I was under the assumption we were already subsidizing the nonproductive by subsidizing the successful. When a successful business uses subsidies to reduce employment (or wages), what do you call that? I wouldn't have a problem subsidizing a successful business if they employed more people that would then buy more product. Seems like a few fat cats like to keep their pie slice big even if that means that their business could be more successful if they would accept a smaller share of the pie.
This isn't just a crop problem...it relates to livestock, as genetics are tsilored to a few very specific traits, sacrificing others. None of this is good in the long run.
BA does a good job of addressing why subsidized crop insurance actually lowers the price of corn, by encouraging production in the fringe corn belt.
I don't disagree with your premise that in the high producing areas, such as mine, that subsidies for insurance and direct payments have driven up the cost of rents and land and provide little net benefit.
I farmed without any crop insurance for the first two decades of my three decade career and took the risks and rewards that were on the plate. Eliminating crop insurance would actually make it much easier for someone with a clean balance sheet such as I possess, to help my sons expand their own operations as the whole cost structure would go down...land rents, seed prices, etc. We would absorb the risk and go forward with more potential profits as supply uncertainties would lead to a roller coaster of prices. Much more so than we have experienced even with extreme weather events as of late.
But the political goal of having corn planted in ND, as BA illustrates, to get the 100 million corn acres would not be happening on a regular basis. Crop insurance is the carrot that gets the job done, and gets the acres in the ground.
Perhaps sometimes it is hard to see the forest for all the trees in the way.
I am certainly not arguing for subsidies: I would be the first to say cut them all.
I'd suggest that at above $4 corn there is very little productive capacity planted that wouldn't be- the land and/or rent are merely higher.
It's a pretty expensive way of keeping a few million acres of low productivity ground in production.
Or, that if you direct that marginally productive acre to soys or wheat then prices will just push more prime acres to corn.
Would also point out that at $3 any of that capacity is a problem because you don't need more and even a little more is too much.
I guess then we'd need a new farm support program.
Also, if you look at the thing in its entirety, the marginal production goes to ethanol and while there might be decent net energy return to corn ethanol from the best and blackest prime dirt, marginal acres are most surely a net energy loser.
Similar criticisms could be directed toward the marginal portion of production where you're just supporting non-renewable water for non-renewable oil.
I'm not going to be on the cover of any farm magazines but believe it or not I'm not so dumb or envious that I don't respect and admire what many of the people who are riding the wave of this boom have accomplished.
But I also have a sense that the survivors in this game are primarily outstanding, highly focused short term optimizers and I think that the future is probably going to offer up some surprises that come from way outside that box and some of the solutions aren't going to be ones they can dictate the response to.
Well Nox $4 corn will probably always be planted in Grundy county Iowa, unless inputs really got nutty. We went across S Dakota this summer and everything looked fantastic, talked to a guy and his wife at church that got back from Mitchell, SD and they said some corn and beans are out...150bu/acre corn where last year 60 bpa was about the best. Folks out there need affordable crop insurance, or I would imagine alot of the ground would go back to pasture, we keep hearing "lowest cow numbers since the 50`s" and if you go out west, it is pretty obvious. And you can draw a circle around the "I" states and that 150-200 mile fringe beyond that is going to something other than the high value crop that corn has become. Here in Iowa we`re gonna raise corn with or without insurance, regardless.
Even beyond rent, if you have irrigated corn like in Colorado...can you irrigate $4 corn? Those recent flood areas did have some very nice corn coming, but it`s a harsh area. In most places in Iowa, if you can drag a planter across the field before May 20th, you`ll get 150bpa and think it`s a disaster, but those prime areas will get you 80 million acres, if I`m in a fringe area, it`s gonna cost $400-$500 to put in a corn crop even if land costs aren`t an issue, they need a insurance carrot dangled in front of them.....maybe not so much for them, we`re all dumb farmers, but rather give their lenders piece of mind
In the early 2000`s when you were really doing well if you grossed $400/acre on corn. David Kruse was giving advice on someone wanting to rent "another 80" He said "You are going to make $20/acre profit if you`re lucky, if you run over a buried fence post and ruin a rear tractor tire....there goes your profit". Now when margins were that tight, they couldn`t even begin to fuction without affordable crop insurance. If you are established as me and Red have become, then yes we can handle that risk, but we aren`t going to take on foolish long-shot risk for nothing either.
Not sure if you do, but even as I upgrade my equipment line and get ready for the next generation to start taking the reins, I feel like my back is against the wall of federal farm policy. Common sense payment limits would be no limits at all, and no payments. Farms would expand and fail just like any business should, with failure the ticket in for someone else to enter in.
I think if the government is going to subsidise farmers that it should have a benefit to society. How does subsidising carbohydrates and hydrogenated oils make sense? And before you start bashing me, I'm one of the largest corn users in my county. And last time I checked I don't get subsidies for producing protein for humans. Hum?