Agriculture's Enron is coming: Agriculture's own, perfectly legal, public scandal won't be over subsidies

 

By Dan Looker, Business Editor, Successful Farming/AgOnline dlooker@mdp.com or 800-374-3276

Des Moines, Iowa

www.agriculture.com

 

Harold Breimyer has been dead more than a year. And he's still right. It's uncanny.

Born on a modest farm in Ohio in 1914, Breimyer was a brilliant economist who began a long USDA career by driving country roads to sell New Deal farm programs in 1933. He retired as a nationally respected professor at the University of Missouri in 1984. Almost to his death in 2001, Breimyer wrote a clear, blunt newsletter called On The Economy.

Years ahead of Ken Cook

His newsletter recognized the stock market bubble early and predicted failure for the Freedom to Farm bill.

Breimyer called the 1996 Farm Bill the worst ever. "What is worst of all ... and indefensible, is the paying out of big bucks (1) irrespective of the level of market prices, and (2) without necessarily requiring performance on the farmer's part. The former is often put in terms of seriously weakening the safety net that has long been a distinguishing feature of farm programs."

He wrote that back in March 1996, before grain prices collapsed and long before Ken Cook's Environmental Working Group put your USDA payments on the Internet.

Don't think Breimyer was a mystical seer who could predict the future. He was a smart man who saw through political BS and kept his Jeffersonian dream of opportunity for farmers.

I can imagine what he would say about the latest farm bill. He might like its new conservation emphasis and efforts to protect you better from low prices. Yet, I'll bet the plainspoken Missouri professor would give it a D.

The reason? There's no food security in the Farm Security and Rural Investment Act of 2002. Breimyer knew that conservation and food reserves are crucial to gaining public support for help for farmers.

Just as our federal government has been filling the Strategic Petroleum Reserve to ready for war with Iraq, corn supplies are shrinking. Even with a normal 2003 crop, Iowa State University economist Bob Wisner expects a corn carryover below 700 million bushels by next September.

The coming food crisis

The 1996 Farm Bill killed the farmer-owned reserve that used to pay you to store grain. The federal government no longer controls big supplies as it did during the early 1980s. Like the rest of our economy, agriculture has gone to a just-in-time delivery system. It sticks farmers with the cost of being the nation's granary.

This year is a taste of what's to come. If we have another drought as bad as the one of 1988 -- when some Iowa counties had the least rainfall in recorded history -- watch out.

Prices could get so high that you'll finally have something to put in the bank. Hang onto it.

Those prices will also hurt your customers -- cattle feedlots, ethanol, and ultimately, consumers. After the 1988 drought, the Food and Agriculture Policy Research Institute estimated what would have happened if USDA hadn't had 4.3 billion bushels of corn on hand. With just 2.3 billion bushels in storage consumers would've paid $40 billion more for food from 1989 through 1996. (September corn stocks this year were just 1.6 billion bushels.)

University of Tennessee economist Daryll Ray shares Breimyer's view that reserves of grain make good sense. As he said in his July 22 column on our Web site, @griculture OnlineT, "Low grain prices appeal to livestock feeders, and high prices appeal to crop farmers. But could it be that we are better off with relatively stable prices that moderate the booms so that busts are less likely to follow?"

Junking a divine inspiration

Mandatory set-asides in the old farm program didn't work well. (I like the idea of voluntary set-asides.) But we ditched the farmer-owned reserve at great risk. What if we had a drought worse than 1988? Civilizations have fallen to climate change before.

Breimyer's Depression-era contemporary, Agriculture Secretary Henry Wallace, got Congress to create his "ever-normal granary" in 1938. His idea of storing surplus crops for lean years came from Joseph's advice to the Egyptians in the Bible.

The Chinese had a similar system of paying farmers for surplus grain to store for lean times. It lasted 1,400 years. Congress killed our food security after just 58 years. Angry consumers may one day ask why.

"Just as our federal government has been filling the Strategic Petroleum Reserve, corn supplies are shrinking." - Dan Looker

Copyright Meredith Corporation 1997-2002. All rights reserved.

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