Is staying the course the
Is staying the course the
right course for farmers?
US farmers received £19.2b of farm subsidies to
compensate for low prices in 2000 and are expected to
get another £11.2b this year. And yet advocates of Freedom
to Farm still insist that their policy could work, given mild
tinkering. Alan Guebert explains
DURING the bleak farming days of the 1930s Great Depression, American humorist Will Rogers joked that new John Deere tractors would not have seats because "farmers do not need seats; they lost their backsides in the market."
The story remains humorous today because it remains truthful. The difference, however, is that what the flooded, cheap world market has taken from American farmers in the last three years, the US government has given back.
In 2000 alone, American farmers received a staggering, record $28.3b (£19.2b) in government subsidies. US Department of Agriculture economists estimate 2001 subsidies could total another $16.4b (£11.2b). That two-year, $45b (£30.6b) total is what the entire seven-year Freedom to Farm program was to cost when it became law in 1996.
The driver behind this climbing cost is production. Pick any US farm commodity today and increasing production, either here or abroad, is closing the door to potentially higher 2001 prices. For instance, in the coming year:
• American soyabean plantings are likely to be a record 30m ha (74m acres), up 2.6% from a year ago, and production could top 81.7m tonnes.
• Maize plantings are projected to decline 2.8% to about 31m ha (77m acres), but a favourable growing season will easily add to 2000s projected carryover of 45.7m tonnes.
• 2001 winter wheat plantings, estimated at 16.7m ha (41.3m acres), are 2m acres less than 2000 but the global wheat glut will keep domestic prices low – $93-$100 (£63-68)/t, according to USDA, unless weather clips world production;
• Cotton plantings in the coming year are estimated to be 6.4m ha (15.9m acres), the largest since 1963.
• After two years of dismal prices and increased production, US dairy prices are projected to climb by a modest 4%, but only if the US economy continues to grow, a hope that is dimming by the day.
• Cattle and hog prices, nothing to write home about in 2000, are headed lower in 2001. Hog prices currently are about 84c (57p)/kg and could fall to 44c (30p)/kg by October because of pending production increases. Cattle prices, now about $1.68 (£1.14)/kg, may have peaked for the year already, say most market analysts.
Put all these dots on a wall and the emerging picture for American farmers in 2001 is less than bright. Even the most conservative ag economists, those who strongly endorsed – and remain steadfast to – Freedom to Farm are beginning to sound worried.
On January 30, the Commission on 21st Century Agriculture, a blue ribbon committee named by Congress to monitor Freedom to Farm, reported to the US Senate that changes totalling nearly $13b (£8.8b) a year are needed to keep American farmers backsides out of the fire after the programme expires in 2002. Many in Congress, even the tight-fisted conservative Republicans, say that estimate is too low, believing $20b (£13.6b) would be closer to the mark.
The cost – and Freedom to Farms fatal flaw – can be tied directly to a simple, but crucial, change contained in the 1996 programme, explains Larry Mitchell, a former USDA official from the now-departed Clinton Administration.
"In the past, (American) farm programmes were commodity price support programmes," says Mitchell. "Their intention was to lift farm income by lifting farm prices through reduced crop plantings.
"Freedom to Farm is a farm income subsidy programme; it requires no planting reductions. Subsidies are paid by taxpayers. Support programmes attempt to get the market to pay."
Mitchell advises Congress and farm leaders to move swiftly to either limit production or re-institute supply-gathering tools like a farmer-owned grain reserve (eliminated in 1996) to absorb the excess.
Alas, no one is prepared to take the hint this year. Congress and farm leaders, despite the ample evidence to the opposite, believe staying the course is the right course. The chairman of the Commission on 21st Century Agriculture, Kansas ag economist Barry Flinchbaugh, told the Senate on Jan 30 that crop insurance, increased (US) farm exports, tax law changes and farm supports will pull American farmers through this low income ditch.
Flinchbaugh, the intellectual father of Freedom to Farm and one not known for his modesty, called the Commissions recommendations a "four-wheeler", an allusion to a powerful four-wheel-drive farm vehicle.
Fine metaphor, professor, but does that four-wheeler have a seat?
In 2000 alone, American farmers received a staggering, record $28.3b (£19.2b) in government subsidies. US Department of Agriculture economists estimate 2001
subsidies could total another $16.4b (£11.2b)
Even the most
conservative
ag economists, those who strongly endorsed – and remain steadfast to – Freedom
to Farm are
beginning to
sound worried
Alas, no one is
prepared to take
the hint this year. Congress and farm
leaders, despite the ample evidence to the opposite, believe
staying the course
is the right course