Something is seriously wrong with our farm policies and Congress is asleep at the switch. Yesterday, Costco started rationing rice, not because of a shortage, but because the price has risen 40% in the last 3 months. It appears that Asian customers, hearing of the rice shortage in their home countries have started hoarding rice.
What is really wrong is that Congress is about to pass a $30 Billion farm bill that keeps and in some cases raises direct payments to large agriculture companies based on the amount of land they own. Senator Tom Harkin, Chairman of the Agriculture Committee knows something is rotten in Washington.
The direct payments are based on the amount of land that certain farmers own, and Mr. Harkin, who has sought to eliminate the payments, said that many recipients of the money then use it to acquire more land and qualify for more payments.
“It’s like the black hole in space that astronomers talk about: everything gets sucked in and nothing ever comes out,” he said. “This is the black hole of agriculture. It doesn’t make sense, but farmers continue to get it.” Mr. Harkin said there was not much he could do because “I don’t have the votes,” adding, “People love free money.”
Almost everything the Congress has done in the last few years on farm subsidies has been seriously flawed. Pushing farmers to grow more corn for ethanol has not helped the environment and sparked “tortilla riots” in Mexico City. Subsidizing the growing of cotton in Mississippi has made it impossible for cotton growers in Africa to make a living. Continuing to subsidize domestic sugar processors has severely distorted the world market price for sugar.
What’s worse is, because John McCain’s key financial advisor Phil Gramm and his wife Wendy pushed through a bill to shield the Commodity Futures Trading Commission (which Wendy headed) from SEC oversight, it is a giant casino for hedge fund investors.
There is also no movement to require tighter regulation by the Commodity Futures Trading Commission of futures markets. Many farmers suggest that hedge fund money is building a speculative bubble in farm commodities and causing wide swings in futures prices, making it more expensive for them to use futures to lock in crop prices. Farmers fear that the bubble could burst, like in the housing market.
“It’s a train wreck waiting to happen,” said Tom Buis, the president of the National Farmers Union.
There is only one solution to this. Scrap all direct farm payments and move to “a new revenue assurance program that would help farmers in times of need, but save money in boom years when crop yields are strong and prices high.”