Firmly on the merry-go-round
Firmly on the merry-go-round
American farmers are trapped on a merry-go-round of
their own making. They cannot get off the spinning
machine until it slows and the best way to stop it –
by cutting acreage – is something they are loath to do.
Alan Guebert explains
THE US Senate put an ugly ending to an ugly year in American agriculture when it failed to complete its version of the 2002 Farm Bill just before Christmas. The bitter debate and farm group back-biting that led to the failure will carry over to 2002 in Washington and on the farm.
The multi-level fight boiled down to either act now to deliver about $16bn a year (£11.3bn a year) in safety net direct farm subsidies or wait until the new year to see if the global agricultural economy improves to trim that enormous number. President Bush was in the wait-and-see camp; farm groups and opposition Democrats who hold a slim, one-vote margin over Bushs Republicans in the Senate, disagreed.
The unfinished fight reveals the hurdles that must be cleared in 2002. When the market-oriented House bill, a 10-year continuation of Freedom to Farm, was presented to the Senate as an option, the Senate flamed it. That means most senators – Republicans and Democrats alike – believe Freedom to Farm needs substantial changes if its to continue as US farm policy.
It also shows how presidents from either party can continually poke American farmers in the eye and never pay a political price as long as Congress sooner or later delivers the money.
The defeat also means when the Senate finally passes its Farm Bill (sometime after Jan 23, when it returns from the Christmas break) more fireworks and more delay will occur as it and the House work to marry their very different editions.
And it is likely to mean that American farmers will live another year on the dole – big government payments in 2002 to fill the gap between low farm prices and high production costs. Unless, of course, a global weather scare frightens prices higher.
During the Senate fight, senator Kent Conrad of North Dakota described the current US farm picture this way: "In real terms, US farm prices are the lowest in 50 years. In October, the farm price index (calculated by the US Department of Agriculture) collapsed for its biggest one-month drop in 91 years. The drop could have been bigger, but USDA has been keeping records for only 91 years."
Shortly after Conrad offered that opinion, USDA offered its – 2002 grain prices will not improve much. USDA sees 2002s average wheat prices only slightly higher than 2001s $96/t (£68/t) average; maize at perhaps $74/t (£52/t), a nudge more than 2001s average of $67 (£47); and soyabeans at a steady, money-losing $165/t (£117/t).
The picture is no different in livestock and dairy. In November, because of plummeting prices after Sept 11 and a slowing domestic economy, American farmers were losing more than $100 a head (£71 a head) on cattle sold, about $6 (£4.25) for every hog sold, and more than $1 (70p) per 45kg (100lb) of milk sold.
That means on a per-farm basis, according to the University of Illinois, the average Illinois farmer earned an income of about $31,000 (£21,900) in 2001, far below the 2000 figure of $52,000 (£36,750) and well under the 10-year Illinois average of $44,000 (£31,100) a year.
And as the growing legion of Freedom to Farm critics are quick to point out, nearly one-half of that 2001 income came from Uncle Sam through direct subsidies. It will be little different in 2002.
News from overseas is similarly depressing. In December, USDA related that 2002 will mark the eleventh consecutive year of increased soyabean acreage in Argentina, one of Americas chief soya competitors. Argentinas current economic and political woes made it a virtual certainty the country would devalue its Peso, putting American soya products at a large price disadvantage just as the record-breaking South American harvest hits the global market.
Other reports show Brazilian exports of maize – non-GMO maize – will be record-breaking, too, another loss of American farm markets. China, too, will export 5.4m tonnes of maize in 2002. The startling numbers raise the question that if China and Brazil continue to expand agricultural exports, how much of the global market will be left for American exports? The answer is less.
On and on it goes. And on and on it will go.
If the Senate cannot complete its Farm Bill – then work out a compromise with the already-passed House bill – expect US farmers to plant more soyabeans, less maize and less spring wheat in 2002. The remaining iniquities of the current legislation will, as from 1998 through 2001, move soya acres up and limit maize and wheat acres.
That simple fact implies ample, cheap grain for continued expansion of the livestock and dairy sectors. Especially in dairy, where commercial dairymen are so anxious to expand that they now pay more than $2300 (£1625) for a bred heifer, $1000 (£710) more than just a year ago.
Indeed, American farmers are trapped on a merry-go-round; one largely of their own making. And they know it. Thats why they fought so hard for continuing Freedom to Farm in 2001: they cannot slow the spinning enough to get off. They cannot get off the spinning machine until is slows and the best way to slow it – cut acreage – is something they are loath to do. Difficult choices await them when Congress returns.
Indeed, Congress will act when American farmers get their act together. When that will happen is anyones guess.