Commentary: Rising prices, nagging questions

Published 5:00 pm Tuesday, May 20, 2008

There’s something that’s been bothering me lately. It’s a gut feeling I often get these days when I read, see and hear the news and I think to myself “That is just not right.”

The topic is the rising cost of food, both here in the U.S. and globally, and what’s really getting at me is the implications, not too subtle innuendo, and sometimes outright claims that farmers are at the root of the high commodity prices that are causing worldwide food shortages. You and I know this doesn’t add up. It’s as if they’d like you to believe farmers had conspired to grow more corn for ethanol because it would cause worldwide grain prices to reach all-time highs. In fact the farming community has done what it has always done – produce what the market demands.

Time and time again the news reports lead with “corn being grown for ethanol” as the reason for high food prices, usually followed by mention of ongoing drought in Australia and Europe and then perhaps mentioning the increasing demand for food imports in India and China.

If the story goes into much depth, there might even be mention that there is more corn being grown than ever, over and above that grown for ethanol. Some of the news coverage and articles focus entirely on the food for fuel controversy.

If you are looking for a scapegoat for a global food “crisis,” farmers are an easy target. But, as with most global issues, the causes and solutions are much more complex.

It isn’t like ethanol just got discovered as a fuel alternative. The U.S. government adopted a policy of encouraging development of ethanol resources that dates clear back to 1978.

The subsidies for growing and distilling ethanol have been in place for years. Up until the last the last couple of years even that wasn’t enough to affect corn and other grain prices.

All of the other factors came into play at just the right time. Besides the drought and changes in the global marketplace, the U.S. farm program policy has also added to the current dilemma. The historical supplies of government-purchased commodities have dwindled due to significant changes in the farm program. There just isn’t as much emergency grain in storage these days.

When you take the time to look at all the factors affecting the supply and cost of food, the fact that 15-20 percent of the feed corn acreage is going to ethanol production is the least of these.

According to most reports I can find, grain for ethanol accounts for at most 10-15 percent of the increase in food costs to date. Consider that a $1 rise in price per bushel of wheat translates into a 10-cent rise in the cost of a loaf of bread, and it becomes obvious that commodity prices are a small part of the overall cost of food, particularly here in the U.S.

Rising food costs and shortages in the poorest of countries is a tragedy of epic proportions and many other factors including distribution and the upheaval of war come into play.

So, as someone who is closely tied to the farming community, I have to ask a different kind of question. Where was concern, the public outrage, the grand-standing by politicians all those years when the price of corn, wheat and other commodities was below the cost of production? Is it any wonder farmers are turning to the most profitable crops they can find? For once farmers have a choice about what to grow and some control of their destiny. The marketplace will take care of itself in due time and prices for the near future already reflect this.

The truth is if commodity prices hadn’t gone up like they have, we’d be having serious talks about a looming farm crisis. Skyrocketing fuel costs, doubling of fertilizer costs and double-digit increases in other input costs have cut into the bottom line for farmers and you can expect net incomes to decline accordingly.

I urge the state and federal leadership to back off on making short-sighted changes to farm policy including ethanol production, let alone pulling the rug out from under farmers by suddenly scrapping ethanol production subsidies and programs. Certainly other technologies will emerge and new and different crops will surface as fuel sources. Farmers will gear up and grow for these emerging markets as well.

Instead of threatening to end ethanol programs and worrying about subsidies, decision makers should be steadying themselves for what will happen in the farm sector when commodity prices do eventually fall.

John Burt is executive director of Farmers Ending Hunger and a retired Oregon State University Extension Service agent who writes from Keizer, Ore. E-mail: Burtjgb@aol.com.

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