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Advisor

Lucky on policy a third time?

Commodity farming has twice benefited from very fortuitous policy circumstances over the last two decades.

 

The first was in 1998. The gubmint had, probably wisely, stated that it would get out of the farming business- eliminate setasides and phase out farm payments. But when the basis on which it was sold- huge China demand- was revealed to be at least 5-10 years in the future they immediately backtracked and doubled up on payments, then later extended them further.

 

That happened because of the luck that we had a temporary illusion of a budget surplus and President Clinton was in political trouble. There was still a decent sized contingent of farm state democrats whose loyalty he could buy, along with enough Republicans.

 

Then, of course in the mid 2000s it was revealed that MTBE was a disaster and the oil industry desperately wanted out of the immense liability associated with that. At the same time, world oil markets tightened from rising demand from Asia and simultaneously financial market deregulation and a policy to sharply depreciate the dollar resulted in a huge speculative bubble and quadrupled the price of oil.

 

That resulted in the swiss army knife ethanol standard, sold as part energy policy, part environmental policy, part farm subsidy.

 

Anyway, production has now caught up with that surge in demand and "agriculture" is going to need a new policy.

 

We haven't had a functioning Federal government since at least 2014 and it will probably only get worse before it gets better.

 

I wouldn't place strong odds on passing anything.

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