The Shock of Profitable Corn

Within what may be termed "mainstream" agriculture, there are two schools of thought when it comes to ethanol: (A) it's wonderful, and (B) it's wonderful, but we simply must do something about that high price of corn. There are many factors at play here, and there is no doubt that ethanol will not be the salvation of the family farmer and rural communities, as is so often portrayed. Additionally, there are some real international concerns about the food vs. fuel issue. Those, along with the many other issues, are topics for another day. Today, I am going to allow myself a bit of a rant on those that run around promoting school of thought (B).

This leads me to an article I ran across last week regarding the Conservation Reserve Program. CRP is quite possibly the single most successful conservation program ever, and it essentially consists of paying farmers to take environmentally sensitive land out of production. Farmers usually sign 10 year contracts to participate in CRP, and if they withdraw early they must pay substantial penalties. And now several agricultural groups (mostly livestock types) want USDA to let farmers plant crops on land currently enrolled in the Conservation Reserve Program without paying the aforementioned penalties:

A number of agricultural groups have been calling on U.S. Agriculture Department officials to allow planting on CRP lands without penalties.

Kendall Keith, president of the National Grain and Feed Association, says that's the best way to solve a looming problem. Keith believes the ethanol boom is going to keep pushing up demand for corn -- and land to grow it on.

"Where's the land going to come from? If we're not going to let the CRP land come out, then the U.S. is going to have a difficult time competing in export livestock markets where we've seen growth in the past. And we simply need the grain to be competitive," Keith says. [Full Article Here]

Though not explicitly stated, it is obvious that the whole goal of this push is to drive down the price of corn, which currently is at a level that actually provides a profit to the producer. For the first time in about 10 years. Shocking, I know.

It is abundantly evident that the consumers of cheap corn- primarily the livestock, dairy, and food processing sectors- have received far more of the benefit from farm bill commodity programs than commodity producers have (See this Darryll Ray article for more). It's not hard to figure out- if a purchaser buys a bushel of corn for $2 that costs $3 to produce, they essentially "gain" a dollar. And if the government steps in to keep the producers of that $2 corn in business indefinitely, the people buying it will receive that $1 subsidy (or more) indefinitely as well. And then think about export markets. In the past, we have exported millions of bushels of below-the-cost-of-production grain. China has been able to buy grain for $2 that costs $3 to produce- why don't we just give them a dollar in cash and be done with it? And if we can't compete in livestock export markets without a giant sea of too-cheap corn, is that such a tragic occurrence?

(For more research on how farm programs subsidize the livestock industry, see Industrial Companies' Gains from Low Feed Prices, 1997-2005 [pdf]. The inestimable Aimee Witteman of the Sustainable Agriculture Coalition played a part in that paper.)

Furthermore, why in the world would we allow CRP acres into production to drive down the price of corn when politicians have been devoutly praying for high grain prices for years? That would not make much sense, unless any politicians supporting this absurd move are more interested in maintaining a centrally-planned agricultural economy than seeing even the slightest hint of a free market. Not only that, but according to everyone we'll be moving to cellulosic ethanol in the near future, which will relieve the pressure on grain markets. Should we really tear up environmentally sensitive ground- much of which is recovering from years of abuse, a slow process to be sure- just to tide us over until cellulosic shows up?

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Floor Fight?

The hot news in the farm bill world today is Collin Peterson's insistence that the farm bill will be written only by agriculture committee members- and that he has assurances from the House Democratic leadership that it will stay that way. From today's Farm Policy Update:

“‘People are misguided if they think the farm bill will be written on the floor. . . . It would be a recipe for chaos’ he said” (As specifically reported by CQ’s Ms. Richert). [Full Article Here]

Also, yesterday Philip Brasher of the Des Moines Register reported much the same thing:

The chairman of the House Agriculture Committee is throwing down the gauntlet to colleagues who want to make major changes in farm policy: Get a committee member to sponsor your ideas or don’t try to push them.
Rep. Collin Peterson, D-Minn., tells reporters he’s been assured by the House Democratic leadership that the committee’s wishes will be followed on the 2007 farm bill.
That’s a problem for House members such as Rep. Ron Kind, D-Wis., who aren’t on Peterson’s committee but are trying to overhaul crop subsidies and steer more money to conservation, nutrition, biofuels and other programs.
[Full Article Here]

These reports got Ken Cook, president of the Environmental Working Group, fairly riled up over on EWG's Mulch blog:

The sprawling, omnibus farm bill will be written in his committee, Chairman Peterson says, and anyone who has strong convictions about any of its important and costly components, from food stamps to trade to subsidies to conservation, ought to have gotten on his committee in the first place. Second option: pass those thoughts onto a committee member. They'll see what they can do.....

And he has said all along that his table is the only table. He says he has the firm assurance of House Speaker Nancy Pelosi that the farm bill will be written by his committee, not on the floor. Presumably he means that while the bill will come to the committee of the whole with an open rule that allows amendments, Speaker Pelosi will enforce caucus discipline to ensure the committee's work passes largely undisturbed; ditto for the fruits of conference....

Will Pelosi really instruct--or tacitly signal--Democrats to approve whatever the House Agriculture Committee delivers, sometime this summer or fall? Will she discourage consideration of ideas found in the proliferation of "marker bills" that seek to tighten payment limits; shift billions out of commodity subsidies and into conservation, nutrition and rural development; give fruit and vegetable producers meaningful support; or refashion the farm safety net altogether? Will she say that when it comes to farm policy, the House has 46 members, not 435? [Full Post Here]

Sorry for the long excerpts- Go read the whole thing. Right now. It's that good.

Anyway, this is an excellent example of the political ins and outs of the farm bill that most people don't have the time to comprehend. But I'll try to explain a little bit, because the question of what Speaker Pelosi allows to happen on the floor of the House is perhaps the second-most important question of the entire farm bill process (the first being the budget- how much money is available).

There is, to be frank, somewhat of a tactical split among the organizations working hard to reform the farm bill (through payment limits, more money for conservation, etc.) Especially when it comes to the House Agriculture Committee, which generally isn't as interested in reform as the Senate Committee is. While we all share many of the same basic goals, some groups have decided to spend most of their time trying to convince members of the Agriculture Committee to reform the farm bill, while others have focused on representatives off the committee.

Generally speaking, the representatives off the committee and the groups that support them see the House Ag Committee as too invested in the current system and unwilling to accept the changes necessary to reform the farm bill. This is why you have seen the proliferation of "farm bills" from representatives off the committee- the most notable of which is probably Ron Kind's bill, the Healthy Farms, Foods, and Fuels Act (Kind is also involved in another farm bill proposal that just came out, "FARM 21"). This can generally be referred to as a "floor strategy".

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Wal-Mart Chicken Sourcing

After several days spent back home again in Indiana, I'm here in Lyons and itching to post. First, let me say thank you to all who have helped us come tantalizingly close to achieving our $15,000 fundraising goal by May 15th. If you haven't contributed, please consider doing so. To the news.

Rural America Needs A New Generation

In 1900, the work of 30 million Americans, or 39% of our population, produced our food supply. Today fewer than 2% or 2 million Americans farm for a living. Only 70,000 of those are farmers under the age 35, compared to twenty-five years ago when there were 350,000 farmers under the age of 35.


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