The Problem With US Farm Policy

It has long been argued that US farm policy has hurt the world’s poor (especially in Africa). But with food prices at such high levels, it is a direct contributor to the current crisis. In today’s WSJ, Adam Lerrick writes a scathing editorial criticizing the policy. Excerpt:

The G-8 countries’ interventions have distorted global agricultural markets to the paralysis point. Politicians legislate price supports to enrich farm voters. Lobbies extort tariffs to block cheap food imports and subsidies to underwrite food exports at prices that destroy competitors in poor countries. Conservationists have agitated to set aside productive land and pay farmers not to grow. And now green energy advocates push ethanol quotas and tax credits that divert food into fuel.

For a decade, the world’s demand for food has grown faster than the supply. Throughout the developing world, hundreds of millions of people have migrated from the country where they fed themselves to the city where they must buy their food. A new middle class is eating more and eating better.

Seven pounds of grain are required to produce a single pound of meat; China, India and Brazil are eating 40% more beef than in 2000. Global food stocks have collapsed to a 50-day reserve, their lowest level in half a century. Even as the mountains of grain in government warehouses have eroded, G-8 members have been holding back supply.

Poor farmers have been deprived of a livelihood. Who will plant when rich world producers – protected from imports and guaranteed a subsidized gain on exports – dump crops on world markets, pushing global prices below the real cost of production?

In the name of conservation, U.S. farmers have been bribed to keep fields fallow – 36 million acres of cropland, the size of Iowa, at a taxpayer cost of $2 billion a year. In Europe, large farmers have been compelled to leave 10% of their holdings idle.

Food and fuel have been placed in competition for crops and land. A 10% content mandate for every gallon of gas, and $7 billion of subsidies, now divert one-third of the U.S. corn crop to ethanol, and have driven soybean acreage to its lowest level in more than a decade.

Even aid is tainted. The U.S. provides one-half of world food relief, but is the only major donor that gives in kind and not in cash. Thousands of tons of cereals are transported by barge along the Mississippi, navigated across two oceans on high-cost American ships and delivered by truck in Africa – where stockpiles of local grain are rotting for want of buyers. The same $2 billion worth of aid spent buying local foodstuffs would increase benefits for poor consumers dramatically and build a market for the crops of farmers.

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