Farmers Need Fair Prices and Competitive Markets

We could arguably solve "free trade," genetic engineering, soil conservation, expensive inputs, food for ethanol and other current vexing farm issues and still agriculture would be plagued with its two primary problems -- a fair price for what farmers produce and the increasing lack of competitive markets.

First, as markup time approaches for the 2007 farm bill it is important to understand that agriculture's chronic crisis of below cost-of-production prices is not of recent origin, but dates back to the very beginnings of the nation.

Daryll E. Ray, director of the University of Tennessee's Agricultural Policy Analysis Center and holder the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture at the University of Tennessee and author of Rethinking US Agricultural Policy: Changing Course to Secure Farmer Likelihoods Worldwide, offers a succinct and detailed analysis of that history.

"The list begins with the oft-repeated line that farm programs were started in the 1930s because rural incomes were a fraction of urban incomes at that time. And as far as the story goes, it is true that farm income in the 1930s was below the national average. Without a knowledge of agricultural history it would be very easy to conclude that the 1930s farm income problem was simply associated with the Great Depression.

"The low farm incomes of the 1930s did not begin with the Crash of 1929," he continues. "By the time the Great Depression hit, US farmers had been experiencing for decades their own periodic periods of depression."

In the past 20 years we have seen a more intense and concerted effort by the "free traders" to insure that farm income has stayed low by paying in many cases below cost-of-production prices to farmers all in the name of attempting to boost US exports, Dr. Ray stresses.

Along with this effort has come a shift from a universally diversified agriculture to an almost universally specialized agriculture. In America's heartland the spike in crop exports, as we have seen, came beginning with the Great American Grain Robbery of 1972 and continued well into the 1980s before the rush to export began to abate.

Compounded by Earl Butz's urging of planting fence post to fence post, thousands of farmers ignored the axiom that not only has the ability to overproduce always been a fundamental characteristic of agriculture, but because surpluses were simply past history the problem they now faced was to adequately produce for an increasing export demand.

It was at this time that there was a major push to lower commodity prices. It was argued that under previous farm bills, prices were supported above world price levels. It was said that the US held out a price umbrella which allowed our competitors to price grain slightly below the umbrella and steal our export business, Dr. Ray reminds us.

Despite evidence to the contrary this approach to policy has continued since 1985 through all subsequent farm bills, even accelerating in more recent bills. Specifically, the 1996 Farm Bill eliminated short-term supply management and rendered price support instruments ineffective. Since 1996, US crop prices have generally declined about 40%.

We are now to the point that government payments run about $20 billion per year and represent nearly half of all net farm income in some years. For grain farmers, government payments often represent all (or more than all) of the net income for their operations.

Clearly doing away with nonrecourse price support loans, changing to recourse "marketing loans" and dramatically lowering the loan rate has not increased US grain exports. What it has done is lower the grain prices and income received by farmers, while greatly enhancing the profits of the Cargills, ADMs and the other great giants of the grain trade.

While "commodityism" and "regionalism" also reared once again their ugly heads in the debate over the 2002 legislation, the public, the media and the politicians were also being fed -- in daisy chain fashion -- a steady diet of anti-subsidy misinformation which not only betrayed the perpetrators ignorance of farm economics, but has heaped scorn upon the US's already beleaguered family farmers from nations near and far.

Throughout that current anti-subsidy propaganda blitzkrieg and the resulting legislation the organized family farm community remained shamefully mute. Save for the National Family Farm Coalition and a few of its local and regional affiliates no group or organization publicly challenged these subsidy myths that were abroad in addition to openly opposing the final farm bill that was signed into law by President-select George W. Bush.

This lack of verve and spine not only resulted in farm legislation that was doomed to failure, but as a policy continued to contribute to an image of farmers and the communities in which they live as being greedy and absorbed in self-interest at the expense of the common good.

The result has been a public relations disaster for family farm agriculture, in addition to successfully playing into the hands of corporate agribusiness in its centuries-old campaign to rid agriculture of its "excess human resources."

As Keith Mudd, a farmer near Monroe City, Mo., so succinctly framed the current farm subsidy question, "it is not the subsidy that allows the larger farmers to buy out their smaller neighbor, it is the system. If Cargill and ADM had to pay for our production, the subsidy would not be necessary. If commodity prices were higher, farmers would make money from farming, would be less inclined to quit and would reduce the opportunity to expand farm size."

Mudd's analysis is the type of message that the public needs to hear with the same regularity that it has been subjected to by those who believe all farmers are agriculture's "evil-doers" when it comes to "subsidies."

Regarding the growing corporative concentration in agriculture few substantive efforts have been made in recent years to confront the problem. The fact that the problem needs to be immediately confronted was recently again made vivid with the release of the findings of a National Farmers Union-commissioned study conducted by Drs. Mary Hendrickson and William Heffernan of the University of Missouri on the concentration of agricultural markets. The statistics revealed increased concentration in every industry except ethanol production.

The NFU study documents that the top four beef packers dominate 83.5% of the market, four pork packers control 66% of that market and the top four poultry companies process 58.5% of the broilers in the United States. Tyson Foods is listed in the top four of each of these categories. The retailing industry also has been gradually increasing its degree of concentration, with the top five companies controlling 48% of US food retailing, compared to 24% a decade ago.

"This study supports what we have long known," NFU President Tom Buis said. "In the absence of public policy intervention, consolidated and non-competitive markets flourish, while independent family farmers disappear. Congress must take action to restore competition in the marketplace. The 2007 Farm Bill is the perfect opportunity to make that happen."

A.V. Krebs publishes the online newsletter, The Agribusiness Examiner, email He is author of The Corporate Reapers: The Book of Agribusiness.

From The Progressive Populist, May 15, 2007

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