The biggest questions facing the U.S. beef industry are not likely to be answered by the current farm bill.
One of humanity’s oldest occupations, agriculture hasn’t been in vogue for quite some time. However, it’s perceived by most people to be a noble, but not an overly financially rewarding, occupation; and Americans generally hold farmers in high regard.
Farming is perceived as being a lot like teaching school or being a policeman. We appreciate what they do, but it’s understood they generally aren’t professions where practitioners get rich.
In fact, movies and the media have long propagated the image of a typical farmer driving a 20-year-old pickup, working from sunrise to sunset, and being married to hard-working spouse willing to do with less because it’s the life and man she chose.
Sadly, there’s an element of truth to that image, as the ag crisis of the mid '80’s lingers in our collective consciousness. However, the coming of ethanol subsidies has reshaped the face of agriculture since then, and farming largely has been a pretty good career the last several years.
If you drive down the main street of our local town, you’re more likely to see a new pickup or Cadillac owned by a farmer than the businessman who serves him. It’s more difficult these days to sell the image of a farmer who is the victim of a system that conspires to deprive him of what he’s due economically.
Nonetheless, we still see the press releases that claim that, without an increasing level of subsidy and price protection, food prices will skyrocket. Plus, not only the livelihood of farmers, but also the abundance and safety of our food supply will be put in jeopardy. We also see press releases claiming that farming has, in fact, been a fairly lucrative career choice, and that less support is justified because price levels have been, and are projected to remain, over support levels, etc.
It’s true that the fast-food industry and retailers are starting to blame ethanol for higher food prices, and the environmental community has begun to question its validity as well. And while the level of ethanol subsidies is the only item being discussed that has the promise to drastically alter the current economic landscape, few folks believe it has the political legs to actually be addressed in any substantive way.
Certainly, we know that any single line of the farm bill can create significant ramifications, and there remains a laundry list of items that the industry is concerned about. In the end, however, the biggest questions facing the industry are not likely to be answered by the current farm bill.
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One of the biggest questions is whether American farmers are so good at their job that they can actually out-produce the artificial demand created by ethanol. The answer to that question will determine whether farming profitability has been elevated to new levels, or whether we’ll return to largely breakeven price levels and the whims of Mother Nature.
In the short term, ethanol has greatly improved the profitability of farming, while downgrading the profitability of the cattle industry. In the longer term, the system will likely find a new balance, and the result will be a larger farming industry, a smaller cattle industry, and higher food and energy prices.
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