Government Subsidy and Agriculture

Dixie “Quills” Foster, Friend of LPJ, Iowa (home state of corn producing farms), has passed an article concerning the owner of Premier, a company that, among other things, makes/sells fencing for farms and ranches:

Premier Newsletter:

I suspect that many share my views that the less govt. in our lives the better. I was again reminded how unrealistic my view is during Premier’s UK sheep tour in early June.
What’s uppermost in the mind of British sheep producers? Govt. policies. Why? For decades the British livestock producers received an annual “headage” payment. Officials counted the ewes and cows on your property and paid a cash subsidy accordingly. …
Two years ago the govt. subsidy was disconnected from the number of ewes and cows. That’s a huge change of and by itself. But, and this is vital to understand, UK govt. farm payments are also declining each year. They’re scheduled to disappear in 5 years. … The hills of Wales, Scotland and England, synonymous with sheep for 200 years, may become largely “sheepless.”
A U.S. example: when the US govt. suddenly terminated the wool subsidy, US mohair and fine wool producers confronted a similar “change or die” reality. The result: Very few Angora goats, fewer fine wool ewes and far more meat goats than there were in 1990.
And other US govt. policies (past, present and future) are key forces in shaping US agriculture as it is today. Consider:1. Decades of generous crop subsidies encouraged farmers to produce very large crops of corn, soybeans, wheat, barley, rice, etc.
2. John Deere®, Monsanto®, and Pioneer®, to name just a few, responded wisely – and profited accordingly.
3. The resultant cheap grain made producing pork and poultry profitable. So they expanded – and expanded some more.
4. Cheap grain also made US corn-fed (and the industrial-scale feedlots of the High Plains) what it is/they are. …
5. A few years ago Archer Daniel Midlands®,[I] with the help from others, persuaded the US govt. to provide a 51¢/gal. ethanol subsidy. That combined with $60/barrel oil and cheap grain, created a “biofuel mania.”
6. Now one subsidy (for ethanol) is dominating the others. Grain is no longer cheap. As a result, pork, poultry and cattle feedlots are no longer the dependable profit sources they once were. It’s change or perish.

And what’s the response of the US govt.? Even greater subsidies and mandates for ethanol. While applauding the profits it offers crop farmers, I consider this to be absurd national policy. Why? Because most experts admit that corn ethanol is not a useful long-term national solution for reducing our dependence on oil. A carbon or BTU tax would be much more effective.
Many suggest that biomass ethanol is the answer to our oil dependence. But is it really? A recent article in Foreign Affairs noted that it would require a semi-load of switchgrass every 6 minutes 24 hrs. a day to feed a typical ethanol plant. That’s not realistic. When I lived in England some tried to produce electricity using baled straw as a fuel source instead of coal, oil, or natural gas. … The effort failed because it was not practical to haul so much biomass to one point.
And yet encouraging biomass ethanol appears to be one thing upon which both Congress[II] and the President agree. What is it about officials and leaders that enable them to overlook basic realities?

Markets are markets and too often government intervention has not produced what was originally intended – it just creates further problems or a problem of a different nature. It is the people who suffer most for the decisions made by national leadership. Less government, less intrusion creates a better free trade atmosphere as well as a government that is more efficient. Government should only be concerned with ethical business practices and ensure those laws are enforced for the safety and welfare of the general public – not as a special attention to a lobby agenda of a corporation or series of corporations.

Thanks, Quills, for your contribution.

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[I] See The Case of Kathy Flippo vs. ADM.

[II] NPRA – Renewable Fuels Standard (RFS)/Biofuels Mandate.