The Cultivation of Agricultural Subsidies
In this lesson, students will examine some of the history of and current debate over agricultural subsidies in the United States. They will look at the government's role in protecting the growers of specific crops, and also weigh the economic disadvantages of a program that discourages competition and free trade. Finally, students will study the effect of subsidies on a specific U.S. crop -- sugar -- and make recommendations for the future based on an understanding of the effect on all stakeholders.Download lesson as PDF
Part 1: What Is a Subsidy?
(25 - 30 minutes)
- Start With a Pop. [Access/Analyze] Place a non-diet bottle or canned soft drink in front of students. Ask how much they'd be willing to pay for it. After getting some answers (perhaps a consensus), have students look at the label of ingredients and identify which of the ingredients can be traced back to a farm, especially high-fructose corn syrup. In breaking down the cost for a bottle/can, how much do students think goes to the producer of the sweetener?
- What Is Their Threshold? [Analyze] Then, ask students if they'd be willing to pay $1 more (per can or bottle) if they knew it would make the drink healthier. Or, what if more of the cost went back to the farmers? After getting a sense of their opinions on paying more to help out farmers, ask them if their opinions would change if they knew that farmers were guaranteed to receive certain prices for their crops, regardless of the influence of supply and demand on the price. Survey students on whether any have heard of the term "subsidy." Encourage some students to try to provide a definition. View All Videos
- What Is a Subsidy? [Access/Analyze] After students watch the definition and get some more clarification on what a subsidy is, ask them to provide examples of being subsidized by parents -- examples of things they have purchased even though they didn't have all of the money to do so. (Make sure that students don't include examples of buying something with a credit card and going into debt.) Probe for opinions on what it's like to benefit from a subsidy. You can ask if they are more likely to take something for granted if its purchase was subsidized, or if they are more appreciative. Is there a relationship between the desire to earn money and the ability to have purchases subsidized? Does some form of subsidy allow students to spend more time on school and less time working to earn spending money?
- How About Farmers? [Access/Analyze] Ask students to apply some of this personal insight/experience with subsidies to farming and farmers. Tell them that the government provides subsidies to U.S. growers of a select group of crops. Using the information from Instant Expert, explain that there are proponents and critics of the practice. Have them listen to the following news report from Capitol News Connection, which details President Obama's plan to overhaul the current system.
- Understanding the Farm Bill. [Access] Explain that agricultural subsidies are part of each Farm Bill. The Farm Bill is a spending plan that is authorized every five years. The last one was passed in 2008. Using the following link and audio clip from National Public Radio, have students read the description of the Farm Bill and what it contains and listen to the audio. Discuss agricultural subsidies in the context of the Farm Bill. What else does the bill include?
Discuss what students learned from the report. What types of crops are being subsidized? Why might abolishing the subsidies be difficult to do? What is the alternative to a program that protects U.S. growers?
Part 2: A Sweet Example
(25 - 30 minutes)
- Connect to the Case Study. [Access/Analyze] Go back to the soft drink you brought into class. Now that students know more about the Farm Bill and subsidies, ask them if they think any of the drink's ingredients are subsidized. They're likely to recognize that the high-fructose corn syrup is derived from corn, which is subsidized. Ask students: What typical sweetening ingredient does high fructose corn syrup replace? (The answer is sugar.) Have them brainstorm ideas for why soft drink companies use high-fructose corn syrup instead of sugar (cost and shelf life). Survey students to see if they know from which crops we get sugar. Then, give students access to the Sugar Supply Case Study and also have them review the following audio clip from American Public Media's "Marketplace":
- Accessing Different Perspectives. [Analyze] Have student groups analyze this case study using Activity Sheet 1 as a guide. Their goals should be to know who the industry's stakeholders are, to understand the different perspectives they represent, to compare and contrast domestic and foreign sugar markets, and to understand the effects that sugar subsidies have on businesses, consumers, and other nations.
- Message in a Bottle. [Access/Analyze] When students have finished breaking down the case study, conduct a classroom "briefing" on the issue. Ask individual groups to share their knowledge of: the current system of sugar subsidies; how it protects U.S. sugar growers; how it affects food manufacturers; and how it affects the competitive playing field that helps keep consumer prices in check. Go back to the bottle of soda. Explain that other countries (e.g., Mexico) use sugar as the sweetener. Based on their new knowledge, have them make the connection between domestic sugar subsidies and the relatively recent use of high-fructose corn syrup in soft drinks.
Part 3: A Place at the Table
(60 - 90 minutes)
- What Do Other Teens Think? [Access/Analyze] Show students the Teen on the Street interview in which teens were asked: Would you rather pay less for drinks and snacks if it meant that people in the U.S. sugar industry would lose their jobs or have their pay cut substantially? Discuss student opinions on the topic. View All Videos
- Perspectives on the Global Playing Field. [Access] With the letter to the Secretary of the USDA, students have learned from the perspective of industries and companies that rely on sugar for their products -- the consensus expressed in the letter is that the USDA needs to open up the sugar market to more global competition. Have students investigate additional perspectives, particularly that of the sugar industry in the U.S. and the sugar industry in other countries. Their investigation will set up the next steps.
- Connect to Government Processes. [Act] Divide students into three groups representing the following stakeholders: U.S. sugar growers, confectionary manufacturers, and a coalition of sugar growers from Brazil. Tell them that the Farm Bill will come up for reauthorization in 2013. They have the chance to influence administration officials, members of Congress, and industry groups. Ask each group to write an editorial that reflects their views on the sugar subsidies, including if they believe the subsidies need to be altered in the next Farm Bill and how the subsidies can be improved if that is their position. In order to write the editorial, ask each group to research the following:
- The history of U.S. sugar subsidies
- The economic advantages, if any, of maintaining the current program
- The economic disadvantages, if any, of maintaining the current program
- Potential ideas for expanding sugar-import opportunities
Encourage your students also to make use of Capitol News Connection's Ask Your Lawmaker tool to submit their questions to their local politicians.
- Background information that helps support their opinion
- A clear statement of opinion
- Persuasive language
- A call to action
- What happens when previously subsidized crops lose price supports? Have students investigate the history of U.S. tobacco growers, who lost government subsidies in 2004. What influenced the change? Have students compare and contrast the environments for tobacco growers then and now.
- Using current information on market prices, government price supports, and growing conditions in your area, ask pairs or groups of students to decide which crop they would decide to grow if they ran a large farm. Have them defend their choices with hard facts and sound reasoning.
- Government subsidies also exist in other areas of the world -- e.g., many European nations, Japan, and New Zealand. Individually or in pairs, have students compare the subsidy programs of one of these nations with those in the United States. What are the similarities? What are the differences? What are the advantages or disadvantages to all stakeholders?
Instant Expert: Subsidies Edition
An agricultural subsidy is a support payment that the federal government makes to farmers and large agribusiness concerns. These payments began during the Great Depression with the Agricultural Adjustment Act of 1933. Amid the drastically falling price of crops, Congress -- with the backing of President Franklin Roosevelt -- passed legislation that paid small farmers to take cropland out of rotation. The decreased supply of selected crops increased their value.
Today, these payments continue for growers of certain commodities such as wheat, corn, rice, soybeans, cotton, and sugar. The government also guarantees a basic price for these crops. If the market price falls below a guaranteed "price floor," the government makes up the difference. Approved as part of a Farm Bill that is typically reauthorized every five years, the subsidies and price guarantees are intended to do the following:
- Mitigate the effects of disaster. Crop yields -- and farm revenues -- fluctuate based on weather conditions and the spread of certain plant diseases. Proponents say that price supports and other subsidies help smooth out any losses farms may experience during lean years.
- Manage the supply of food. By guaranteeing prices and managing how much of each crop is grown (or not grown), the government ensures a steady domestic supply of basic commodities for its citizens. Proponents say this protects the United States against fluctuations and interruptions in the global food supply.
But the practice of granting agricultural subsidies is complex and controversial. Critics point to the following issues:
- American agriculture has changed. In 1933, 6 million small farms were home to about 25 percent of the population. Today, large corporate farms account for most crop production. Only 2 percent of the population lives on a farm. Rather than helping small farmers, the subsidies provide income to large businesses that have the collective power to lobby Congress and make campaign contributions.
- Subsidies can stifle competition. Critics argue that the practice promotes poverty in nations that grow important commodities but are unable to compete on price because of the subsidy. For example, sugar is grown in some of the world's poorest countries. They would benefit from exporting it to the United States. But the combination of a government subsidy for U.S. sugar growers and a tariff -- or fee -- on foreign sugar does not make that economically feasible.
- Producers and consumers feel the pinch. Subsidies can often have the effect of inflating the value of a crop. Again, using sugar as an example, Americans pay at least twice as much for sugar than people in other countries do. And companies that depend on sugar -- such as candy manufacturers -- struggle to start or maintain their businesses in the United States.
- Subsidies drive production decisions. Currently, subsidies are available to producers of about a dozen commodities. This has the effect of encouraging the production -- or the non-production -- of some crops that no longer have the same demand, such as tobacco. Subsidies are not available for what critics say are crops that would better benefit American health, such as certain fruits and vegetables.
Nevertheless, the payments continue. In the 2008 Farm Bill, Congress authorized billions of dollars in crop subsidies.
To view all terms from every lesson, visit the main Glossary section.
Commodities: goods (often agricultural products, and natural resources) for which little or no processing is involved, so there isn't a great deal of difference in the quality of the goods
Determinants of Supply/Demand: factors other than price that affect the supply (or demand) of a product or service; factors might be change in the number of producers or change in consumer preferences or consumer spending power
Fiscal Policy: government spending and taxing policies designed to create desired effects on the economy
Incentive: a reward or benefit that motivates people to do something
Scarcity: the condition that results from demand being greater than supply
Subsidy: financial assistance (usually provided by the government) to targeted industries, companies, and individuals
Surplus: the condition that results when supply is greater than demand
Tariff: a tax on an imported good or service
- Investigate the role of subsidies in the history of U.S. agriculture.
- Analyze the effect of government subsidies within a specific industry.
- Decide upon and communicate opinions and ideas on the future of the program.
- 120 - 150 minutes
- Computers with access to the Internet
- Activity Sheet 1
- Bottle or can of soda, processed in the United States
- Agricultural subsidies
- Price guarantees
- Supply and Demand
The procedure outlined in this lesson plan addresses the following standards from the Council for Economic Education:
- Standard 1 : Scarcity
- Standard 3 : Allocation of Goods and Services
- Standard 4 : Role of Incentives
- Standard 5 : Gain from Trade
- Standard 6 : Specialization and Trade
- Standard 7 : Markets - Price and Quantity Determination
- Standard 8 : Role of Price in Market System
- Standard 9 : Role of Competition
- Standard 10 : Role of Economic Institutions
- Standard 16 : Role of Government
- Standard 17 : Using Cost/Benefit Analysis to Evaluate Government Programs