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Veteran Advisor

Re: Simplify the issue

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I've just skimmed this thread but I think it is hilariuos for you guys to talk about this as a justified program without realizing your livestock producing brothers have no such gaurauntee and more importantly their Bankers don't!

How do you justify this program for one segment of the ag economy and not the other?

Oh might be some kinda trickle down thinkin involved?

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Re: Simplify the issue

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I agree.

 

The idea of some level of cap or scaling as WCMO suggests attempts to acknowledge that.

 

In our part of the world the subsidy on a very good revenue product would be maybe $20 per acre.  If the individual cap (looking at cap for simplicity's sake) was $20K, that would cover 1000 acres. More acres in wheat country or whatever.

 

I think I'd also write the rules pretty tough as far as the potential for gaming them because we all know how quickly farmers catch on to any opening.  Nevertheless, large farms with multiple family members would just have some inconvenience in splitting entities, could still make arrangements to share equipment for economies, etc. so it would only really be a problem for the largest operations, who, I am told, already enjoy substantial advantages of scale.

 

But of course the argument would then be that government shouldn't pick winners and losers. To which the obvious answer is fine, no subsidies, which is clearly more fair to all citizens anyway.

 

A bit of game theory that actually becomes a bit like Mutual Assured Destruction. For a very large operator- he might rationally conclude that he is better off with no subsidies than for the smaller operators who he hopes to overtake to be advantaged. The smaller operator might conclude that he is better off with no subsidy to the largest guy, who is licking his chops to gobble him up- even if he has to give up is own.

 

Actually when you think about it that way the hardest sell might be for the lobbyists and the crop insurance industry to convince farmers to "just shut up and take the money, because it is free, and we brought home the bacon"

 

 

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Honored Advisor

Here`s the open secret, Jr.

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There is a "trickle down" factor on crop ins, it`s just those pesky importing Chinese and doughts have stopped the flow of the trickle.  If there wasn`t a crop ins subsidy would the "$3 corn clowns" be asking with a grin, "are we gonna plant 96 million or how much more corn acres?".  Insurance encourages fringes acres and corn on corn, without insurance we`d be asking, "will it be as much as 85 million acres?".  Until `revenue assurance` got rolling awhile back I considered going without the extra expense of ins, I even signed the paper at the FSA office. But I have collected once or twice on the price part of the insurance, the gov`t funded "put" has made me comfortable taking on a little short term locked in rate debt.  If crop ins has me at ease to do extra things, well you can multiply that affect by 20 to see the `social engineering aspect of these farm programs, it transcends R or D the gov`t in general would like farmers to get to the point where 48 row planters and 16 row cornheads are common place...and psst! that means that alot of you won`t be here.

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Veteran Advisor

Re: Here`s the open secret, Jr.

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BA, if you want to dig deep enough you will find a government position paper from the 1980's ( Reagan's tenure) that states the goal of getting American farms to the approximately 20,000 number of viable working farms.  Remember when, in the midst of the farm crisis, Reagan quipped "Maybe the problem is that we need to export more farmers?"   Bob Bergland, the outgoing secretary of agriculture, and a fine man and public servant, had a long statement about what was going on in agriculture which was called "A time to choose". First the ingoing Reagan officials blocked the publication, and then released it. I had a copy at the time, and read it. Lots of good stuff, and the gist of the book was that with all the money that was being spent on Agriculture in America, we were buying whatever type of system we wanted.

 

Once you realize that the goal ever since, R or D, has been to consolidate farms to a group that government can manage; all the programs, susidies, crop insurance, diasaster insurance, write downs, bailouts....all make perfect sense.  Why would government risk the loss of one of the 20,000? Heaven forbid that you would have to deal with 200 quarter section type farmers when you can deal with just one BTO instead. This is where powerful central federal government leads us to.

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Honored Advisor

Re: Here`s the open secret, Jr.

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That is very interesting Red, that though say a `freedom of information act` you could find a gov`t position paper on this, because it`s definately been the direction of agriculture in the last 30 yrs for sure.  During the 80`s debt write-offs those greedy clowns just were going broke "off script" so the gov`t steps in and determines the winners and losers. I have know doubt even as obvious this is there will still be some whistling through the graveyard and scoffing at this "conspiracy theory", others will believe they will be the 48 row man themselves and say "fine with me!".  This is somewhat like what happened with hogs, 30 yrs ago Wilsons in Albert Lea was killing 6, 8,000 hd/day with the office of half dozen or so buyers that would line up the kill. One had the idea at the time that the company big shots would rather replace those guys that were begging a farmer for 20 hd, with just one buyer that just gets contracts for 200hd semi loads...I`m sure it made the big shots` lives much easier and of course the few farmer winners of that battle can be pretty cocky today, checking their hog sites.

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Senior Advisor

Re: Who is it in the big bad government

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That wants to consolidate farms so we can campaign against them?

 

It is my understanding that colleges and farm publications keep promoting expansion as the key to a successful enterprise.! I think the reason is that promoting the efficiencies of scale is their big selling point. Machinery companies, fertilizer companies and chemical companies do nothing to dispute that.

 

As far as congress, I don't think Chuck Grassley or Tom Harkin give a darn how many acres we farm. What would be their interest in that? Or Obama or Mccain for that matter. I think you are seeing a conspiracy that doesn't exist

 

Big machinery and effective chemicals have had more to do with expansion And the TAX CODE is quite friendly to expansion. That writeoff of a $200k machine is a big windfall to larger operators. Their living expense is a far lower percentage of their income versus a modest sized farm.Thus they have $200 k to invest in that new equipment with an immediate writeoff. That is not an incentive to make farmers bigger but an incentive for larger businesses in general.

 

While they argue that the tax incentives encourage additional sales for companies, they don't offer the same tax incentive for non business purchases which would stimulate additional sales as well. In truth it is an incentive to let business folks to keep more of their money. If all of the people in my community could write off a new car or truck in one year, there would be oodles of new cars and truck in my neighborhood. Thus it is a very directed incentive to the chosen few and that ain't Joe Sixpack either.

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Senior Advisor

Re: Agricultural stabilization and conservation service

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All of this started to give farmers price security as they had no defense against a ruthless market. The conservation part was to assist in stopping wind and water erosion.

 

The farm programs of today are amorphed version of that original concept. Giving todays farmers a way to insure price and production to a certain extent. Which in turn allows people to expand their operations with the same ability to insure the profitability on the additional acres So anyone can grow their operation while limited only by their management skills and access to capital. Plus ambition and comfort with risk would be other considerations.

 

I don't see any goivernment conspiracy at all other than the government will help you insure more production and more crop if you strive to produce more. If you don't do the work and don't assume the risk you will not get as much assistance as somebody else does.

Veteran Advisor

"export less grain and more farmers"

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that was the actual quote.

 

Some good discussion of the Reagan years from a critical film source..

 

http://www.sensesofcinema.com/2011/feature-articles/kansas-towards-a-rhetoric-of-the-1980s-farm-debt... 

 

I tried to find the source for the "20,000 famers" goal but google failed me. It was a think tank , like the CATO institute, and I read it 20 years ago after someone mentioned it to me and I thought it was baloney. If someone knows which institute wrote about this, please let me know.

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Advisor

Re: Simplify the issue

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Well, Jr, for many years, the livestock industry has been beneficiaries of the cheap food policies of the USDA via the farm bill.  The trouble is, they got used to the idea of cheap grain.  Now they believe it's their "right" to push for it.  Congressman Lucas' farm bill, target price proposal was an attempt to revert to the policies before "freedom to farm" legislation came into being. Only in the areas where cattlemen graze wheat in the southern plains do you have people pushing for this.

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Veteran Advisor

Re: Simplify the issue

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Can't disagree with your point at all. Good post.

Oh don't forget that consumers were the real benficiates!