We all need to eat, and farmers produce the food that we buy.

However, we only need to eat a certain amount of food. Once we have enough, there is no reason to buy any more.

When people earn more money, they may choose to buy expensive food, or eat out at restaurants more regularly, but in general they do not spend a higher proportion of their income on food. They spend their spare money on 'luxuries' such as mobile phones, electronic goods, holidays, entertainment and cars.

Money spent, income gained

When we buy something, the money that we spend becomes an income to the people who produce the goods.

We spend more on luxury goods when we have more money. The incomes of the people who produce these goods will increase as our spending increases.

However, we spend roughly the same on food, so the income of farmers – who produce our food – stays the same.

Compared with the incomes of other people, farmers' incomes are left behind, and farmers become poorer than others.

Over many years farmers have become more efficient at producing food. For example, agricultural machinery has improved, and farmers can use fertilisers and pesticides. In general, farmers now produce more food than ever before.

However, as the production, or supply, of any good increases its price tends to fall.

Normally, as the price of a good falls, we will buy more of it.

However, as the price of food falls, if we already have enough to keep us from being hungry, we will continue to buy the same amount. (We may eat in restaurants more, but the money that we spend on this does not benefit farmers.) Because food prices are lower, we will have saved some money. We tend to spend this money on luxuries.

Yet for farmers, the lower costs for food mean that their incomes will fall.

So, again, farmers have become worse off, this time both in comparison with other people (relatively poorer) and compared with how well off they were before (absolutely poorer).

This is the agricultural problem. It affects farmers in both rich countries like the UK and poorer countries such as Jamaica. Farmers in all countries are becoming worse off than others in their societies.

To help to keep farms in business, most governments in rich countries offer some kind of subsidy – a special payment given by the government on top of what the farmers normally earn from producing food – to keep their incomes at reasonable levels.

In the European Union (including the UK), the subsidy given is part of what is known as the Common Agricultural Policy (CAP). Farmers on large farms benefit most under the CAP.

There are several reasons, including the following.

• Countries like to be self-sufficient in food. They do not like being entirely dependent on other countries in case, for example, war breaks out.



• If farmers went out of business, lots of other businesses would be affected – for example, farm-machinery manufacturers and local shops. It would also affect the local tourist industry: tourists rely on farmers to maintain the countryside.



• Food is perishable – it goes off quickly. It therefore makes economic sense to grow food locally, rather than pay the high costs of flying food in from abroad before it goes off.

Subsidies help farmers to stay in business, but they do create a further problem. Receiving subsidies from the government encourages farmers to produce more.

The effect of this is for farmers to produce much more food than the country needs – a surplus. The government has paid for this extra production and therefore takes control of the surplus.

Often the surplus is sold very cheaply overseas, possibly below what it costs to produce. This is because once the food has been produced, it seems better to receive some money for it rather than throw it all away.

This process is called dumping. It is a major problem for farmers in poor countries. They cannot afford to sell the food they produce at the low price of the subsidised, imported food.

Since agriculture is the main way of making a living for many people in poor countries, dumping can be very damaging.

To find out more about the impact of dumping on the lives of farmers in poorer countries, go to Real lives. You can also read about a farmer in a richer country in this section.

To find out more about the issues and the international trading system, look at The issues and Free trade.

To find out what you can do, look at Take action.

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