The Clinton administration has announced that, due to the "growing farm crisis," the U.S. Department of Agriculture plans to channel $1 billion of additional funds to the America's farmers in 1999. This comes on the heels of $6 billion in "emergency" federal farm aid approved by Congress in October 1998.
Agriculture Secretary Dan Glickman has even declared a national "pork crisis" in America. No, he wasn't talking about all of the parochial spending in congressional appropriations bills. He was speaking of the need to increase the price of hogs.
Farmers are complaining that 1998 was one of their worst years in recent memory. "We're in the midst of another farm crisis," says agricultural expert Jim Welter of Consolidated State Bank in Kansas. "It might not be as bad as the mid-'80s, but it's really hurting."
Farmers blame the "crisis" on a confluence of problems: overproduction, high overhead costs, depressed demand due to the Asian crisis and bad weather. Texas, Oklahoma, and Dakota farmers suffered an extreme drought in 1998 with losses exceeding $6 billion. But the development that really makes the nation's breadbasket nervous is not bad weather. It's low prices. Farmers are not complaining of a bitter harvest, but of a bountiful one. Corn, wheat, livestock and other commodity prices are down an average of 20 percent this year, as shown in the accompanying chart.
When America's farmers are permitted to plant and raise whatever they wish whenever they wish, and when they produce for the market, not for government, then our food supply is secure and prices are low.
But if you are someone who buys food, rather than produces it, 1998 was not one of the worst farm years ever -- but by far the best. To argue that low food prices are a worrisome development because they hurt farmers makes about as much sense as maintaining that increased life expectancy is a bad thing because it victimizes the undertaker.
Many politicians have responded to the low prices, however, by demanding that we carve up the Freedom to Farm Act. Approved just four years ago, that act phases out government price supports and ends acreage reduction payments. A recent news story in the Kansas City Star grouses that reliance on "the invisible hand of the free market has battered much of rural America."
The truth is that the Freedom to Farm Act is, so far, a success. It is producing food aplenty at very low prices. Let's keep in mind that throughout most of history a "farm crisis" was exactly the opposite of what we have now. A crisis meant a lousy harvest. Low yields meant a shrinking food supply and higher prices. When such a crisis emerged, workers and their families might go hungry and even starve.
In 1998 food in the United States was cheaper than at any place at any time in world history. How in the world can that be portrayed as bad news? This is one of the great modern-day success stories and one of mankind's greatest technological triumphs. It is a success story that emanates from the incredible productivity of the American farmer.
This year's decline in food prices is merely the continuation of a long-term trend. Over at least the past 100 years, food prices have been on a steady and steep decline. Over just the past 20 years, commodity prices have fallen by an incredible 40 percent in real terms.
This is precisely the opposite of what doomsayers were predicting not long ago. In the early 1980s Lester Brown, president of the Worldwatch Institute declared, "The period of global food security is over. As the demand for food continues to press against the supply, inevitably real food prices will rise." And it was almost exactly 20 years ago that the famous Club of Rome doomsday report Limits to Growth forecast that population growth and lost farmland would mean lower per capita food production, higher food prices and more global hunger. Yes, many millions of people across the globe still go hungry, but not because of inadequate food production. Since 1970 per capita food output has grown by nearly one-third.
I am not saying that we should ignore the plight of midwestern or Texas farmers, but rather that we should keep their woes in proper perspective. The paradox of modern-day agriculture is that farmers often do better when yields are low, because prices are high. But for the rest of us, low prices mean higher real incomes.
The late, great economist Julian Simon always complained of government's and the media's propensity to convert good news into doom and gloom. Reporters are forever in search of a victim even when the underlying trend -- lower prices, greater technological innovation, faster economic progress -- is benign.
The lesson of the first few years of the Freedom to Farm Act is that when America's farmers are permitted to plant and raise whatever they wish whenever they wish, and when they produce for the market, not for government, then our food supply is secure and prices are low. What a tragedy it would be if Congress were to reverse the Freedom to Farm Act and revert to command-and-control agriculture policies.
Free-market farm policies have not battered, but rather have blessed, American consumers. If Freedom to Farm is rolled back or repealed, it will be a victim not of its failure but of its success.
|Food, Glorious Food: Agriculture Commodity Prices|
|October 1997||October 1998||% Change|
|* Price per bushel|
|** Price per 100 pounds|
|Source: USDA, 1998.|