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Fact Sheet: Farm Justice Proposals for the 2012 Farm Bill

by: Brad Wilson

Fri May 11, 2012 at 16:00:40 PM PDT


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The biggest issues in the US farm bill, both domestically and globally, are those of the Commodity Title.  Historically these are multitrillion dollar market management issues, hugely affecting sustainability, (crop rotations,) farm income, food prices, rural development, research,  public health, and the global food crisis.  Of these various issues, the most acute one today in the U.S. (and beyond,) is the dairy crisis, which is rapidly destroying dairy family farming, one of the most valuable sectors of family farming today.  

What follows are 3 major farm justice proposals for the 2012 farm bill.  These are:  

1. NFFC's "Federal Milk Marketing Improvement Act of 2011" (SB 1640).
2. NFFC's "Food from Family Farms Act:  Commodity Title," (FFFA)
3. Farmer Owned reserves:  NFU's "Market Driven Inventory System," MDIS

These proposals go far beyond trendy alternatives, such as subsidy caps and other subsidy reforms, which do not address the underlying problems.  It is crucial that food movement advocates not miss these three specific proposals.

Brad Wilson :: Fact Sheet: Farm Justice Proposals for the 2012 Farm Bill
1.   NFFC's "Federal Milk Marketing Improvement Act of 2011" (SB 1640).

The Dairy Crisis:  The Canary in the Mine of U.S. Agriculture.  The Farm Bill today is much much worse than the one farmers had at the start of the 1980s.  Higher market prices for many farm commodities today disguise that fact.  To see how bad it is, take a look at the Dairy Crisis.  Dairy Family Farms are being massively destroyed.  This is the most critical issue in the farm bill today.  What's happening in dairy, could happen to any farm commodity sector  under current and proposed farm policies and programs.  

Dairy Price Floors and Supply Management, Not Subsidies.  The Dairy Crisis can be immediately fixed with NFFC's Federal Milk Marketing Improvement Act of 2011.  Like good dairy programs of past years, Price Floors based upon the real world cost of production are used instead of government subsidies at taxpayers' expense.  No subsidies are needed because the need for subsidies is removed by effective farm policy.  Price Floors are protected with supply management, to prevent oversupply, to balance supply and demand.

Tell Congress to enact SB 1640, Now!  NFFC's dairy bill, the Federal Milk Marketing Improvement Act of 2011, has already been introduced into Congress.  This is an emergency.  Act now to directly confront agribusiness exploitation in the 2012 farm bill.  Support SB 1640.

2.   NFFC's "Food from Family Farms Act:  Commodity Title," (FFFA)

Eliminating the Need for Subsidies.  NFFC calls for eliminating farm subsidies, by eliminating the need for them, and by instead requiring agribusiness buyers, to pay fair prices for farm commodities, above the cost of production.  The government would no longer pay to partly compensate farmers for the chronic failure of farm markets to adjust supply and demand and keep prices above zero.

Price Floors and Supply Management.  The method of this program is a revised version of what was used in the past, (ie. 1942-1952)when agribusiness paid "parity" prices to farmers and there were no subsidies needed.  Price Floor "Loan Rate's" on "nonrecourse" loans prevent farmers from being victims of low market prices, from agribusiness dominance of markets.  In turn, this program is protected by Supply Reductions, as needed to balance supply and demand at fair trade price levels.

Protecting Consumers and the Poor.  To protect the poor, consumers, livestock interests and processors from skyrocketing prices, the proposal also calls for Reserve Supplies, to be placed on the market when Price Ceilings are triggered.

A Massive Shift in Money to Protect the Environment.  The Conservation Title of the farm bill is meant to address problems that can't be fixed by the market management of the Commodity Title alone.  Over the years, however, Commodity title Price Floors were lowered, more and more, and then eliminated.  Farm prices do not self correct in free markets, however, so prices followed Price Floors down to the lowest levels in history (ie. 1998-2005).  This represented a massive transfer of wealth from diversified family farms to agribusiness competitors.  This happened because poultry and hog factories and giant cattle feedlots were able to purchase feed ingredients at below-cost prices, thus massively subsidizing them with a transfer of market money.  The result has been a loss of "value-added" livestock income from most family farms, in addition to their low crop prices.  Without livestock they had no economic use for forages like alfalfa and clover, which provide abundant free nitrogen from the environment, forcing crop farms to buy more nitrogen, in less sustainable forms, from agribusiness.  As a result, most farms lost high quality Resource Conserving Crop Rotations, which also reduce or eliminate the need for herbicides and insecticides.

Prevention Against Export Dumping and the Global Food Crisis.  The U.S. is the dominant global farm exporter, bigger than OPEC in oil.  While most farm commodity prices (ie. per bushel) were once greater than or equal to oil prices (per barrel), the US has used it's global dominance to lower market prices, to lose money on farm exports.  Why?  To covertly subsidize multinational agribusiness buyers with below cost farm commodities.  While OPEC balanced supply and demand and drastically raised oil prices, the U.S. overproduced and lowered Price Floors.  Half of the world is rural, and 70% of the population of Least Developed Countries.  80% of the "undernourished" are rural. These farming countries and regions have been enormously impoverished by US export dumping (at below costs of production).  In fact, they've become so poor, without even any compensatory subsidies, that they can hardly benefit from the recent higher prices, which they desperately need, long term.  This is a dilemma, as the needed higher farm prices also cause basic food for the desperately poor to become unaffordable.  They need both Price Floors and Price Ceilings.

Findings:  Massive Improvements at Massive Savings.  Econometric studies of policy options similar to the FFFA have found that it would have greatly increased farm income, as cheap corn and other prices were eliminated.  At the same time, by eliminating all farm commodity subsidies, FFFA provides huge savings in government (taxpayer) costs, far beyond other reform proposals.

All of this and much more is fixed by the Food from Family Farms Act.

3.   Farmer Owned reserves:  NFU's "Market Driven Inventory System," MDIS

MDIS is a more modest alternative to the Food From Family Farms Act, and serves to show Congress how little it would take to massively improve farm policy and programs.  While it doesn't totally eliminate the need for farm commodity subsidies, it goes a long way in that direction.  (Note:  proposals for subsidy caps or limits do not at all address the chronic need for subsidies, [ie. when farm programs lack Price Floors and Supply Management].)

MDIS uses a soft Price Floor, a price level that simply triggers Supply Reductions the following year.  It also uses a Price Ceiling, which triggers the release of Farmer Owned Reserve Supplies when prices rise above Price Ceilings.  Price Floors and Price Ceilings are set lower in this proposal than in FFFA.  A wide gap between the Floor and the Ceiling is used (60% above the Floor) to give a larger range in which market forces can operate.  

Findings:  Modest Reforms Could Bring Huge Market Improvements and Cost Savings.  Two econometric studies of MDIS looked at how it would have performed in market conditions like we had 1998-2010.  That period started with the lowest farm commodity market prices in history, and ended with much higher prices, sometimes more than three times the levels of the earlier prices.  The results clearly showed the large benefits of having even these modest Price Floors and Price Ceilings.  

For More Information see:  

Primer:  Farm Justice Proposals for the 2012 Farm Bill: (http://www.zcommunications.org/primer-farm-justice-proposals-for-the-2012-farm-bill-by-brad-wilson)

Primer:  Revenue Insurance in the 2012 Farm Bill (http://www.lavidalocavore.org/diary/5157/primer-revenue-insurance-in-the-2012-farm-bill)

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