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The last farm bill?
Both houses of Congress have passed versions of the 2007 (just barely) farm bill that will be submitted to conference in January and ready for the president's signature before spring. The final legislation will not be as good as the one just expiring, as it is difficult to craft generous legislation when outside forces want every dollar and times in agriculture are good. By 2012, when the next Food, Nutrition and Energy Bill is written, the forces of the marketplace may finally accomplish what no political majority has had the gumption to do: end price support payments. There is always a regional split in the farm bill debate, as cotton and rice states stand solidly behind their major commodities and refuse to let a bill go through that has financial reform to reduce the size of payments or challenge the income level of those receiving the federal support. This bill looked as likely as any to make sweeping change in the payment system, with Midwest Republicans and Democrats, and the Bush administration, roundly criticizing the excesses and national newspapers showing examples of millions being sent to "the wealthiest 2 percent of Americans." But, in the final House and Senate bills, the only reform is elimination of the three entity rule: the "Mississippi Christmas Tree" that allows multiple payments to wind up in the bank account of one farmer. In this civil war, the South won. Money drove the content more than any other factor. The cost of the war had the Bush administration pushing hard against any spending increases for farm programs. Congress tried to impose its own form of restraint in the "pay as you go" policy that was invoked in the House and circumvented in the Senate. No one can cook the books better than these guys; so watch the "out years" that are propped up by projections that will be unrealistic when we get there. The good thing is that we may never get there. In this cheap dollar world with stronger demand for agricultural exports and an insatiable appetite for expensive energy, we may have found a way to kick the subsidy curse and breathe the fresh air of the marketplace. The demand for corn and soybeans could shift even more acreage and cause cotton prices to go up. The demand for wheat could pull rice prices well above support levels. If we maintain world demand for food and high prices for energy, we have a great likelihood of not utilizing the money allocated for price supports and reducing farm spending, making the farm bill work and its architects look like geniuses. This doesn't mean that producers won't take every government dollar they can get or shy away from any incentives, but a strong and sustained market causes even the most confirmed "mailbox checkers" to become capitalists. Although it sounds foolish to predict five more good years to go with the two we've already had, by 2012 we may create a system that is more prepared to respond to market influences than drop into the safety net of the last half of the 20th century. The grain markets are already beckoning farmers to commit to sales in 2009 and 2010 at profitable levels and the new energy bill may ensure demand for corn past the next test of the ethanol subsidy in 2010. There are new dynamics in agriculture that will cause change in the course of this farm bill. Land, machinery and input costs are going up very sharply. Those farmers who aren't willing to play a high stakes game will sell out or relinquish control to another generation. Many, who buy in, will be doing so as an investment and not as a livelihood. Business minded managers will seek annual profitability and produce for the market with government supports being secondary. Am I dreaming? We've got five years to find out. In that time, there are untold world disasters that could befall us. We will have a new president in a year and set a new course in world politics. The biggest crisis looming appears to be the conflict between addressing global warming and satisfying demand for energy. Agriculture benefits from expenditures in both areas. I think we will head into a conservation mode that will shrink the size of vehicles we drive. I don't think $200 per barrel oil is out of the question. Ethanol production will expand in relationship to government mandates and market penetration of higher E-blends, like E-20 or E30. Cellulosic ethanol production still shows limited promise of being cost effective on a commercial scale. If you are looking for a biblical sign for the future, combine our last two years of agricultural profitability with the next five that will play out under this farm bill. That equals seven. Wouldn't that be amazing! Seven years of demand that exceeds supply by enough to have market prices that do not require government assistance. But always be aware that business is cyclical and success causes excess. Excess leads to collapse and the cry to big brother for help. Help comes and votes are cast; politicians are rewarded and the cycle begins again. Editor's note: Ken Root is now celebrating his 34th year as an agricultural professional. His career began as a vocational agriculture teacher then turned to agricultural broadcasting and writing as well as environmental consulting and association management. He was the original host of AgriTalk (1994-2001) and now is lead farm broadcaster for WHO Radio in Des Moines, Iowa. Date: 12/20/07
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