Commodities to Stablize, But Prices Could Stay High

Recall all the talk earlier this year about speculators and price volatility. The claim was that speculation was leading to extremely high costs. Although there was a some truth to that, those same speculators took a bath when costs dropped.

As a recent AP article reported, "'People bought oil and commodities because they thought the rest of the world would continue to consume,' said Phil Flynn, senior energy analyst with Alaron Trading Corp. 'They were wrong. And they were wrong in a spectacular fashion.'"

And that wild speculation that drove prices so high also helped make it so that prices in some sectors, especially fuel, have dropped so low in recent weeks.

While market fluctuations are inherent in a market economy (and I think complaints about fluctuation are often misguided, or at least overstated), one problem will take longer to work out. Unlike fuel, which tends to respond rather quickly to changes in input prices, food takes a while to work out. As the AP article notes,

Food prices are likely to take longer to come down. While the prices for wheat, corn and other grains have declined, and the gasoline used to transport food is cheaper, meat prices are likely to remain high because farmers have thinned out their herds. And, processed food like cereal has many more factors than ingredients that determine how much they cost — labor, packaging and marketing all figure into the mix.

One of the problems with food production in a modern (read: processed) market, is that the costs are complex and varied. Because of that, costs seem to move up quickly, but down very slowly. While market fluctuations are hard on every market, it appears food impacts are among the longest lasting. As the next administration considers energy, food, and economic policies, we can only hope they recognize that none of these areas are independent of the others.

Recent News

Happy Holidays.

Here is an interesting story from the NY Times.

Revenue Needs, Ag Policy, and Taxes

Mr. Kristof has again hit on the food aspects of agricultural policy in the New York Times. Today, he makes some keen observations on Governor Paterson's proposal to raise revenue with "an 18 percent sales tax on soft drinks and other nondiet sugary beverages."

The state's use of taxation authority to stem problems brought about by certain types of food consumption raises interesting questions about the role of consumers and the notion of consumer sovereignty that has been largely ignored in agricultural policy. The articles I cited last week provide a good introduction to this topic. In some areas, increased knowledge about the products being consumed and their effects (on the consumer or on the public through the production system) is an insufficient driver of change. Thus, as with smoking, Mr. Kristof notes that revenue needs were the gateway into executing a beneficial policy from a public health standpoint through taxation, in much the same way that a soda tax may be a viable means of improving public health today.

Interestingly, the notion of food democracy is built upon a very strong premise of consumer sovereignty. That is, it would appear somewhat incoherent to think about food democracy as generating policy that rejects consumer sovereignty. But the matter is surely complicated by our representative form of governance, the revenue needs we have on a public level, or both. Unfounded paternalism is likely to emerge as the rallying cry for those who strongly believe in consumer sovereignty. But I doubt that cry will come from those who favor food democracy. Rather, I suspect we should further refine the notion of food democracy with a model of a representative food democracy that has revenue needs and, at times, should be paternalistic.

Mr. Kristof also notes, "Part of the solution must come from reforming agriculture so that we stop subsidizing corn that ends up as high fructose corn syrup inside soft drinks. Unfortunately, Mr. Obama on Wednesday chose Tom Vilsack, the former governor of Iowa who has longstanding ties to agribusiness interests, as agriculture secretary — his weakest selection so far." His opinion of Governor Vilsack aside, I wonder what the political viability of such a tax means for the future of subsidized agriculture when considered in light of the market liberalism underlying international trade. If public support for such a tax emerges, then it would seem to me that public outcry against our current methods of subsiding production should emerge. Perhaps subsidies should not be decoupled from the product produced if consumer choices--demand--is not the sole basis upon which production choices should be made. This should raise in many readers' heads questions about international trade. That is, I do not think our international trade regimes have questioned consumer sovereignty. That is, they would not allow subsidies focused on food production with less harmful consumer effects--justified by consumers' failure to adequately rationalize the costs of consuming that food into purchasing decisions. If that is true, then the market liberalism that dominates international trade may itself prohibit ag subsidies that would further the same ends as the policies implemented through state taxation. Of course, skewing demand through tax policy is not the same as subsidizing certain crops, or is it? And, in any event, removing corn subsidies for reasons related to public health does not necessarily mean that alternative subsidies should be provided to the production of more healthy food. But I could spin a strong argument that they should based on a food security rationale and bolstered by the inherent uncertainty of production and the prospect of shortage, if not a cheap-and-healthy-food mantra.

Vilsack Tapped for USDA Secretary

Story here.

The Mississippi River Partnership Project

Monsanto and a host of environmental groups are doing something to stem nutrient and sediment movement in the Mississippi River Basin. This page has the details. And hat-tip to Tom Redick and the ABA Ag Management Group listserve for bringing this to my attention.

Interestingly, I suspect that Monsanto's role is one of utilizing technological advances to reduce the environmental costs placed on natural resources (or us) by our current production methods. And I suspect the pressure put on production by informed consumers, the environmental movement, or both, is spurring this horse on. I tend to think that an even better set of spurs would be meaningful environmental regulation that requires this sort of reduction without prescribing the manner in which those reductions are achieved. In this regard, our current regime of "best management practices" that is common to the ag sector (though not implemented in the nonpoint source arena) is perhaps not as well suited to generating this sort of advance.

For an interesting take on our relation to the soil and the Drake Law School's Agricultural Law Center's renewed attention to the issue, see Neil Hamilton, Feeding our Green Future: Legal Responsibilities and Sustainable Agricultural Land Tenure, 13 Drake Journal of Ag. Law 377 (2008)

Air Emissions

Just a short post that might further the conversation on Susan's last post:

Let's suppose that existing production levels could be achieved through a different model. And let's call that model a small farm. Let's further suppose that those small farms are the quaint ideal that many people think of when they think of farms and farmers. With something like air pollution, is there an argument that the emissions are as problematic on a decentralized basis as they are on a concentrated basis? If so, then there is no choice at all; the industry (and I don't mean that in the big/better sense) should be regulated. I see two problems with that:

1) Internalizing that cost may itself lead to concentrated production if there is some efficiency with scale (recalibrated for this cost). And if all emissions are dangerous, it wouldn't be coherent to exempt the small to counteract this advantage.

2) Implementation would be very difficult. That is, concentrated production is a benefit when it comes to monitoring and compliance. For instance, two million coal fired power plants would be difficult to permit.

Of course, it may be that production levels cannot be maintained (as blasphemous as that is to the agrarian creed). If production decreases and the decentralized model takes root (though I don't think it would, given #1), then the air benefits from decreased emissions. So maybe the question is, do we need this food given its cost?

But maybe another of my premises is wrong: are air emissions at concentrated facilities different than air emissions from Grandpa's farm?

EPA on Air Quality Reporting for Livestock Operations

It hasn't received a lot of press, but industrialized animal agriculture operations have been fighting for an exemption from the air quality emissions reporting requirements that other businesses must follow. And, the Bush Administration's EPA has supported them. Last week, there was a split decision of sorts.

As reported in the Baltimore Sun, Most Poultry Farms are Given a Break :

The Environmental Protection Agency backed away from the blanket exemption it had originally proposed, saying the largest livestock farms will still have to report releases of potentially harmful gases - but only to emergency response planners, not environmental regulators. The agency freed the majority of growers housing fewer than 125,000 chickens from any reporting.

Chickens are a big concern in Maryland, where the article reported that ". . . Maryland's multimillion-dollar poultry industry released more than 20 million pounds of ammonia into the air last year - 50 times the total released by the state's other industries."

Meanwhile, a South Dakota news site reports that South Dakota Republican Sen. John Thune has filed a bill to exempt livestock from the Clean Air Act. Thune says the Clean Air Act was designed to target smokestacks in industrial states and not farm and ranch livestock.

Allow me to add in some commentary here -

There are many that support exemptions for small farming operations because they are, well among other things - small.

However, industrialized agriculture has been touted as the way of the future because of the economies of scale presented and the efficiency of modeling our farms after our factories - where one product is mass produced in a large quantity.

For a variety of reasons, I personally disagree with the assessment that "bigger is better," particularly when producing a living product. And there are convincing arguments that many of the alleged efficiencies do not reflect hidden costs to socieity, i.e., externalities. But putting these issues aside, it seems to me that agriculture cannot have it both ways.

Either you go for a small, low-impact operation that is exempted from many of the kinds of regulations that are imposed on "industry." Or, you go with an industrialized model that by definition is like a factory. So, the trade off should be that it will be regulated like a factory. The effort to act like an industrialized factory and yet be regulated like Grampa's farm just does not make a lot of sense. If this is a burden on the industry, that burden should be factored into the cost of production.

Bill Moyers Interviews Michael Pollan

I missed this when it was first shown the night after Thanksgiving, but here is a link to the Bill Moyers interview with Michael Pollan. The topic of the interview is U.S. food policy, and it is a fascinating two part session that includes a short insert on urban farming.

Agricultural Law in Sub-Saharan Africa

Professor Fred Boadu of Texas A & M University posted the following announcement in the last issue of the Agricultural Law Update, the newsletter of the American Agricultural Law Association. As he explains, the development of an agricultural law framework will be critical to the success of the agricultural sector in developing economies.

Objective

About 30 years ago, Neil Hamilton forcefully made the case for the need to introduce Agricultural Law as part of the curriculum in law schools in the United States. Today, as Neil Harl has stated, Agricultural Law has “taken its place in the intellectual firmament.”

I am following the trail of these leaders to make a similar call in the context of Sub-Saharan Africa. I have two main objectives in sending this announcement to the members of the American Agricultural Law Association:

1. To invite participation, solicit ideas and recommendations looking into options for introducing Agricultural Law curriculum into law school and agricultural economics programs in countries in Sub-Saharan Africa.

2. To request that AALA members who know of interested individuals in Sub-Saharan Africa to submit contact information to me so I can include them in database network.

No doubt the introduction of Agricultural Law programs is the responsibility of African institutions themselves. We will need a partnership between Africans, academics and practitioners in the United States and Europe to achieve this objective.

Proposal

1. Invitations have been sent out to interested scholars from Africa to participate in a conference that explores options for Agricultural Law curriculum development.

2. A proposal for the conference will be prepared in collaboration with interested participants from African universities. decided by those who have expressed interest in this effort.

Justification

Agricultural growth is key to reducing poverty in Africa. African countries can no longer ignore the legal and regulatory contexts in agricultural development planning to promote growth given the impact of global forces (governance, food prices, bioenergy, water, climate change, food safety, trade, etc). The proposed program seeks to fill this void.

Contact

If you are interested in this effortand wish to participate, please contact:

Fred Boadu, PhD.; J.D.
Professor, Texas A&M University
phone: 979-845-4410
e-mail: f-boadu@tamu.edu


Post Script

Immediately after reading Professor Boadu's post, I contacted him. Last fall, Christopher Kelley, Neil Hamilton, and I discussed the importance of agricultural laws - indeed, the rule of law - to the development of the agricultural economies of countries. We discussed a program that would bring attorneys to the United States to study agricultural law and then return home to apply what they learned. Our program never got off the ground, but we remained interested in ways to reach out to assist developing countries. In this regard, I was delighted to find Professor Boadu's annoucement. He was similarly pleased to find others that shared his perspectives on the importance of this issue. We hope to meet in January to discuss how to proceed. I told him I would post the announcement on this blog and that hopefully we would find others to join us in discussions.

Headlines

Seems to be a busy week for the Dept. of Ag's news collector. Here is Dec. 11.

Department of Food

Another call for a major shake up at the Department of Agriculture and a major change in the direction of our food system was published today.

Nicholas Kristof called for Obama to appoint a Secretary of Food to focus American agriculture on the production of healthy food through sustainable practices.

Renaming the department would signal that Mr. Obama seeks to move away from a bankrupt structure of factory farming that squanders energy, exacerbates climate change and makes Americans unhealthy — all while costing taxpayers billions of dollars.

Quoting not only Michael Pollan but former USDA Secretaries John Block and Ann Veneman, the point is made that while only 2% of our population are now farmers, everyone eats.  While Mr. Kristol calls upon President-elect Obama to hear the calls for change, it is my hope that the rest of us in the agricultural community will listen as well.  There are some things we are doing right, but there are some things that we are doing very wrong.

Headlines

The Dec. 9 edition of Nebraska headlines is here. Notable developments include the possibility of farm bill reform (i.e., increasing loan rates) given current production conditions, public pressure on livestock production, and looming credit concerns for the more capital intensive sectors of the industry.

The Farm Foundation's recent report can also be found here.

Finally, if you can get your hands on the Environmental Law Reporter from the Environmental Law Institute, the December 2008 issues devotes its coverage to consumption as a piece of our climate change effort. Notably, two articles directly address agriculture: Corn Futures: Consumer Politics, Health, and Climate Change, by Jedediah Purdy and James Salzman, and Sustainable Consumption Governance in the Amazon, by Lesley K. McAllister. I also recommend the introduction by Doug Kysar and Michael Vandenbergh.

And I almost forgot this story about selling the farm.

Store Wars - A Holiday Classic

This video was produced a long time ago, and I always make a point to show it in my Food Law & Policy class as a prelude to our discussion of the regulation of organic labeling. It is so amusing, and so well done - I am always amazed that there are many people who have not had the chance to see it. It was done by Free Range Studios for the Organic Trade Association. Although the link provided is an easy download from YouTube, there is also an official Store Wars website for the video that provides background information on each of the characters.

So, for a light and entertaining post, here it is:

"Sustainable Secretary of Agriculture"

Its all over the food and ag blogs today - as the New York Times Diners Blog reported in their post A Pitch to Obama on Food and Farming "nearly 90 notable figures in the world of sustainable agriculture and food sent a letter to the Obama transition team earlier this week offering their six top picks for what they called 'the sustainable choice for the next U.S. Secretary of Agriculture.'" Among the signators were Michael Pollan, author of the recent NY Times Sunday Magazine article titled, Farmer in Chief, What the Next President Can and Should Do to Remake the Way We Grow and Eat Our Food, Wendell Berry, Wes Jackson, Alice Waters, Marion Nestle, Eric Schlosser, and Bill Niman.

Here is the widely reported list:

1. Gus Schumacher, former Under Secretary of Agriculture for Farm and Foreign Agricultural Services and former Massachusetts Commissioner of Agriculture.
2. Chuck Hassebrook, executive director, Center for Rural Affairs, Lyons, Neb.
3. Sarah Vogel, former Commissioner of Agriculture for North Dakota, lawyer, Bismarck, N.D.
4. Fred Kirschenmann, organic farmer, distinguished fellow at the Leopold Center for Sustainable Agriculture in Ames, Iowa, and president of the Stone Barns Center for Food and Agriculture, Pocantico Hills, NY.
5. Mark Ritchie, Minnesota Secretary of State, former policy analyst in Minnesota’s Department of Agriculture under Governor Rudy Perpich, co-founder of the Institute for
   Agriculture and Trade Policy.
6. Neil Hamilton, Dwight D. Opperman Chair of Law and director of the Agricultural Law Center, Drake University, Des Moines, Iowa.

Another Face of Farming

As noted in a recent post, Payment Limitations and Headlines, the GAO recently called out the USDA regarding abuses under the payment limitation provisions that are supposed to limit the amount of government payments that farmers receive under the federal farm programs. Its report, Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent Payments to Individuals Who Exceed Income Eligibility Limits.

GAO found that of the 1.8 million individuals receiving farm payments from 2003 through 2006, 2,702 farmers had an average adjusted gross income (AGI) that exceeded $2.5 million and derived less than 75 percent of their income from farming, ranching, or forestry operations, thereby making them potentially ineligible for farm payments. Nevertheless, USDA paid over $49 million to these individuals.

Showing a very different side of American agriculture, NPR did a story this morning on a farmer in Southern Illinois that is now forced to see his small and beloved herd of cattle because of financial problems due largely to feed costs, Struggling Illinois Farmer's Hard Choice Deep.

Amid the talk of bail outs and support for various industries, the contrast between these two stories begs the question - who do we want to support? Who do we want growing our food?

Dioxin Contaminated Pigs in Ireland

My "food law" headlines pulled up the following story from Ireland. As we struggle with our food safety system here in the U.S., a problem with contaminated pig food is devastating the Irish hog industry.

From Irish Times -

An estimated 100,000 pigs will have to be destroyed because of the pigmeat crisis which has led to the recall of all Irish pork products in Ireland’s largest food scare since BSE.

The public have been told to dump or return all pork products which they purchased since September 1st last because of the risk of dioxin contamination.

It is estimated that €125 million worth of food products in home and in export markets – up to 25 countries – will have to be destroyed.

The recall followed the discovery of potentially dangerous dioxins, known as PCBs, in pigmeat. They were initially traced in an un-named meat plant in the Republic. The dioxins were contained in feed supplied from a Co Carlow food recycling plant, it emerged yesterday.

Ag Headlines and Newsletter

Nebraska headlines from December 2nd are here. Of note are VeraSun's plans to reject forward contracts on corn, as well as a Canadian challenge to COOL in the WTO.

And Ross Pifer's newsletter is here.