Category Archives: industrial agriculture

Farmers Should be Protected During the Long Periods of Low Prices

This post is by Daryll E. Ray and Harwood D. Schaffer of the Agricultural Policy Analysis Center, University of Tennessee, in Knoxville. They write Policy Pennings, and I use their excellent analysis on this site from time to time.

Today’s writing by Harwood and Schaffer tells us that long periods of low prices which don’t cover crop inputs historically can last a very long time and thus they need greater policy support. (My impression is that the latest farm bill supports farmers better during periods of low prices – readers in the know are encouraged to weigh in to help enlighten us.) Beyond that issue we should perhaps be asking ourselves instead why our policy covers these monoculture crops so heavily in the first place, when the end result is always overproduction.—Kay M.


Commodity policy choice: Treat the symptoms or address the cause of low crop prices

When it comes to developing policy prescriptions to deal with the dynamic of long periods of low prices interrupted by much shorter periods of high prices, two approaches are possible: one approach provides symptomatic relief and the other treats the cause of low crop prices. One must choose one approach or the other.

If policy analysts develop and policymakers adopt public policies that treat the proximate cause of low prices—the presence of a supply that exceeds demand—there is no need for symptomatic relief. On the other hand, providing symptomatic relief (to short term price disturbances when prices are high and little relief when prices are low) ultimately becomes very expensive and risks losing public support for agricultural programs when farmers need them the most.

For many years, agricultural economists understood that agriculture was different from many other sectors of the economy in that an oversupply of grain and oilseeds and the ensuing low prices did not bring about a timely self-correction in agricultural markets. Low crop prices did not cure low crop prices within a reasonable time frame.

In other sectors of the economy, low prices cause suppliers to reduce their production of the item in excess supply and consumers to increase their purchases. The result is that supply and demand come back into balance at a profitable price level quite quickly. This timely self-correction does not occur in agricultural commodity markets.

Because they understood the dynamics of the market, policy analysts worked to develop policies that would isolate a portion of the supply from the marketplace, bringing about a balance between supply and demand and the return of prices that kept producers in business. To keep from accumulating ever-larger isolated stocks, policies were also developed to reduce production to allow demand to catch up with production.

Understandably, farmers were often frustrated with these policies. And from the perspective of an individual farm operation this made sense. If they had been allowed to produce more they could have earned more, they reasoned. And that is true for an individual farm. But when all farms seek to increase production, the result is an oversupply that drives prices downward for everyone, and the size of the decline in prices is greater than the increase in production.

In recent years, policy makers and many agricultural economists have simply chosen to ignore these dynamics and instead argue against policies that manage supply. In place of traditional supply management policies, they have advocated for policies that use crop insurance to protect farmers against variations in prices—symptomatic relief.

The problem is that these policies only work well when prices are at or above the cost of production. If prices remain low for an extended period of time, farmers end up paying premiums for policies that do not even cover the cost of production.

We understand that farmers do not want to hear this kind of analysis; they would rather hear about booming export demand, a growing ethanol demand, and a new “price floor.” When we are invited to speak to farm groups, producers come up afterwards and emphatically say, “I don’t like what you are telling me!” and then they continue, “But I needed to hear that.” When prices were high, many economists were telling farmers that there was a new price floor undergirded by increased input costs.

During this period, we continued to tell farmers about the low prices that would come when the yearly increases in ethanol demand began to stagnate and supply continued to increase. We cautioned farmers to put some of the increased profits in the bank instead of buying lots of new machinery and driving up the price of land. Today, some of those who talked only about high prices and a new plateau are saying to farmers, “I hope you put some money away during the good times.” Good advice, but a couple years late.

The trend in recent decades is toward policies that tend to provide producers with little income support when prices are low for an extended period of time. As a result, the associated costs of maintaining a vibrant agriculture can actually be more costly to U.S. taxpayers through emergency programs/payments. Failing that the results could be devastating to a large swath of farmers. For farmers in less developed countries, lower prices have severe consequences. When prices are low in countries where agriculture is a large portion of the economy, the impact on the economy is severe.

The challenge of policy analysis is not to design public policies that make the good times even better; rather it is to have policies in place to help protect farmers during the long periods of low prices. Over the last century, the periods of low prices have been much longer than the boom times.


Photo: FlickrCC by Rae Allen, c.1958.

The Amazing Radish as Cover Crop

This is a delightful short video featuring Dr. Joel Gruver from Western Illinois University and his study of precision cover crops, especially the radish. It describes the amazing ability of this radish to attract nitrogen, potassium, and other nutrients to the row crop area where it is planted. Since it breaks down quickly after the temperature freezes, it makes quick compost in the fields, too.

To learn much, much more about advantages from using the radish as a cover crop, I recommend this, featuring more information by Dr. Gruver:

Radishes – A New Cover Crop for Organic Farming Systems

Reinert Interview: Farming and Monarchs

Today is the sixth post in this Monday series of subjects covered during my summer 2014 interview of Bill Reinert, recently retired energy engineer for Toyota who played a key role in the development of the Prius and then assumed the role of future transportation planning of alternative-fueled vehicles at Toyota. See his full bio here.
–Kay M.


K.M.: What is your impression of our farming system and what does it have to do with monarchs?

Reinert: The monarchs are in great decline. There is pressure from habitat loss due to illegal logging in Mexico where they go for the winter, but the bigger issue is the genetically modified crops and the loss of milkweed in the United States as marginal lands are put into production. Milkweed has become almost nonexistent, which is the plant needed by the monarchs to reproduce.

Although our food capacity is growing greatly, when we start looking at the effects, the Dead Zone, the pollution of the Mississippi River, the monarch, and the songbirds, then, it seems to me that we’ve made a deal with the Devil. Maybe it doesn’t mean anything in the overall scheme of things if the monarch goes away, but I happened to have a bunch of them in my yard yesterday and I thought to myself, “Oh, God, how beautiful.” So, it’s sad because they’re just another pointer.

There are really no more than 15 or 20 senators that are key to this farm policy, maybe less, and it’s a lot of money to advantage a small number of people at such a large cost. And it is ridiculous to think that the money is going to Mom and Pop farmer. It goes to big agribusiness. If you just moved the Iowa caucus elsewhere, things might change.
[END]


To see last week’s very popular interview subject of “Overfishing” click here.

Coming next week will be Reinert’s comments on the subject of climate change.

Photo credit: FlickrCC by Martin LaBar. Monarch butterfly caterpillar.

A Farmer Speaks Out: Unsustainable High Input Costs of Industrial Farming

The fine folks over at Farm Journal’s AgWeb published a letter which they received from a viewer following a show that they aired about the U.S. Farm Report. I thought it was very well stated, and the unsustainability of today’s big ag trajectory is not discussed often enough. What is the cropland owner to do when caught on this hamster wheel???
—Kay M.


THE LETTER:

In today’s U.S. Farm Report Mr. Phipps rightfully pointed out that we all constantly need to learn new skills. But if these skills are just employed in the same direction we have been going for many decades now, then will accelerate the downfall of even more farmers.

Relentlessly driven by economic competition, farming today is a high input game hunting the highest yield.

Ironically in the same shows which feature serious brokers and farm journalists warning the farmers to be prepared for the consequences of their own endeavors and pointing out the vicious cycle of great harvests and depressed prices, farmers are still admonished to be early adopters of the latest technology, i.e. yield enhancing chemicals, machinery and growing methods…as if the narrow band of specialization of row crop farmers was leading anywhere but disastrous ruin for most in the long run.

Only a few very large operations of that kind make it – not without help from the taxpayer, by the way.

Who profits most? The providers of said chemicals, machinery and growing methods.

I do not need to point out who suffers most from that kind of agriculture which has been in the heads of most farmers. On the other hand, there are a good number of examples of farmers who are breaking the mold, resorting to very different approaches to farming, but they are not featured.

Most of them can be found in the organic and/or horse-farming community. As long as farmers let themselves be talked into the afore-mentioned rat race the attrition of their numbers can be safely assumed.

How about forming organizations in which farmers for example discuss optimal yields for themselves and their communities, not maximum outcomes with their price-destabilizing consequences? How about organizations which help farmers to overcome the narrow specialization and give them tools for more diversified farming operations?

I could give more examples, but the idea should be clear: If we continue to be going in the directions we have been going for several decades now we should not be surprised that we will arrive there. Only a few people with deep pockets can even start independents farms, most will be hirelings and/or dependents of large corporations.

–Respectfully, (Missouri Farmer)