Lawmakers are at odds over whether to boost the price floor for certain food commodities or to spend the same money approving more generous food aid for needy families. By Jacob Bogage, July 12, 2024 at 6:00 a.m. EDTA price floor is a price set above the “equilibrium” price. The equilibrium price is the price when supply equals demand. Normally, when supply exceeds demand, the price goes down, which tends to increase demand or decrease supply, until equilibrium is reached. When demand exceeds supply, the price goes up until again, equilibrium is reached. But markets aren’t perfect and they are unpredictable. The equilibrium price is a safety net. The price floor guarantees farmers a minimum price if prices fall due to oversupply. It’s price insurance.
In the latest draft of a $1.5 trillion measure known as the farm bill, Republicans in Congress have plans to spend $50 billion over the next decade to raise price floors for major agricultural products such as corn, wheat, soybeans, cotton and peanuts.
But to pay for those new prices, the House version of the bill would scrap a 2018 change in the law that allowed presidents to increase benefits in the Supplemental Nutrition Assistance Program, formerly known as food stamps, which subsidizes groceries for nearly 42 million Americans each month.To pay for those new prices, Congress merely needs to vote for the funds. (Former Fed Chairman Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”)
Now Congress is locked in negotiations over whether to send money to food producers or food consumers, as the current farm bill is set to expire Sept 30.This should not be a choice. No “either,” “or.” The government should help those who need help.
“It’s really that farm safety net that’s been left behind,” said Joe Gilson, director of governmental affairs for the American Farm Bureau Federation. “Farmers are just asking for an increase for the reference price, a modest increase, that can address some of the concerns that they’ve seen in their production over the past five or six years.” A bill from House Agriculture Committee Chairman Glenn Thompson (R-Pa.) would raise price guarantees for 14 commodity crops. The proposal raises “reference prices,” the federally guaranteed minimum price, for those products by up to 20 percent. It also includes a 15 percent crop insurance subsidy for new farmers, up from the current 10 percent; those policies can protect specialty crops and livestock that lack commodity price protections. “It’s risk management. It protects against market volatility. Crop insurance protects against weather,” Thompson said. “What we put together is really what the American farmer is asking for.” To balance that spending, Republican proposals would prevent the White House from flexing power to increase future food assistance.Heaven forbid that the GOP should vote to do anything for the poor.
Lawmakers also plan to cut funds the Agriculture Department has traditionally used to help small farmers survive market shocks. The GOP proposals, advanced by Thompson and Sen. John Boozman (Ark.), would not cut SNAP benefits, which would continue to receive annual automatic cost-of-living adjustments to keep up with inflation. But the bill would prevent the president from recalculating benefits outside of budgetary limits.Not only will the GOP not help the poor, but it won’t help small farmers.
Using SNAP funds to pay for higher price floors is “a trade-off that none of us Democrats are willing to make,” Sen. Cory Booker (D-N.J.) told The Washington Post. Booker said Congress should address SNAP and reference prices as independent issues. The standoff could force lawmakers to extend the current farm bill again, either to consider legislation after November’s elections or after a new Congress takes office in January. Without a farm bill, U.S. commodity and dairy markets could face massive upheaval.A totally unnecessary trade-off, because Congress has infinite funds. (Former Fed Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.)
Reference prices are the main method policymakers use to keep agricultural commodity prices stable and help withstand global shocks. U.S. growers compete with international producers in an industry that experiences more price fluctuation than many other goods-producing industries, economists say. Favorable soybean growing conditions in Brazil, for example, could tank the price U.S. growers can demand for their product. But by the same token, a drought in India could boost American rice export prices. If the market price falls below the reference, taxpayer dollars pay agricultural producers a subsidy to make up the difference. That smooths over some of the price volatility, agro-economists say, and can help keep farmers afloat after a rough growing season. Those floors have not increased since 2014, and inflation has increased dramatically since then, essentially leaving producers with a lower price guarantee. But price guarantees only kick in for a subset of commodity farmers. Producers are eligible for the guarantees if they farm on “base acres,” land set aside in 1985 for crop-specific farming. Congress has gradually added acres to the allotment, but the designation only covered 244 million acres of the United States’ 879 million acres of farmland in 2023. So reference prices tend to mainly help larger industrial farm operations, which over time have consolidated ownership of much of those acres. “It’s a lot of money going to a very small number of farmers, representing a very small number of counties in the U.S., who already are receiving significant payments anyway from this program,” said Joelle Johnson, deputy director at the Center for Science in the Public Interest.Examples are:
- Cargill: As one of the largest privately held corporations globally, Cargill is a major agricultural player. They operate farms across various states, producing corn, soybeans, and wheat crops.
- ADM (Archer Daniels Midland): ADM is another giant in the agricultural industry. They manage extensive farmland, process crops, and handle commodities like grains, oilseeds, and sweeteners.
- Bunge: Bunge is involved in grain trading, oilseed processing, and fertilizer production. Their farm operations contribute significantly to their overall business.
- Tyson Foods: While primarily known for poultry and meat processing, Tyson also owns and operates farms that supply feed for their livestock.
- Smithfield Foods:
The advocacy organization Environmental Working Group, for instance, found in 2021 that the largest 10 percent of farms received 81 percent of reference price payouts.The largest 20 percent received 91 percent of the subsidies.The GOP wants to help the largest 10 percent of the farmers while punishing the poorest consumers. Surprised?
Congress has also relaxed rules about which crops farmers must grow to claim subsidies. Legislation in 1996 divorced crop requirements from price support, encouraging growers to “farm the market” instead of “farming the reference price.” Producers no longer have to match the crop they grow on a base acre to the subsidy they receive. For example, a farm can grow more price-stable soybeans on land set aside for long-grain rice, which regularly receives government support. That farm would get subsidies based on the rice market, even though it’s growing soy. To nutrition advocates, a new investment in commodity producers feels like it comes at the expense of families in financial straits, said Johnson from the Center for Science in the Public Interest. “We all accept that SNAP benefits should be adjusted for inflation,” he said. “And we have to be equally accepting of the fact that nutritional guidance, societal norms around food, the availability of food products, the way in which we prepare food are also things which should be accounted for to ensure that SNAP recipients are not losing ground.”Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/
……………………………………………………………………..
The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 