Friday, May 10, 1996
Journal of Commerce
President Clinton had petroleum reserves to tap last week to bring gasoline prices down. Too bad for consumers the nation doesn't have a similar grain reserve to keep food prices down and increase available stockpiles. While gasoline prices have gone up more than 10 percent in the last few months, commodity prices for corn and wheat have nearly doubled since the last harvest because of severe shortages. That will likely mean sticker shock at the supermarket next fall.
Mr. Clinton has been criticized by Republicans in Congress for not acting earlier to bring gasoline prices down, but at least he had the option of using the Strategic Petroleum Reserve. For the crisis in agriculture, options are much more limited.
Earlier this month, he took a first step: He brought some of the land in the long-term Conservation Reserve Program into use for haying and grazing. While this will slightly reduce demand for corn, it can't adequately replace dwindling food stocks. For the past decade, the federal government has consciously - and foolishly - liquidated our nation's food reserves.
The United States now has the lowest food stockpile since World War II, with some analysts predicting we may run out of corn entirely before the fall harvest. This is a disaster we have never faced before. What happened? Can we blame it on bad weather? Or is there, in fact, a connection between the food crisis of the 1990s and the farm crisis of the 1980s?
Indeed, all indications are that the food crisis of the 1990s has been a decade in the making. Rather than putting the bin-busting harvests of the mid-1980s into emergency food stocks (isolated from the market, as is the Strategic Petroleum Reserve), the U.S. government spent billions on export subsidies, driving down prices and draining away the reserves.
The resulting artificially low prices have had huge impacts both here and abroad. They fueled increased demand for industrial corn products like starch, sweeteners and solvents. Low prices also encouraged the formation of gigantic cattle, dairy, hog and poultry factories, which have driven out many smaller family farmers and ranchers. Low prices also were used to ''hook'' other countries on buying cheap, subsidized U.S. food, rather than growing their own.
While these artificially low prices swelled demand, they simultaneously drove farmers out of business, both in the United States and overseas. Many governments were convinced that farm land could be sacrificed to industrial uses because cheap food was available on the world market. They also believed it was advantageous to replace farmers with chemicals and tractors, thus freeing up labor to fuel industrial production.
The combined impact of low prices, upward spiraling demand and reduced production through farmer attrition has skewed our food system. For this and the next few years, demand will outstrip production. Some people will starve. The rest of us will pay higher prices for food, re-igniting inflation.
To make matters worse, we can also expect the Federal Reserve to drive up interest rates in an attempt to dampen inflation - like an 18th century barber who prescribes more bloodletting when the first treatment doesn't work.
Growing food is not like making shoes. There are years when droughts or floods cause shortages. This is normal. What is not normal is the willful elimination of buffer stocks that in the past enabled us to survive a temporary food shortage without major difficulty or starvation.
It is not too late to begin the process of building up and protecting a reserve, both here at home and internationally, through mechanisms like the Food Reserve Coordination Agreement, proposed by North Dakota's Senator Kent Conrad. We can start today, but we have to be careful. First, farmers must be reassured that the means used by the government to create emergency food supplies will not drive farmers' prices below their costs of production. In the past, the government constantly leaked stocks onto the market, often driving prices below the break-even level.
Second, we have to rebuild our food stocks with environmentally sound methods. There are sustainable approaches that can be used to increase production without damaging the earth. We must reject approaches that rely on massive doses of pesticides and chemical fertilizers and genetically altered pigs and cows as the solution to the crisis.
We also must carefully bring demand and supply into balance, and then build up emergency stocks by helping more farmers get back on the land. Crops like corn and wheat are among our nation's most precious renewable resources and deserve at least as much care as our major non-renewable resource: oil.