2004: success story built on subsidies

BY ANY measure, 2004 was not just a great year for American farmers and ranchers; it was a spectacularly great year. Records fell as easily and often as spring rain.

US net farm income, according to US Department of Agriculture projections, was $73.7bn (39bn), fully $25bn (13bn) more than the average annual income from 1993 to 2003. Total agricultural exports popped to $62.3bn (33bn), another all-time American record. Export volume, at 115m tonnes, was nearly 10m tonnes over 2003.

A closer look shows livestock led the way. Dairymen averaged 36cents/litre (19p/litre) for milk for the year. Hog profits, at $22 (12) a head, were five times greater than the average return for any year between 1992 and 2003.

Cattle prices, be they slaughter cattle or yearlings for feeding, brought record returns for ranchers and feeders. In fact, owning cattle in America in 2004 was like owning the US Treasury. At the end of December, slaughter cattle were bringing 90cents/lb (106p/kg) and 600lb yearlings were knocking down $1.15/lb (1.36/kg).

Grain producers cashed in, too. Lovely weather, short carryover supplies going into 2004 and a demand-led, red-hot spring market brought record maize and soyabean yields, record production and huge per-acre profits.

Huge is too small a word for it. For example, on November 22 the University of Illinois reported that the 754 grain farms in its state-wide Farm Business Management programme had an average 2004 farm income of $91,966 (49,200).

And then there were the very generous taxpayers of America, who, oblivious to US agriculture”s swelling fortunes throughout 2004, sent food producers $15.7bn (8.4bn) in farm commodity, conservation and disaster payments last year. With production, price and income records falling left, right and centre, American farmers still cashed nearly $16bn (9bn) of Uncle Sam”s cheques in 2004.

That fact has not escaped long-time – and now new – critics of US farm policy.

Moreover, as the Environmental Working Group (a tart critic that has posted each subsidy recipient”s name, address and amount received at www.ewg.org ) points out, only 10% of US farmers pocket about 70% of the money each year.

Indeed, that so many billions went to fewer than 306,000 of America”s farming millions gives 2004″s otherwise beautiful face a pig-ugly black eye.

More importantly, the fact that a favoured few received most of the billions proves the critics right, notes John Hansen, president of Nebraska”s Farmer Union.

In a note to key policy players and the press on December 28, Hansen claimed the shift in US ag policy, which began with 1996″s Freedom to Farm, ended in 2004. Traditional price-supporting programmes, he wrote, are now “income transfer programmes that look, feel and taste like welfare programmes to most observers”.

In 2005, Hansen added, this “common perception [will] become the reality, which is the current structure of [American] farm programmes is politically indefensible and fiscally vulnerable”.

 Hansen, a plain-spoken family farm advocate, who also serves on a White House agricultural trade advisory panel, states what other farm leaders are too timid to admit: All the free trade/market-oriented preaching offered by America”s biggest farm groups and farmers is miles removed from the practice of grabbing Uncle Sam”s money.

 Last year”s record-smashing run only serves to prove it again. The central element of 1996 and 2002 Farm Bills – “Here are the federal dollars whether you need them or not” – betrays most farm groups” nearly sacred supply-and-demand, free-trade-forever tenets.

The consequences of this money grab are evident and growing. Fewer, bigger, richer farms; more, smaller, poorer farm communities. Supply chain, industrialised livestock production; red meat and poultry producers chained to packers and processors. Less emphasis on soil and water conservation; more soil and water degradation.

The irony of these clashing policies also reached full bloom in 2004. After delicious grain prices through the spring and early summer, the predicted record crops predictably drained prices lower. Over the growing and harvest seasons, maize fell from nearly $130/t (69/t) to $80/t (43/t), soya from $350 (187) to $190 (102) and wheat from $155 (83) to $110 (59).

The tumble permitted most grain farmers to cash in on other government subsidies. It also laid the groundwork for even cheaper 2005 prices and even greater 2005 subsidies.

Exports, long hailed by farmers as their key saving grace, will add pressure to sliding grain prices.

 This year”s record-setting ag export pace will fall by $7bn (3.7bn) in 2005 while food imports will continue their steady rise.

USDA now sees America”s 2005 food trade balance as zero – exports and imports are both forecast at $56bn (30bn). That means next year will be the first year in 50 that the nation will not export more food than it imports.

Even the swiftly falling overseas value of the US dollar, down 30% against the euro in three years, cannot stem the rising import tide. Alas, another tenet of the American farming faithful: cheap dollars means more exports, looks to be falling, too.

Hollow, too, appears America”s farm-record-shattering 2004 because it will be followed by a year in which America”s ag trade surplus will vanish, tumbling grain prices will require even greater farm subsidies and processors and packers will strengthen their grip over food, fibre and meat producers.

So, goodbye, 2004. Hello reality.