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Making sense of the farm bill
The farm bill has been making the news lately and I do not completely understand its content and figured there were plenty of readers in the same boat. While I cannot begin to properly unravel its many complex provisions, there are some key points I do understand and have researched them for accuracy on your behalf.
According to historic records, this will be the 16th farm bill passed since 1933. This public policy document governing much of agriculture is only passed on an as needed basis. When you look at the historic dates for bills passed before, there are periods of time as short as one year and as long as 10 years between new farm bills. Generally the renewal cycle runs about every five years.
You see, agriculture changes and the farm bill must change with it. As an example, just watch the weather. We have had unexpected rains that put May on track to be the fourth wettest on record. Wet fields make for unexpected delays in planting that will reduce yields. Technology is another good example of changing conditions. For the first time in our community, auto steer technology is at work on a local tractor. Along with orbiting satellites in space and fast computers here on earth, we can make a tractor operate in parallel swaths across the field – hands free! So, change is nothing new to farmers and the farm bill must change to keep up.
We all have seen on TV and read about in the papers, that the most recent farm bill just passed Congress. USDA breaks down this bill into several spending sections as follows: 66 percent human nutrition programs, 15 percent farm commodity programs, 10 percent crop insurance, eight percent conservation, and one percent to other programs.
You can see that the bill is in truth a human nutrition program first and a farm program last. Under the agriculture section, the majority of the money (18 percent) is spent on conservation and crop insurance. Farm commodity programs use the remainder.
There is an important food topic not directly covered by the farm bill but it is related. Most conversations I hear lately include a discussion about rising food prices and attempt to find one cause, when in fact there are a number of causes. Some back ground provided by the mid-May issue of Doane’s Agricultural Report is helpful in understanding rising food prices.
Since 2000 global consumption of grains exceeded production 7 out of 8 years while carryover of extra grain declined to its lowest level since 1970. Both of these warn of a growing demand. On average our world population is trending up in meat consumption as standards of living improve. Grain is used in meat animal production. All of these factors happened before this year and help predict a rise in food prices and now help us understand some of its causes.
Let’s turn to two other causes which are the price of oil and the value of our dollar. Oil has been trending up since 2000 with developing countries growing the fastest. And since early 2002 our dollar began to depreciate. As the dollar dropped against other world currencies, the cost of buying our goods went down so people were able to buy more of our goods, including food. The cost of oil impacts food costs and the buying power of other countries drives up the price of a food supply that is not keeping up, yet.
Other causes of rising food prices include ethanol production, lower farm output due to higher production costs mostly due to fuel and fertilizer increases, and finally speculation by traders who have helped inflate food prices. Our food price structure is complex.
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