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April 10, 2008

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Discussion Topic: Hunters Pay As Crop Prices Spark CRP Crisis

From The New York Times:

Out on the farm, the ducks and pheasants are losing ground.

Thousands of farmers are taking their fields out of the government’s biggest conservation program, which pays them not to cultivate. They are spurning guaranteed annual payments for a chance to cash in on the boom in wheat, soybeans, corn and other crops. Last fall, they took back as many acres as are in Rhode Island and Delaware combined. . . .

Groups like Ducks Unlimited and Pheasants Forever want the government to raise rental rates to keep the same amount of land in the program or even increase it. . . .

[Meanwhile bread makers hurt by rising wheat prices ask,] “We’re in a crisis here. Do we want to eat, or do we want to worry about the birds?”

Be sure to check out the full article. Then tell us what you think.

Comments

YooperJack

This is simple economics. We can generate biofuels, but this will diminish the amount of land now used for hunting. As prices for farm crops rise, more vacant land will be returned to agriculture. Are we better off using that land or are we better off drilling more oil wells in exotic places?
Aside: The amount of carbon fuel that is wasted American and Canadian forests is unbelivable!
YooperJack

jstreet

If hunters want to keep the land in CRP they should lease the farm ground @ the rate the farmer would receive per bushel.

How can you blame the farmer for doing what he/she thinks is best? After all, it's their land isn't it?

Andrew

I have been blogging against corn based ethanol for months as it is a fraud. The US government is subsidizing a biofuel industry that's only accomplishments have been raising food prices and destroying habitat. At the same time we are keeping Brazilian sugar ethanol out of our markets with high tariffs.

http://www.nytimes.com/2008/04/10/opinion/10thu1.html?_r=1&ref=opinion&oref=slogin
For the record this may be the first time I've ever agreed with the NYT opinion page.

Mike Diehl

I agree with Andrew. Alot of the added expense in food costs and the intensification of farming is driven by gov't subsidies for the biofuel industry. That's a fool's choice. Make Joe Citizen pay more for food and pay more in taxes so that we can burn more energy producing the biofuel than we were when we just burned petroleum.

SilverArrow

Andrew is right about corn based ethanol -- more cost to produce than it is worth. BUT there are other domestic crops which will yield bio-fuel which we can run in our generally inefficient gasoline engines; will yield better barrels per acre and run our cars better. Bio-diesel is even more efficient from both production and fuel efficiency angles. Hence we can find domestic solutions. We should also be buying on the world market as we will be helping otherwise depressed agricultural economies such as Brazil so those folks can (in theory) become customers of American businesses.

Better decisions along these lines requires courage at the top as well as creative thinking in the cubicles of our mega-energy businesses; neither are commodities! We need to insist on it!

Part of the mission of CRP is to preserve arable land to fulfill future agricultural needs; as such going back to crops is not incompatible with program goals. As has been said, if hunters want birds we have to be willing to compensate the farmers at a market rate.
SA

Mike Diehl

Agreed, but only so long as the market rate is not being inflated by Uncle Subsidies using taxpayer money for biofuel production.

YooperJack

Okay, what's wrong here. We have concensus! That's not normal!

I'm wondering about all of the fire-killed forests out west. Couldn't they be harvested, chipped and converted to biodiesel? I know that its possible to make that product from wood. I also know that there would be little or no soil degradation. Why not?
YooperJack

JMH

I disagree with Andrew's assessment of ethanol, and it's impacts. Ethanol is not to blame for high grain prices, the following four factors are driving high grain prices: high FUEL costs, high fertilizer costs, high seed costs, and high herbicide costs. If corn prices had not increased over the recent years, it was a financial loss for the growers before they ever started, hence prices rose to make production viable.
I live in an area with many acres of CRP, thousands of acres. I have not seen or heard of any coming back into production [including inquiring with people in the local government office responsible for that program]. I asked people I know who farm, they knew of one farm being brought out of the CRP program, in an area with thousands and thousands of acres in the CRP program. I am skeptical that the sky is falling on CRP, most farmers know why that land was retired from production and are not inclined to bring it back into production.
Some of the support for U.S. commodity prices is directly driven by the falling U.S. dollar, grain from the U.S. is cheaper now in many countries than it was in recent years. Buyers are buying more U.S. grain for export, citing the weaker dollar. I don't see anywhere in the NYT opinion piece that identifies the weaker U.S. dollar and rising production costs as the reasons for higher grain prices. World population is increasing, requiring more food, including areas that aren't capable of raising it. If those area's lack an economy capable of producing a financial base to purchase grain with then they are put in a losing situation.
The NYT opinion piece describes rising energy costs as uncontrollable, why? Is it assumed that it's acceptable or legitimate that five companies that refine oil into fuel can show no intention of competing with one another on price and as a result make Billions. Those five companies make more money in one year that several of the countries identified as disadvantaged can generate in their economies - let alone have available to buy food? To put this in perspective, one company - Exxon I believe - made more in profit in it's last fiscal year [40 Billion dollars] than the dollar value of the entire U.S. corn crop.
The five companies who refine most of the fuel sold (gasoline and diesel) in the U.S. are posting record profits and being summoned to Capital Hill to testify that they are "charging what the market will bear". How many of the Billions of dollars, yes Billions of dollars, that the five refining companies made last year do people think stayed or were spent in the U.S.?
If people want to improve things, then it's obvious that only when the oil refining companies have competition and fuel becomes competitively priced will things change from the current (sad) state of things. At this time, with no realistic and feasable alternatives, ethanol and bio-diesel represent a first step. I would rather pay Americans to grow corn and soybeans, refine ethanol and bio-diesel, and sell ethanol and bio-diesel; who will in turn spend those dollars in the American economy than continue with the current trends and policies that enable/embolden the refiners. If the bio-fuels industry can become more efficient in the processes, then they may provide some solutions, but without time to develop and improve no one can factually say conclusively that corn or soybeans can't or will not be a viable source of fuel in the world.
JMH

JMH

I'd like to add that I would support improved incentives to keep land in CRP. It's been a very successful program, compensation should be indexed to inflation so rates would not need to be re-addressed every few years.
JMH

Mike Diehl

Diversion of grain to ethanol production has caused substantial inflation in food prices, in addition to inflation caused by increased fuel costs. It's added almost 60 USC to the cost of raising a chicken, around $4 USD to the cost of raising a turkey. The consumer will pay around $100B extra for food over the next three years because of diversion of grain to ethanol. This is quite apart from subsidies paid by the US taxpayer to farmers and ethanol distillers.

Screw ethanol. Give me my tax dollars back.

YooperJack

JMH:
Agriculture is usualy described as pure competition. As such, farmers take prices. They don't make prices,thy take prices. If my costs are higher, and the market for corn is $10/bushel, I can't charge $12/bushel to make up for higher costs. Actually, I can, I just won't sell any. Rising food prices are a result of rising demand for the products.
Very few people look for brand names on bulk agricultural products. There is no way for me to distinguish my corn for my competitor's corn. Hence, I must take the market price. If something happens to supply, maybe regional crop failures, I can get a higher price for my corn because the buyer can't go anywhere else.

Petroleum is somewhat similar. I don't care what brand of gas I purchase. I shop for price. The biggest difference is that there are only a few actual sellers of gasole and diesel fuel. Also, there is only 17 refineries in the U.S., so that industry is rife with supply bottlenecks. By the way, you cited the Exxon-Mobil profits. Did you know that they paid around 40 per cent of that profit as corporate income tax? Also, did you know that the government profit on those sales (road and sales tax) is measured in the trillions?
YooperJack

Bubba

Well, Yoop, you're a pretty good carpenter, because you just hit the nail on the head.
Hey, hey, hey, Mike Diehl. For once we agree, well, for the most part.

Now, I could go into a Yohan length diatribe, but I won't. Ethanol is a joke!

Bubba

SilverArrow

Bubba
Ethanol is not a joke, it's just that corn is a very inefficient ethanol source grain. Beets, sugar cane, probably potatoes, even some wood chips would yield far more barrels of the stuff per unit of resource put in.
If we had diesel engines in more of our cars then bio-diesel wins hands down on all counts! Cars running bio-diesel get as many if not more miles to the gallon as they would on petro-diesel. You get more barrels per acre and the refining costs are lower! Give me a hybrid car with a deisel engine running the generator and perhaps that mythical 100 MPG becomes possible!
SA

William

For the most part I agree with everyone on this post in one shape or fashion. The one thing that doesn't make sense to me is that if food prices have theoretically increased because of corn being turned into bio-fuel rather than for consumption, why is it that food that has nothing to do with crop land or corn has raised in price more than food that is directly associated with this? For example, cheese has increased in price dramatically, yet cheese production has little or no relationship to available crop land. Yooper- the average American pays 25%-40% of their income in taxes. Can you tell me why Exxon or other oil companies shouldn't do the same? My solution to high food prices would be to stop so much beef and other livestock. The majority of the crops grown in the U.S. are not consumed by humans but consumed by our livestock instead. If we cut down on the farm-raised livestock we eat more of that land could be used for producing ethanol while we still have plenty of crops that could be used for other food products that are directly consumed by humans. This will keep food costs down and provide an American produced form of fuel that doesn't pay more money to the Saudi's and other multinational corporations. Furthermore, most oil companies are multinational companies that do little to boost U.S. economy as they are not based here in the U.S. so they have no need to abide by U.S. laws, regulations or even pay income taxes. These multinational oil companies are in essence not based in any one country so they essentially can circumvent taxes on a large portion of their profits. I for one do not like the idea at all that the money we put into our gas tanks goes into the hands of countries who support terrorism like Saudi Arabia. I think by Americans producing bio-fuel [albiet inefficiently] we can take money out of the pockets of our enemies.

YooperJack

William:
Dairy farmers either grow their feed or buy it. As the price of fd rises, dairy becomes less attractive profitable). When this occurs, dairy herds become smaller. With smaller herds, less milk is produced. Because the supply of dairy is smaller prices must rise unless demand also falls. But demand for dairy products has been stable or has risen slightly. Again, its all economics.

I believe that the corporate tax rate is around 40 or 42 per cent. That can either be a good thing or a bad thing. The profits are actually taxed twice. The corporations pay taxes at the corporate rate. Then the stockholders pay taxes on the dividends, when they are distributed. Generally, corporaions do not pay taxs. They collect taxes and pass these taxes on to consumers. Actually, ou MI Governor called for the President to somehow grab the "outrageous" Exxon-Mobil profits. She wa almost hung! A big chunk of the state retirement fund is in that stock.

William, these companies have to be global. Where would they drill here? We can't open up anything new in the Arctic. We can't drill anywhere near Florida. That's now reserved for Red China. Apparently, communist countries have a much higher regard for the environment than capitalist countries, so we can trust their offshore rigs more than we can trust ours. At any rate, our economy is truly global. Its not going to change. All we can do is adapt to it.
YooperJack

SilverArrow

William
With the exception of wild caught seafood almost every food item you buy in the supermarket has ties to the farm; cheese comes from milk which comes from cows, sheep or goats. Cows, sheep and goats all have to eat to produce that milk and mostly what they eat has to be grown by farmers. Fuel costs are a considerable chunk of our food bill as well; it takes fuel to plant, tend and harvest crops and more fuel to get them to your friendly neighborhood supermarket. That is just the short course in agricultural economics. Yooper already did a great job explaining corporate profits and taxes as well as international energy apportionment.
SA

Bubba

William,

What SA said!

I live on a farm in a heavy agricultural area. I know several of the farmers in my area as some allow me to hunt and fish their properties.
It is really strange just how this ethanol thing has connected one crop, "corn", to the entire agricultural community! Corn syrup sweetens our soft drinks. Corn is fed to our beef, pork, goats and sheep. Corn is exported to foreign countries. Now, corn is an important part of our "fuel" economy and effecting our "wildlife" production!

I'm sorry SA, I still contend ethanol is still a joke! It is no more efficient to burn than fossil fuel and more costly to produce. If you don't believe the cost part, go to the grocery store! You may not pay the price at the pump, but the local market will make up the difference!

Bubba

YooperJack

Bubba, SA:
W're on the right track here. People are using corn for ethanol because its readily available and the mechanisms for growing and harvesting corn are alrady in place. As these markets evolve, I think we'll see farmers producing other products for ethanol conversion. Up here, they're trying something called switchgrass, which doesn't need much water or fertilizer.
Of course, my biggie is wood. I could be a bit off, but if memory serves me, if you cut a tree, lop the branches to 2", roughly 95 per cent of your weight is carbon, hydrogen and oxygen. The tees produce this from the air and water. If you remove this mass, you can do it virtually in perpetuity because you're not removing many of the nutrients necessary for tree growth. Those are in the fine branches and leaves.
I don't like the idea of ethanol from corn. I do believe that ethanol from other products MIGHT be feaible. I'm positive that biodiesel is feasible, I don't know that its economically feasible from wood.
YooperJack

Justin

Farmers are at the mercy of the weather and markets prices. The markets are controlled by stock traders which is NO market indictor. The price of wheat can have a 2.70 a bushel price swing in one day. The spike in costs is making it really hard to continue to farm, even with the grain prices money is hard to come by. When fertilzer costs 360 a ton and fuel is 3.50 a gallon, it has many wondering to do. What do u do if u have no margin of error and that error occurs?

YooperJack

Justin:
While traders are a part of the process, they can't control the market. If demand for corn falls, they can't keep the price artificially high. If demand rises, and there are regional crop failures, they can't keep the price low. I understand that farmers have NO CONTROL over their destiny with respect to specific crops. All they can do is try to produce as efficiently as possible. They can also "hedge their bet" by planting some areas into different crops, in the event that their primary crop doesn't do well. There's the rub! This will involve planting certain areas set aside for CRP into crops like the switchgrass.
YooperJack

Justin

They have a great, too much of influence on it. the different crops dont work in some areas. like in okla, it gets too hot for summer crops and for the most part here soil isnt good enough to grow corn.

Dale Reisert

When I'm lucky enough I can draw a permit to hunt Whitetail deer in Iowa with a bow.

This past year I was lucky and drew a permit and shot a huge Non typical Buck the first day of my hunt.

My buddy and I do a do it yourself hunt and pay the farmer to hunt his land.

I had plenty of time left as I scored early and had time to spend with the farmer.

What he told me almost blew me away.

As anyone who has looked it up ETHANOL made from Corn only produces 80% of the energy produced by Gasoline.

If you have ever used ethanol in any proportion mixed with gasoline in your vehicle the mileage goes way down. High test gasoline in the Mid West is actually cheaper at the pump then regular gasoline with lower percentages of ethanol but you get terrible mileage with it.

The farmer told me when you add in the cost of Diesel fuel to run his tractors it's at best a break even situation and usally cost more to produce corn for the ethanol.

When all of this corn is diverted from the production of animal feed and the human food supply the entire ethanol producing scenario is a Hoax.

Not sure about soybeans but I was told the same thing is taking place.

The big picture is by converting CRP to crop land will do nothing but drive up already high prices on any grain products ever higher, plus the price of Meat has gone throught he roof because the grain in being used of fuel.

Walt Smith

If you don't pay the taxes on the property you don't have any say in what the owner does with it ,period.

Mike Diehl

That's only true if the person paying the taxes on the property does not receive any taxpayer funded subsidies or special tax breaks.

If the landowner takes government money, the government can damb well tell them to do what the voters want (if the voting public want ever get round to discovering how to get the government to listen to them rather than special interests).

YooperJack

Mike Diehl:
I might be wrong but I believe that farmers can elect to enroll in the CRP program but they must remain in that program for a specified (10 years?) time. If they choose to pull out prior to the term, they must pay a "recapture fee" which is a major portion of their tax break back to the local government.
YooperJack




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