Posted on 10/26/2007 9:35:46 PM PDT by bruinbirdman
In 1973 Richard Nixon, US president, under political pressure because of rising domestic food prices, banned the export of soyabeans. The policy had predictably dire results, but today, with the world in the grip of another bout of food price inflation, governments worldwide are rushing to distort the market with subsidies and quotas, price controls and export taxes. They should stop.
In the run-up to its presidential election, Russia has imposed price controls on basic foodstuffs, and plans an export tariff on wheat. China already controls prices; other importers, including Egypt, Jordan, Bangladesh and Morocco, are increasing subsidies or fiddling with their tariff regimes.
The simple problem with all these actions is that they distort the market. Price controls and export tariffs make production less profitable, which discourages increased supply and can make shortages worse. Subsidies stimulate demand so it does not fall into line with higher prices. All distort the terms of trade within a country. Farmers suffer at the expense of city dwellers – especially perverse in countries with high rural poverty, such as China.
None of this is too bad in the short term. If food prices fall back, price controls become meaningless, subsidies can be withdrawn and export tariffs no longer make sense. The more pernicious problems will appear if food prices stay high. With more demand for protein from fast-growing Asian middle classes, lunatic policies to subsidise corn-based ethanol and the legacy of underinvestment during long years of low prices, that prospect seems likely.
For exporters, distorting the market in favour of domestic consumers harms the balance of payments, lowers investment and helps rivals. Nixon’s ban is often credited with creating Brazil’s soyabean industry.
For net food importers, who can keep prices down without shortages only by offering subsides, the risks are much more serious. Cheap food is an open-ended fiscal commitment – once in place it is politically impossible to withdraw – that can play havoc with a budget. Developing countries have improved their fiscal position in recent years. They should not throw that away.
Rich countries, where food is a small part of total consumption, have less to worry about, although they should beware the ratchet effect as food importers increase subsidies and food producers tax exports, driving up world market prices still further. But leaders in the developing world, no matter the political pressure to bring down the cost of grain, should resist. Cheap food comes at a high price.
“In 1973 Richard Nixon, US president, under political pressure because of rising domestic food prices, banned the export of soyabeans. “
It seemed to me, that about that time, we did something with wheat (prices) and that the price of bread (actual bread loafs) has never dropped.
Canada was involved, the price of bread never returned, now we pay 3 or 4 dollars for something as basic as a one pound package of simple bread.
European subsidy info (poor source-oxfam)
http://www.terradaily.com/reports/Oxfam_Europes_Farm_Subsidies_Unfair.html
better source of european and american farm subsidy battles
http://www.ncpa.org/pi/internat/pd110599a.html
The “wheat thing” u mention was when the US sold wheat to the USSR for the first time. It sent world prices up.
us wheat prices, historical (other foodstuffs as well thru the links)
http://www.nass.usda.gov/Statistics_by_State/Washington/Historic_Data/smallgrains/whtallpr.pdf
I'm saying it's not so much the farmers (most of who work ten hour days with no real day's off). It's the marketers and groceries who short-shrift them so badly - and the politicians who go along with this arrangement so much that they'd rather give the struggling farmers tax-payer provided subsidies than reign in the greed of those taking advantage of those farmers. Guess who's funneling a lot of money to those politicians? Ain't the farmers.
“The “wheat thing” u mention was when the US sold wheat to the USSR for the first time. It sent world prices up.”
You really seem to know about this subject, the wheat prices you linked to show how this progressed, thanks.
As a common man, I never understood this silent transition.
To avoid confusion, it is the links in post 6 that matter.
Please don’t take my posts personally. I was a farmer for much of my life. Til I couldn’t afford it anymore. The cold war kept us and the ussr from trading. That changed in ‘73 when we were able to sell the russians some wheat.
The us is #2 in the world in ag subsidies. The European union is #1. Gov’t subsidies serve to balance world prices, often on the low side. A totally free market would have the effect of sending prices skyrocketing and then going too low.
Ag policy and especially the new ag bill are always misunderstood. Did you knwo that 78% of the ag bill cost is for social programs, esp food stamps? 12% goes to farmers.
Nixon banned the export of soy beans to Japan due to a very limited supply. Japan then turned to Brazil and aided them in clearing their forests to grow soybeans. Nixom made a mistake.
Other countries do produce some food cheaper than the usa and our and the european subsidies hold that down. At first blush, that seems dumb. However, one must consider what would happen if other countries took over the ag business while our farmers went out of business. It is a vicious circle to say the least.
Lets put a price control on Fillet Mignon!! 50 Cents per pound sounds about right. Might as well do it on Ribeye and NY Strips too!!
Fire up the grill!!!!
bttt
“Please don’t take my posts personally.”
I meant to explain that I agree with you. I agree with you and I would like it if you stay on this lesson in history.
This is real and actual history.
The Europeans pay their farmers directly to give them a high price, much highter than in the US. They then turn around and export these grains at a lower rate. The Europeans have traditionally put tariffs on ag imports to help protect their own farmers.
The US goes about it differently. They “guarantee” a lower price to their farmers and then utilize “export enhancement programs” in which the gov’t sells grain cheap.
The US also pays farmers not to produce, to leave some of there land idle. These programs have had different types of names you may be familiar with i.e. soil bank of the 50’s and 60’s, diverted acres (70’S and 80’S), set aside acres (80’s), and recently the Conservation Reserve Program (CRP) (late 80’s to present). These non farmed acres have been required to be seeded to grass and trees, etc. as a form of land conservation. It has benefitted wildlife greatly.
As I mentioned earlier, this has been a viscious cycle. The US has been the traditional “warehouse” of surplus grains.
Under the various farm programs, farmers are allowed to take loans on grain they choose to store while waiting for prices to rise. They pay interest plus the full loan amount when they later sell their grain. All these loans are counted as expense in the ag program budget, despite being paid back.
how much is the current
US subsidy for corn?
please be specific
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