Monday, March 28, 2011

What is Wrong with Current Ag Policy?

The latest writing from the University of Tennessee's Daryll Ray and Harwood Schaffer is a brutally honest assessment of the current ag policy. Washington, are you listening?

For as long as the authors of this column can remember, our understanding of commodity policy was that it is to provide a safety net for farmers. And we thought that we had a pretty good handle on what a farm safety net should be. A safety net should minimize damage to commodity prices/revenues during the "hard times," the times when production chronically outruns demand such as during 1998-2001 crop years and during many previous periods. A safety net also should protect farmers against catastrophic onfarm production losses that result from the vagaries of weather. In exchange for this protection, these policies also protect consumers from extremely high prices.
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Since the 1985 Farm Bill and especially since 1996's Freedom to Farm, commodity programs have moved away from safety net and price stabilizing concepts. Major policy instruments designed to provide a safety net have been eliminated or dismantled. Today there are no price floors, no stabilizing reserves, or other supply management instruments. The movement away from these policies has been partially based on the belief that grain exports make price-stabilizing policies unnecessary.

It is argued that reasonably set price supports, reserve programs and setasides just get in the way. So the argument goes, just replace these programs with payments, if you must do something. But if world trade were perfectly free, it is stated or implied, US crop agriculture's prosperity would be guaranteed and payments too could be eliminated. Aside from what has happened in policy direction since the 1985 and 1996 Farm Bills, what is happening now? To us the whole notion of commodity programs and its attendant safety net concept has been flipped so it is now upside down. We have come the point-contrary to the our understanding of the purpose of commodity programs-that making payments when they are not needed is just fine.
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US taxpayers are underwriting a guarantee of record profits to farmers at a time of 9 percent unemployment and when people are losing their homes. Plus, there is the $5 billion in direct payments. Direct payments are paid even though prices are well north of all costs. They are an embarrassment whether it is in rural cafes or talking to our city cousins. And, there are demands to continue them in the next farm bill. Why? Because otherwise there would be no "baseline" money for farm programs. It is not because they make sense as a safety net, they don't, of course. They are totally inadequate when prices collapse. ... read more...

1 comment:

  1. The general tone of this article is ridiculous. What has been "replaced" isn't a farm safety net. What has been erected is a horrific scam. That scam is the ethanol per bushel subsidy fraud designed to drive the smallest operators out of the business via a conceptual charade,ie, that ethanol is thermal load positive, and that the American farmer is entitled to hand out......

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