s upkeep. But with agricultural subsidies, farmers no longer have to worry about poor harvest or low marketability.
4. Manage Food Supply
The more farmers there are, and the more successful farms there are, the greater the harvest, and the higher the food supply. A country that produces plenty of agricultural products often do not have problems with food supply, but is in fact, a huge exporter of such products to countries that lack food supply. It is easier to manage a resource when there is plenty of it, than when there is lack.
Disadvantages of Agricultural Subsidy
1. Need Government Intervention
Agricultural subsidies directly affect the price and supply of commodities, which the government uses as part of its manipulative tactic. Without subsidies, prices and supply go on its natural course – something naturally predicted by the market fluctuations.
2. Lack of Product Diversity
Not all kinds of crops or products are eligible for subsidy. Farmers who badly need subsides may be forced to grow crops dictated in the program. This affects the variety or diversity of agricultural products in the market, which ultimately defeats the purpose of lowering agricultural imports because then products that are not produced locally will have to be sourced elsewhere.
3. Discriminate Other Farmers
Agricultural subsidies discriminate farmers that specialize on crops or agricultural products that are not eligible for subsidy. Those that grow eligible crops get funding have higher chance of producing good harvest, enjoying higher profits, and living comfortably – those that do not have higher chances of failure.
4. May Hurt the Environment
Alternating crops and diversification is a traditional method of sustainable farming. But with agricultural subsidies, the continuous planting of similar or the same crop for prolonged period could eventually hurt the environment. In addition, the use of certain chemicals to ensure good harvest spells disaster environment wise.
Who benefits from Agricultural Subsidy in Nigeria?
