by George Naylor (a version of this article appeared in the winter edition, December 1999, of Iowa Sierran)
As farmers close the books on the 1999 season and ponder their future in farming, they know that the price of grain and federal farm policy will be the "make or break" determinants of that future. The rest of society needs to know that the whole farming landscape is at stake -- will we have diversified family farms producing food for the nation or will they be replaced by specialized factory farms, and what will that mean to the environment?
Farmers are operating under the notorious Freedom to Farm Act passed in 1996. This Act established a radical seven year policy that completely eliminated price floors under farm commodities and prevented the Secretary of Agriculture from implementing conservation set-asides and food security reserves. This forces fencerow-to-fencerow crops to be dumped on the market even if market prices fall substantially below cost of production as they are now. Unless we have a crop disaster next year, corn is expected to remain substantially below $2.00 per bushel and beans below $5.00. Because farm prices are so low, the federal government is spending over $20 billion in direct payments from the Federal treasury to avoid financial collapse of the farm economy.
Those of us who have been critical of Freedom to Farm believe that market price floors should be established at true cost of production levels for storable commodities, like $3.50 per bushel for corn and $8.00 per bushel for soybeans. This can be accomplished with the use of nonrecourse loans, food security reserves, and conservation set-asides so that increased farm income will come from the purchasers of the grain rather than taxpayers. The nonrecourse loan program sets a floor because grain that will not be absorbed by the market at the loanrate, say $3.50 per bushel for corn, will enter the food security reserve and be isolated from the market. Conservation set-asides will avoid wasteful production and unnecessarily large food security reserves.
Of course, any change in farm policy means there will be winners and loosers. Lets look at how the incomes of typical farms are affected by raising corn and soybean prices through the nonrecourse loan program. These consist of Farm A that raises cash grain; Farm B where livestock is fed from hay, pasture, crops and crop residue raised solely on the farm; Farm C that buys feed for livestock but raises and sells cash grain equal to or greater than the equivilent amount of boughten feed; and Farm D, a large livestock confinement or feedlot operation that raises no crops, hay or pasture and buys all its feed. According the Food and Agriculture Policy Research Institute (FAPRI) at Iowa State University, higher corn and soybean prices translate into higher feed prices and, thus, higher livestock prices. So, how is total income affected for each type of farm or ranch?
Farm A that raises and sells cash grain is clearly a winner.
Farm B clearly won't see higher feed costs since it produces all its own feed but will see higher livestock prices. Farm B is a winner.
Farm C buys its feed from off the farm so will see higher feed costs, but these will be offset one for one by the higher prices for the cash grain. The livestock it produces will sell for higher prices. Farm C is a winner.
Farm D, which buys all its feed, will see the full rise in the cost of feed. According to FAPRI, the rise in livestock prices will not completely offset the rise in feed costs. Farm D will be a looser.
It seems to me that we can look at Farm A, Farm B, and Farm C as "primary producers" -- farmers and ranchers who reap the bounty of the land but must bear the responsibility to protect the soil, water, and biodiversity of the local ecosystem. Farm D, on the other hand, could be characterized as a "secondary producer" who has no direct connection to the land and needs land only as an area for disposal of animal waste. Also, secondary producers depend on primary producers to raise the livestock feed and, often, young animals like feeder calves.
Remember that under the Freedom to Farm Act, corn and soybean prices are far below their actual cost of production and are projected to stay quite low for many years to come. In this situation, secondary producers like Farm D can get on the phone and order any amount of feed for less than it cost to produce with no direct responsibility for external costs to land, water, biodiversity, or rural communities in the production of that feed. In other words, the winners and loosers in the earlier analysis are just reversed. Is it any wonder Freedom to Farm has ushered in the full tilt expansion of vertically integrated confinement hogs and chickens and feedlot beef? It was a farm bill made to order for factory farms.
Given that primary producers have direct responsibility for being stewards of the land for the rest of society and future generations, it would seem a folly to organize our agricultural pricing system for the sole benefit of the secondary producers. Coincidentally, we know that primary producers who are also family farmers can rapidly adapt crop rotations and practices to protect the land, employ local young people in healthy work situations, generate local economic activity, and make important civic contributions to our rural communities and our state and national life.
This seems to argue that, like Thomas Jefferson advised nearly 200 years ago, government policy needs to do everything it can to support independent family farmers on the land. Freedom to Farm, with its substitution of federal dollars for reasonable market prices and its lack of supply management, has done just the opposite.
George Naylor farms near Churdan and is a member of Iowa Citizens for Community Improvement which is a member of the National Family Farm Coalition. He is a member of the Governor's Ag Task Force and a former member of the Executive Committee of the Iowa Chapter of the Sierra Club.:
