In this week's Victual Reality, we ran an interview I did recently with officials from the National Corn Growers Association and the American Farmland Trust.
I edited the transcript in a certain amount of haste (it was right during the chaos of our Sow What? series on food and farming) -- and I left out a couple of noteworthy bits. See below the fold.
I found it fascinating that these industrial corn guys can be pro-market zealots on one topic, and blithely dependent on government intervention on others.For example, I asked them about supply management -- the New Deal-era policy in which the government helps farmers avoid overproduction through grain reserves, land set-asides, and other mechanisms. Under supply management, the government essentially tries to keep crop prices from falling too low, which would hurt farmers, or going too high, which would squeeze consumers.
Supply management essentially ended in the early '70s, when government policy shifted to encouraging farmers to produce as much as possible, all the time.
After the Nixon Administration began to dismantle supply management, corn production exploded and its price fell steadily. Big grain traders like Archer Daniels Midland and Cargill got access to an ever-growing supply of cheap corn, which they cunningly transformed into profitable products like high-fructose corn syrup and ethanol.
Taxpayers have paid out hundreds of billions in subsidies to keep farmers churning out products as prices fell.
Corn and its derivatives literally swamped the nation, ending up everywhere from our soft drinks and sweets and other processed foods to the bellies of our ruminant farm animals and even the gas tanks of our cars: all places it had rarely, if ever, been before.
Here's what my interviewees said about supply management, emphasis mine.
Ralph Grossi, American Farmland Trust: We're not fans of supply management. We think that has been a concept that's been tried many times over the years and it's failed miserably because supply management generally requires a heavy government intervention in the marketplace. And it is very hard to sustain markets and send the right signals when government is intervening on a regular basis, and so we would not be in favor of a supply management system.
John Doggett, National Corn Growers Association: We would definitely oppose any supply management scheme in any part of legislation.
Philpott: And why is that?
JD: Well because, one, as Ralph said, it doesn't work. And two, we will then export that deduction someplace else, and all we have to do is look at what happened in the '70s and '80s when we had set-asides that encouraged farmers in other countries to ramp up production. We unilaterally disarmed and lost our competitive edge.
So they raise two objections to supply management. The first is that it represents an unacceptable intervention by the government into the marketplace. Can't have that!
The second needs translating. Essentially, Doggett is saying that if U.S. farmers intentionally ramped down corn production, and thus pushed up its price, then big grain buyers like Archer Daniels Midland (incidentally, a funder of the Corn Growers Association) will simply look elsewhere for cheap corn, undercutting U.S. farmers.
He has a point. Argentina, for example, has emerged as a major corn producer over the past two decades. If the U.S. tried a supply-management scheme today, farmers there would likely respond to the ensuing price increase by ramping up production, and easily undercut their U.S. competitors.
Fair enough. Globalization pits U.S. farmers against their peers in the "developing world"; they battle it out to be the lowest-cost producer, and big buyers like ADM win. Doggett has no critique of corporate-led globalization; hardly surprising, given the roster of corporations that support his group.
But if the specter of supply management inspired my interviewees to invoke the genius of the unfettered market, ethanol makes them bow before the power of benevolent Big Government.
I'll repeat of a bit of the interview as published, adding a line I unaccountably cut, which I'll put in boldface for emphasis.
Philpott: The ethanol boom is what caused corn prices to spike -- and ethanol has entered a glut phase. Will the government just keep raising the renewable-fuel standard [which requires a certain percentage of biofuels in the national fuel stream]?
Jon Doggett: Certainly no one anticipated that ethanol production would take off like it did after the passage of the 2005 energy bill. And obviously the high price for gasoline factored into that, and the renewable-fuel standard as passed into law in the energy bill factored into that. There were a number of things that caused ethanol production to come up as quickly as it did. We are at a bit of a plateau in demand.
But I think that the long-term scenario for renewable fuels is excellent because we're not making any more oil, and the places we're getting the oil aren't very good places for us to go and get it. This market is going to have some ups and downs for the short term, but long-term I think that we're going to see some excellent opportunities. But will the government raise the renewable fuel standard? Yes.
Fascinating. The market has decided there's already too much ethanol being made, which should be a signal to cut back on production. But this corn man blithely figures that the government will just keep intervening to require more. "Excellent opportunities," indeed.
Grossi of Farmland Trust added something interesting on the ethanol phenomenon. He claimed that elevated corn prices were inspiring a change in industrial livestock-feeding practices: feedlots are rediscovering grass, of all things, as animal feed.
I've been in the dairy and beef business all my life. I've watched how we've fed beef in this country, where we brought young steers right off the cow right into the feedlot because we had cheap corn. And then we fed them corn for six months to fatten them up. Well, we're already seeing an adjustment: because of the price of corn, the feedlots are leaving cattle out, believe it or not, on pasture, and putting weight on in the way we used to put weight on animals, and then bringing them in just to finish them in the feedlot. That's how we adjust to these changes [in corn price]. That's just an example of a very positive adjustment, we believe.
Interesting, if true.
Peterson’s Waxman-Markey amendment: the nitty gritty and what it means
Comments
View as Flat
Ron Steenblik Posted 4:52 am
26 Oct 2007
Good points about schizophrenia about ethanol
But as for supply management, generally what it does is quickly generate rents in the system. Many supply-management schemes involve quotas, for example. The initial recipients benefit richly. Subsequent entrants (i.e., those who do not inherent the quotas from their parents) have to pay increasing prices for quotas or land (in the case of crops), and everybody falls victim to "the transitional gains trap".
I've looked for a quick reference that explains this, and this one will have to do. Canada has administered supply management in its dairy and poultry sectors for decades. As W.T. Stanbury writes in "The Politics of Milk in Canada":
Incumbent farmers often love the idea of supply management, because it will enrich them. But consumers -- who will have to pay higher prices -- are rarely consulted, and future farmers -- who will have to pay an entry fee to join the system -- have no vote.
It's a bad idea: don't do it.
Permalink
Jason D Scorse Posted 7:27 am
26 Oct 2007
So a question for you Tom...
if you had your choice which would you prefer?
A. That these corporate agribusiness types were actually consistent with their free-market ideology and therefore eschewed most, if not all, government interventions in agriculture (except for insistence, environmental controls to make sure that the externalities are addressed)
or
B. That they were consistent with their desire to milk government in every way possible so as to maximize profits for their constituencies and they dropped the pretense of being free-market types
I think your answer will be instructive as to the direction environmentalists should pursue.
J.S.
I teach environmental economics and blog at www.voicesofreason.info.
Permalink
Farm Bill Girl Posted 9:09 am
27 Oct 2007
Supply management IS consumer friendly!
because it prevent corporate monopolies and empowers farmers and is better at controlling the tendency towards industrial factory farming. Canada has supply management for dairy and poultry. family farmers are better able to stay on the land, they are NOT at the mercy of corporate monopolies because they are able to bargain for a better and fair price. Unlike US poultry growers, 95% of whom are on contract with a vertical integrator company and are basically serfs to the Tysons of the world, Canadian poultry growers exercise a fair amount of freedom. Consumers are able to access locally grown produce and each region has poultry production, unlke the US, where productino is highly concentrated in the South.
http://www.newrules.org/journal/nrfall00farmer.html
for dairy, Canada is acknowledged among dairy farmers as having the best system. type in the words "Dairy farmers" and "Crisis" and you will see reference to dairy farmers around the world suffering and going out of business like mad. it is a very sad state of affairs. last year was the WORST year on record for dairy farmers in the US since the great depression. and what happens is these farmers give up their precious land and it is then developed, and all we are left with as consumers are dairy CAFOs with 10,000 cows in ID as our model and no local production.
See here how Canada benefits from price stability and consumer benefit from price stability as well.
http://www.tradeobservatory.org/library.cfm?refID=99957
Milk prices are higher for now in the US, but that could change at any time, which is what causes so much mental anguish for dairy farmers trying so hard to survive. the volatility of the market serves no one. the tendency towards factory farm dairies hurts the environment, is abusive to animals and further fuels sprawl as farmland is eaten up in formerly pristine places like upstate NY and PA.
I do not mind paying fairer prices for my food is i know it is enviromentally sustainable, humanely raised, and helps family farmers stay on the land.
there is a problem with the quotas being so high in Canada. they are working on that problem. but look here in the US--land costs are so high, prices are so unstable and the work is so excruciatingly hard that you very rarely see young people who want to go into dairy. very few of the dairy farmers i know have children who want to take over their farm. so who will produce the milk for us? i'll guess US consumers will have to make do with India/Chinese imported milk!
and for poultry, those poor farmers are just serfs to the corporation, very few to no rights. the US Senate farm bill has a livestock title that finally gives them some due process (like being able to sue a company if they just cancel their contract for no good reason. right now, they are forced into arbitration on the company's terms.)
as a consumer, i much prefer having a domestic, safe, diversified food supply made up of family farmers and not factory farms. and if i have to pay $.50 more for my $.99 cent tyson chicken, i will.
Permalink
bookerly Posted 10:46 am
27 Oct 2007
Biofuels as a Crime
Sorry for posting essentially the same thing in two places.
http://news.yahoo.com/s/ap/20071027/ap_on_sc/un_food_vs_b ...
A UN official suggests bio-fuels are a crime against humanity.
Dear Farm Bill Girl,
It is great that you have so much money that this doesn't bother you. The question is (since food is really a world commodity, not just a national commodity), what do you and others expect the poor to eat? cake?
patrick in Beijing
Permalink
spaceshaper Posted 8:13 am
28 Oct 2007
Cheap shot, Patrick
Just how do Farm Girl's food purchase choices hurt the poor - anywhere? Or what am I missing here?
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
Permalink
bookerly Posted 2:58 pm
28 Oct 2007
Not intended as a cheap shot
Notice that she said she would be willing to pay 50 cents more for a 1 dollar chicken, that is an increase of 50%. For the poor, that is disastrous. I don't know her, so it is not personal (and I apologize if it came across that way), but is rather indicative of a trend in the environmental movement that says price increases are okay as a path to a greener environment.
The trend is reflective of the fact that most self described environmentalists (and I am not picking on ANY individual, since I don't know you) make much more than the median income, and very few show much concern for the poor in the policies they advocate (very few, not all).
Sorry if it came across as a "cheap shot", but the pun was irresistable (sigh)....
However the concern remains.
patrick in Beijing
Permalink
Ron Steenblik Posted 10:39 pm
28 Oct 2007
Supply management consumer friendly?
I'm always amused by the self-serving arguments made by industries that call for supply management. It has nothing to do with their own profits, you see: they're helping consumers! The implicit assumption is that consumers would prefer to pay higher prices on average in exchange for reduced price volatility.
Besides treating consumers as dumb sheep, incapable of making rational purchasing decisions on their own, how reasonable is that assumption? Perhaps there are consumers who would prefer to pay a premium for reduced price volatility, but I doubt they count for the majority of the population -- else we would see consumers eschewing stores that routinely put select items of their merchandise on sale.
Because of its geography (and a long tradition, until recently, of high barriers to trade between the Provinces) and dispersed population, it makes sense that more of Canada's fresh dairy and egg production takes place locally.
And I'm sure that the Canadian dairy farmers (existing ones, not potential entrants) love their supply-management system, as it protects them from rises in feed costs and ensures high prices. Whether the system benefits consumers is arguable.
By the way, while Canada seems to be stuck with its system, the EU is planning to abolish theirs. To quote Agricultural Commissioner Mariann Fischer Boel (hardly an enemy of the farm sector), the EU's milk quota system:
If market structure is the issue, there are better ways to address that problem, such as strengthen the application of anti-trust rules to the agri-food sector, and eliminate regulations that prevent farmers from selling directly to consumers. With that caveat, if people want to pay more for milk or eggs from their local farmer, they should be free to do that. But they should not force that preference on the rest of society.
Permalink
amazingdrx Posted 11:05 pm
28 Oct 2007
Choice information
Where there is an informed choice, consumers prefer non-ethanol gas. Due to the higher mileage and less pollution without ethanol added to gas.
For every 10 gallons of E15 you need to buy an extra gallon to go the same distance. And a gallon and a half of oil was used to grow the corn and transport and process it into ethanol.
By passing fuel standards that force ethanol on consumers, agribizz representatives (elected and unelected lobbyists) serve their corporate masters.
Informed consumers prefer plugin hybrids that run on 60 cent per gallon electricity for most driving.
http://amazngdrx.blogharbor.com/blog
Permalink
spaceshaper Posted 11:23 pm
28 Oct 2007
Still off the mark
Patrick, many of the poorest people in the US are those working in the ag industry to produce these artificially cheap foods, either as hired hands in the field and the processing plants or as theoretically independent farmers but effectively as sharecroppers. Read Farm Girl's post again and you'll see it expresses direct concern for these low-income individuals, and the policy direction she advocates are more likely to improve their financial condition (and their food choices) than not. And for those in the US whose income is not affected by ag policy and who can't afford $1.50 chicken, that's what social programs (not ag programs) are for. It's dumb policy to artificially lower the price of food for the wealthy just so the poor can also afford it.
If you're thinking of the global poor, I don't see how maintaining cheap chicken prices in the US is going to help anyone anywhere.
But to go beyond a defense of Farm Girl's excellent post I think your accusation of lack of concern amongst environmentalists for the less privileged is as wrong as could be, or at least way out of date. I think it's fair to say that the days of environmentalism being associated with the protection of exclusive domains at the expense of the common folk are long gone. Certainly those who post in Grist are almost by definition comfortably off - but I see their concerns for global social equity in environmental policy overwhelmingly in evidence throughout this arena.
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
Permalink
Tom Philpott Posted 12:04 am
29 Oct 2007
Crises of overproduction
Supply management schemes such as the ever-normal granary and set-asides developed in response to a series of overproduction crises, climaxing with the Great Depression.
It turns out that farmers don't respond very well to price signals, especially when prices drop. They tend to ramp up production when prices drop, hoping to make up on volume what they're losing in price. But everybody else makes the same calculation, putting yet more downward pressure on prices.
Agribusiness has learned to profitably soak up these excesses by conjuring up dubious products like corn-based ethanol and high-fructose corn syrup. But as I and others have shown ad nauseam, the situation is extremely hard on the environment and the public purse. Subsidies are a symptom, not the cause, of overproduction. Absent some sort of supply management scheme, we're likely to see them perpetuate.
Those with long memories will recall the free-market fervor that surrounded the passing of the '96 Farm Bill, cheekily titled the Freedom to Farm Act. It marked the final evisceration of supply management, and the triumph of Earl Butz's produce-as-much-as-possible-all-the-time ideology.
Foreign markets -- rammed open by Nafta and other mechanisms -- were going to soak up any excesses, obviating the need for subsidies or any other government interventions.
What happened? Farmers produced like mad, prices plunged, and the government paid out more in subsidies than ever. And ADM and other grain buyers made out like bandits. Mexico soaked up enough U.S. corn to knock hundreds of thousands of smallholder farmers off the land, but not quite enough to keep the price of corn above the cost of production.
When the ethanol bubble bursts, we'll again be looking at literal mountains of corn in the Midwest. It will be interesting to see what happens then.
Patrick's claim that our cheap-food monstrosity somehow serves "the poor" is of course imbecilic. Mass quantities of cheap, low-quality food, zipping around the globe as inputs for low-wage, low-skill food factories (including meat factories), perpetuate poverty; they make poverty profitable.
Victual Reality
Permalink
Ron Steenblik Posted 12:46 am
29 Oct 2007
Please explain how farm-workers benefit from s.m.
Spaceshaper: please explain how farm-workers and tenant farmers benefit from supply management schemes. Wages for farm-workers are determined by supply and demand (and immigration policy). As an occupation requiring almost no formal training, it is one of the poorest paying. Just because prices for commodities rise is no guarantee that the wealth will trickle down to farm-workers, especially immigrant farm-workers.
And as for tenant farmers, what happens when commodity prices rise? Land rental charges rise. So the tenant farmer experiences rising costs as well as rising prices.
Let's consider a real-life example, involving rising land rents, family farm workers, and the availability of locally grown organic produce. In the text block below I've shortened the article to save space, but the full article can be accessed here.
Schemes to artificially prop up commodity prices generate rents that become capitalized into the prices of fixed assets: land and production quotas. That phenomenon has been recognized since the days of David Ricardo, and continues to be valid.
Permalink
Jason D Scorse Posted 3:41 am
29 Oct 2007
Tom, if you get a chance...
I would appreciate an answer to my question above. Thanks.
I teach environmental economics and blog at www.voicesofreason.info.
Permalink
Tom Philpott Posted 3:45 am
29 Oct 2007
About the corporate agriobiz types?
I'll take answer A, with a heavy lashing of antitrust enforcement on the side.
Victual Reality
Permalink
Jason D Scorse Posted 4:13 am
29 Oct 2007
Excellent...
You and I agree more than you probably realize. So maybe we can flesh out what this would look like. What a farm policy based on free-market principles and anti-trust safeguards would actually mean. And then translate this into talking points for environmentalists and those interested in agricultural reform so that it maybe actually happens sometime in our lifetime.
I teach environmental economics and blog at www.voicesofreason.info.
Permalink
bookerly Posted 4:24 am
29 Oct 2007
We Poor Imbeciles
There is a difference between defending the existing American agricultural system (which is terrible) and supporting changes which will hurt the poor (also terrible).
There is no American social welfare system which will help poor people if food prices rise. The center right President Bill Clinton, working with a far right Republican Congress (and the usual cowardice on the part of the merely greedy Democrats) eviscerated the already weak American welfare system during the 1990's. So Spaceshaper, I am not sure what country you live in, but you comments that price rises are okay for the poor is pretty far off the mark.
As to comments by anyone here that the majority of environmentalists care about the effects of their proposals on the poor, I ask only for evidence. I have never seen any. It just ain't so. As the old lady in the BK commercial once said "Where's the Beef?".
Ironically, one of the reasons that environmental groups get nowhere is their inability to reach out to groups involved in issues such as social justice. Claiming that one cares is not enough, the evidence would show if proposals for reform carefully included analysis of their impact on those who aren't wealthy, and serious proposals to deal with those impacts. They don't.
Mostly people say "oh, we'll rebate the tax increases to the poor" or some such. Anyone see why this is a problem? Why it doesn't really work?
Tom, I may be an imbecile, but I am not the one you are criticizing. Where on earth in what I have posted do you find the words or ideas attributed to me? ROFLMAO. I can't even argue with you, since I don't have any of the beliefs you suggest I do.
Perhaps you are referring to postings elsewhere where-in I point out that for many developing countries that lack abundant natural resources to sell to rich Americans, the only means they have of attracting capital is by selling food. THESE countries have asked for more access to western markets as the only means they see for lifting their populations out of poverty. But none of them have ever suggested that you should pay as little as possible, au contraire, pay more!!! (grin).
Tom, if you have any ideas for how else they can lift themselves out of poverty, please feel free to put these forward. We imbeciles await your enlightenment!!
Generally speaking, I am all for family farms and support the ideas of buying locally. But I do note that most of the discussion includes nothing about how to help reduce poverty among farm workers. (Just as the discussion about temporary immigrants includes nothing about protecting the rights of such immigrants..... no... oops... the latest proposals by agricultural interests want to WEAKEN those protections.... me bad).
The current system has problems. But raising the price of food (as advocated by bio-fuel supporters) is not helpful.
In terms of the global food market, there are many different things happening, some positive, some negative. But Tom's description of it is not accurate.
Sharply elevated corn and wheat prices are hurting the poor. America faces a growing income gap, with increasing stress on the lower middle class (and some segments of the middle class). Environmental or Agricultural policies that don't take this into account are not reality based, and are less likely to find the broad support they need to be implemented.
patrick in Beijing
Permalink
Jason D Scorse Posted 7:20 am
29 Oct 2007
Patrick...
how about raising the Earned Income Tax credit, the standard tax deductions, and providing universal healthcare?
Would that help?
I teach environmental economics and blog at www.voicesofreason.info.
Permalink
bookerly Posted 7:59 am
29 Oct 2007
Timing
Jason,
Certainly Universal Health Care helps!! The problem with any kind of tax credit is that it provides money not on a week to week basis, but in a lump sum. Most poor people don't have the resources to manage money in such a manner that these are useful.
For "tax rebates", the problem is that money is taken "now" and given back in maybe 18 months. For people living on or close to the edge, even losing the seemingly (to those not poor) sums can be disastrous.
There may be better methods. When the Chinese government raised the gas price, it kept a special lower price for cab drivers. This kind of response keeps the money flow even, which is critical for the poor.
Standard tax deductions no longer reach the poor generally (except for children). There is no renters deduction (or a very small one), and most of the others don't apply.
The Earned Income Tax Credit is good. But I wonder how many people actually use it (as opposed to being eligible for it?). I will look for this information when I have time. (smile). Off to class!!
patrick in beijing
Permalink
Jason D Scorse Posted 8:47 am
29 Oct 2007
Patrick....
make sure to vote in the next election, even from China. There will be one candidate who will do all of these things and another that will fight against them and give more tax cuts to the rich.
I teach environmental economics and blog at www.voicesofreason.info.
Permalink