Tuesday, September 8, 2015

If the price to farmers is too low, what should they do?

Picture source (AP)
 Farmers in the EU have been protesting low prices for milk and pork recently, and doing so by direct protest; placing manure in the streets, dumping milk and hay,  and in these two pictures pelting riot police with straw and then setting it on fire, apparently.
Picture source (Reuters)
We used to do this sort of thing in America, too.

The general public doesn't know much about the price swings that farmers regularly confront - right now the price that farmers get for their corn is less than 50% of what it was a few years ago, for instance - but the price of corn chips hasn't decreased at all, and in fact, I can't recall when I've seen commodity prices going down reflected in any retail prices at all.

But if commodity prices go up there's no waiting.  the price of food goes up instantly.   I look at situations like this in the EU and when I do I see actions that make the situation that the farmers are facing pretty obvious to the public.  I'm sure that if I had a pitched battle between riot police and flaming hay on my street I'd remember it... but our battles in America aren't waged that way, at least not any more.   The price of what you're growing drops 50%?   Too bad; maybe the next guy will have more luck.

(Image source Reuters: Jacky Naegelen) 1,000 tractrors flood paris
Should farmers have a stable income or have the government intercede on commodity prices in your opinion?  Are these guys just crazies, or do they have a point?

1 comment:

grasspunk said...

I have no answers here but I’ve been farming here five years so I see a few things.

One thing I heard from my accountant – about half the local farmers here are doing exactly what they did ten years ago. Back then they were profitable, now they are losing money. This is depressing for them. They are doing a great job by their own standards but it isn’t profitable. The price of fuel, tractors, tools, fertilizer has climbed steadily but the price of a cow is pretty much the same. Subsidies are dropping a lot this year, which is the proximate cause of the outrage.

OK, so you want to get a bunch of old Gascon farmers to change their systems? That takes time. They’re slowly getting out of cattle and in to cereals, and now more into vineyards. I’m guessing this is because the Chinese market pushes up the commodity price of the grape harvest. The Paris protestors aren’t Gascons, of course, but their problems are likely similar.

We run a low-cost operation. Where we hit challenges is when dealing with the department of agriculture. They want us to plow the fields more and do high-input, high-output farming and they subsidize for it. We want to work the fields less to save on costs and capture more of the retail margin to be profitable. If I don’t seed my pastures into cereals once every five years they become “permanent pasture” and I lose the right to plow them which affects resale. The point being the whole structure of farming with subsidies and their associated government rules were created in a certain economic environment and as the world market changes those rules and subsidies are not changing fast enough. It’s the whole centralized control problem – college educated bureaucrats think they know the market better than the farmers. Given that structure, farmers take a big risk if they go out and do something different that costs them hugely in subsidies. So they complain about the subsidies instead.

Nobody has invited me to protest. Paris is too far, but I could do Toulouse or Bordeaux in a good day.