the international debate on trade
Price supports, inventory management, and grain reserves
Interview with Rhonda Perry
of the Missouri Rural Crisis Center
Rhonda Perry is Program Director of the Missouri Rural Crisis Center (MRCC). She recently returned from the (September, 2003) Cancun, Mexico Ministerial meeting of the World Trade Organization (WTO). She attended the meeting as an NGO (Non-Governental Organization) delegate representing the National Family Farm Coalition and the Rural Coalition. In this interview with In Motion Magazine publisher Nic Paget-Clarke, she spoke by phone from the MRCC office in Columbia, Missouri.
In Motion Magazine: Something happened in 1996. What was it?
Rhonda Perry: In 1996, we got a new farm bill that was hailed as the Freedom to Farm, which is now being called Freedom to Fail. We got the best farm policy corporate money could buy. Cargill, ADM, and other multinational grain traders wrote this farm bill and made sure it got implemented with no public debate. This bill eliminated all of the tools that the government had, and farmers had, to ensure any kind of price for their commodities at the marketplace. It allowed prices to go as low as they could possibly go. Theres now no limit to how low grain prices can go. And weve seen drastically low grain prices.
From 96 until the most recent farm bill, farm income lost in the marketplace has been replaced with emergency payments from the government. 60% of farm income is now in the form of subsidies. Commodity prices have gone down by 40%.
Also, its been a flat-line for exports for the last twenty years. We have not increased exports even though the whole goal of Freedom to Farm was to increase our exports with lowered U.S. prices prices lowered so that we could compete in the world marketplace. I think we all know that is nothing more than a race to the bottom. Its like saying, Whichever farmers in whichever countries can get screwed the most are going to win. We cant afford to buy that line any more.
Then, in the most recent farm bill, in 2002, they took that mechanism of subsidizing farm income with money from taxpayers versus the marketplace and legitimized it and put it into policy. In the last eight years, weve seen a tripling of subsidies. And even with that tripling of government subsidies to farmers, farm income has decreased by 16%. Nobody is getting rich here in the farm community.
On the consumer end, prices have stayed level, but producers have received 38% less of every consumer dollar during the same time-frame. Producers havent won and consumers havent been the beneficiaries. Who have been the beneficiaries are multinational grain traders and livestock factories who have been able to take access to record low cheap grain prices and use it to, number one, flood the world marketplace and drive down prices worldwide, and number two, use that access to cheap grain to set up their own industrialized livestock factories which have then put independent livestock producers out of business.
The results of current farm policy and subsequent trade policy are clear and the beneficiaries havent been farmers or consumers or the environment around the world.
Changing the debate at the WTO
In Motion Magazine: And this is in the context of the WTO negotiations, in which the U.S. position has been what is called neo-liberalism -- trying to get the developing countries to liberalize their laws on tariffs and subsidies. Its been pointed out by people in the South, of the world, that thats hypocritical. How do you see that?
Rhonda Perry: Well, it is hypocritical. And its not only hypocritical on the part of the U.S. government, which is basically acting in these negotiations as an arm for corporations, but its wrong-headed. We as U.S. farmers need to have an understanding, which many of us do, that these policies are not going to benefit U.S. farmers even if the U.S. wins. Even if there wasnt a debate mounting about the U.S.s push for more market access in developing countries while subsidizing U.S. farmers, even if we win that and the U.S. is able to continue those policies within the context of the WTO, U.S. farmers still will not win. We need to have an understanding that the major debate that needs to be going on in the WTO should not be the debate that is on the table now.
The fact that negotiations broke down we see as a plus because the issues that were on the table were not issues that farmers in any country could win, no matter what happened. We have to change the course of the debate so that what we are talking about is the ability of farmers worldwide to earn a fair price from the marketplace. And weve got to have policy tools to do that.
Price supports, inventory management, and grain reserves
In the U.S., those tools need to consist of some kind of price support mechanism, some type of international inventory management, and some type of international grain reserve. The U.S., because we have such substantial market power agriculturally, in the world marketplace, sets the world price and needs to play a leadership role in ensuring that we have policies in place that are going to raise U.S. farm prices and raise world commodity (farm) prices. If we dont, we are going to keep this conversation going at the level of Who should get the subsidies?, Who shouldnt get the subsidies?, Who should have market access? and Who shouldnt? The debate should be around the creation, and the ability of countries to have: policies that ensure food security and environmental sustainability, fair prices for family farmers, and reasonable prices for consumers. We can even ensure that there should be a reasonable return for folks in the middle who are doing the processing and the trading.
Unfortunately, those folks in the middle have decided to take more than their fair share and we seem to have a lack of political will on the part of U.S. policy makers, and to some extent policy makers from developing countries, to address that issue and to ensure that everyone in the agricultural sector can earn their fair share and make a decent living.
The Cancun debate and opportunities
In Motion Magazine: How would you sum up Cancun (the WTO Ministerial meeting in Cancun, Mexico in September 2003)?
Rhonda Perry: Cancun. We would sum it up by saying it was very good that there was actually a debate. Historically, there hasnt been a debate. We were glad to see that there were countries coming to the table fully prepared to have a debate and to talk about a developed countrys policies and the wrongness of them. However, we would say also that the debate does substantially need to change from the issues of subsidies to the issues of coming up with farm and food policies that ensure that we dont need subsidies to survive. As long as the subsidies are the debate we are not going to the real issue.
We would say that because the debate was had in Cancun, because negotiations broke down, we now have further opportunities to bring together farmers from the U.S. and farmers from other countries, both developed and developing countries, to talk about what those policies would be, could be, and should be. To talk about how we are going to change the course of this debate from simply the symptom, which is subsidies, to the bottom line, which has got to be the ability of farmers to make a decent living from the marketplace.
I think we are well on our way to doing that and we are joining forces now with a number of farm organizations from around the country based on our experiences with Cancun. We feel positive that this has created an opportunity for us to generate a real debate about the real issues.
In Motion Magazine: Bill Christison, President of the Missouri Rural Crisis Center, in a recent speech given at the announcement of the publication of the Rethinking U.S. Agricultural Policy study, mentioned four points of a plan to bring about change: fair prices, a farmer-owned reserve, the curtailing of corporate concentration, and incentives for the enhancement of local food systems. Can you talk about that?
Rhonda Perry: I think that basically covers it. The specific tools that impact price from the marketplace are three. They are, one, some type of price support which comes from a non-recourse loan rate. Two, some type of inventory management. And, three, a farmer-owned grain reserve. Those three things combined create the ability for farmers to get a fair price from the marketplace.
We cannot be in a system in which we cannot manage commodity supplies. Its just a free for all -- You should produce as much as you want. History shows that as long as we have low prices farmers are forced to try to make up in volume what they are losing in price. We have got to have some type of price support thats combined with an inventory management program that ultimately gets combined with a farmer-owned grain reserve.
Also, I think that the latter two probably need to be international. Weve got to have something that combines international inventory management with an international farmer-owned grain reserve, especially for primary commodity producing countries.
Finally, this needs to be joined with policies that provide incentives for environmental sustainability and for food security in the U.S. and around the world.
In Motion Magazine: How do you implement something as wide reaching as that?
Rhonda Perry: There are some current experiences There are some programs that have been somewhat successful that we can take from, such as the work that has been done on fair trade coffee and international coffee pricing mechanisms. We need to consider the same sorts of programs with other commodities as well.
Right now, the U.S. is under the gun on these issues. We are being hit with Youve got to get rid of U.S. subsidies. We are being hit with a major budget deficit. And we are going to be dealing with a U.S. farm policy agricultural budget.
There is going to be a move to get rid of subsidies, or at least cut subsidies, and of course our proposal says if you cut subsidies, which are now 60% of income, and you do not replace them with something that enables farmers to get a fair price from the marketplace, you are going to be destroying the infrastructure of the family farm system of agriculture in this country. I think policy makers understand that.
We are now at a point at which we can have real conversations with policy makers in the U.S. about how we could do that. I think the logical outcome of that will have to be international inventory management and farmer-owned grain reserves.
I think we have the capacity to do that. Its not that we have lacked the capacity, its that we have lacked the political will.
In Motion Magazine: How would the farmer-owned reserve work? Would individual farmers simply hold back grain from the market?
Rhonda Perry: All of these components -- the price supports, the inventory management, and the grain reserves -- they are all components that we have had in farm policy at various points over the last fifty years.
It is not individual farmers making these determinations on their own to plant fewer acres so that they can raise the prices in the U.S. or worldwide. Thats not going to work.
There is a rightful role for government to play -- and we would say the rightful role should be ensuring that there is an adequate supply of grain on-hand, managing the supply with the demand, and ensuring there are price support mechanisms.
This would be a national policy, and we would propose it should become an international policy, in which farmers can be paid money to store grain as part of the grain reserve, the U.S.s grain reserve, -- that grain is kept off the marketplace.
The issue with grain is we have a very small window in which all the grain comes onto the marketplace at once. That creates the ability of corporations to use that cheap grain thats all coming on the marketplace at once to drive down prices. And, also, we have the lowest stocks that weve had in history on most major commodities.
We need to have some kind of logic put to that in which we have a grain reserve that ensures that we have an adequate supply of grain on-hand that we have access to, but that is kept off the market. Farmers can participate in that program by storing grain on-farm until the market reaches a set "trigger price", at which time grain can be released on to the marketplace. Its not individual farmers just determining what grain should be held off the market. It would be part of a national grain reserve effort.
Curtailing corporate concentration
In Motion Magazine: Will this policy you are outlining help curtail corporate concentration?
Rhonda Perry: Absolutely. We make the case that one of the only ways to curtail the current trend towards corporate concentration, both in grain and in livestock, is to force corporations to have to pay a fair price for what farmers produce. Right now, again, because they are able to basically steal the grain and pay as low as they can possibly pay for the grain being produced by farmers, they use that grain to consolidate the marketplace internationally and in the U.S.
They specifically use that cheap grain to industrialize the livestock industry.
Missouri is a prime example. We tend to be a state made up of a large number of diversified operations -- meaning farmers grow their own grain and feed it out to livestock. We have a substantial number of livestock producers both in hogs and cattle. This is of real importance to states like Missouri.
If a farmer is growing his own corn and it costs him $3.25 to grow that corn and Cargill can buy it for $1.89 and set up their own corporate livestock factories, well, obviously, they have an unfair advantage to consolidate that industry. We have seen the direct result of cheap grain in the increase number of corporate livestock factories in Missouri and throughout the Midwest.
We need to ensure that we have policies that enable independent family farm livestock producers to compete in raising livestock. It only makes sense, in our opinion, that this come in the form of prices from the marketplace, balancing supply with demand, and a grain reserve policy. Without those three components it would be very difficult to substantially increase farm income and take away the subsidies. We think we need to be able to get our income from the marketplace not from taxpayers.
Clearly, this current farm policy and trade policy has further consolidated both the grain and the livestock industry to the point that I think farmers are realizing that this is not the way to go. Weve seen the results of current policies and now is the time for us to be having conversations and discussions and making demands on our policy makers about what kinds of policies we do want to have.
In Motion Magazine: How do farmers at the grass-roots level get involved in this struggle?
Rhonda Perry: There are a number of organizations in the U.S. and worldwide who are working on these issues. We would suggest that the best way is to hook up with organizations like ours who are both participating in the policy arena in the U.S. and are participating in discussions with farmers around the world -- through Via Campesina and other organizations -- to ensure that we are all on the same page, and that we can change the scope of this debate past subsidies.
We invite anybody who is interested in participating in the debate whether you are a farmer, or a consumer, or someone who cares about the environment, or a taxpayer who really wants to not be supporting corporate agriculture but wants farmers to be able to survive -- to hook up with organizations like the Missouri Rural Crisis Center which is working through the National Family Farm Coalition, the Rural Coalition, Via Campesina, and a number of other international forums to make our case.
Published in In Motion Magazine October 5, 2003.
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