We're lucky President Clinton had petroleum reserves to tap in order to
bring gas prices down last week. Too bad for consumers we don't have a
similar grain reserve to keep food prices down and increase available food
stockpiles. 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 which will likely turn into sticker
shock at the supermarket by next fall.
President Clinton has been 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
a first step, which was to bring some of the long-term Conservation Reserve
land into use for haying and grazing. While this act will slightly reduce
demand for corn, it can't adequately replace dwindling food stocks. For
the past decade, the federal government has consciously -- and I would
argue foolishly -- liquidated our nation's food reserves.
We now have the lowest food stockpile since World War II -- with some
analysts predicting that we may run out of corn entirely before the fall
harvest -- a disaster that we have never faced. What happened? Can we
blame it on bad weather? Or is there, in fact, a connection between the
food crisis of the 1990s and the farm crisis of the 1980s? Indeed, all
indications are that the food crisis of the 90s has been a decade in the
making. Rather than putting the bin-busting harvests of the mid-1980s into
emergency food stocks (isolated from the market as is the Strategic
Petroleum Reserve), the U.S. government spent billions on export subsidies,
driving down prices and draining away the reserves.
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 better to replace farmers with chemicals and
tractors, freeing labor for 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 higher 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 the willful
elimination of buffer stocks which in the past enabled us to survive a
temporary food shortage without major difficulty or starvation.
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 used by the government 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, driving prices below break-even levels.
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
chemicals or 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 and
deserve at least as much care as our major non-renewable resource -- oil.
Institute for Agriculture and Trade Policy
1313 Fifth Street, SE, Suite 303
Minneapolis, MN 55414 USA