Gloomy Forecasts Cast
Shadow over Farmers

"It would be a disaster of a magnitude that would be well beyond political acceptability," is the way University of Tennessee economist Daryll Ray recently described to a Congressional committee the future of crop agriculture. "Left to itself, it would continue its downward spiral, bankrupting successive farmers on a given piece of land, forcing bank foreclosures and, in general, wreaking devastation on all rural areas."

Other studies and testimony also underscored Ray's gloomy forecast.

Predicting that US net farm income could drop more than $9 billion in the next two years, taking a triple hit from reduced government payments, rising production costs, and lower prices for milk and hogs, a report prepared by the Food and Agricultural Policy Research Institute (FAPRI) was also presented to Congress.

"The projections represent our best estimates of what the world would look like under a very specific set of assumptions," says Robert Young, codirector of FAPRI at the University of Missouri, who was chief briefing spokesperson in the presentations to the agricultural committees of the US Senate and House of Representatives. "The principal purpose of a baseline is not to predict the future, but to serve as a benchmark for analyzing alternative policies," Young says.

The FAPRI baseline is prepared by agricultural economists at the University of Missouri-Columbia and Iowa State University in collaboration with economists from other universities.

In addition, federal farm subsidies radiate in a vicious circle as tax money spent to prop up farmers leads to overproduction, lower crop prices and the need for even more taxpayer payments, according to a study by Sparks Companies Inc. of Memphis, Tenn., a global consulting firm whose clients include large agribusiness firms, investment banks and government agencies.

The study said that large farmers benefit disproportionately from the bailouts. and that the government bailout money helped skew market conditions. "The current programs nail the little guy," agreed Iowa State University economist Michael Duffy. "We're propping up a system that is not working."

The Sparks study questioned the need for the $70 billion the government has spent since 1996 to bail out farmers going in part to large, highly efficient farm operations. Many big operators can compete successfully in domestic and global markets on their own, it said. If the current system of annual bailouts continues, the study cautioned, the fruit, vegetable and livestock industries, currently kept out of the public money trough, "will seek a slice of the pie."

Iowa State University economist Neil Harl sees the FAPRI projections signaling for the agricultural economy a "clear and present danger." Farming, Harl said, "is extremely vulnerable. We could have a replay of the 1980s," he adds.

The FAPRI annual report to Congress last week looked at 80 composite farms across the country, which are designed to replicate real-world conditions.

The annual 10-year baseline projections, used in legislative policy-making, show net farm income declining from the present $45.4 billion to $36.3 billion in 2002, the lowest level in a decade. That is a decline from $55 billion net farm income in 1996, when world grain supplies were low and commodity prices were high.

The FAPRI baseline projects net farm income beginning to recover after 2002. By 2010, it will climb back to $45 billion, well below previous peaks. Other projections in this baseline are that direct government payments to producers will fall by more than half between 2000 and 2002.

FAPRI projects crop prices in the near term to average 20% below the 1995-99 levels. The brightest spot in the outlook is a continued increase in cattle prices through 2003.

Leading the increased production costs are rising prices for natural gas used in the manufacture of nitrogen fertilizer, essential for corn production. Expenses for fuel, fertilizer and other manufactured inputs increased more than 10% in 2000. "Expenses are expected to show another significant increase in 2001 due to higher fertilizer prices," the report said.

On the income side, plentiful world supplies of crops keep prices under pressure. The baseline projections are based on assumptions that include normal weather, continuation of present farm programs, and that government loan rates continue at their maximum levels through the baseline period.

The Sparks study cites Census of Agriculture data that show the largest farmers in 1997 got 12% more for corn and 16% more for soybeans than the smallest. The largest farmers, said company vice president J.B. Penn, "are really efficient in terms of having a very low unit-cost structure. And nobody has paid attention to that."

Output, Sparks said, should have dropped, too. It didn't because "as long as production is profitable at the subsidized price, farmers will continue to produce." Iowa State's Duffy disagreed with that piece of the analysis. Farmers boost production as prices drop, he said, because they need to boost their incomes with higher volumes.

Mexican Gov't Queries Missing 'Bracero' Wages

Between 1942 and 1964 nearly five million Mexicans harvested US crops mostly in California, Texas and other Southwestern states.

Immediately after the beginning of World War II California agribusiness interests, pleading a domestic labor shortage, sought to make it possible for more Mexican farm laborers to enter the US. After Mexico declared war on the Axis powers the US and Mexico entered into such an "executive agreement" which was ratified by only an exchange of diplomatic notes in August, 1942.

The provisions of the agreement included: Mexican workers were not to be used to displace domestic workers but only to fill proved shortages; recruits were to be exempted from military service and discrimination against them was not to be permitted; the round-trip expenses of the worker were guaranteed, as well as living expenses en route; hiring was to be done on the basis of a written contract between the worker and his employer, and the work was to be exclusively in agriculture.

These "braceros" (literally "arms," the Spanish equivalent of the English word "hand," meaning a laborer available for hire), were free to buy merchandise in places of their own choosing. Housing and sanitary conditions were to be adequate. Work was guaranteed for three-quarters of the duration of the contract and wages were to be equal to those prevailing in the area of employment, but in any case not less than 30 cents per hour. Deductions amounting to 10% of earnings were authorized for deposit in a savings fund payable to the worker on his return to Mexico.

As Ernesto Galarza recounts in his epic book, Merchants of Labor: The Mexican Bracero Story, what followed in the some 21 years of the bracero program is one of the more shameful chapters of American agriculture and US history where laws were blatantly abused and the program was extended far beyond the purpose for which it was created by corporate agribusiness interests interested solely in maintaining a cheap labor market.

The legacy of that shame has again come to public attention with the announcement that Mexican government officials will now investigate the alleged disappearance of millions of dollars earned by the braceros used in the US during the war and after.

Although the surviving braceros and their families failed in their first attempt to recoup hundreds of millions of dollars that the US Farm Security Administration withheld from them and deposited in the Farmworker Savings Program in Mexican farm banks, their cause has gained momentum in the past few years but generated little Mexican government interest.

However, in a sign of the changes since the defeat of the deeply rooted Institutional Revolutionary Party, a point man for President Vicente Fox said the new administration strongly endorses the investigation. "We need to find out exactly what (is) or is not owed," said Juan Hernandez, director of the president's office on Mexicans living abroad, told the Los Angeles Times' Rich Connell and Robert J. Lopez.

Galarza points out that a Presidential Commission on Migratory Labor in 1951 noted that "in effect the negotiation of the Mexican International Agreement is collective bargaining in which the Mexican Government is the representative of the workers and the [US] Department of State is the representative of our farm employers."

Finally, weary of such informal agreements during the war years the Mexican government insisted in the early 1950s that any further contracting of Mexican labor must be done under the supervision of the US government. Such action was taken under what was know as Public Law 78. The declared purpose of the law, enacted on July 12, 1951, was to assist "in such production of agricultural commodities and the products as the Secretary of Agriculture deems necessary, by supplying agricultural workers from the Republic of Mexico."

It authorized the Secretary of Labor to recruit such workers, establish and operate reception centers, provide transportation, finance subsistence and medical care in transit, assist workers and employers in negotiating contracts and guarantee the performance by employers of such contracts. The law also established the policy of the Federal Employment Service "to provide for the recruitment of workers for employment in the US ... only when such recruitment is in accordance with provisions of an agreement between the US and a foreign government."

But, as Galarza showed, Public Law 78 simply allowed agribusiness to mold the law to its own purpose, controlling how many braceros it used, how it distributed them geographically and by crops, the economic uses to which they were put, the ways in which the contract labor pool was manipulated, and the administrative procedures that were devise to insure, from the industry's point of view, an almost ideal cheap, subservient and government sponsored labor market.

Today more than two million braceros, who spent years performing back-breaking labor for US agricultural companies from 1942 to 1964, now find themselves well past retirement age and back where they started before crossing the border: no pension plan, no social security, no money.

In addition, attorneys in the US are preparing to file a class-action lawsuit on behalf of ex-braceros on both sides of the border. Even if the funds can't be found, lawyers hope to build a case proving that the governments and banks are still liable.

Investigating the savings fund will be complicated by the passage of time and the possibility that records no longer exist. One of the Mexican banks has said it does not know what became of the workers' savings.

While much of the controversy has focused on Mexico, under the international accord, the US government was responsible for ensuring that workers received proper benefits. Federal agencies were officially the "employer" of the braceros, a requirement Mexican officials sought to help protect the workers' rights.

Public records reviewed by the Los Angeles Times show problems soon developed on both sides of the border with oversight of the contracts and the savings program. Part of the oversight problems stemmed from the limited number of Mexican government officials in the United States to monitor contracts and work sites. "It is impossible for these officials to meet the demands for their services," concluded a 1945 analysis by the Pan American Union, now the Organization of American States.

Scholars who have examined the issue, Connell and Lopez report, say it is not clear that all of the workers' money made it to Mexico.

"Under the agreement, employers were to deduct the funds and forward them to the US government, along with records showing how much each worker was owed. The monies were then to be credited to Mexico's Central Bank and sent to two other financial institutions. But Mexican banking officials complained that the United States was lagging in forwarding the documentation needed to promptly disburse the savings to workers, according to Mexican news accounts from the period."

A.V. Krebs operates the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, Washington 98203-0201;

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