Opinion: Beware of the POTUS effect
It’s well known that U.S. President Joe Biden faces a steep challenge when it comes to winning over voters in farm states, but his efforts of late should give farmers here on the northern side of the border pause.
That’s especially so when the goals of ramping up production and curbing inflation appear in the same announcements.
We have lots of history to remind us of what can happen when politicians start dabbling in farm production decisions. The words of the late Earl Butz — the colourful, 1970s-era U.S. secretary of agriculture — come to mind. He’s the one who coined the phrases “plant fencerow to fencerow” and “get big or get out.”
U.S. farmers took up that challenge and, when coupled with the EU’s postwar hungry-never-again strategy, the world was awash in surplus grain and export subsidies. Trade wars became the mantra and farm profitability plummeted.
It helped sell the artificial economics behind the environmentally suspect ethanol industry, as a way to use up all that corn U.S. farmers were producing. In a paper released earlier this year, researchers at the University of Wisconsin-Madison said what many have been thinking of late:
“… corn ethanol is not a climate-friendly fuel and we need to accelerate the shift toward better renewable fuels, as well as make improvements in efficiency and electrification,” according to lead study author Tyler Lark.
His team found that the Renewable Fuel Standard drove up corn prices by about 30 per cent, while other commodity crop prices such as wheat and soybeans were pressed upward by 20 per cent. That drove increased production.
From 2008 to 2016, corn cultivation in the U.S. expanded by 8.7 per cent, accompanied by more fertilizer use (an extra three to eight per cent each year), more water quality degradation (three to five per cent increases in nitrate leaching and phosphorus run-off) and more carbon emissions attributable to land use changes.
“This one policy effectively bumped up pollution from the entire agricultural industry by several per cent,” Lark wrote.
If Joe Biden was truly interested in curbing inflation and helping to feed the world while supporting sustainable production practices, he’d be reviewing whether it makes sense to be burning corn in gasoline tanks. But of course, that wouldn’t make him very popular in the Farm Belt.
There’s been a lot of work by a lot of smart people over the years to put some discipline into the way governments support their farmers — so that their production decisions are predominantly influenced by market signals instead of politicians.
Generally speaking, there has been a better equilibrium between supply and demand; farmers have seen profitable and more predictable returns. At least, that was the case until the past year or so, when supply chain disruptions caused by severe weather and the pandemic teamed up with Russia’s invasion of Ukraine.
U.S. farmers were already looking for ways to cash in on high commodity prices by pulling 1.7 million acres out of the Conservation Reserve Program and back into annual crop production.
Now Biden is doing what politicians are prone to do — trumpeting the rhetoric that it is somehow up to farmers to feed the world and promising to help them do it.
Calling American farmers the “breadbasket of democracy,” Biden has announced three measures to support more production from U.S. farmers — crop insurance incentives designed to dramatically increase double cropping, a doubling of a grant program to encourage more domestic fertilizer production and incentives to increase precision agriculture technology adoption.
It’s not that the U.S., or Canada for that matter, shouldn’t be interested in increasing domestic fertilizer production or that adopting precision technology is a bad idea. However, those changes and their impact on productive capacity are years in the making.
The shortages created by an artificial sidelining of Ukraine’s productive might are acute.
Even if the double-cropping initiative creates more commodities, that extra production won’t come to market for another year. Then what? Will that artificially ramped-up production machine simply be turned off when Ukraine comes back online?
The fallacy of production politics is profound and could actually do more harm than good. If history repeats itself, commodity prices will soon fall to below profitable levels, making it impossible for the world’s poorest, many of whom are farmers themselves, to grow their way out of poverty.
Farmers’ job is to feed the markets. It’s up to the politicians to feed the world. They need to do that by focusing on increasing access to food, of which production is only a small part, and stopping the insanity of war — not politicking on the backs of farmers.
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Source: Farmtario.com