Farmers or agricultural industry?

by Prof. Dr Eberhard Hamer, SME Institute Lower Saxony

No other industry is as highly competitive as agriculture, but there is also no other industry receiving as many subsidies as agriculture does. It is a question of these subsidies when green eco-phantasts fight for “lean grassland”, for “natural forests with bark beetles”, for “a green band” lengthwise through Germany, for “frog bridges”, for a “production without artificial fertilisers” and similar uneconomical “causes”.
  On the other hand, the farmers as producers are fighting a desperate battle against the market power of the big buyers of milk, pigs, grain or other things. These buyers can dictate prices to them. They are international corporations, and the small farmers are helpless against them.
  To a considerable extent, agriculture subsidies go to the processors of agricultural products. There is no conclusive explanation known for this fact. For all intents and purposes, agricultural subsidies should only benefit agricultural producers.
  Only 9% of our 266,700 agricultural enterprises count more than 100 hectares; so more than 90% are small, medium-sized family businesses. It is also always these that are at the forefront of media coverage, and they are seen by the population as the actual farm structure.
  Economically, however, the situation is quite different:

  • The average farm size in Germany is 66 hectares with an increasing tendency, because more and more small farms cannot survive and thus the concentration of farms is increasing. The annual death of about 2,000 farms thus mainly affects small farms.
  • It is, however, not the 90% small farms but the large farms that have the say in the large agricultural associations. The latter have so far succeeded in ensuring that subsidies are calculated on the basis of hectares, which means that large companies have benefited excessively.
  • There is also a legal difference between the family farm and most large-scale agricultural corporations: the former are sole propriorship farms, the latter are usually corporations. In the East, many functionaries of the old agricultural production cooperatives have taken these over (formerly: “Junkerland in Bauernhand – Squire’s land in farmer’s hand”; now: “Von den blauen zu den roten Baronen – From the blue to the red barons”).
  • The mentality is completely different between family farms and large-scale agricultural corporations: While the former – in order to survive at all – usually have to combine crops and livestock farming, mass and mono-production prevail with the large farms. Either agriculture or animal husbandry – and both in large dimensions.
  • In terms of business management and production requirements, a large agricultural enterprise today is in principle no different from other large production or service enterprises, except that mass production is, of course, carried out in agriculture or livestock farming.

Therefore, in practice, these large farms are not agricultural enterprises but commercial enterprises on an agricultural basis.
  So although farmers’ economic activity has for many reasons not been considered to be commercial and they are therefore not subject to trade tax, this does not apply to agricultural factories. A pig fattening facility with thousands of pigs, a factory farm with tens of thousands of chickens, or a dairy farm with hundreds of cows is no longer an agricultural but in reality a commercial enterprise with mass production, high-tech, and a narrow product range. This applies to all large agricultural corporations.
  The EU is currently debating how subsidies should be distributed more fairly.
  If one takes seriously the idea that large agrarian corporations are differently structured, legally different, and are mass instead of variable producers, one must also differentiate between farmers and industrial companies in the matter of agricultural promotion. Large corporations must not be allowed to receive subsidies, would also have to pay trade tax, since they have as little to do with farming businesses as crafts have to do with industry.
  If therefore

  • the corporations were considered commercial enterprises and not agricultural enterprises,
  • the commercial enterprises were subject to trade tax
  • and the agricultural subsidies were to benefit only family farms

consistently, this would

  • reduce the death of small businesses,
  • promote the change to organic farming,
  • revive the real purpose of subsidies (maintaining family farms),
  • require lower subsidies
  • and destroy the false label of the agricultural agribusinesses as “farms”.

Then the unfair competition between small farmers and mass agricultural production in Germany would also disappear, through trade tax and the reduction of subsidies; then the 90% farming enterprises would to be able to compete again and agricultural policy would again benefit farmers instead of corporations.  •

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