Mark Ritchie, Institute for Agriculture and Trade Policy
We're lucky President Clinton had petroleum reserves to tap to bring gas
prices down last week. Too bad for consumers we don't have a similar grain
reserve to keep food prices down. While gasoline prices have gone up over
10% in the last few months, commodity prices for corn and wheat have nearly
doubled since the last harvest, due to severe shortages.
President Clinton has been unduly criticized by Republicans in Congress for
not acting earlier to bring gas prices down, but at least he had the option
to use our nation's Strategic Petroleum Reserve. For the crisis in
agriculture, however, his options are much more limited. Last week he took
the first step, which was to bring some of the long-term Conservation
Reserve land into use for haying and grazing. While this will slightly
reduce demand for corn, it can't replace adequate food stocks as the best
way to handle reoccurring food shortages. For the past decade, the federal
government has consciously -- and I would argue foolishly -- liquidated our
nation's food stocks.
We now have the lowest food stocks since the Second World War -- with some
analysts predicting that we may run out of corn entirely before the fall
harvest -- a disaster that we have never faced. Almost without notice, the
heart wrenching front page photos of family farmers going broke have been
replaced by similarly compelling images of mothers unable to feed their
children and cattle starving for lack of feedgrains. What happened? Can
we blame it on bad weather? Or is there, in fact, a connection between the
farm crisis of the 1980s and the food crisis of the 1990s?
The Institute for Agriculture and Trade Policy has spent much of the past
year investigating the underlying causes of the sudden shift from seemingly
endless surpluses to unprecedented shortages. Our research indicates that
the food crisis of the 90s has been a decade in the making.
Rather than putting the excellent harvests of the mid-1980s into emergency
food stocks (isolated from the market like the Strategic Petroleum
Reserve), the U.S. government spent billions on export subsidies, driving
down prices and draining away the reserves needed in times like the
The resulting artificially low prices have had huge impacts both here and
abroad. They fueled increased demand for industrial corn products like
starch, sweeteners, and solvents. Low prices also encouraged the formation
of gigantic cattle, dairy, hog, and poultry factories which have driven
out many smaller family farmers and ranchers. Low prices were also used to
"hook" other countries on buying cheap, subsidized U.S. food, rather than
growing their own.
While these artificially low prices swelled demand, they simultaneously
drove farmers out of business, both in the United States and overseas.
Many governments were convinced that farmland could be sacrificed to
industrial uses because cheap food was available on the world market. They
also believed that it was advantageous to replace farmers with chemicals
and tractors, thus freeing up labor to fuel industrial production.
The combined impact of low prices, upward spiraling demand, and reduced
production through farmer attrition has skewed our food system. For this
and the next few years, demand will outstrip production. Some people will
starve. The rest of us will pay high prices for food, re-igniting
inflation. To make matters worse, we can also expect the Federal Reserve
Bank to drive up interest rates in an attempt to dampen inflation, like an
18th century barber who prescribes more bloodletting when the first
treatment doesn't "work."
Growing food is not like making shoes. There are years when drought or
flood cause shortages. This is normal. What is not normal is willfully
eliminating the buffer stocks which in the past enabled us to survive a
temporary shortage without major difficulty or starvation. Even the
current severe droughts in the U.S., France, the United Kingdom and Germany
and the longer-term shortages in Asia and Africa could be handled if we had
a proper food reserve.
But it is not too late to begin the process of building up and protecting a
reserve, both here at home and internationally, through mechanisms like the
Food Reserve Coordination Agreement proposed by North Dakota's Senator Kent
Conrad. We can start today, but we have to be careful. First of all,
farmers have to be reassured that the means the government uses to create
emergency food supplies will not drive farmers' prices below their costs of
production. In the past, the government constantly leaked stocks into the
market, often driving prices below the break-even level.
Second, we have to rebuild our food stocks with environmentally sound
methods. There are sustainable approaches that can be used to increase
production without damaging the earth. We must reject approaches that rely
on massive doses of pesticides and chemical fertilizers and genetically
altered pigs and cows as the solution to the crisis.
We must carefully bring demand and supply into balance, and then build up
emergency stocks by helping more farmers get back on the land. Crops like
corn and wheat are among our nation's most precious renewable resources
deserve at least as much care as our major non-renewable resource -- oil.
Is it really more important to drive than to eat?
The Institute for Agriculture and Trade Policy
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Minneapolis, Minnesota 55414 U.S.A.
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Institute for Agriculture and Trade Policy
1313 Fifth Street, SE, Suite 303
Minneapolis, MN 55414 USA