Bountiful harvests cast shadow on US cornucopia
Record corn crops are keeping prices low - and jeopardizing US efforts to cut back on farm subsidies.
ST. ELMO, ILL. — Farmer Gordon Stine steps through a stand of corn so dry and ready for harvest, it crackles with anticipation.
"This [yield] has got to be awful close to the top," he says, shucking three full golden ears in a row. In this part of southern Illinois, a good yield would be 130 bushels an acre. This year, Mr. Stine is staring at better than 160.
Throughout most of America's corn belt, farmers are harvesting a record crop.
There's only one problem: Corn prices have reached lows not seen in more than a decade. Unless surpluses dwindle and the downward price trend reverses, America's bold experiment to let farmers produce what they want will come under sharp scrutiny.
Some farmers argue that the nation's Freedom to Farm program needs time to show its value; others call it "Freedom to Fail." Ironically, weather and foreign producers - rather than policymakers - could determine who's right.
"What happens in the next six months will probably have a large impact on how that debate shapes up," says Mitch Morehart, an agricultural economist with the economic research service of the US Department of Agriculture (USDA). "If prices turn around, that may change the debate."
So far, Stine is one of the few farmers complaining about US farm policy. That's partly because most producers like the flexibility it allows; partly because - although the government's intent was to discontinue the high-price subsidies of the past - farmers continue to reap record federal aid. The money - amounting to some $20 billion last year and even more this year - comes in the form of regular subsidies (some of which were continued in the new farm legislation) and emergency help. These federal payments are keeping the farmers afloat.
"We have maintained at least some notion of a safety net" in current farm policy, says Paul Westcott, an agricultural economist at the USDA's economic research service. Counting subsidies, he calculates corn farmers this past year eked out about $2.05 a bushel on average. That's enough to offset their seed, fuel, fertilizer, and other direct planting costs.
Even Stine here in St. Elmo expects the 2,000-acre farm he runs with his brother to turn a profit this year. But he's still dissatisfied.
"I would rather get all my money out of the marketplace and get zero out of the government," he says. He wants a government-mandated program that would restrict production. "You have got to go back to some kind of supply management," he says.
Last month, state affiliates of the National Farmers Union lobbied the US Congress for a similar change in current policy. "We didn't run into anybody who thought it was working," says Larry Quandt, president of the Illinois Farmers Union. "We're spending more and not protecting the farmers as well."
But policy analysts doubt the US will return to supply-control programs because they've been so discredited.
"I'm not sure anyone has any answers," says Bill Lesher, an agricultural consultant in Arlington, Va. "When you basically have five years of globally good weather, any kind of a farm bill really comes under pressure."
While nearly ideal weather in the US has boosted world corn stocks to their highest level in a decade, bad weather in China is keeping corn prices from falling further. Severe drought will cut the Chinese crop by an estimated 10 percent this year and its corn exports by more than half. That means the US, already the world leader in corn production and export, could gain an even more dominant share of the world's corn trade - three- quarters of the harvest sold on global markets. A key question is whether China will continue to trim farm subsidies - perhaps as a step toward joining the World Trade Organization.
Meanwhile, world demand for corn keeps growing.
The USDA forecasts world consumption will climb 1 percent in the 2000/2001 crop year to 607 million metric tons - the same level as projected world production.
If nations cut production - or bad weather does it for them - prices could start climbing again, economists say. But if no such shock materializes, low prices and record government subsidies could well force Congress to take a new look at its agricultural policy, especially after the November presidential election.
"You don't see donor fatigue apparent yet," says Bruce Gardner, agricultural economist at the University of Maryland in College Park. "At the same time, I think there's an undercurrent that we can't keep having this spending year after year."
(c) Copyright 2000. The Christian Science Publishing Society