House Ag Committee Chairman Frank Lucas, a fast talker by birth and trade, spared few superlatives when describing, in a telephone press conference January 28, the finally finished, modestly named Agricultural Act of 2014.
“Historic in many ways,” Lucas said of the pending law as he shared the call with his Senate counterpart, Debbie Stabenow, a Democrat from Michigan.
What’s more, he continued, the three-years-in-the-making legislation was “amazing” and, in fact, “a reform bill.”
Caught up in his expansive rhetoric, Lucas finished describing the law’s bigger elements with a flourish: “This is not just a good Farm Bill, it’s almost a miraculous Farm Bill!”
Truth be told, the 950-page bill is not a near-miracle, not amazing, not very reforming and, most definitely, not historic.
It is a very late, very dense, and very status quo law that further institutionalizes scale over substance and insurance over economics.
On the face of it, there’s nothing wrong with either growth or insurance. Under this law, however, the two are tied tightly together; growth is all but guaranteed by heavily subsidized revenue insurance. The market is, well, in there somewhere.
How that policy will work is certain to be tested in 2014.
Right now corn is scraping along at US$4 per bu., ethanol is poised to lose some of its government-mandated demand, the export market is increasingly crowded and competitive and U.S. farmers will grow between 13.9 billion and 14.3 billion bu. of corn this year, or about 2 billion bu. more than forecasters predict will be needed.
As such, Iowa State University economist Robert Wisner estimates cash corn prices will drop from an already-thin average of US$4.40 per bu. in 2013/14 to a well underwater season average of US$3.75 to US$3.90 in 2014/15.
The new farm law, with its higher insurable levels and fatter insurance subsidies, makes this corn-choking outcome quite likely. So likely, in fact, that the January 29 Wall Street Journal editorialized that the cost of this new “shallow loss” insurance program could “balloon to US$14 billion a year” if overproduction results…
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