Fair Prices and Concentration

For our nation's family farmers, presidential election years usually are filled not only with empty promises, but also generous amounts of political stereotyping. 2004 seems to be no exception. Trade issues, genetic engineering, mad cow scares and subsidies undoubtedly will be addressed as this year's campaign progresses.

Yet two key issues concerning family farmers -- fair prices for their products and fair and competitive markets -- likely will be all but ignored. These two issues should be top priority for any candidate.

A study by the Agricultural Policy Analysis Center at the University of Tennessee concludes, "US farm policy has abandoned market stabilization tools in favor of production and trade liberalization with disastrous results. Because crop agriculture does not quickly self-correct like other industries, the elimination of supply management tools in recent US farm legislation has led to record-low farm prices, and record-high government payments of nearly $20 billion per year to American crop farmers.

"This cheap-grain policy has benefited multinational agribusiness firms, large livestock operators and importers, but not crop farmers who now sell grain below the cost of production. Under the current US farm policy," the report continues, "the cost of producing major crops has been much higher than the prices charged for them. More significantly, even with subsidies added to market income, returns for wheat, soybeans, and cotton were still well below the cost of production."

"As a result," the study says, "foreign competitors charge us with dumping excess US production on world markets for less than the cost of production. This in turn ratchets up the cost of competitors' farm programs and damages the agricultural economies of developing countries. The outcome of this 'race to the bottom' is certain: All farmers around the world will lose."

Simply comparing prices farmers have received in recent years with the cost of production, we see this economic disparity in US agriculture. In 2001, for example, the market price for wheat was 40% below cost of production, soybeans 32%, cotton 52%, corn 23% and rice 45%.

An Oxfam America study, endorsed by several farm and commodity organizations seeking to strategize another path, has concluded that the problem of overproduction could be solved by reviving a system of price supports akin to the New Deal policies of the 1930s. Quite unlike our present policy of direct government subsidies, this model of price supports is backed by a grain reserve. It works by keeping surplus grain off the market, breaking the vicious cycle where farmers have to produce more every year to break even.

Iowa corn farmer and current president of the National Family Farm Coalition, George Naylor, concludes, "This wasn't a perfect system by any means, but it did keep cheap grain from flooding the market and by doing so supported the prices farmers received. The program, while not always administered well, actually made money in good years." The 1996 Freedom to Farm bill, however, passed by a Republican Congress and signed by a Democratic president, managed finally to abolish such supply management tools.

In the New Deal of the 1930s, the federal government set and supported a target price for storable commodities like corn. When the market price dropped below the target, a farmer was given an option: Rather than sell his harvest at the low price, he could take out what was called a "non-recourse loan" using his corn as collateral for the full value of his crop.

The farmer then stored his corn until the market improved, at which point he sold it and used the proceeds to repay the loan. If the market failed to improve that year, the farmer could discharge his debt simply by handing his corn over to the government, which would add it to something quaintly called the "ever-normal granary."

It was a grain reserve managed by the USDA, which would sell from it whenever prices spiked (say, during a bad harvest), thereby smoothing out the ups and downs of the market and keeping the cost of food more or less steady or "ever normal."

The Agriculture Policy Analysis Center study shows that price supports in this model would take 14 million acres in major commodity crops out of production the first year, while boosting prices by 23% to 30%. "Farm income would rise," says author Dr. Daryll Ray, "causing a decline in government payments of more than $10 billion per year."

Farmers also need the nation's anti-trust laws to be enforced. The laws originally were designed at the end of the 19th century to thwart economic concentration in agriculture, but over the past century they've been corrupted by the courts. Today enforcement is restricted narrowly by a politicized Department of Justice to price fixing; while the "urge to merge" continues unabated.

Unchecked consolidation in the system also leads to problems in the "traceability" of our food; that means knowing where the seed or stock came from, how it was grown and what happened to it after leaving the farm gate.

Attention also must be paid to the men, women and children -- domestic and immigrant workers alike -- who labor in fields and orchards across the country. As famed journalist Edward R. Murrow reported long ago from a farm field in his famous documentary, "Harvest of Shame," "It has to do with the men, women and children who harvest the crops in this country of ours, the best-fed nation on earth. These are the forgotten people, the under-protected, the under-educated, the under-clothed, the under-fed. If it were not for the labor of (these) people ... you might not starve, but your table would not be laden with the luxuries that we have all come to regard as essentials."

As the election year rhetoric begins to heat up throughout this political year, the plight of family farmers and workers and the current policies that keep them in near servitude must assume their place in the political dialogue. Whether the right issues come up remains to be seen.

Even so, it might serve us spiritually and materially when we sit down to the cornucopia of food grown and harvested by these people in the months ahead to exercise not only some traceability, but also concern for the labor that bestowed upon us these gifts of the Earth.

Fair prices and fair markets are key to family farmers' survival. Government policies to restore fair prices and fair markets to rural America would restore the principle of economic democracy, without which, as Thomas Jefferson reminds us, we cannot have political democracy.

A.V. Krebs operates the Corporate Agribusiness Research Project and publishes a free email newsletter, The Agribusiness Examiner; email;

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