A post on Anti-Dismal about who gets what from agricultural subsidies concludes the biggest gains go to the landowner. * corrected below
That is backed up by this paper by Chris Nixon from NZIER which says that product prices are capitalised into land prices.
The findings Anti-Dismal points to, indicate it doesn’t matter if they are real market prices or ones artificially inflated by subsidies.
However, if the impact of the removal of subsidies and the ag-sag which followed that is any indication, subsidies benefit those who depend on farmers too.
When subsidies were removed after the 1984 election, farmers were brought kicking and screaming into the real world and many feared there would be a mass exodus from farms. Farm values fell – adding credence to the view that product prices are reflected in land values – and some people were forced to sell, but most hunkered down and learned to stand on their own feet.
However, when the subsidies went, farmers’ incomes fell, they stopped spending and jobs were lost downstream. The worst effects weren’t felt by farmers but by the people who processed what they grew, worked for, contracted to, supplied and serviced them.
If the removal of subsidies hurt those downstream more than farmers, they must have benefitted from subsidies too.
Correction: * Paul Walker points out in a comment below that it was the farmer not the landowner who benefits most.
Since it’s now two days after I made the original post, I’ll address that in a new post.