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As U.S. commodity markets continue to soar, debate over farm policy becomes more complex

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As the same time that many commodity prices are reaching record-high levels, debate over a new farm bill continues. A new strategy will be needed to insure that current safety nets are kept in place in 2012 legislation.

These are heady times for farmers, with commodity prices reaching record levels and no end in sight to a market that seems to have settled into a bull mode. But there’s a downside — farmers are aware of it and justifiably aren’t worried much about it at the moment, but those who lobby the halls of Congress on behalf of agriculture are literally wringing their hands and gnashing their teeth over it.

But first, let’s revel in the good news, because it’s such a rare occurrence. In the Southeast, thanks to our climate and soils, we can grow many different crops, including cotton, peanuts, corn and soybeans. All of these just happen to be sitting at record-high prices going into the spring 2011 planting season.

John McKissick, an economist for more than 30 years, says he can’t remember when an outlook was this good across the board. Speaking at the 2011 Georgia Ag Forecast, he says that farmers will have to find the right mix to take full advantage of the bullish prices.

“For 2011, growing cotton looks to bring the highest economic return. The higher cotton prices combined with the tight supplies of other crops has caused competition for farmers’ acres, meaning buyers of all row crops are trying to woo farmers,” says McKissick.

Despite high stockpiles, the economist says supplies for corn remain tight because of its use for fuel production. In 2000, 6 percent of the corn crop went to fuel. Last year, 37 percent of the national corn crop went into fuel, only slightly more, 39 percent was used to feed animals.

“If you are a crop farmer in Georgia, you are looking at a good situation, much better than last year, even though inputs are increasing, says McKissick.

Input costs, he says, are expected to rise. Fertilizer, for example, will cost 5 percent more. Fuel prices will continue to climb, too, along with seed costs. But that seems to be a minor concern at present. Apparently, conditions favor robust prices for some crops for some time to come.

Another agricultural economist, Dennis Conley of the University of Nebraska, says he can’t remember grain stocks being this low in the last 20 or 30 years. “We are at record-low stocks. So if there is any kind of a glitch at all in the U.S. weather, supplies are going to remain tighter and we might see even higher prices.”

One of the most recent price hikes came after the USDA cut back its already-tight estimate of grain inventories. Estimated reserves of corn were cut to about half the level in storage at the start of the 2010 harvest. Soybean reserves are at the lowest levels in three decades, the USDA estimates, in part because of heavy buying by China. The ratio of stocks to demand is expected to fall later this year to “levels unseen since the mid-1970s,” the agency says.

The downside to all this giddiness, and what has agricultural lobbyists most worried, is that we’re only a few months away from negotiating a new farm bill. And at a time when trimming the deficit is again in vogue, how does U.S. agriculture justify spending money on a new farm program when crop prices continue to soar?

One thing is for sure, past strategies won’t work. There’s a new mindset on Capitol Hill, and more than a few members of Congress are Tea Partiers who believe the scope of government should be very limited. Rand Paul, the new U.S. senator from Kentucky, has gone so far as to call farm subsidies a form of welfare.

But there’s one thing all members of Congress agree upon — the need for security and a strong national defense — and that might be a good place to start when attempting to frame the debate for the next farm bill.

Not a week goes by that we don’t see news reports on how the global food supply is being stretched to the limit, and food riots increasingly are becoming a concern in many countries. Signs of the strain not only are being seen in developing countries but also in places like Australia, Argentina, Canada and Russia.

America currently is in a position of strength as far as being able to produce its own food and fiber, with the most efficient and innovative farmers in the world. A good farm bill, with adequate safety nets, would go a long way towards insuring that position for years to come. 

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