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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.

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Comment Preferences

  •  Tip Jar (6+ / 0-)

    "We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!" family farm woman, Donahue Show, 1985

    by Iowa Farm Activist on Sun Sep 25, 2011 at 04:06:17 AM PDT

  •  my grandfather who died in 1973 remarked (3+ / 0-)
    Recommended by:
    Josiah Bartlett, markdd, terabytes

    in that year that corn was bringing the same price it was the year he was born, 1893.  He also remarked frequently that farmers were the only businessmen who bought retail and sold wholesale

    •  As I get older, my memory gets worse, and (0+ / 0-)

      I've seen where the elderly say funny things that have important symbolic meaning.  According to USDA's track record book, corn was $0.36 in 1893, and $2.55 in 1973.  Adjusted for inflation, in 1973 dollars, 1893 corn was $2.10.  

      I'd speculate that it might be your memory, because the amazing thing is that in 1947 corn was $2.16, the highest in history, so at times 1947 and 1973 had the same prices, even though 26 years had passed.  Many farmers have made similar comments, for example here in 1985 at about 5 minutes 10 seconds,  http://www.youtube.com/...  

      (And 2005, after almost 52 years of congressional lowering/elimination of price floors, we had $2.00 corn, the lowest yearly average in history!)  

      "We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!" family farm woman, Donahue Show, 1985

      by Iowa Farm Activist on Fri Sep 30, 2011 at 12:11:47 AM PDT

      [ Parent ]

      •  regarding corn, that may have been the (0+ / 0-)

        corn blight year and he may have remarked upon it in 1972 or 1971; I do remember myself that corn was $1/b and it was after I received my draft notification.  I had to report for induction at Fort Jackson 1971 while he had reported to Fort Jackson in 1917, which he remarked upon.  this pins the date from 1971-1973, as I was hospitalized for most of 1970. OTOH his knowledge of the price of corn in 1893 may have been imperfect as he was very young then

  •  OK except for one thing (0+ / 0-)
    We need farm bill price floors and supply management in the next farm bill.  We need fair trade, not more of  this free trade.

    It's not like ag prices are depressed because of free trade.  If anything, free trade helps Kansas farmers, which is why Kansans across the political spectrum are ardent free traders.  Free trade gives them access to foreign markets, while Kansas has relatively little of the manufacturing that's decimated by import competition.

    In short, without free trade it would cost even more to provide those price floors.  

    The Rent Is Too Damn High Party feels that if you want to marry a shoe, I'll marry you. --Jimmy McMillan

    by Rich in PA on Sun Sep 25, 2011 at 05:50:20 AM PDT

    •  Correction...maybe! (0+ / 0-)

      It could be, in the context of the diary, that you're not even looking at free vs. fair trade in the global sense it's usually mentioned; you might be looking at a wholly different paradigm for how we buy and sell food inputs domestically!  I don't think that would fly.

      The Rent Is Too Damn High Party feels that if you want to marry a shoe, I'll marry you. --Jimmy McMillan

      by Rich in PA on Sun Sep 25, 2011 at 05:51:51 AM PDT

      [ Parent ]

      •  I AM looking at free vs. fair trade globally, (0+ / 0-)

        as well as the relations between rural states and regions and other areas domestically.  Since farm commodities such as corn, wheat, rice, cotton, and soybeans do not self correct in free markets, they are usually cheap, below cost, if there are low or no price floors.

        If you read my article carefully, you'll see that the data shows that the US, the dominant global price leader for most of these and similar farm exports, has chosen to lose money on exports.  So yes, I'm talking about a wholly different paradigm for how we buy and sell food inputs domestically and globally.  So don't you think it will fly to insist that Congress price our farm commodities above US costs?!!!!!  Is that your take on US politics?  You're arguing that we subsidize the rest of the world, even though we're bigger than OPEC in export market share?

        Note that I'm also calling for policies that neither Republicans nor Democrats have supported lately, the traditional Democratic policies that also include price ceilngs and reserve supplies to protect consumers.  Perhaps you think that won't fly either.

        These matters are almost wholly unknown, even though they used to be the dominant policies of the US.  We've forgotten our history.  That doesn't mean they can't have political clout in today's debates against those who want to subsidize Saudi Arabia most of the time with below cost corn.

        "We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!" family farm woman, Donahue Show, 1985

        by Iowa Farm Activist on Tue Sep 27, 2011 at 07:12:57 PM PDT

        [ Parent ]

    •  Except for the actual data, the actual record (0+ / 0-)

      of history for Kansas farm income.  

      The ideology of free trade claims that the key is "access to foreign markets." But as farm markets have moved toward free markets, 1953-1996 and beyond, Kansas farm commodity prices have fallen dramatically, as I documented repeatedly above.  Losing money per unit is not a benefit for Kansas.  If you sell more units, you lose more money. It's like the ethnic joke about the one who was losing money so he doubled his operation.  So free trade destroys wealth creation and jobs creation.  Perhaps you missed the part above about how farm commodity markets don't self correct, so they're usually low.  It was long claimed (ie. since the 70s) that free trade would increase export income, but in fact, exports did not deliver.

      Market Access is essentially a way for multinational corporate buyers to lower prices globally. You go from country to country to bring in cheap imports to lower prices.  The US is the dominant global market exporter, but we haven't used our clout to raise prices for US (and Kansas) profits. We've lowered US profits to subsidize multinational buyers with below cost grains

      Secondly, there isn't a cost to price floors, except for start up money for revolving loan funds. Farmers pay interest into the program, not the other way around. Estimates in the past were that the government made money on the programs.  Supply management, balancing supply and demand, is a key to protecting the price floors.

      Perhaps, if you read the article again, you could better attempt to rebut it.

      Why Kansan's believe what they do is, well, "What's the Matter with Kansas."

      "We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!" family farm woman, Donahue Show, 1985

      by Iowa Farm Activist on Tue Sep 27, 2011 at 07:01:55 PM PDT

      [ Parent ]

  •  rake-off (0+ / 0-)

    The price of wheat may have declined since the late 1940s, but prices of bread and flour have gone up and up.

    I do lots of baking, and I can tell you that quality of major brand flours has become dreadful.  Gold Medal is simply not a decent product for at least the past two decades.  I am old enough to remember when GM used to bake up quite nicely.

    When I bake bread I use flour water and yeast. Maybe a little oil. What, pray tell, are all those other ingredients on bread package labels?  Excuses for adding extra dollars to the price of a loaf?  Extra .50 for each ingredient, with a bunch of companies, whose CEOs sit on each other's boards, all selling each other different chemicals and substances, including, apparently, inedible wood cellulose, so that everybody  gets a cut?  I am finding it harder and harder to believe that processed food is profitable in any sense in which an ordinary person would understand the word.  

    •  You have my sympathy (0+ / 0-)

      Data on the farm share of food costs, with the input share (Monsanto John Deere, etc.) taken out of the farm share, shows that in absolute terms (and adjusted for inflation), the farm share has gone down, and both the output share (exporters, food and feed mills and other t, grocery chains, etc.) and input share have gone up significantly.

      "We're trying to warn this nation of a tidal wave ..., and it's coming your way, whether you want to know it or not...!" family farm woman, Donahue Show, 1985

      by Iowa Farm Activist on Tue Sep 27, 2011 at 07:17:52 PM PDT

      [ Parent ]

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