post by Chris Bedford, Center for Economic Security
chrisbedford@charter.net
On June 3, 2008, Sen. Maria Cantwell (D-Washington) chaired a remarkable hearing of the Senate Commerce Committee on "Energy Market Manipulation". The entire hearing is available for viewing at the C-SPAN website. George Soros, Michael Greenberger of the University of Maryland School of Law, and Mark Cooper, Research Director for the Consumer Federal of America were among those who testified. The hearing was "remarkable" for its blunt language and depth of honesty rarely witnessed in the kabuki dance of swirling lobbyists in Washington. In essence, the experts agreed our pension funds, banks, and hedge funds have taken "a position" in oil futures, the amount of which is neither known nor regulated. Senator Phil Gramm (formerly of Texas) inserted language in a bill in 2000 that moved responsibility for exemption from regulation to control speculation from the speculator to the public. This meant that instead of a speculator having to request for an exemption from speculation regulations dealing with transparency, the minimum payments in a margin, etc -- the public had to challenge any deal they thought bad -- a fact that basically deregulated the futures market. So, we have today the core capitalist institutions that manage our investments, pension funds and guard our savings buying oil futures in the name of their fiduciary responsibility. And, as George Soros said in the hearing, "oil in the ground today is worth more than oil at the pump." So these "good guy" investors as well as greedy hedge fund maniacs are driving the futures market for oil. The result has been a prediction by one investment bank of $200/barrel oil very soon. Of course, this bank is thought to be a holder of large futures contracts that will benefit from $200/barrel oil. A conflict of interest? Well, in this deregulated market this is but a small crime. Michael Greenberger pointed out that the largest owner of fuel oil in New England is a New York Bank. The federal regulators treat this bank as if it were an oil company, producing oil -- not a speculator. Senator Olympia Snow of Maine spoke eloquently about the impact of $4.50/gallon home heating oil on her constituents. Their pension fund may be liquid but they have to choose between heating their homes and eating and healthcare. But I digress. With no margin requirements, no transparency, a weak and weakening dollar (in some measure because of the speculation) and real growing demand for oil -- financial speculators are creating a massive speculative bubble in oil. In the process, they have impacted farmers engaged in oil intensive industrial agriculture. The high price of petroleum based inputs (+ land rents) is effectively confiscating the "incredible profits" of $6 corn. In turn, some of this capital that controls the price of oil futures has invested in commodity futures because of the link between oil and industrial commodity production. A safe bet!? In my opinion, the speculative bubble and its consequences constitute another important reason we have to disconnect our food system from petroleum to the largest degree possible. Organic farming techniques, particularly those developed by the Rodale Institute, point to one way forward. Organic no-till farming builds soil health, sequesters carbon, dramatically reduces energy requirements, and strengthens our ecosystems, the real marketplace where our future will be decided. The current Farm Bill's support for oil intensive agricultural production (including ethanol) condemns us to the excesses of this situation. We can't wait for the next Farm Bill to turn this ship around. Oh, the price of oil. Mark Cooper of the CFA testified that the real price of gas at the pump, if you remove speculative pressures, would be $2.50/gallon.
Now that the deal is done, waves of comments -- raving, scathing, maddening, praising -- are flowing across the media waves regarding that love poem of food policy pork and peril, the 2008 Farm Bill. The dust is settling and now I think all that can be said is that most of it is bad, but some of it is good. And next time it will hopefully get better. But don’t take my word for it, there are lots of opinions out there. Here are but just a few to chew on:
From Dan Barber's NY Times Op-Ed. Dan is the chef and co-owner of Blue Hill at Stone Barns and the creative director of the Stone Barns Center for Food and Agriculture:
No one wants farmers to suffer, especially chefs. But if we’re spending $20 billion or so a year on farm subsidies, we ought to invest in the foods we eat. And I mean eat, not process into something that resembles food. That means fewer subsidies for grains like corn and soy, and more help for growers of broccoli and tomatoes.How do we do this? We could start by rewarding diversity over yield, basing subsidy payments not on how many acres of corn a farmer grows but on the number of varieties of crops he plants. We could also link payments to, say, the efficiency of nitrogen fixation (crop rotation helps the soil retain nitrogen, so farmers don’t need to add it with chemicals) or equate them with how much a farm helps soil and water conservation. In effect, tie payments to plant health.
From the official press release of the National Family Farm Coalition:
George Naylor, an Iowa corn and soybean farmer, said, “While other countries are rebuilding their food stocks or considering establishing Strategic Grain Reserves, our Congress and the president put its head in the sand and continues to leave America’s food security in the hands of Wall Street speculators. By letting prices fluctuate without any price floor or government reserves, the Farm Bill only heightens economic uncertainty for both family farmers and consumers in an already precarious economy.
[full press release posted below]
From Old MacDonald had a farm bill by Debra Eschmeyer on Grist :
One way to interpret farm policy is to follow the money. According to the Institute for Agriculture and Trade Policy, Cargill's profits increased nearly 1,000 percent from $280 million in FY 1997-98 to $2.34 billion by FY 2006-07. Add to that pile of profits the $35 billion in indirect subsidies that the industrial animal factories (owned and controlled by corporations like Cargill) reaped by being able to buy feed crops at 20-25 percent below the cost of production.
From The enemy of my enemy: Why a Bush veto of the Farm Bill is bad for the food movement (and the world) by Elanor on The Ethicurean:
Distract locally, deregulate globally: The administration’s mainstream message (and yes, I did just link to Fox News, my own historic first) sounds an awful lot like the rhetoric used by some progressive reform groups. Officials take every opportunity to toss around “wealthy farmer” references as rationale for why they think we should limit government subsidy payments. But officials have also suggested that if we don’t reform subsidies, it would “complicate our relationship with trading partners” — in other words, it would majorly piss off the World Trade Organization. Something tells me that they care a lot more about that than they do about the mis-use of some ag subsidy dollars. I mean, really — has the Bush Administration ever seen a loophole it didn’t like?
From Ari Le Vaux, Talking farm and food politics with the candidate:
Barack Obama: The Farm Bill has many positive provisions, in particular, an increase in federal funding for the development of renewable fuels, which will help reduce our nation’s dependence on foreign oil. The legislation provides an additional $10.3 billion for nutrition assistance programs, such as food stamps and school lunches. Although the Farm Bill is far from perfect, I support the legislation because it recognizes the important role of America’s farmers and ranchers, and the need to develop our rural economy. It is regrettable that John McCain [who voted against it] does not agree. While the Farm Bill does lower significantly the income limits of farmers eligible for subsidies, it doesn’t provide as much reform as I have advocated.
From Gus Schumacher’s Why We Need the Farm Bill, Boston Globe, May 26, 2008:
But there is no question that the bill is better than the veto option proposed by the president. By using his veto pen, President Bush wanted to extend the existing, flawed, and out-of-date 2002 farm bill into the future…This new law makes an unprecedented commitment to support locally produced food and expand access to these healthy products for all. Expanded resources will support additional free fruit and vegetable vouchers for seniors at farmers' markets, such as at the new Allston/Brighton farmers' market and the three new farmers' markets located near health clinics in Dorchester. It will also provide new sources of loan capital to develop locally grown food businesses and support the many farmers in New England making the transition to organic systems. The new bill allows schools flexibility to purchase locally in their school meals programs, to create new markets for local farmers, and to bring just-picked fresh fruits and vegetables to local schools.
From Michael Pollan’s letter to his listserv readers
Here's what I think happened. Critics of farm-policy-as usual-- and I count myself among them-- did a much better job of demonizing subsidies than they did proposing alternative forms of farm support that would have won over some percentage of the farmers now receiving subsidies. The whole discourse depicting subsidies as a form of welfare -- payments to celebrities, rich people in cities, mega-farms etc-- convinced many farmers that the ultimate goal of the farm bill's critics was to abolish subsidies, rather than to develop a new set of incentives that would encourage farmers to grow real food and take good care of their land. Had the reformers crafted proposals that were easy to explain and attractive to even just a segment of commodity-crop farmers, we could have made much more progress.
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