It takes a lot more bushels of Kansas wheat to pay the salary of a Senator or Representative today than it did during the 1940s (and the same applies per unit for Iowa corn or soybeans, Georgia peanuts, Mississippi cotton, Arkansas rice, Minnesota sugar beets, Wisconsin milk, and all of the other major farm commodities). What follows is my testimony, (with minor editing,) for a farm bill hearing in Wichita Kansas, hosted by former Agriculture Committee Chairman Pat Roberts (R-KS), and Debbie Stabenow, current Senate Agriculture Committee Chairwoman, (R-MI). The “Hearing” featured only pre-selected panelists. No testimony from the floor was allowed. I submitted my statement in writing, and confronted Senator Roberts about it after the meeting. Roberts has been in Congress since 1980.
What has Deregulation Done to the Price of Wheat for Kansas?
In today’s dollars (2010, CPI) Wheat in 1947 (price x production) made more than $30 billion. That was a good year. One bushel of wheat sold for $2.29, and one barrel of crude oil sold for less, for $2.16. More typically, from 1948-1952 the average price of wheat was $2.01.
From 1948-1952 wheat made, on average, $20 billion. Back then we had wheat price floors set at 90% of parity. (100% of parity is the traditional standard for fair trade, living wage farm prices.)
The reason for price floors was and is that wheat, corn and other farm commodities do not self correct in free markets. Prices are usually low, below full costs, without price floors. This is proven by abundant economic data on price inelasticity, plus the record of history, as highlighted here.
Beginning during the Eisenhower administration (1953), price floors were lowered. That’s when they began to deregulate farm programs by lowering price floors, under pressure from corporate farm commodity buyers. For example, the Committee for Economic Development called for drastically lower wheat prices to run wheat (corn, rice, cotton, etc.) farmers out of business, 1/3 of farmers within 5 years, for example, to cause agricultural concentration. Price floors were lowered more and more until they were ended in the 1996 farm bill, Freedom To Farm, (when Senator Pat Roberts was chairman of the Agriculture Committee).
Under the further deregulation of Roberts’ policies, the price of wheat fell to only $2.48 in 1999. That was the lowest wheat price in history. Adjusted for inflation, the 1947 wheat price was $22.35, and the 1948-1952 wheat price was $17.62, but the 1999 wheat price was only $3.25 (26% of parity). It is not surprising, then, that four emergency farm bills were passed from 1998-2001 to address the dramatic and immediate failures of Freedom to Farm. By 2008 oil had risen by more than 42 fold, to more than $91/barrel, (not adjustef for inflation. In contrast, over the same time span, wheat rose by less than 3 fold, to only $6.78 (55% of parity). Wheat was then said to have “skyrocketed,” like oil, even though the wheat/oil ratio had fallen from 106% to just over 8%.
You can apply these figures to the salaries of Congress. From 1948-1952, with Congressional salaries at $12,500, it took, on average, 6,213 bushels of wheat to pay a congressional salary. Under Roberts deregulation, Freedom to Farm, (1996-2010,) it took, on average, 41,365 bushels of wheat to pay a Congressional salary. That’s an increase of 35,152 bushels of wheat or (6 2/3x). That’s the difference between how Congress set wheat prices, and how Congress set their own salaries.
Over the years, wheat farming methods have improved, and wheat yields have increased a lot. So in today’s dollars, has wheat income gone up? Remember, wheat income, in todays dollars, was $30 billion in 1947 (at 18.2 bushels/acre,) and 1948-1952 it was $20 billion (at less than 17 bushels/acre). As it turns out, there was not a single year 1953-1972 when wheat income reached $20 billion! There were 3 years in the 1970s above $30 billion, and 5 more through 1982 above $20 billion. Next, however, we find that there was not a single year 1983-2010 when wheat income was above $20 billion even with all the increases in yields. (The same holds for corn under deregulation, with slightly fewer years below 1940s price levels, and it takes many more bushels of corn to pay one Congressional salary today.) Meanwhile, the cost of production for wheat has gone up by 9% per year 2004-2009 (> 50%, and more since then).
Clearly deregulation of the farm bill has been a huge failure. Under deregulation, including “free trade” agreements, the US lost money on wheat (vs full costs & excluding subsidies, USDA-ERS,) every year but 2, 1976-2009.
Under deregulation, Congress failed to manage US farm commodities like a business, balancing supply and demand. OPEC did that, because they had sufficient export market share to make it stick. As a result we’ve seen oil at much higher prices than wheat. All together, in today’s dollars, wheat income (price x production) since 1952 is more than $625 billion below what it would have been if we’d reduced supply by another 10% on average and priced it at parity. (Add an additional $2.5 trillion above parity to match oil prices.) Meanwhile wheat farmers have received $137 biillion in subsidies, (since wheat subsidies started in 1961,) for a net reduction of nearly $489 billion (below the earlier fair price standard). In other words, wheat subsidies compensated farmers for less than 22% of the reductions in prices below the fair trade (parity) standard. Meanwhile, we’ve paid more wheat subsidies on cheap and below cost wheat exports than on wheat used domestically.
Under deregulation, Roberts and others have had taxpayers paying hundreds of billions of dollars to farmers, instead of charging fair trade (parity) prices to countries like Saudi Arabia. We’ve been subsidizing OPEC (and many others) with deregulated, below fair-trade-priced grains since 1953, (and for a quarter century below full costs). Meanwhile OPEC raised prices, (dramatically, and farmers pay those outer-space prices as production costs). In fact, however, the US has long had greater export market share than all of OPEC for crops like corn and soybeans. During the early 1980s, our wheat export market share was about the same as the Middle East in oil. We’re the giant of farm commodity exports, the price leader for wheat, rice, corn, and soybeans and other crops. Senator Roberts and the other deregulators, however, chose for the US to charge less and less and less on those exports, and to run up huge government costs along the way. They accommodated the self interests of multinational grain buyers, not the strategic national interests of the United States
We need farm bill price floors and supply management in the next farm bill. We need fair trade, not more of this free trade. We need to run farm programs like a business, not further deregulation, and further losses and reduced income levels for rural areas and for the exports of the United States as a whole. We need the Food from Family Farms Act of the National Family Farm Coalition. We need for the Democratic Party to return to it’s roots in rural wealth and jobs creation, as in the New Deal Farm Programs, the Steagall Amendment of 1941 (a private sector economic stimulus), and the Harkin-Gephardt Farm Bill of the 1980s and 1990s.