Lofty prices don’t equate to lofty returns

I talk to more and more farmers who admit they sometimes wish the farm bill could somehow just go away. Not because they don’t deserve a subsidy program, but because they’re sick and tired of the political football that the farm bill has become.

Everybody from the citizen on the street to the president of the United States has an opinion these days — often uninformed, but always well-worded.

Shortly after Bush rejected the bill, Deputy USDA Secretary Chuck Conner told reporters, “This massive spending package — coming at a time of escalating food prices and gas closing on nearly $4 per gallon — in our opinion is simply unacceptable.

“It is irresponsible to ask the American taxpayer, who is struggling to make ends meet, to subsidize farm couples and those who make more than $1 million a year. Simply put, this is bad policy and it is unfair policy.”

But U.S. farmers do deserve the best farm bill the U.S. taxpayer can buy, no doubt about it. Here’s why:

Most farmers aren’t netting those lofty futures prices — We hear about the high prices for corn, wheat, rice, cotton and soybeans, but a widening basis and difficulties with forward contracting erode that price.

High input costs are trimming margins — Granted, farmers may have a lot of money coming in. But not much sticks to their pocketbooks. “I’m glad to see these prices high, but I can tell you, it’s not a lot of comfort,” Brownsville, Tenn., farmer Richard Jameson told me. “Last year, I bought generic glyphosate for $15 a gallon. This year, it’s $32. DAP has gone from $400 a ton to close to $1,000 a ton. Potash is doing the same thing. Diesel fuel could be headed to $5.”

The vagaries of weather — People see high prices and believe everything is great for farmers. But the weather can take away crop profits in a heartbeat. For example, coming up 10,000 or so bushels short on a soybean contract means having to pay back the difference between the contract price and the current price. When prices are apt to soar for no reason at harvest, the farmer can have a real problem on his hands when this occurs.

Food and fiber security — U.S. farmers don’t get the credit they deserve for being the breadbasket of the world. And no one considers the cost our farmers incur to protect our nation’s soil and water and the safety of commodities we consume — a cost not incurred by a lot of farmers in other countries. Is the value of this stewardship worth a subsidy to offset the additional cost? Bet your bottom dollar it is.

Other countries have subsidies, too — If you want to do away with agricultural subsidies, then level the playing field first. The rest of the world should remove subsidies and tariffs that inhibit trade of U.S. agricultural commodities.

Good prices always cycle into bad prices — In vetoing the farm bill, the administration stated that it “would not accept a farm bill that fails to reform our farm programs at a time when farm income and crop prices are setting records.”

It would appear that whoever is advising the president has indeed just fallen off the turnip truck. Basing farm policy on a single snapshot of price, instead of a long-term baseline, is simply naïve.

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