Here’s the ‘first’ of the story on subsidies

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webmaster | 10/26/12

You left out a very serious part of “the rest of the story” in your Friday, Oct. 19 editorial, “Drink that milk and eat that cheese.” However, in this case, we might better say that it was “the first of the story” that you left out. And it’s a very long “first of the story,” beginning over 80 years ago.

Feed crop subsidies have distorted livestock feed prices for so long that the situation has just become taken for granted and considered normal. The subsidy acceptance mind-set is especially true now that such a large portion of the population seems to imagine they are getting something for nothing from government; amusingly and hypocritically found completely unpalatable when the public learned of Candidate Romney’s simply stated truth that: “... 47 percent are in some way dependent on government handouts ...” off-hand remark amongst friends.

But to stay on track and on subject: Dairymen, cattle feeders and poultry farmers all grew their businesses on the basis that feed commodities (primarily corn, wheat, barley and soybeans) were abundant and cheap. Why abundant and cheap? Because when the price was too low to make a profit, the government just paid farmers to keep them afloat and producing ever more feed commodities every year. At 13 billion bushels — corn counts for most of the feed grown — that’s 2,400 pounds of corn per U.S. citizen. It’s also enough to make about400 pounds of meat and eggs, in addition to our milk, for every man woman and child in the country, not counting for any other feed inputs like natural grass, hay or all the other things that livestock eat in order to grow.

Yes, the resulting cheap food kept consumers happy, that was the point of it, along with food security. But when grains became so cheap that they were being dumped on world markets at below costs of production, the agricultural economies of many developing nations were completely destroyed. Resultant impoverished populations became dependent on handouts for survival — just like our farmers.

That’s what happens when markets are distorted by government stupidity. Eventually, under negotiated terms of recent trade agreements, the USDA and Congress were finally forced by other nations to do something about the disparities our subsidies were causing.

That happened, and it is called ethanol. Ethanol fuel mandates seemed, to this humble student of politics and economics, to be the way our Congress yet again ran away from one problem just to make a new one. Of course Congress never calls a spade a spade (what’s new?), so ethanol was sold as a great leap toward “energy independence,” even when everybody knows that’s a pretty big stretch of imagination. The promised efficiencies in conversion of corn to ethanol still (pun intended) haven’t arrived.

And just to spike the ball, here are a few more bad things about feed grain subsidies: When we had feed grains being produced in gross abundance and it was almost impossible to get rid of it all, Bob Peterson, chairman of IBP — a former beef and grains conglomerate and now a part of Tyson Foods — declared in about the year 2000 that feed grains are, for all practical purposes, free commodities.” That said volumes on the subject.

Another little-advertised and little-understood problem, even within American agriculture, was that cheap, below-true-cost of production livestock feeds distorted land use. Why graze cattle on ranch land when a feedlot owner can just feed them Mr. Peterson’s “free” feed? One result was too much meat on the market and returns to farmers that were too low, forcing many to sell. The worst result was that the numbers of ranchers in the U.S. declined 25 percent over the past 20 years. Some of the decline was consolidation, but a more important part of the decline was the conversion of grazing land to non-agricultural use and hobby farms. Neither use benefits the consumer or the environment in the long run.

Cheap, subsidized feed made food appear cheap. Subsidies always do that. McDonald’s was happy, they sold cheap burgers and more of them. Politicians were happy, nobody complained about food prices. Cattle feeders were happy, they got a lot of their feeder calves from Mexico, Canada and public-land calf producers and then fed them Mr. Peterson’s “free” feed. And even dairymen were happy, enjoying high margins between solid milk prices and cheap feed prices. And on top of cheap feed, dairymen had a supply-and-demand control program; a program so complex that even many dairymen didn’t understand it, and itself a form of subsidy.

So let’s all have empathy for these fiscally challenged dairymen, I do. I too, as a rancher, in the past suffered years of fiscal challenge due to ... the results of years of excess subsidies to others, and originally designed by Congress as an ill-devised political fix to an ill-perceived problem.

H. Clay Daulton,
Madera County


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