>>Agriculture of USA

Agriculture of USA

: Agriculture of USA.

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 (EAD) 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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