The Need For Farm Programs...

Many people are currently questioning the need for farm programs and the effects that these programs have on the family farm. I hope that a conversation on this issue will help in the search for answers.

I have read a number of articles lately that suggest that it has been the farm programs that have led to the expansion of large farms. I don’t think that farm programs are the cause of this expansion at all and, in fact, I think that as per acre farm subsidies are reduced, the farms tend to get larger. Two examples to examine are the European Union and Brazil and how their farm policy, or the lack there of, has affected the farm structure. It takes 4 to 5 times our rate of subsidies to provide adequate income for the farmers to sustain agricultural production on the multitude of small, European farms. This comes at no small expense to the taxpayers who pay an average 50 percent tax rate to support the Common Agricultural Policy (CAP.) The CAP consumes about 1/2 of the total EU budget. The other end of the spectrum is Brazil, which provides very little in the form direct agricultural subsidies. A small family farm there is 50,000 acres, and some individuals own farms as large as 500,000 acres.

The expansion in size of U.S. farms is simply a matter of farmers responding to economic forces that direct us to expand so that we can spread out fixed cost over more acres and hopefully sustain some reasonable level of profitability. Unfortunately, most full-time farmers are faced with the inevitable, get big or get out. From experience, I can say that getting bigger isn't always the desired direction that farmers want to take, but we do it by necessity. Expanding most likely requires a considerable amount of increased financial risk and work, as farmers try to farm the additional acres without adding man power or equipment - both are taxed to the point that farmers are often working 16 to 18 hours days. In addition, the farmer will risk as much as half of his net worth each year with little or no guarantee that there will be a profit in the end. I don't know of many other established businesses that are willing to assume this much risk.

Farming is much different than almost all other industries in a couple of other ways. As price takers, we get a price that is set on the world market that is influenced heavily by supply and demand factors. Farmers can’t simply ask for a higher price to cover increasing expenses. Also, every time the prices of a gallon of fuel, a ton of fertilizer, a tractor, combine, insurance or even a pair of work boots goes up, it is subracted from our profit. No cost of living increases here, no raises, no passing the cost on to the market. We have to absorb the expenses and try to survive on less...or get bigger so that we can hope to provide a similar standard of living for our families that our urban cousins enjoy. After all, my kids want nice clothes, too.

I think that maybe we have overlooked one main reason for farm programs, and the reason that farm programs were first developed more than 70 years ago: stability. Farm programs were designed to prevent the boom and bust cycles that were, and again could be, inherent to agricultural production and profitablity. Grain prices can be very volatile, and without some mechanism for income stabilization, farms would fail at a much faster and frequent rate. Past history shows that this can also lead to serious problems for the banking industry that services agriculture and the communities where they are located. I don’t want to suggest that the current Farm Bill is perfect. None ever have been, and it is quite possible that none ever will be. We struggle every five to seven years to craft a new and improved program that meets the needs of our society.

Our Congress works hard to meet these needs by including programs that provide funding for conservation programs, to insure that we all can enjoy cleaner air and water along with improved wild life habitat, and rural development funding to businesses in rural areas to help provide well-paying jobs. Farm programs provide money for nutrition programs, too. In fact 54 percent of the total 2002 Farm Bill spending is for nutrition programs that include school lunches, food stamps, WIC and food for the elderly and disabled. Only about ¼ of the total Farm Bill spending goes to farmers, and the costs to the average tax-paying household in this country is about 38 cents a day (The Facts on U.S. Farm Policy, House Agriculture Committee, 2002).

The words “food security” have come up a couple of times, and maybe they have been a little over used. On the other hand, it should give people a sense of security knowing that we will never have to worry about having an ample supply of food.

Dale Schuler

A new year, with wheat at a critical point

The wheat-producing industry in the United States is at a critical point. Many factors are involved, but what is at stake is the profitability of our wheat producers and the future viability of a wheat-growing industry in our country.

High energy-related expenses - fuel and fertilizer costs - along with a long-term trend of relatively low grain prices has put considerable pressure on our producers’ bottom line. Coupled with the possibility of cuts in federal farm program spending, we end up with a very real likelihood that it will be difficult for wheat to be profitable. There is a real urgency that we act to help our producers so they can remain competitive in the world marketplace.

What sets agriculture apart from other businesses is that we can’t simply raise the price of our product, nor can we pass on the costs of our ever-increasing expenses.

We need a more effective federal farm program that provides food security for our nations consumers, conservation programs that insure clean air and water while allowing land to stay in production, and of course, a system that allows for a profit when the market fails to provide prices that can cover the costs of production.

One other area of concern is how our government has allowed the railroads to operate and act as monopolies that charge excessive rates and provide substandard service. We need legislation that requires the railroads to act in a more competitive manner as well as a system of arbitration that results in more reasonable rates for our producers.

Technological advancements in wheat have lagged behind other crops grown in this country, and this has created an environment that has us not only trying to compete in a world market place but also competing against other crops for resources. We are experiencing input costs that may be inflated since they are priced for the more profitable crops. (Priced a combine lately?) Supporting traditional plant breeding as well as working to gain acceptance of biotechnology for wheat are important issues if we want to keep researchers interested in developing new traits that can lead to the development of new uses, higher yields, higher quality or higher value for our producers and consumers.

We have many challenges ahead of us, and we need your help. Don’t just say that “someone should do something about it.” Get involved and let’s do it together so that we all can have a profitable future in growing wheat.

Dale Schuler

It's Time to Move Forward

It's time to move forward and get a biotech wheat variety developed for commercialization within the United States! And yes, I know those are "fighting words" for many growers who come from highly export-dependent states, as I do.
Yet, let's look at the situation: wheat acres are declining (500,000 acres lost last year in North Dakota alone), foreign competition increasing ( in the countries of the FSU, for example), competition from other biotech crops, a crumbling infrastructure for storage, handling and shipping, a flat national yield trend line, rising input costs, and, not the least, an increasingly demoralised wheat farming community (especially among the younger farmers).
How are we to counteract these trends? Will we, as an organization and an industry, simply sit back and let these trends engulf us?
No! We cannot, and we will not!
One of the answers, I believe, is to develop a biotech wheat variety(s), as soon as possible, with enough traits that will both lower our cost of production, and provide our customers, both domestic and foreign, with the type of end use product they desire.
I think this course of action may represent the U.S. wheat industry's last, best hope.
What do YOU think?

Onward!!

I have not posted for awhile, have been busy travelling (DC) and farming (yes, I do find some time for that also!), so I guess it is time to put down some current thoughts:
First, to Lance T., let me say I agree that crop insurance is a topic to be addressed, and soon! The western U.S. has been suffering from multiple droughts, and we need to find solutions to issues like shallow losses and erosion of yields. Let me assure you that NAWG, through its Domestic Policy commitee, is working hard on this issue.
Let me post one idea to you: what if you could buy multiperil just like fire/hail, as $/acre of coverage, rather than using yield averages--would that interest you? Of course, it would be more complex than that, but that is the basic idea--and the $/acre coverage would have to be within historic, reasonable yield/price parameters!
Secondly, to Chuck and Anon.--thank you for your kind comments and suggestions--they are greatly appreciated!
That's all for now---will post again as new responses come in!
Sherman

First Musings

Greetings,
If you are reading this first attempt by a NAWG president to put his thoughts down on e-paper in our inaugural NAWG BLOG (hey, that's kind of catchy!)--Welcome!
It was suggested to me by someone I greatly admire that this would be one of the more important ways that association leaders would communicate with membership "rank and file" in the future, and so given the plethora of issues facing our association and industry at the present time, I thought it would be good to give this a try and see what kind of response we would get.
Issues: What are your feelings on USW/NAWG/WETEC consolidation? How about the upcoming 2007 Farm Bill--what new/old programs should be added/subtracted? Is the high cost of fuel driving you crazy (it is me!!!)? How about more and more regulations? Does the ongoing drought require NAWG to request disaster aid yet again?
But wait--there's more--if fuel is high now, then how much do you know about NAWG's efforts to advance the production of cellulosic ethanol? How about transgenic wheat--do you believe, as I do, that it is imperative that we as an industry get over the consumer reluctance hurdle as quickly as possible if we are to remain competitive internationally? There is a lot more we will discuss in the coming months, and I eagerly await your responses/thoughts/questions on these and other topics.
SJR