Another Well Intended Farm Bill Failure
By Brad Wilson at Dec 09, 2011
This is a response to: Sweetening the Deal for CAFOs: Hidden Subsidies for IFAP in the 2012 Farm Bill by Patrick Baron.
I like the values and intentions in this blog, and also the sources used, but the basic argument is fundamentally wrong for a variety of important reasons. Unfortunately this is consistent with about 99% of what’s written on the subject from a similar point of view.
The basic argument about hidden “subsidies” is correct. What’s wrong is that crop subsidies don’t cause it, and therefore mere “reforms” of crop subsidies do not fix it. It’s caused by below cost gains. The gains are caused economically by the “lack of price responsiveness” “on both the supply and the demand sides” for groups of crops grown in various regions. Prices and supplies don’t self correct in free markets, so prices have usually been low for well over 100 years. It’s caused politically by the reduction (1953-1995) and elimination of price floors and supply reductions (as needed).
The farm bill is usually misunderstood. Historically there are 2 parts, market management (Commodity Title price floors and ceilings, supply management, or the lack thereof, and also GIPSA), and all of the other titles, where checks are written to try to fix what’s left, or what market management can’t adequately adjust, or where Congress chose to have it fail (ie. conservation, credit, research, trade, nutrition, farm subsidies).
Yes, “one role that the farm bill has” currently “is to dole out billions to subsidies,” but nowhere do you put this in context. You appear not to know that there were no commodity subsidies in the farm bill for decades, ie. until 1961 for corn, wheat, other feedgrains, 1964 for cotton [with exceptions], 1977 for rice, 1998 for soybeans).
“The largest recipients ... corn and soybean producers?” You fail to mention that the largest recipients have been the largest losers from the lowering of price floors. These crops didn’t get any gains, they only got vast reductions and losses. Corn, for example, was reduced by about $1.3 trillion, then got back about $0.2 trillion in subsidies, for a net reduction of more than $1 trillion. This extra data is not available from any source I know of other than me, though it comes straight from USDA data. You paint a totally different picture, as does about everyone else. You don’t have the data you need.
the “programs are in place,” therefore, NOT to “protect U.S. farmers,” but to protect the buyers, as farmers are destroyed. For example, they called for lowering price floors to run 1/3 of US farmers out of business within five years, and Congress went alone (but not quite as fast). But they proposed better farm bill alternatives than what you’re proposing, as they called for price floors much higher than we had int he 1980s, yet you, by default, support zero price floor programs (unlike Daryll Ray and Tim Wise).
Yes, overproduction keeps prices cheap, and yes that’s the purpose of the farm bill, but subsidies don’t do that (see links to proof below). They simply reduced supply (acreage) reduction programs, then eliminated them in 1996.
The relevant dates and description of farm bill history are not as described here. 1953 is when price floors were first lowered. 1961 is when subsidies were started for some crops. Subsidy programs didn’t controll supply at all. Acreage reduction programs did that, or the lack thereof. Additionally, the lowering and ending of price floors ran diversified farmers out of livestock production, resulting in much less “freedom to farm,” much less flexibility, as, without livestock, they didn’t need hay and pasture, so they plowed it up and planted row crops. .
The programs of the past didn’t keep prices high, they kept them in the middle, at parity. For example, corn/bu and oil/barrell were both $2.16 in 1947, but then, later, OPEC ran it like a business, balancing supply and demand and raising prices. The US did the opposite, choosing to overproduce and lose money on exports to secretly subsidize corporate buyers. So in 2008 corn “skyrocketed” (many say) to $4.16 (vs $2.16 in 1947), while oil did the same, rising to $95.25. (http://www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp) Really, $4.16 was low, $8.43 was the middle (parity), and $95.25 was high, and so was $50, and $20.
No, the farm bill wasn’t “shifted ... to decreasing costs and risks for mass producing of commodity crops,” it increased the risks. True, there were 4 emergency farm bills between 1998 and 2001, and they reduced risks relative to the increased risks, but overall the overall risks were greater than prior to 1996, (ie. even with subsidies, until prices rose in 2007, but then the risks were still greater than during the 1980s farm crisis, etc.).
“Insolvent business model?” The US the dominant farm commodity exporter, bigger in corn and soybeans than OPEC in oil, chose to lose money on 8 commodities for a quarter century (1981-2006, every single year except 1996).
The CAFO corporations are not the biggest buyers of farm commodities. That’s Cargill & ADM. Cargill probably gets tens of thousands of times as much benefit from the farm bill as a farm commodity subsidy recipient at the top 1% mark gets in compensations for massive reductions and losses.
Yes, there’s a huge windfall for IFAP in the farm bill, but it’s not subsidies, as Ray and Wise understand. The full amount is not just the money below zero, but below the previous (1942-1952) parity (“fair trade” price or “living wage” price standard).
You misrepresent the “dramatic spike in 2008.” The “June 2008 peak” is only 1/3 of the record high price for corn, (ie. $7.03 here in June 2008 [http://www.linncoop.com/images/E0061701/news0708.pdf, p. 6], 1 day only, vs a yearly average price of $21.10 (CPI 1947, http://www.measuringworth.com/calculators/uscompare/result.php?use%5B%5D=DOLLAR&year_source=1947&amount=2.16&year_result=2011),. 2007-9 corn, wheat and rice yearly average prices were in the bottom 25% of all time prices (GDP deflator) with 1 minor exception out of 9 (3 crops, 3 years).
The World Bank piece is weak, in that it places so little emphasis on the need for high farm prices to combat food poverty. In fact, 80% of the undernourished are rural, 70% of the population of Least Developed Countries. They had decades of low farm prices prior to the recent higher prices, led by the US willingness to make lower and lower profits on farm exports, and to lose money on them for a quarter century. These very undernourished need fair trade farm prices, but the decades of low prices caused massive poverty and therefore a dilemma: they can’t even “afford” wheat and rice at export-dumped price levels, let alone fair trade levels (ie. parity). Africa needs parity.
Ok, more context: we had the lowest prices in history (ie. lowest, 2nd lowest, 3rd lowest, 8 of the ten 10 lowest, 28 of the 30 lowest) in recent years for each commodity crop. To rise from the lowest 1 of 144 price years up to the 25% range: is that “to rise dramatically?” Your context is very weak because you’ve been following the model of others who do the same and who lack the necessary data analysis. Remember, the Food Price Index referenced in the World Bank link only goes back to 1990, so it covers the lowest 20 years of farm prices in history. It shows the highest food prices “ever” within the 20 years of the lowest farm prices ever, going back to 1866.
Again, the farm bill serves CAFOs, but not via subsidies. They merely serve to hide the real economic causes and divert blame.
By the way, did you know that farm subsidies were greatly reduced in the last farm bill, or have you never read that anywhere? What happened is that subsidy triggers for countercyclical and LDP subsidies were given no cost of living (cost of production) increases since 2002, while costs went up 50% or so and are still climbing. That means that subsidy amounts don’t kick in until prices fall much farther below zero. If prices had been low, it would have been a disaster. The farm bill today, (and what you, by default support,) is much worse than the 1980 farm bill, so if we have low prices, like after the 1970s price spike, then it will be a huge disaster. Subsidies help support your goals, as they help farmers, not CAFOs, but what is really needed are fair trade price floors. African American farmers, (http://www.federationsoutherncoop.com/cottonstudy/cottonsections.htm) the Africa Group at WTO, (http://www.zcommunications.org/wto-africa-group-with-nffc-not-ewg-by-brad-wilson) and Via Campesina (http://www.zcommunications.org/via-campesina-with-nffc-support-for-fair-farm-prices-by-brad-wilson) support me on what’s needed, as I document at my Farm Bill Primer.
Your Farm Bill Budget Visualizer misleads people about the farm bill, as the biggest economic impacts (market management, described above) and benficiaries of it are off budget. Market Management, about which you seem unaware, is much bigger than the Nutrition Title in US and global economic impact.
Your chart is wrong on what benefits CAFOs. Subsidies don’t cause cheap prices. I’ve given 4 kinds of proof on this here, (http://www.youtube.com/user/FireweedFarm#p/c/A1E706EFA90D1767/4/mkEhW-tg9Q0) and here (http://www.youtube.com/user/FireweedFarm#p/c/A1E706EFA90D1767/5/feTeT45iWnc), including your own sources! Yes, they’ve gotten EQIP money, but not benefits from commodity subsidies (and insurance is just a new trick for giving subsidies, but with a new corporate group of nonfarmers [insurance] getting a large share). Revenue Insurance is to insure against a bad farm bill. We could just as well insure those on minimum wage against the failure of Congress to raise it with the cost of living.
Ok, one more time: when farmers get subsidies, it’s a lessening of a reduction, not a benefit. In the 1985 farm bill, the potential corn subsidy was increased from $0.47 to more than $1, but the price floor was lowered even more, leading to a net reduction. See my chart of the actual data on this in Michael Pollan Rebuttal 1. Daryll Ray has a similar chart for the 1996 farm bill here (http://agpolicy.org/blueprint/PresentationAPACReport.pdf, p. 14). Therefore, subsidies did not “maintain this broken system,” they were a trick to make it worse and divert the blame to the victims. Most farmers went out of business, and most surviving farmers who had livestock lost it.
Yes, pasture based farms are put at a competitive disadvantage, but not mainly by subsidies, except that they get less of those. Low/no price floors/supply management made grassfed less competitive.
You refer to “deregulatory policies,” but don’t explain it. The new subsidies were not “resulting” from deregulation. These are 2 separate matters. They resulted from the utter failure of Freedom to Farm (1996), which brought bankers to lobby alongside farmers. Deregulation, reducing, eliminating price floors, requires no subsidies. We had 7¢ corn here in 1932, with no subsidies.
Yes, we need “an accurate and thorough accounting of the true costs of IFAP,” but you’re not giving a basis for it.
Your cited sources are great, but apparently they were too weak in style (too nice, too moderate,) and you missed their own views, unlike what I’m trying to do here, which is more blunt and direct. I’ve criticized Tim Wise and others for exactly this (where other major high status people also misunderstood him) here: http://www.lavidalocavore.org/diary/4651/philpott-bittman-are-wrong-about-tim-wise.
All of the corrections I’ve made here go against the agribusiness output (buyers) complex, which all of your errors unknowingly support.
Ok, finally, remember: Don’t shoot the messenger. I didn’t do this, I’m just sharing the better, more complete factual picture (with more than twice as much data).