U.S. Agriculture: Pricing Itself Out Of International Markets? Politicians like to tell U.S. farmers they're the most productive and efficient in the world when competing on a level playing field. But this is dangerous and misleading. Moreover, it is not conducive to sound policy.
Brazil, for example, has become very competitive in world soybean production.It has taken tropical soils long thought to be unproductive and is using lime and fertilizer to produce very competitive soybean yields. And the area with these soils is huge - millions and millions of acres. Brazil is a large country - compared to the continental U.S., it is larger "by a Texas."
In addition, Brazil has developed a first-class national agricultural research system. That system has been used to develop soybean varieties adapted to tropical soils and conditions, and no one else in the world has done this. But Brazil is not the only country with tropical soils capable of high soybean yields.Very similar soils are scattered throughout sub-Sahara Africa and in Colombia.
The U.S. is still more efficient than Brazil at keeping soybean operating costs low. But when you factor in land costs, the competition is a lot tougher. The value of current subsidies is capitalized into the value of land. This drives total production costs up, with the danger that the U.S. will price itself out of the market.
From a legislative standpoint, the U.S. needs to change the way it addresses the chronic income problem in agriculture. If we want to address the chronic income problem of farmers, and it is appropriate to do so, we need to disconnect the income supplements from the use of land. In that way, the benefits will no longer be capitalized into the value of the land, and thus drive up costs.
In addition, more attention should be given to rural development, or the expansion of non-farm activities in rural areas. That would enable farmers to live on their farms while garnering additional productive employment. This way they could remain productive citizens in their home communities instead of migrating to urban centers and contributing to congestion and the need for costly infrastructures to accommodate larger populations.
It's not too late to appropriate and invest funds for rural development. For years, human capital has been drained out of small rural communities.
If we would take the money currently being used to subsidize counter-productive commodity programs and invest it in developing rural communities, it would do much more to help lower-income farmers. Moreover, it would do it on a sustainable, longer-lasting basis.
The current system has resulted in a vicious cycle of bidding up land prices, and is very costly for the public treasury. Moreover, present programs tend to benefit the larger farms rather than the truly disadvantaged.
Some day the body politic will realize these counterproductive effects and revolt against expensive farm commodity programs. In addition, the body politic will eventually realize that we must compete in a global economy if we are to sustain our economic growth and development.
G. Edward Schuh is Regents' professor and director of the Freeman Center for International Economic Policy at the Humphrey Institute of Public Affairs, University of Minnesota.
Click below for the previous stories in the series, written by agricultural economists and marketing specialists, offering information on the 2002 Farm Bill.