Agriculture of USA
Almost 21mln. people or about 17 % of all population works in
the agriculture of USA. Nearly 3 millions independent farms deliver feed
products to the American consumers. The area of an average farm in the
USA makes about 400 acres. In 1984 there were more than 2.3 million
farms in the country. However, the very large farms -those with 1000
acres and more account for more than 40% of farm acreage. The largest
manufacturers of grains making up 2,3% of total of farms, produce about
50 % of wheat in the country. Similarly, the largest 2 % of the
manufacturers of chickens - broilers own 70 % of market sales.
Number of firms producing selected products in the USA. 1980es.
Product Numbers of firms producing
this product
Wheat 446075
Corn 937704
Rice 11445
Soy-bean 511229
Tobacco 179141
Pea-nuts 23046
Dairy products 197269
Cattle 1354309
There is therefore some concentrations of agricultural
production in hands of the largest manufacturers in the USA. But even
largest agricultural manufacturers accept the established prices for
production. For example, 2 % of the manufacturers of grain, that make up
50 % of grain production in the USA, are represented by 27000
independent firms. The new firms can also penetrate into the majority of
agricultural branches with relative ease. There are special branches -
exceptions. For example, there have been state regulation that have
limited for many years the number of tobacco producers. However, even
domestic manufacturer, who are protected against entry must compete for
sales to the foreign manufacturers in the export markets.
State tax regulation plays important roll in encouraging of
farm development in USA. Since 1988 the tax rates on profit in an
agriculture have been established at a rate of 15 and 28% whereas
earlier they ranged from 11 up to 50 % with the intermediate rates.
Farms with the income up to 50000 dollars pay tax at the 15 % rate, and
every next 25000 dollars at - 28% rate. Since 1989 the size of the
tax-free profit has increased up to 2000, and since 1990 - up to 5000
dollars.
Calculation of surtax in USA agroindustrial complex has a
number of peculiarities, each of which can represent a tax privilege.
The USA tax laws gives the farmers the right to subtract the costs
connected with some works in agriculture and cattle breeding from the
tax paid. Work on soil preservation, water resources protection, soil
preparation for farming are of thus kind. The tax discount works for the
incomes and losses suffered by the farmers in connection with the sale
of cattle or forages. These losses are subtracted from the farmer's
charges and the more favorable taxation mode is used for profit, than
for income taxation. The farmers, who are engaged in cattle feeding use a
tax privilege as a delay of income getting, that is all expenses are
estimated per one year, and all incomes on his(its) realization the next
year. Besides the farmers have the right to apply methods of
accelerated amortization of agricultural machines and equipment on
higher rates. It allows them to considerably reduce the sizes of the
taxed income, that is to pay the taxes on the lower rates. As a result,
the more machines, equipment, the farmer gets, the less taxes he pays
this year and in the following period of amortization. The farmers are
given alternative to use new amortization rules to reduce the taxed
income or to make allocation by equal shares for 3-45 years depending on
the kind of property.
The tax rules for corporations limit the sizes of the allowed
allocation from the taxed income connected with expenses for fodder,
seeds and fertilizer. The farmer corporation can receive the right for
discounts only after actual complete consumption of materials.
The special tax privileges are given to farmer cooperative
societies. Thus, fruit growing cooperative societies? marketing, and
also those purchasing farm machines are released from surtax payment.
One of major functions of tax privileges in agriculture is to
stimulate scientific and technical development, accelerate realization
of technical novelties, which, as a rule, require large additional
capital investments. To stimulate investments of the farmer capital in
technical innovations the special conditions of the taxation are
provided these tax laws:
• Establishment of the tax discounts on the investments gain;
• Budget compensation for tax payments on investment gain;
• Prolongation of tax payments and capital investment gain for the period of end of investment process completion.
Farmer has the right to take advantage of one of the favorable
taxation terms, if he introduce innovations, which are found in the
state or regional agrarian programs. The farmers participating in the
state agrarian programs, have the right to detain tax payment capital
investments gain as long as the investment process is completed. The
tax volume decreases by inflation, and the sum of the tax is distributed
per years in regular intervals.
The state tax regulation in the USA enables the farmers of the
advanced countries to change the size tax volume at the expense of use
of various tax privileges and discounts. The numerous tax privileges
reduce fiscal functions of taxation system in agrarian sector to a
minimum level.
The main role in belongs to the agrarian legislation. The acts
determine the basic forms and methods of state influence on an
agriculture. In recent years the role of budget assignments for support
of the prices on agricultural production and incomes of the farmers, as
well for regulation of market structure of agricultural production and
foodstuffs has increased. Organization of Economic Assistance to
Development (ОEAD) estimates that the USA farmers received 22 milliards
dollars for financial support.
Specific feature of financing of USA economy, is that the means
from the federal budget are primary allocated for the target programs
having national importance. So, two programs work in agroindustrial
complex at the federal level: "Stabilization of the Incomes" and
"science and scientific service". Besides more than 10 interbranch
target programs of national importance providing interests of an
agriculture and farmers work at a federal level. There are soil
conservation and land withdrawal program, food help to needy population,
marketing and inspection, social development of rural areas. The budget
means distributed according with this programs are summarized and
allocated to the branch federal budget of the USA agriculture. Its basic
part (more than 80 %) is supervised by the US Ministry of an
agriculture through good-credit corporation (GCC) and other
financial-credit bodies. The rest of 20 % of means are distributed
through state and local management bodies. Of all US budget charges
about 60 % is necessary for realization of farmer income stabilization
program and social - charitable support of needy farmers, almost 10 % is
distributed for the programs development village at the state and
regional level, about 5 % — for scientific researches and scientific
service, 25 % — for social and native-protective purposes. Thus, 3/4 of
budget assignments allocated to US agriculture are spent for farm
production regulation and 1/4 for social purposes.
This system of federal budget distribution allow to regulate
farm production, through the prices, loans, credits and grants. The
target program "Stabilization Of the Incomes " is subdivided into 3
large programs: " Prices and Incomes Support ", " Crop Insurance ". "
The Farm Credit ".
the direct gratuitous payments from the federal budget are very
important and have great influence over the farmers. The grants are
powerful economic stimulus of involving farmers in realization of the
state programs of farm regulation. The farmers, who carry out the taken
obligations on realization of the state agrarian programs have right to
get them, as well as loans. The grants use stimulates farmers to
intensify farm production in case the sowing areas are reduced
permanent income even due to the system of compensatory payments from
the federal budget farmers are ensured in permanent income even if the
situation is not favorable.
The US agricultural policies provide minimal and steady prices
for agricultural products. The price support frequently results in huge
surpluses of agricultural products, which authorities are compelled to
buy and to keep prices from sharp fall. Agricultural price support,
alongside with other policies inducing farmers to keep their land idle
have also brought contributed in the prices paid by the American
consumers to subsidize the farmers.
The American government agricultural policy supporting crop
prices and farmers incomes has resulted in federal costs of more than 85
billions dollars in 1981-86 years. There is a complex of price support
policies used by the government to benefit agricultural firms. The
simplest of the programs is a price floor similar to the one discussed
above for wages. Such a program has been used for many years to bolster
the incomes of dairy farmers However, the impact of this type of price
floor is somewhat different from the minimum wage program discussed
above. In the case of an effective minimum wage the surplus of workers
seeking work are not employed. However, in the case of an effective
price floor established for dairy products such as milk, the government
actually purchases the surplus and in that way uses taxpayers money to
help increase the income of mill: producers When the price floor is
above the equilibrium price of milk consumers also foot the bill to
assist dairy farmers by paying higher prices for milk. Because milk is
not storable for long periods, the surplus milk is usually converted to
powder, cheese, or butter before being stored.
In recent years government purchases of surplus milk have
amounted to about 10% of total production. During the early 1980s the
federal government spent over $2 billion annually to purchase surplus
milk. To help reduce the program in 1986 the government purchased dairy
herds of farmers who agreed to stay out of the milk business for 5 years
The dairy cows purchased through this program were then slaughtered The
price support floors for milk were also reduced in 1986. However, the
new program is not expected to eliminate the surplus.
The federal government also intervenes in the market for other
agricultural commodities in various ways. The method most recently used
to support the incomes of grain producers has been the imposition of
target prices for crops. Target prices are price floors 10 sellers
However unlike the price supports discussed above for milk target prices
do not directly increase the market price paid by buyers. Instead, the
entire quantity supplied by farmers at the target price is dumped on the
market. The resulting price depends on the demand for the commodity.
Farmers are then subsidized by the government through a payment for each
bushel sold equal to the difference between the target price and the
price paid by buyers .
At the beginning of each crop year the US Department of
Agriculture announces the target prices for various crops and the
eligibility requirements to participate the target price program. For
example, in 1987 the target price for wheat was $4,38 per bushel
Typically, farmers are required to hold a certain percentage of the
their acreage land to be eligible for the target price. In 1987 farmers
had to hold idle 25% of their land to gain the right to the target
price.
The government does not buy grain surplus, on the target price
instead all produced graine amount is offered for sale at the market.
Consumers are clearly better under the target price program
than they would be under a price floor of $4.38 per bushel. In fact, one
of the justifications of the target price program in recent years has
been that it does contribute to lower prices for U.S. crops, thereby
increasing the ability of U.S. producers to compete with foreign
competitors in international commodity markets. However, because of the
acreage restrictions that go along with the program, prices can be
higher than would be the case.
Subsidizing farmers in this way therefore transfers income from
taxpayers in general to farmers, but it does not necessarily result in
lower commodity prices to consumers compared to those that would prevail
in a free market The United States Is not the only nation that
subsidizes farmers in ways that increase quantities supplied. Other
nations have their own subsidy programs that tend to raise prices
received by their farmers above the equilibrium level. The result of
these programs has in recent years has been a glut of grain on
international markets, sharply reducing prices. Farmers in nations
without subsidy programs have suffered. For example, in Canada where
farm subsidies are below those in other nations, many farmers have been
forced out of business.
There are also other examples. The policy of encouragement of
the domestic manufacturers of sugar in the advanced countries damages to
a number of the developing countries, whose climate is best suited for
sugar production. The surplus of sugar in the advanced countries
because of price thresholds on surpluses causes the sugar exports from
these countries. And it means, that the developing countries should
compete with them at the world markets. Thus policy of support of sugar
manufacturers in the advanced countries results in decrease of the
producers incomes in the less advanced countries. The same situation
develops with other branches of agroindustrial manufacture. The support
of the prices on rice in the USA damages to the rice producers in
Thailand. The creation of favorable conditions for the manufacturers of
cotton in USA results in decrease of the incomes in Egypt and Mexico.
The experience of state regulation of agroindustrial manufacture
in market economy of USA shows, that the state is an effective
mechanism of modern economy. The activity of the state depends on the
development of the market, its infrastructure, degree of involving of
national economy in the international relations. An effective
utilization in USA of such tools as: the competition, tax system, budget
and credit system, frequently even to the detriment of other countries -
promotes development of market economy in the country, induces
development of domestic branches of the national economy and at the end
increases competitiveness of production of domestic manufacture in the
world market.
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