january 5-8, 2007 so why are there farm bills? daryll e. ray blasingame chair of excellence...
TRANSCRIPT
January 5-8, 2007
So Why Are There Farm Bills?
Daryll E. Ray
Blasingame Chair of Excellence
Agricultural Policy Analysis Center
University of Tennessee
Ag Policy Did Not Start in 1932 Historic policy of plenty
Land distribution mechanisms – 1620 onward Canals, railroads, farm to market roads Land Grant Colleges – 1862, 1890, 1994 Experiment Stations - 1887 Cooperative Extension Service – 1914
This policy of plenty often results in production outstripping demand
Characteristics of Ag Sector Agriculture is different from other
economic sectors.On the demand side: With low food prices—
People don’t eat more meals a day They may change mix of foods Aggregate intake remains relatively stable
Characteristics of Ag Sector Agriculture is different from other
economic sectors.On the supply side: With low crop prices—
Farmers continue to plant all their acres Farmers don’t and “can’t afford to” reduce their
application of fertilizer and other major yield-determining inputs
Who farms land may change Essential resource—land—remains in production
in short- to medium-run
When Policy of Plenty is Too Much
Given agriculture’s inability to quickly adjust to overproduction and low prices, there are 3 policy strategies: Supply side Demand side Just pay money
Exports, Exports, Exports For the last quarter century, exports
have been heralded—and continue to be by some—as agriculture’s salvation Exports is the production safety valve that can
rebalance agricultural markets Exports will grow at accelerating rates
As Dr. Phil would say, “So, how has that been workin’ for ya?”
What about Exports?
10
20
30
40
50
60
70
1975 1980 1985 1990 1995 2000 2005
Bill
ion
Do
llars
Bulk Exports
Total Agricultural Exports
What about Exports?
Index of US Population, US Demand for 8 Crops and US Exports* of 8 Crops1979=1.0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
US Population
US Exports
US Domestic Demand
*Adjusted for grain exported in meat
What about Exports?
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Do
llars per B
ush
el
Corn Exports
Corn Price
Th
ou
san
d M
etri
c T
on
s
What About Exports? Why have exports not fulfilled our
hopes? Export demand is braked by issues of food
security/food sovereignty International crop production is impacted by
Increased acreage: Stage of development Yield advances: World-wide distribution of
technology US role as the leading nation in the world
Politically, economically, technologically, and militarily And in prices too: Others price off US prices
Implications for the WTO Market access may not be sufficient
May benefit beef and Anjou pears What about crops covered by the Farm Bill?
What about Exports?
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Developing competitors: Argentina, Brazil, China, India, Pakistan, Thailand, Vietnam15 Crops: Wheat, Corn, Rice, Sorghum, Oats, Rye, Barley, Millet, Soybeans, Peanuts, Cottonseed, Rapeseed, Sunflower, Copra, and Palm Kernel
Th
ou
san
d M
etri
c T
on
s
US
Developing Competitors
Questions to Ask When you are provided with an ag
policy proposal ask yourself: Does this proposal take into account the
behavior of consumers both domestic and foreign?
Does this proposal take into account what we know about the behavior of producers?
Decoupled/Direct Payments Examine these using the test I have
suggested: Direct payments—
Do not affect consumer behavior Do not result in increased exports Do not result in fewer planted acres when prices
are low Are paid out even when farm prices and income
are high Same is paid when prices are in the tank
In Times of Exploding Demand The current program will work Environmental payments will work Rural developments will work Any farm program will work NO program at all will work
But times of exploding demand always come to an end
What Does Agriculture Need? A “Policy for All Seasons”
Realistic about the way aggregate agricultural markets work
Takes into account consumer behavior Takes into account producer behavior Recognizes limited ability of exports to
rebalance aggregate agricultural markets Recognizes demand growth seldom outstrips
supply growth for long
Thank You
Agricultual Policy Analysis CenterWWW.agpolicy.org