Minnesota Farmers Union

(June 26, 2009) - At critical juncture points in public policy, stakeholders with the most power (read biggest and most effective lobbying organizations) go all out to tilt public policy in their favor. No surprise there. The amazing thing is how little flack they get when they openly contradict the very purpose of the policy or policy change.

The current health-care debate is a case in point. Reforming health care has become a "must-do" in this country. It costs too much and does not provide adequate care to all in need.

Several remedies have been suggested including the addition of a "public" health insurance plan as a way to broaden accessibility and lower costs of the health care delivery system.

In a June 21, 2009 Washington Post column, George Will asserts "Competition from the public option must be unfair because government does not need to make a profit and has enormous pricing and negotiating powers."

(June 19, 2009) - Secretary of Agriculture Vilsack has indicated some skepticism about the creation of a grain reserve, although it is difficult to know just what he was referring to when, at the G-8 meeting in Italy, he told Reuters writer Jeremy Smith, "Our recent experience with that concept was that in theory, [a grain reserve] sounds like a terrific idea but in practice it was very difficult. What we saw was that it really didn't create the kind of stability in pricing that people thought it would"
(http://af.reuters.com/article/investingNews/idAFJOE53I02N20090419?sp=true).

In this column we want to take a look at the liabilities and benefits of a properly managed stock-holding program from the perspective of the US taxpayer. In the absence of any clarification by the Secretary and assuming the administration would manage such a program in good faith, let us look at some of the most common criticisms that have been made of grain storage programs and the implications for taxpayers.

(June 12, 2009) - In this series of columns we examine the impact of the rapid run-up and subsequent decline of crop prices on various groups, including crop farmers; livestock, dairy and poultry producers; importing countries; and consumers and whether or not a properly managed grain reserve program could have mitigated the problems faced by each of these groups. In this column we look at the ethanol industry as an important cause and casualty of the price bubble.

To some extent the increased use of corn in the production of ethanol can be attributed to changes in agricultural policy in 1996 and the growing scientific consensus on the role of human activity on global warming. The 1996 Farm Bill effectively eliminated the floor on crop prices and, when the universally anticipated structural increases in corn exports did not materialize, allowed grain prices to fall well below the cost of production.

The explanation for the low prices was "over production" even though the year-ending stock-to-use ratio for the years beginning with 1998 was well below historic levels. With significant fixed costs, crop farmers continued to plant their fields to minimize their losses, hoping that a random crop failure somewhere would lift prices to profitable levels.

(June 5, 2009) - Grain and livestock producers are not the only ones affected by the increase in crop prices that began in September 2006; urban consumers have been affected as well, or at least indices of food price changes would suggest so. Between September 2007 and September 2008-just after crop prices hit their peak-the retail cost of cereals and bakery products for urban consumers increased by 12.3 percent. Between January 2000 and December 2005 the year on year price increase for cereals and bakery products averaged a little over 2 percent.

As prices peaked, some conceptualized the issues as one of food vs. fuel as much of the consumer price increase was attributed to the increased demand for corn as the basic component of ethanol production. The ethanol demand for corn increased by nearly 100 percent between the 2005 and 2007 crop years while corn prices increased by 149 percent. It is easy to understand why ethanol was identified as the underlying culprit of the jump in food prices.

But the increase in food price is much more complex than just an "ethanol did it" story. In fact, not even the corn price increase itself is simply an ethanol-did-it story. Let's first take a brief look at the run up in corn prices before discussing the food price issue.

(June 3, 2009) - When I was drawing a paycheck as a cocksure marketing advisor and newsletter writer nearly 30 years ago, my colleagues and I often explained our hedging mistakes by simply declaring our advice had been "ahead of the market."

We were right, the line of malarkey went, but the slicksters in the futures markets were too stupid (lazy, ignorant, rich...) to realize it. By the time those clowns came around, though, our clients got cracked for 15- or 20-cents a bushel that, in the early 1980s, oftentimes equaled half the price move for the year in corn, beans or wheat.

The sweetest part of this excuse is that anyone can say they are "ahead of the market" anytime and be right 100 percent of the time because, sooner or later, the market will turn and the now-ripened baloney, although costly, will be proven correct.

This can't-miss advice came to mind recently when I read an on-line marketing guru urge farmers to "get ahead of this market" and begin selling some of their 2009, 2010 and 2011 corn because this year's record rainfalls east of the Mississippi will "make a lotta' grain."

(May 29, 2009) - With all of the challenges faced by the livestock sector over the last several years - bovine spongiform encephalopathy (BSE or mad cow disease), export bans, E. coli and other food borne diseases, uncertainty over the implementation of animal identification and country of origin labeling - the last thing they needed was a 250 percent increase in the cost of the grains and oilseeds they use as feed ingredients coming at the same time as they faced a dramatic increase in fuel costs.

But that is what has happened over the last couple of years. At the same time as feed costs have increased, the prices received by producers for their animals have decreased. The US average price for cattle, all beef, was $90.80 per cwt. in September 2006 - when the price of crops began to increase - and by March 2009 the price had fallen to $78.50 per cwt., a 14 percent decrease. In that same time period, calves fell from $135 per cwt. to $104 per cwt. and hogs, all, fell from $48.90 per cwt. to 44.20.