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  • Free Trade Fact of the Day

    Looking at the relationship between protectionism, subsidies, and world hunger, American Enterprise Institute visiting scholar Adam Lerrick writes:

    The world has the ability to feed itself at affordable prices. There is no shortage of productive land. Large tracts in Ukraine, Kazakhstan, and Brazil offer huge potential. Putting fallow acres back into production could quadruple Russian cereal output to 300 million tons each year. The labor, technology, and capital are all at the ready.

    So why has the market failed to respond to this most basic of human needs?

    In the United States, we pay farmers $2 billion each year to put 36 million acres of cropland–an area the size of Iowa–out of production under conservation programs. In Europe, large, efficient farmers must leave 10 percent of their land idle. (In response to the food crisis, U.S. and European conservation programs have been suspended.) Biofuel subsidies and government production mandates force food and fuel to compete for crops and land. As figure 4 illustrates, $7 billion of subsidies now divert one-third of the U.S. corn crop to ethanol production.

    High corn prices have displaced 12 million acres of soybeans and reduced U.S. soybean acreage to its lowest level in a decade. At the same time, a 54¢ per gallon tariff on Brazilian sugar-based ethanol limits imports that are grown on low-grade pastureland and that do not divert food capability to energy production. The livestock industry claims that ethanol subsidies raise corn prices by 50 percent. The International Monetary Fund calculates that one-fifth of the rise in food prices is due to the use of crops for fuel.

    The developing world cannot fight hunger in the face of a distorted global food market. Agricultural trade barriers on imports and subsidy programs in the United States and Europe dump crops on world markets, depressing prices below international costs of production and forestalling the growth of a healthy farm sector in emerging economies.

    In agriculture, even medium-term supply response is slow, thereby amplifying the price increases. Whether in Nebraska or Thailand, farmers who have survived the boom-and-bust cycles of their industry are cautious. It is only after a perceived fundamental shift in demand that output increases.

    Posted in International [slideshow_deploy]

    One Response to Free Trade Fact of the Day

    1. Darvin Dowdy, Houst says:

      Whats the old saying? A problem is just an opportunity with thorns on it. Something like that.

      The myriad of above mentioned problems must be viewed as opportunities for the U.S. farmers. Both corporate and family farms. Optimism.

      Why are these large tracts of land in other parts of the world not producing? Who cares! Be happy that they're not. More opportunities for U.S. farmers.

      It seems that the U.S. farmer can get the job done where few others can. We, here in the U.S., need to keep tight lipped about our successful growing methods. As any good business person would do. We need to wean the U.S. farmers on subsidies and "grow here, grow now, make money". Develop advanced storage facilities for storing the excess grain that is not being used for ethanol production.

      Then we should invite the world to come shop at our grain store. And we should get the highest price that the market will bear. And make no apologies for it. We want to see Farmer Brown driving his new Escalade about town.

      As for "emerging economies". NOT OUR PROBLEM. They've had 60 years to emerge having assistance heaped upon them. If they haven't done it by now, they never will. Time to get off of that kick. Its "our" economy that needs to emerge to higher levels.

      Between the drastic increase in domestic oil production and our grain (& other food) producing capabilities, our economy could skyrocket like nothing ever seen before. If our so called leaders don't squander these opportunities. The world population will soon be at 7 billion. And they've all got to eat. Lets ring the dinner bell for them. Darvin Dowdy

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