14, 2006: Crop farmers must have that “danged
if you do” and “danged if you don’t”
feeling right about now. But, really, it is not what they
have done, it is what a low-farm-price policy and a surge
in ethanol-driven corn demand have wrought. Nonetheless, the
blame game continues and crop farmers have been hit with a
double whammy of late.
The first hit comes from WTO trade talk discussions and the
argument that US farmers, supported by what are described
as generous subsidies, are dumping corn on the world market
at prices below the true cost of production. International
development NGOs argue that US subsidies have stimulated US
producers to grow more corn, soybeans, wheat, rice, and cotton
than they would have in the absence of subsidies. As late
as August 11, 2006, the cash price of a bushel of corn on
the CBOT was $2.06. As a result they call for the end of US
farm subsidies. At the same time, various groups argue for
the reallocation of budgeted funds from commodity programs
to rural development, conservation, subsidized insurance,
decoupled payments or whatever is in the interest of the person
The second hit is typified by the comments from Richard Bond,
Tyson Foods chief executive, who is quoted by Philip Brasher
in a Des Moines Register article as saying “Quite frankly,
the American consumer is making a choice here. This is either
corn for feed or corn for fuel - that's what's causing this.”
Brasher writes, “Tyson Foods Inc., the world's No.
1 meat processor and poultry producer, warned Tuesday that
consumers would have to pay more for beef, pork and chicken
next year because of the rising price of corn.” Tyson
Foods is reacting to the high animal feed prices brought about
by the current demand for corn to be used to make ethanol.
On November 22, 2006, cash corn prices hit $3.59 per bushel.
Let’s get this straight. When the prices of corn and
cotton are low, US farmers are blamed for depending on subsidies
to cover their cost of production and hurting farmers in less
developed countries around the world. And when these same
US farmers invest in ethanol plants to sop up the surplus
production, consumers are told that the resulting higher prices
will force them to make a choice between food and fuel.
Seldom does anyone mention that meat producers have benefited
from commodity prices that are below the cost of production.
Some of the benefits of subsidized crop production have been
enjoyed by integrated meat animal producers like Tyson Foods
who have benefited from low cost feed inputs.
This double whammy confronts us with a policy challenge.
Policies that result in low commodity prices harm some people
(farmers in less developed countries) and benefit others (integrated
livestock producers, processors of grains and seeds, and bulk
farm commodity importers). Likewise, high crop prices benefit
some people (farmers in the US and countries around the world)
while increasing the costs for those who have benefited from
the earlier low prices.
Lost in all of this is any discussion of corn farmers and
what it takes to produce a bushel of corn. No one wants to
talk about the characteristics of crop markets that result
in long periods of low prices. Policymakers run away from
discussions of the type of policy instruments it would take
to provide farmers with a fair remuneration for their investment
and labor while at the same time providing consumers stable
prices and a secure supply of farm commodities to meet their
needs for both food and fuel.
To our way of thinking, what is needed is a “policy
for all seasons” that enables commodity farmers to receive
the bulk of their income from the marketplace while, at the
same time, ensuring consumers of the long-term stability of
their supply of farm products to meet their needs for food