Secretary of Food

Now usually I am against any type of change for bureaucracy unless it is eliminating them. This is because their budget incentives are not like to save and make a profit like business. Instead, they must spend as much money as possible so that they will not lose their funding. Nicholas Kristof in the International Herald Tribune makes a good case for a change, here:

“As Barack Obama ponders whom to pick as agriculture secretary, he should reframe the question. What he needs is actually a bold reformer in a position renamed “secretary of food.”

A Department of Agriculture made sense 100 years ago when 35 percent of Americans engaged in farming. But today, fewer than 2 percent are farmers. In contrast, 100 percent of Americans eat.

“We’re subsidizing the least healthy calories in the supermarket – high fructose corn syrup and hydrogenated soy oil, and we’re doing very little for farmers trying to grow real food,” notes Michael Pollan, author of such books as “The Omnivore’s Dilemma” and “In Defense of Food.”

This is not unlike what will happen if we subsidize the car industry. When the government grants protection to an industry they do not need to listen to demand as much. For example, farms do not need to make more healthy foods even if people are demanding them. Instead, they make the cheapest food and rake in the big bucks. They know whether they grow things with crazy pesticides, it will not matter because they will get there money at the end of the year. When it comes to the auto industry, they will have no incentive to continue with their costly hybrids in the same way.

Some may then argue let’s hold them hostage and tell them to only make organic food or we will not give them their money. This also is a bad idea because maybe the pesticides are not that “crazy” or that people prefer it. The consumers have sovereignty and if you allow them to demand what they want. We will get the right amount of organic and non-organic food.

Funny part of this article:

“One measure of the absurdity of the system: Every year the American taxpayer sends me a check for $588 in exchange for me not growing crops on timberland I own in Oregon (I forward the money to a charity). That’s right. The Agriculture Department pays a New York journalist not to grow crops in a forest in Oregon.”

Of course, this author continues to complain that we are subsidizing fatty foods. When really the problem is the subsidy itself.

The rest of the article is here.

~PCCapitalist

Agriculture Subsidy Opportunity!

This is from an forwarded email but is great satire for what actually happens in the agricultural sector:

“Honorable Secretary of Agriculture Washington, D.C.

Dear Sir:

My friend, Ed Peterson, over at Wells, Iowa, received a check for $1,000 from the government for not raising hogs. So, I want to go into the “not raising hogs” business next year.

What I want to know is, in your opinion, what is the best kind of farm not to raise hogs on, and what is the best breed of hogs not to raise? I want to be sure that I approach this endeavor in keeping with all governmental policies. I would prefer not to raise razorbacks, but if that is not a good breed not to raise, then I will just as gladly not raise Yorkshires or Durocs.

As I see it, the hardest part of this program will be in keeping an accurate inventory of how many hogs I haven’t raised.

My friend, Peterson, is very joyful about the future of the business. He has been raising hogs for twenty years or so, and the best he ever made on them was $422 in 1968, until this year when he got your check for $1,000 for not raising hogs.

If I get $1,000 for not raising 50 hogs, will I get $2,000 for not raising 100 hogs? I plan to operate on a small scale at first, holding myself down to about 4,000 hogs not raised, which will mean about  $80,000 the first year. Then I can afford an airplane.

Now another thing, these hogs I will not raise will not eat 100,000 bushels of corn. I understand that you also pay farmers for not raising corn and wheat. Will I qualify for payments for not raising wheat and corn not to feed the 4,000 hogs I am not going to raise?

Also, I am considering the “not milking cows” business, so send me any information you have on that too.

In view of these circumstances, you understand that I will be totally unemployed and plan to file for unemployment and food stamps.

Be assured you will have my vote in the coming election.

Patriotically Yours,

PS: Would you please notify me when you plan to distribute more free cheese?”

~PCCapitalist

Tequila: It’s more expensive to hug your toliet!

Unless you have been dead for the past 12 months, the price of foods keep going up. Corn has risen even more than anything else. Some people blame the ethanol subsidies and others blame other things. When things like this happens, we often see shock waves throughout the economy of the world. In this case, it is the Mexican drink Tequila. This from the USA Today:

“But behind the fence, the blue agave plants, the raw ingredient of Mexico’s famous tequila, are getting harder to spot. They are being replaced by row after row of leafy cornstalks.

That switch to abandon slow-growing agave plants to cash in on corn, beans and other food crops selling for record prices worldwide could limit the supply of tequila and drive up the cost of a shot or a margarita.”

So like many other farmers the high prices of corn and the higher demand for Ethanol have made people want to switch to corn. The Ethanol drive lately has been government grown. That is for another post but the idea is still the same. If the government raises the demand artificially for something and farmers switch to it, then we are using taxpayers money to raise prices on goods.

The rest of the article here.

~PCCapitalist

Marxist of the Week: Environmental Protection Agency (shutdowns Texas’ Plea)

This from the International Herald Tribune:

“The Environmental Protection Agency has denied a request from Texas to temporarily reduce ethanol requirements for gasoline in hopes of bringing down corn prices.

A federal energy bill passed in December requires that 9 billion gallons of ethanol be blended into gasoline from Sept. 1 to Aug. 31, 2009. Perry asked the EPA in April to drop the Renewable Fuels Standard requirement to 4.5 billion gallons, saying demand for ethanol is raising corn prices for livestock producers and driving up food prices.

“I am greatly disappointed with the EPA’s inability to look past the good intentions of this policy to see the significant harm it is doing to farmers, ranchers and American households,” Perry said. “For the EPA to assert that this federal mandate is not affecting food prices not only goes against common sense, but every American’s grocery bill.”

I have to agree with Governor Perry on this one. If it was a natural market increase in demand for ethanol then Texas would have to deal with it. Since this is artificially done by the government there is no reason for it. The EPA probably said no because most states would follow suit.

What does this tell us? This shows that the market demand for ethanol is fake and since the government has subsidized ethanol production that no one wants, they have to force people to take it.

The rest of the article can be found here.

~PCCapitalist

Farm Subsidies must go!

But they aren’t anytime soon…

I hope you don’t like corn…

Because you are going to pay a lot more for it.

Almost every person running for President is supporting some type of corn agricultural subsidy.

This is because they believe they are “investing” in Ethanol, in where?
yes, Iowa. How convenient.

A subsidy in this case is when we give a direct payment from the taxpayer to the farmer who is growing corn, in this case.

Current candidates have moved towards saying that its in the “national security interests” to not be dependent on foreign food and that corn subsidies will make more Ethanol. So we are paying farmers to farm more corn than the market wants. As if you understand capitalism, the market should set the fair price for corn and makes the domestic farmers compete fairly on the world market. They don’t, they get these government handouts like welfare for farmers.

Then to protect the farmers from the low price of their new surplus, the government uses price supports to keep the price high. The federal government then uses your tax dollars again to buy the surpluses. Now you are bidding against the government for your food, which artificially makes the price high.

The Office of Budget and Management stated that in 2005 we paid $26 Billion dollars a year in farm subsidies. This is coming straight out of your’s and my pockets, not including the surplus management and the competition with the government.

There are obviously even more problems than just your high price and overproduction.

1) We ship some of the extra stuff to other countries as “aid.” Ask the African corn farmer after he is put out of business because he can’t compete with free corn that floods his market.

2) The constant overproduction hurts the environment. If Farmer John could farm 30 acres of corn because thats how much he can make without losing money to a fair market price then he should do that. The government will then pay him to farm more acres because he knows the government will buy it at the same price. He will be hurting the extra land for no reason at all.

3) We pay farmers that are already well above the average income of Americans.

4) Oh I almost forgot guess who pays to store the corn waiting for it to go to Africa or rot? We do!

So back to Ethanol. Now that there is a higher demand for corn to use to make Ethanol, you will see prices rise even higher. And as these candidates support more subsidies you will see more tax money thrown away, more environmental damage, more foreign farmers go out of business, and more unnecessary costs.

I probably missed some of the negative effects of subsidies but I say this to the candidates:

When did the interests of America, security or non-security, include charging consumers more than they should by competing against them, wasting tax-payer’s money (in more way than one), paying farmers to hurt the environment and put poor nations farmers out of business?

My solution: if an increase in demand for Ethanol raises the price and that in turns causes people to farm more corn, then great. But let the market do it! Don’t wake up one morning, to the Ethanol lobbyists, and say “more subsidies will fix this nations energy problems.”

….and let’s not even go into whether or not Ethanol is the future energy source….

~PCCapitalist