Farm Progreams: Insurance or Social Program?

I've likely written something on this before, but I'm too lazy to look it up.

There are multiple ways, "frameworks", for looking at farm programs:

• as a social program. In this view payments should go to farmers based on their need, what they have to have to continue farming.
• as a reform program.  In this view payments should reward farmers for doing "good" things, like sustainable practices, etc.
• as an insurance program.  In this view payments should be like insurance, where the size of the payment is proportional to the size of the enterprise.  That is, when you buy homeowners insurance, the amount of coverage is tied to the value of the house.  The same when you buy collision/comprehensive coverage for a car.

It's usual, particularly among liberals, to use the first two frameworks. 

Hemp and Tobacco (and Taxis) III

Reverting back to tobacco, in contrast to the article quoted in my first quote, there was at least some evidence that the benefits of the tobacco allotment/quota programs eventually benefited the owners of the quotas more than the actual farmers.  This article from the 1981 Washington Post discusses the issue, tied to the fact that Sen. Helms, a man for whom I had about as little respect as possible, was pushing the tobacco program while his wife was an owner of tobacco quota.

Note: IIRC over the years, maybe in the 1990's, the law was changed so that absentee owners of quota had to either sell the quota or become more actively engaged in farming.

Hemp and Tobacco (and Taxis)

The Atlantic has an article using a history of the tobacco program to talk about hemp.

The history is accurate enough.  The professor points out that tobacco quotas were initially based on past tobacco production, so they tended to provide existing tobacco farmers with a guaranteed annual income (disregarding weather and similar hazards) for years.  That stabilized the regional economies.  When the program was ended there was immediate upheaval and consolidation of farms. By locking out new farmers (she doesn't note the limited provision for new farmers in the program, though the amount of quota available each year was small) it meant black and white sharecroppers lost a chance for upward mobility.

Her argument thus becomes:

"Instead of charging would-be cannabis growers for the privilege of growing, states should award licenses to a larger number of applicants from communities that have been hit hard by the War on Drugs. Much as small-scale tobacco farms anchored entire communities across the Southeast, cannabis cultivation on a human scale, rather than a corporate one, can build wealth within communities of color where opportunities to amass property have been denied—frequently at the hands of the government.

 The argument seems good, but as I've argued in other posts, the growing of hemp in the new world of legal pot (and industrial hemp) is subject to many hazards, even for experienced farmers trying to add a new crop to their operation.  If the argument was that people who had been growing illegal pot should be given licenses to grow it legally, I'd have fewer concerns.  But asking people from the inner city to grow hemp would be stupid. You'd have to have a new hemp producer program to offer financing, help gain access to land, and provide mentoring. ( I don't know the failure rate for new farmers of conventional crops, but I suspect itt's high.) That's not happening.

In the absence of such a program what would likely happen?  As in programs reserving government contracts for minority and female owned companies--you use a figurehead with the right attributes, while the real money goes to the men behind the curtain.

Are Farm Programs Insurance or Welfare?

Seeing several articles, some based on EWG's research, hitting Trump's MFPI and MFPII for helping big farmers and not small ones.

Seems to me there's a basic conceptual issue here; how are farm programs to be "framed"?

One way to look at them is as "welfare", similar to food stamps, welfare (TANF), Pell grants and student loans, etc.  For welfare programs, our expectation is that our tax dollars are given on the basis of "need", with the most needy getting the most money.  If farm programs are indeed "welfare", as they've often been labeled, then giving the most money to the largest farmers in bass-ackwards.

Another way to look at them is as "insurance", whether it's federal flood insurance or unemployment insurance or the insurance policies on cars, homes, and life provided by private companies.  In all such cases (that I can think of), insurance coverage is tied to the "value" of the property.  The more expensive the car or house, the more coverage you can get on them.  The better your salary, the higher your unemployment insurance benefit.

The Effect of (Some) Government Programs

From the Rural Blog's post on tobacco, specifically moves raising the minimum age to buy cigarettes from 18 to 21:

"The [tobacco] industry has shrunk since the federal program of production quotas and price supports ended in 2004, and consolidated into larger farms. Pratt estimated the number of burley growers has plummeted from 175,000 to 3,000. And that has reduced the political influence of the crop that once had a powerful hold on Congress and state legislatures."

In other words, in 15 years the number of farmers has dropped to 2 percent of its starting level.

Side comments:  there's still the meme on the left that farm programs help the big guys, which drastically oversimplifies by lumping all farm programs together.

McConnell's Gift to KY Farmers: Hemp Price Support Loans to Follow?

Mitch McConnell will face the electorate in 2020.  Kentucky has announced 1000+ farmers have been given licenses to grow hemp. That might help Mitch in his primary in 2020 since he's closely identified with getting the approval for hemp. But the farmers are planning to grow 42,000 acres of hemp, which strikes me as possibly threatening a hemp surplus. (To compare, KY may have about 4,000 tobacco farmers and something under 100,000 acres of tobacco.)

(I don't know, but I don't think anyone else does either.  We don't know how big the demand will be, how well the farmers will do in growing hemp, how good the processing facilities will be. The Rural Blog post I link to mentions CBD oil.  I had the impression that CBD oil came from marijuana, not hemp.  I found this assertion though: ">BD is one of 60 chemicals known as cannabinoids that are specific to cannabis plants. The CBD that we use in our CBD hemp oil tinctures is made from industrial hemp, a non-psychoactive derivative of cannabis that contains insignificant traces of THC. Industrial hemp products are legal nationwide and contain less than 0.3% THC.")

So I wonder how long it will be before hemp farmers find the need for and the political clout to get price support loans incorporated in farm legislation?

MFP and Privacy of Data

Article in the newspaper, lost track of which one, reporting that FSA had issued something like $23 million in MFP payments so far.

I'm impressed less by the speed with which the agency was able to issue the payments than by the ability to provide statistics.  With the centralized payment process the payment data should have been easy but they're also reported applications made and paid.  I'm not sure what's supporting that--maybe the business processes are in the cloud, making such data easy?

The article also went on to note that EWG was asking for release of the payment data.  That reminds me of this notice.  I've read it a couple times and still don't understand it, perhaps because I'm remembering that the 2008 or 2012 farm bill included a prohibition on providing payment data.  My memory may be wrong, or the law may have changed in more recent farm bills.

Haspel on Greenberg's Mistaken Times Op-Ed

Tamar Haspel should be followed by anyone interested in food policy. Here she offers good criticism of a Paul Greenberg op-ed in the Times.

I do want to comment on Greenberg's idea that specialty crops should return to the Midwest from the South and the coast.  The problem I see is that the South and coasts (and Central and South America) have natural advantages for growing fruits and vegetables--specifically their growing seasons are longer and/or opposite to the season in the central U.S.  Transportation, specifically the interstate highway system and air, has obliterated the advantages of growing locally. 

Wendell Berry Meet Westby Cooperative Creamery

Washington Monthly had a piece on the Westby:

Westby is the exception, not the rule. It’s a holdout from an earlier era when co-ops helped farmers and rural communities keep a much larger share of the nation’s wealth than they do today. Most everywhere else across rural America, the powerful cooperative movement has either faded or, worse, become co-opted by giant monopolies that prey off the very small-scale producers they’re supposed to protect. In that way, they reflect a broader change in the economy. While pretending to represent farmers’ interests, these co-ops in fact dictate prices to farmers just as Amazon dictates prices to book publishers and Walmart to its suppliers. Cooperative Creamery in WI

Wendell Berry writes for the Henry County Local on the recent spate of creameries and distribution channels dropping dairy farmers and includes this:

The person interviewed in these several articles who makes clear and admirable sense is Gary Rock, a dairyman, one of Dean’s terminated, in LaRue County: “He would like to see a base program across the nation that sets production quotas in line with market demands.” He thus sees through the problem to its solution. He is advocating the only solution to the problem of overproduction. Kentuckians don’t have to look far for an example of the necessary solution, for we had it in the Burley Tobacco Growers Co-operative Association. That organization effectively controlled production, maintained fair prices, and gave the same protections to small producers as to large ones. The history of the Burley Association disproves, as its membership conscientiously rejected, the “inevitability” of the destruction of family farms by agribusiness corporations.

Of course Berry is wrong.  Production wasn't controlled by the co-op, but by your faithful USDA/ASCS bureaucracy (operating in conjunction with the co-op).  "Supply management", one term for the sort of program involved, is something Canada still uses for dairy and eggs and maple syrup. We dropped the tobacco and peanut supply management programs after I left, not that there's any relationship. :-)

Cost of Farm Programs by Crop

I've been remiss in noting this post from IL extension which goes through a Congressional Research Service report on the expenditures by crop under the 2014 farm legislation.

Cottonseed Again

Illinois extension has a piece on the cottonseed provisions of the 2018 Senate Ag appropriations bill. To my jaundiced eye, it looks as if the cotton growers are trying to get a goodie added through the backdoor--using appropriations to change policy.  If they do, we'll see what Brazil and the WTO think of it.  If they do, the professors will have another example to add to their picture of how government really works.

A Bubble Bursting--the Farm Economy?

It's probably been years since I posted about the possibility of an agricultural depression, like the 1980's.  Farm commodity prices have fallen and been low for several years, and the value of ag land has fallen as well.  In the 1980's those two factors meant those farmers who had overextended themselves in an effort to cash in on the 70's boom in prices started going bankrupt.  But not so this time, at least according to this article.

The factors at work:

1. farmers built up their net worth during the boom better than they did in the 70's
2. interest rates now are low, in the 80's high
3. lending on real estate was more rational 
4. better safety net due to more crop insurance coverage.

Not really qualified to question any of these, though I would observe no. 4 conflates insurance coverage for weather and coverage for economy.  We did have some bad years during the 80's weather-wise, but I don't recall much crop insurance coverage for economy.

I'd also observe there are a lot fewer farmers today than in the 80's, which IMHO reduces the likelihood of any one farmer going bust--there's fewer marginal players in the game. 

A New Farm Bill on the Horizon

Chris Clayton has a report on Rep. Conaway, chair of House Ag, and his outlook for a new farm bill.

My initial reaction is it's likely that Trump's budget outline will call for deep cuts in farm programs.  If not, people who want to defend other existing programs against Trump's cuts will start asking: "what about agriculture"?

But then I remember the Reagan administration. That's many years ago and my memory has faded.  IIRC the White House didn't really like farm programs and cut back where and when they could.  But their supporters, particularly conservative House Democrats whom they needed because the Republicans were still in a minority in the House, were able to make deals and fight drastic rollbacks. And the farm situation was rapidly going downhill, as farmers had overextended themselves during the boom years of the 70's and were now facing bankruptcy.  That led to one of the worst years ASCS ever had--1983 and the Payment-in-Kind Program: a jury-rigged program to use CCC-inventories to finance the biggest land diversion program we'd had, perhaps in our history.

And of course there's the freeze on federal employment, something Reagan also had.

Taxing Sugar--Hypocrisy

The Post (Wonkblog) has a piece arguing the merits of taxing sugar, that is sugar instead of soda.

I'm sure one could find in back issues of the Post an attack on USDA's current sugar program, which sets import quotas for foreign sugar, as costing the American consumer millions of dollars in added costs for their sugar.  I'm also sure you won't find the food movement backing the sugar program as an instance in which government programs make Americans healthier.

(Note: I really have no brief for the sugar program; I just note the world is more complicated than advocates realize.)

Dairy: Supply Management Versus Organic

NYTimes has a story on Canadian dairy farmers and their relationship to the EU (remember the Canada/EU treaty which was delayed for a bit by Walloon dairy farmers (i.e., Belgium).  Their concern is that more cheese may be imported from the EU into Canada. Two paragraphs:

The way the country’s “supply management” system works now, Canadian dairy farms are almost guaranteed to prosper. Milk production is controlled by quotas, marketing boards keep prices high and stable, and import duties of up to 300 percent largely shut out competition from abroad.

But after the deal, the Comprehensive Economic and Trade Agreement, which was signed on Sunday, comes into effect, much more imported cheese will be allowed to enter Canada duty-free from the Continent. And farmers worry that this one dent in their defenses could be the beginning of the end for supply management.

Later the article cites an estimate of over $200 per year in additional costs for dairy products for the average Canadian farmer, or roughly $.50 a day.  Some speculations:

So the Canadian system probably maintains a lot of smaller family dairies, farms which have been lost in the U.S. as dairies got bigger and bigger.  (Maybe I'll get ambitious and research the point--looks like 11,000 farms averaging about 90 cows.  It's hard to get comparable data but a quick skim of this says my generalizations seem valid. This seems to say that there's proportionately more organic dairies/cows in the US..)  The food movement would like that.  But the dairy products in the grocery stores are likely rather generic; with supply management protecting a farmer's place in the economy, there's little incentive to experiment with organic milk, raw milk, or niche cheeses.  The food movement won't like that.

The bottom line, very tentatively, is: families can pay more to preserve family farms or pay more for choice of milk products (i.e., organic).  The downside of supply management is the higher prices apply to all; the upside of the US system is consumers can choose whether to pay the premium prices for organic.

Rural Development and LGBT

A post at Lawyers, Guns and Money on the USDA's rural programs, the outreach to the LGBT community, and the concerns of the right wing (Limbaugh).

Cottonseed Yet Again

I've blogged on the issue of making cottonseed an oilseed before.  Here's a good backgrounder by Keith Good on the issue. 

Short summary: bowing to Brazil's victory on cotton programs at the WTO, Congress took cotton out of the other farm programs in the 2014 farm bill.  Didn't touch authority on oilseed designation.

Times on Cover Crops and Finance Industry Logic

NY Times has an article on increased use of cover crops by farmers to build soil, increase water retention, and reduce erosion.  Author cites big farms--3K to 10K acres.  The cover crops seem to be a mixture.  And spring planting is really no-till, though that's not clear in the article, where no-till is rather dismissed.

I remember in Nash County, NC, I think it was during my fall visit to get oriented to ASCS field operations, the CED went out to a sawmill.  They were shaving logs to make the thin wood strips used in making baskets (this was before plastics).  The CED signed up a couple of the workers to cover crop practices which were cost-shared under the old Agricultural Conservation Program.  Under cost-sharing ASCS would pay a part of the per-acre cost for installing the practice  while the farmer paid the rest. Nixon and Earl Butz tried to kill the ACP, but eventually settled for eliminating some practices, They focused on the one which increased production, which included cover crops.  Their logic was similar to Greenspan's logic in supporting deregulation in the finance industry:  rational financiers wouldn't take irrational risks; Butz said rational farmers would spend their own money to install cover crops. 

Cottonseed Equals Oilseed?

Illinois extension has a discussion on the possibility of cottonseed being added to the list of oilseeds covered by farm programs.  Up to now, even though cottonseed is more than 50 percent by weight of the product of the cotton plant, the fiber has been considered the crop, with cottonseed a useful by-product, like milk is the product of the dairy cow, with the meat being a by-product.  Apparently there's a push on to implement a provision of the farm bill to add it as an oilseed, but there's budgetary implications (maybe one billion dollars, almost real money) and trade-offs in terms of program provisions and encouraging/discouraging crops. 

Hard To Foresee the Future--Farm Programs

Agriculture.com reports new CBO projections: higher outlays under the FSA farm programs PLC/ARC and lower outlays under crop insurance.