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Farmers aren't the main beneficiaries of 2002 Farm Bill, economist says
(Friday, July 15, 2005 -- CropChoice news) -- 1. Farmers aren't the main beneficiaries of 2002 Farm Bill, economist says 1. Farmers aren't the main beneficiaries of 2002 Farm Bill, economist says By Dan Looker Daryll Ray doesn't sound like a populist. He doesn't raise his voice when he speaks. Like other scholars, he uses slides of graphs to make his points. But when the University of Tennessee agricultural economist, who has spent his career analyzing farm policy, spoke at Iowa State University Wednesday, he said farmers' interests have been co-opted by agribusinesses that benefit the most from the 2002 Farm Bill. The main effect of the 2002 Farm Bill has been to subsidize commodity production so that vertically integrated livestock producers, exporters and processors can buy those commodities for prices below farmers' costs of growing them, Ray said. "Tyson and Smithfield ought to pay the full cost of soybean meal," Ray said, drawing applause from at least one listener. Ray was the evening speaker at the first day of Iowa State's Agricultural Policy Summit, a three-day event that includes nearly the entire Iowa congressional delegation and the results of an ISU survey showing that the state's farmers like the basic direction of the 2002 Farm Bill. Ray acknowledged that drastic changes in farm policy are unlikely without some kind of crisis, but he managed to debunk a lot of the common wisdom behind today's farm programs. "We've heard today that crop exports are going to be the salvation for agriculture," Ray said. He showed a slide of projected imports of corn by China that was prepared by the Food and Agricultural Policy Research Institute (FAPRI) at the University in Missouri at about the time the 1996 Farm Bill was passed. It showed Chinese imports rising steadily, to 750 million bushels by 2008. Then he showed a graph of Chinese corn imports since then. They've fallen. China actually exported 500 million bushels of corn in 2002, instead of importing 500 million by that year, as FAPRI had projected. FAPRI was off by about a billion bushels. Ray said he wasn't picking in FAPRI. USDA and other government agencies had similar optimistic predictions at the time. Overall, exports of the top eight US commodities have been flat since the 1970s, Ray said, showing another graph. Some commodities like soybeans have gained while wheat exports have suffered, but "on average, if you look at them all, the trendline is flat." Ray said that the 1996 Farm Bill, which ended set-asides and the government's ability to manage supply, "was really the watershed farm bill." Then, when farm income suffered, Congress voted for an infusion of cash into farm programs. In 2002, it made additional income support permanent, with a counter-cyclical program that in many ways is similar to the target price system that paid farmers "deficiency payments" before 1996. The big difference, of course, is that farmers still can plant just about anything they like and get those payments. "Crop farmers like it quite a bit. They can grow anything they like and no one is telling them what to plant," Ray said. Ray said if we just went back to the pre-1996 farm program laws, the government would save about a $10 billion a year and farmers would get higher prices from the marketplace. Supply and demand rules don't always apply in ag. Ray, who has been critical of the end of supply management in USDA programs, repeated his assertion that the forces of supply and demand that govern consumption of most goods and services don't always work well in agriculture. "If the prices are really low, do we eat five meals a day? If they go up, one? No," he said. If, as critics of farm programs like Oxfam suggest, the U.S. ended cotton subsidies, it might help African cotton farmers by raising world prices, but only because U.S. farmers would shift to other crops. If all subsidies were ended, farmers worldwide would just plant more to try to survive and all would suffer from depressed prices, he said. For crop agriculture, "timely, free-market self correction is a fantasy," he said. Ray said that 50-cent-a bushel corn is possible if, as he expects, global food production increases dramatically. "One of the things that happens with globalization is that it's not just farmers that have more access {to overseas markets} it's agribusiness as well," he said. Technology from those agribusinesses will fuel dramatic increases in yields in countries like China, he said. "They've been doing a lot of work in China to make their soybeans and wheat yield well in soils that have too much salt," he said. Brazil has much more land to open up to production, and nations like Russia and Ukraine are becoming more productive. "Agribusiness wants volume. If you're a seed dealer, you want to sell as much seed as you can," he said. In this environment, a lot of the ideas on the table for the next farm bill won't work very well, Ray said. Revenue assurance and farmer spending accounts won't help much if the long-term trend for prices is down, he said. The current level of subsidies to farmers is likely to loose public support. Green payments, while laudible, won't resolve the oversupply problem. And just ending subsidies completely would lower farm income. Ray did not advocate going back to traditional supply management, however. "I do think it's time for a merging of agricultural and energy policy," he said. Farmers need a new crop that's not a competitor with existing food crops, he said, something potentially as big as soybeans. "We need another soybean, we need something to sop up acreage." Energy crops could be the next equivalent of soybeans, he said. At one time, America's farmers planted 30% to 50% of their acreage for energy - feed for horses and wood for fuel. The modern equivalent might be something like switchgrass, Ray said. Ethanol could be made from it, but it can also be burned with coal to make electricity. That would be better for the environment. It would reduce imports of fuel. "And best of all, we don't ask farmers to not use their land," he said. Fuel crops would require subsidies, both to growers and to utilities, Ray said. "but you can pay for that and still have a lot of money left over" compared to the current farm program. Iowa State University's conference, "New Directions in Federal Farm Policy: Issues for the 2007 Farm Bill," continues through Friday. For information on late registration for the rest of the conference, call 515/ 294-6222.
2. ACGA Responds to Ag Secretary Inquiries at Farm Bill Forum NASHVILLE, Tenn. July 7, 2005 Keith Bolin, President of the American Corn Growers Association (ACGA) has submitted an official response to U.S. Secretary of Agriculture Mike Johanns' six questions which were posed as part of the first of a series of farm forums.
"ACGA commends your leadership and initiative for launching this series of public forums and solicitation for comments from the public on the development of USDA’s proposals for the 2007 farm bill, said Bolin, a corn and livestock producer from Manlius, Ill. Your commitment to this open and timely process is exceptional in today’s political climate."
In an official written response, Bolin went on to answer each of the six questions posed by the Secretary. That official written response may be seen at http://www.acga.org/News/2005/070705b.htm Before answering the first question, Bolin pointed out the fact the line of questioning showed a lack of understanding of the problems facing U.S. farm and ranch families and the related solutions. Bolin stated, "This first question, in itself, shows the critical need for you to more closely examine what is espoused to be the ‘conventional thinking’ for U.S. agriculture policy. Global markets, important as they are to the U.S. farm economy, have not been the driving force for our agriculture economy for over twenty years. In fact, exports have been the driving force in the U.S. agriculture economy only three times in the last century those periods being during and immediately after World War I and World War II and when the Soviets required huge grain imports in the early 1970’s. Our market growth has been in domestic sales and use. To the economic peril of the U.S. farm economy, our policy makers have mistakenly spent the last three decades insisting that the boom times of 1973 and 1974 were the normal and preferred course for the U.S. farm economy and that all we had to do to regain those glory days was to become ‘more competitive in the global market.’" "That quest for improving our competitiveness has too often, and almost always, focused on only one component of competitiveness price. What U.S. policy makers have failed to identify is that there are many other components to competitiveness other than just price, such as quality, reliability and customer preference, to name a few. Consumers do not look only to price when buying automobiles, food, clothing or anything else for that matter. If they did our highways today would be almost exclusively traversed with KIA automobiles as opposed to the diverse mix of small and large cars and the heavy dose of SUVs, which is the reality of today’s consumer preference." Bolin explained in his written response that a good farm program includes not only a good commodity program, but also good programs for conservation, research, rural development, nutrition, credit, and etcetera. He went on to point out the three components of a good commodity program as ACGA envisions it: 1. Price support, not subsidies, Bolin’s official response ended by stating, "In conclusion, we again compliment you and the Department of Agriculture for your foresight in providing these farm forums and your commitment to advance solid recommendations for the 2007 farm bill. We would also strongly suggest you solicit input on one more question in all future forums. That question should be ‘How do we increase farmer income and increase the producer’s share of the retail food dollar to a fair and equitable level.’" Bolin’s entire seven-page response may be found at http://www.acga.org/News/2005/070705b.htm -30-
3. Ventspils Grain Terminal to be Commissioned In August LONDON (Dow Jones) -- The Latvian Ventspils Grain Terminal on the Baltic Sea will be commissioned in the second half of August with a capacity of 2.5 million tons of export grain a year, according to the press office of the Ventspils regional parliament Friday. The terminal will handle export grain from the Baltic states, Russia and Kazakhstan. The $30 million project is divided in two phases, with the first phase to be completed at the end of July. The first phase includes a railway approach, unloading stations, and 12 storage facilities totaling 74,000 tons. The second stage includes the construction of nine extra storage facilities totaling 60,000 tons.
4. China Grain Needs Overstated BEIJING (Dow Jones, 07/08/05) -- China may have overestimated its grain needs by assuming a food security requirement level of more than 400 kilograms per capita a year, an influential analyst with a government think tank said. "The popular judgment held by many experts (in China) needs to be reviewed," said Han Jun, rural department chief with the Development and Research Center of the State Council, China's Cabinet. Han told Dow Jones Newswires in a telephone interview Thursday that an estimate of 400 kg of grain per capita a year isn't essential to ensure China's food security. "We have conducted a study, which is yet to be published. (According to its findings) 370 kilograms of grain per capita will roughly meet (China's) food consumption needs each year," he said. Han said farmers had difficulty selling their grain whenever per capita grain supply surpassed that level. He didn't provide a demand estimate for the nation as a whole. -Demand Growth To Be Slow And Gradual According to Han, China's demand for grains will continue to grow in the years ahead but the pace of growth will slow significantly in the coming several decades, even though population will peak only in 2030, he said. Urban consumption is expected to remain stable while that in rural areas will decline in the coming years, he said. Continuing rural migration into cities in search of jobs and a switch in rural eating habits in favor of meat and other protein-rich foods as rural incomes rise, are factors expected to aid a drop in rural grain consumption. The expected decline in rural demand will likely be more than enough to offset incremental demand from around 10 million people added to the population each year in the coming decades, he said. Grain consumption in the form of feed will, however, continue to grow, as China's meat consumption remains at a comparatively low level, according to Han. However, grain consumption for feed use tends to stabilize, or even decline, when per capita meat consumption surpasses 60 kg a year, a conventional saturation level in most markets. Currently, Chinese urban residents on average consume around 40 kg of meat per capita a year, close to between 45 and 50 kg they will likely consume with further income growth. Growth in meat demand will come mainly from rural areas, where consumption now is around 19 kg per capita a year, Han said. -Govt Measures To Boost Production Paying Off While Han's views may force a rethink in government strategy on what it takes to ensure food security, the Chinese government is expected to go ahead with its programs to boost grains production. Amid reports that the government's food grain stocks had fallen to 30% of annual demand at the end of 2003, a level not seen since 1974, the government took some unprecedented steps such as subsidizing grain growers, aiding seed and agricultural machinery purchases and scrapping a tax on production to encourage farmers to grow more grain. Those measures, along with favorable weather, lead to a rise of 9% in Chinese grain production to 469.5 million metric tons in 2004. Government officials have projected production to be flat to slightly higher in 2005. However, despite a forecast supply gap of nearly 25 million tons in 2005 -- up from around 20 million tons in 2004 -- domestic grain prices have mostly remained unchanged or even fallen in some cases, partly because of frequent releases of government reserve stocks into the market. To halt a decline in wheat prices this year, the government even had to order state warehouses to stop selling old wheat and instead buy new wheat from farmers in the summer season. China's grain reserves, for which no reliable estimates are available from the government, are still considered to be far higher than the usual international standard of 17%-18% of annual consumption advocated by the Food and Agriculture Organization of the United Nations.
5. US share of wheat, soybean exports likely to keep declining By Dan Looker If it seems like marketing, and keeping track of your global competitors, is getting more complicated, you're not alone. Curtis Jones, director of economic analysis for one of the world's largest grain companies, Bunge Global Markets of White Plaines, New York, also finds the markets more challenging these days. Thursday he explained why at the Iowa State University Agricultural Policy Summit in Ames, Iowa. Here are some of the reasons he gave: Jones' outlook for U.S. exports isn't all gloom and doom by any means. The U.S. should maintain its 65% share of global corn trade, he said, partly because Brazil's higher transportation costs work against shipping high yielding crops like corn. Also, partly because of importers interest in food safety, quality and indentity preservation, the U. S. should benefit with better infrastructure as the industry "decommoditizes" into more specialized crops, he said. Ultimately, he expects Brazil to loose its status as a producer of nonGMO (genetically modified) soybeans. That will benefit the U.S., he said. "Differentiation is where the value is going to be added in the future," he said. Of course, the U.S. can't be complacent. Our river lock and dam systems are 20 to 30 years beyond their expected life span. The nation's barge fleet is deteriorating, partly because high steel costs make replacement difficult. And we have a tight rail system. When asked if growing ethanol production might cut the U.S. share of global corn trade, Jones said it could, although he didn't factor that into his analysis. That change would have a bigger effect on agribusiness than on farmers, he said.
6. MP recognizes efficiency won't solve farm crisis by Paul Beingessner It's not very popular to be pessimistic. Pessimists are seen as casting a dark cloud over life. Better to whistle while you work than to focus on the dark side of the daily grind. But it's kind of hard to keep on the sunny side with the type of news we have endured lately. Take, for example, a recent prediction by two important international organizations. It should scare the daylights out of farmers. The Organization for Economic Co-operation and Development and the United Nations Food and Agriculture Organization issued a joint report predicting that world prices for wheat will decline by 11 percent over the next decade. The cause for this piece of gloom is familiar - increasing production in developing countries and further productivity gains among producing nations. The report also suggested what every farmer already knows - that input costs will continue to increase. The OECD provided its bit of advice to farmers faced with these prospects - become more efficient and productive. We'll ignore for the moment that the cause of the problem and the suggested cure, increased productivity, appear to be the same. As a backdrop to the pessimism of the OECD and the UNFAO, Canada's federal and provincial Agriculture Ministers met in Kananaskis, Alberta, this past week. A front page article in the Western Producer focused on what it said Wayne Easter, the Parliamentary Secretary to the Agriculture Minister would tell the conference. According to the article, Easter would argue that governments should reverse "a decades-long obsession with farmer efficiency" and recognize that "market power is the key to sustainability". It is a startling comment, but one that will resonate with farmers. As farm income figures clearly show, decades of increasing productivity and efficiency have produced greater agricultural output but continually falling farm incomes. Farmers have, quite literally, produced themselves into poverty. What is startling is that a politician in Ottawa would have the nerve to admit the failure of conventional wisdom, even as the OECD falls back on it. Easter's anticipated comment on market power is a theme he has touched on before. Farmers are becoming more and more aware that their difficulty lies in their lack of power in the economic system. The case in point that made this crystal clear to many otherwise-myopic farmers is the power of the big meat packers in Canada to sop up the profit in the cattle industry while farmers flounder. It is a fairly simple equation. Prices for farm products will only rise if buyers see their supply threatened. This will never happen while we produce in surplus and market as individuals. The two choices are to control production or negotiate collectively, or both. Wayne Easter is well aware of this. His challenge is to recommend mechanisms that will give farmers this power. One of these suggestions could be to strengthen the toothless and useless Competition Bureau. Easter also recognizes that government focus on the state of the agriculture industry as a whole, rather than on the state of farming, has hurt farmers. The government has defined success as an increase in agriculture exports. While this is undeniably good for the few global companies that dominate the world food trade, it has done little for farmers. Government has done a host of things that benefit agribusiness but ultimately result in lower returns to farmers. While Easter's remarks, as predicted by the Western Producer, show a firm grasp of the problem, Ottawa is not likely to receive them well. It is telling that the several page press release from the Agriculture Department devoted but a single sentence to Easter's report: "Parliamentary Secretary Wayne Easter made a presentation to Ministers on findings flowing from his consultations since January 2005 with Canadian producers on the challenges related to declining farm incomes." Did Wayne say all the things the Producer predicted, or is it possible Ottawa is not ready yet to give up on making us more efficient? © Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net
7. Organic farming produces same corn and soybean yields as conventional farms, but consumes less energy and no pesticides, study finds Susan S. Lang ITHACA, N.Y. -- Organic farming produces the same yields of corn and soybeans as does conventional farming, but uses 30 percent less energy, less water and no pesticides, a review of a 22-year farming trial study concludes. David Pimentel, a Cornell University professor of ecology and agriculture, concludes, "Organic farming offers real advantages for such crops as corn and soybeans." Pimentel is the lead author of a study that is published in the July issue of Bioscience (Vol. 55:7) analyzing the environmental, energy and economic costs and benefits of growing soybeans and corn organically versus conventionally. The study is a review of the Rodale Institute Farming Systems Trial, the longest running comparison of organic vs. conventional farming in the United States. "Organic farming approaches for these crops not only use an average of 30 percent less fossil energy but also conserve more water in the soil, induce less erosion, maintain soil quality and conserve more biological resources than conventional farming does," Pimentel added. The study compared a conventional farm that used recommended fertilizer and pesticide applications with an organic animal-based farm (where manure was applied) and an organic legume-based farm (that used a three-year rotation of hairy vetch/corn and rye/soybeans and wheat). The two organic systems received no chemical fertilizers or pesticides. Inter-institutional collaboration included Rodale Institute agronomists Paul Hepperly and Rita Seidel, U.S. Department of Agriculture's Agricultural Research Service research microbiologist David Douds Jr. and University of Maryland agricultural economist James Hanson. The research compared soil fungi activity, crop yields, energy efficiency, costs, organic matter changes over time, nitrogen accumulation and nitrate leaching across organic and conventional agricultural systems. "First and foremost, we found that corn and soybean yields were the same across the three systems," said Pimentel, who noted that although organic corn yields were about one-third lower during the first four years of the study, over time the organic systems produced higher yields, especially under drought conditions. The reason was that wind and water erosion degraded the soil on the conventional farm while the soil on the organic farms steadily improved in organic matter, moisture, microbial activity and other soil quality indicators. The fact that organic agriculture systems also absorb and retain significant amounts of carbon in the soil has implications for global warming, Pimentel said, pointing out that soil carbon in the organic systems increased by 15 to 28 percent, the equivalent of taking about 3,500 pounds of carbon dioxide per hectare out of the air. Among the study's other findings: In the drought years, 1988 to 1998, corn yields in the legume-based system were 22 percent higher than yields in the conventional system. The soil nitrogen levels in the organic farming systems increased 8 to 15 percent. Nitrate leaching was about equivalent in the organic and conventional farming systems. Organic farming reduced local and regional groundwater pollution by not applying agricultural chemicals. Pimentel noted that although cash crops cannot be grown as frequently over time on organic farms because of the dependence on cultural practices to supply nutrients and control pests and because labor costs average about 15 percent higher in organic farming systems, the higher prices that organic foods command in the marketplace still make the net economic return per acre either equal to or higher than that of conventionally produced crops. Organic farming can compete effectively in growing corn, soybeans, wheat, barley and other grains, Pimentel said, but it might not be as favorable for growing such crops as grapes, apples, cherries and potatoes, which have greater pest problems. The study was funded by the Rodale Institute and included a review of current literature on organic and conventional agriculture comparisons. According to Pimentel, dozens of scientific papers reporting on research from the Rodale Institute Farming Systems Trial have been published in prestigious refereed journals over the past 20 years.
8. CAFTA-NAFTA: Now is the time for the voters to decide By R. Dennis Olson Special to the Farm Forum Institute for Agriculture
and Trade Policy, Minneapolis Last month, after publicly vowing to ensure the viability of Minnesota's $2 billion sugar beet industry, Sen. Norm Coleman flip-flopped and helped the Central America Free Trade Agreement (CAFTA) squeak through the U.S. Senate in the closest trade vote in recent memory. An even closer vote is expected in the House, possibly as early as next week. Coleman decided that expanding the failed trade deregulation model set by the North American Free Trade Agreement (NAFTA), which primarily benefits global food corporations and pharmaceutical cartels, takes precedence over standing up for Minnesota's family farmers and rural communities. "My sense, and my colleague's sense, is we got as good as we can get," said Coleman. "I will be supporting CAFTA, and I hope my friends in the sugar industry will reflect on what's good for them." Senate candidate Mark Kennedy joined Coleman in supporting CAFTA saying: "We've gotten a compromise with the administration that protects sugar through the farm bill and sets us on a path that can keep sugar profitably grown in Minnesota for generations to come." However, the additional sugar exports from CAFTA countries, when combined with sugar exports already allowed for Mexico under NAFTA, would likely cause the suspension of the U.S. sugar program, which has effectively matched supply with demand, avoided costly overproduction, and guaranteed fair prices for farmers at no cost to taxpayers. A 2003 North Dakota State University study projects "that domestic [production] would decrease 25 percent for sugar beets ... for every 10 percent decrease in price." If sugar imports exceed 2 million tons, the study concludes that U.S. sugar beet production would shutdown. Over 32,000 people depend on the sweetener industry for their livelihoods in the upper Midwest. Minnesota, North Dakota and Montana rely on $62 million in state tax revenues generated annually by this industry. How will CAFTA make up this shortfall? In all likelihood, it won't. The Bush Administration's own International Trade Commission (ITC) projects that any gains in overall exports to CAFTA countries would be negated by increased imports. "U.S. exports....are likely to increase by $2.7 billion....and U.S. imports....are likely to increase by $2.8 billion....after full implementation....of... [CA]FTA," the ITC concludes. The flawed CAFTA/NAFTA trade model affects all commodities. After 11 years of NAFTA, U.S. prices for major agricultural commodities are still below the cost of production. Additionally, agricultural imports from Europe, China, and other parts of the world have increased twice as fast as exports - rising from $32 billion in 1996 to $46 billion in 2003. For half a century, the United States has run strong agricultural surpluses that have served as a bulwark for our overall balance of trade. But no more. Thanks to trade deregulation through NAFTA and other trade agreements the United States is actually projected to become a net importer of agricultural products for the first time in the last 45 years. It's no coincidence that this worrisome trend in agriculture has coincided with a soaring U.S. trade deficit that threatens to undermine our economic security. Farmers from both the U.S. and Central America have mobilized to oppose CAFTA and the expansion of the failed market deregulation model it represents. CAFTA would force Central American countries to dismantle border protections against agricultural imports dumped into their markets at below cost by U.S. multinational agribusinesses. If CAFTA dismantles these protections, we could experience another wave of forced immigration of small farmers similar to when NAFTA forced 1.5 million Mexican farmers from their land with increased imports of cheap corn. The Bush administration admitted as much in a promise to send additional funds to CAFTA countries for "rural development assistance," which will be needed to mitigate the anticipated eviction of small Central American farmers from their land. This is why 20 rice farmers from Central America recently traveled to Washington to lobby against CAFTA. "If DR-CAFTA passes, our productive agricultural sectors are condemned to disappear," said Victorio Velerio, the President of the National Federation of Rice Producers in the Dominican Republic (also a CAFTA signatory country). "The CAFTA Agreement...resembles failed trade policies of the past," says David Fredrickson, President of the National Farmers Union in the U.S. "CAFTA further encourages a race to the bottom for producer prices and fails to address major issues that distort fair trade." Coleman and Kennedy have staked their positions: More of the same is what they promise. Representatives Jim Ramstad and John Kline also support CAFTA, and Rep. Gil Gutknecht is undecided. In addition to Senator Dayton, Representatives Betty McCollum, Jim Oberstar and Martin Sabo oppose CAFTA. Now is the time to let our Congressional delegation know what you think. R. Dennis Olson -- dolson@iatp.org | |
