STRAIGHT TALK ON AGRICULTURE

A Conversation with Mark Ritchie

Mark Ritchie is Agricultural Trade Policy Analyst for the Minnesota Department of Agriculture and the co-chair of the League of Rural Voters. He is author of Crisis by Design: A Brief Review of U.S. Farm Policy and Loss of Family Farms: Inevitable Result or Conscious Policy?, as well as numerous articles and essays on farm policy, agricultural trade and environmental issues in agriculture. Ritchie spoke with Multinational Monitor recently about the drought and other issues confronting family farmers in the 1980s. Excerpts from the conversation appear below.

Multinational Monitor: How are commodity prices determined today?
Mark Ritchie: In the 1930s, with the coming of [Franklin Delano] Roosevelt, the first major national farm legislation was passed and signed. The legislation was based on some of the ideas that arose out of the Populist Party in the 1890s. The most important features of the basic farm programs as they existed in the '30s, and continue to exist today, had to do with price floors, price ceilings and supply management. The government created an agency called the Commodity Credit Corporation [CCC] which was a government agency. At first it was quasi-private but it is now totally a government agency, which has the responsibility of assisting farmers in balancing the ups and downs of the commodity markets during the year.

What typically happens in the U.S. [is] almost all the farmers harvest their main crops in the span of about 30 days in October and November of each year. That means that 12 months of supply comes onto the market in a one-month period of time. Logically, it will depress and push the market and prices very low during that period of time. Because of this, the grain companies have always been able to wait until those couple months of a year, [when] farmers need to sell because they need money to repay their loans, they need to have money to cover their taxes, they don't have the storage. So the grain companies [can] buy all of their crops in the fall of the year when prices [are] very low, and then sit it out until next year and then not have to pay farmers a more normal market price because they were able to buy most of what they needed during distressed times in the fall.

So what the government did was create an agency that said to farmers, if the price falls below a certain predetermined level, and that level is determined by Congress, you can come into our local office, which is in every county of the U.S., and you can borrow a certain amount of money against each bushel that you produced. This is called the 'loan rate.' And we will loan you this money and when prices recover you can repay the loan with interest.... [I]n the 1930s ... the loan rate establish[ed] a minimum or a floor price at roughly the cost of production. The way it would work was if the corporations started bidding the price down below this pre-determined level, once it hit that level farmers would go to their local CCC office and borrow that much against their crop. So essentially, they no longer had the pressure on them to sell their crop to the grain companies, because they'd borrowed money, they could pay their bills, they could send their kids off to school and do whatever they needed. And then when the grain companies decided they wanted the grain, they would bid the price back up above that level, and when it reached a certain point, farmers would sell the grain to the grain companies, take the money and repay the loan from the government with interest. So this was the kind of basic floor support loan policy and program. It's been in effect since the 1930s and it's been a very effective program. In fact, for the commodities for which this program has existed, and in general it has been for most of the major grains and cereals--corn, wheat, soybeans, cotton, rye, sorghum, a whole number of crops-- this floor price, when in effect, has set, more or less, the market price. You can look over the 30-40 year time, and you'll see that the market price stays just above this minimum price set by Congress. Of course, when you have some emergency situations, like the drought, or the Russian wheat deal, you can see some very sharp rises and fluctuations. But in general this price establishes the market price for commodities.

Now, also during the 1930s, farmers were not only worried [about] maintaining some kind of minimum price, but also there were droughts and dustbowls, just like we have today, and the grain companies who owned the grain during those periods of shortages were able to raise the price dramatically, as they will try to do today. Farmers at that time and even today are either the largest or almost the largest consumers of their own products. Cattle producers buy a lot of the corn, chicken producers buy a lot of the soybean meal. In the 1920s and 1930s oats were a major crop because they were feed for horses, which were used for farming. So farmers were also very concerned, as were city people, about the effects of shortages on price increases. And so they built a ceiling price into the farm program, also. If the grain companies during times of shortage tried to raise the price and charge people very high prices for the commodities, the government maintained reserve food stocks, which [it] would then release onto the market very slowly to bring that price down and keep it in a fairly narrow range. So the government was intervening both to support prices nearly at the cost of production at the bottom, and they were intervening to release stocks onto the market to keep a ceiling on prices. This had a couple of important effects. One, of course, is it kept consumer prices very low and stable. But it also tended to restrict speculation ... particularly speculation, for example, on the Chicago Board of Trade or that kind of commodities speculation, where the money is made by sharp price springs.

Now the third element of this farm program of the 1930s was one in which there was a recognition that if there were many years of very good weather in a row--along with technological advancements--that farmers would tend to produce larger and larger crops ... Surpluses buil[t] up at different times, and if you didn't have a mechanism by which the government helped farmers to reduce their production when there were times of surplus you would tend to build up mountains of corn, and the government would be the buyer of last resort [and] you'd have high taxpayer costs. There are many problems which come from times of surplus production and times of surplus storage. So they instituted a series of supply management programs, where the government would take a poll of the farmers, a referendum, a vote, and based on the approval of the farmers, the government would implement a percentage reduction of the production, to help bring supply in line with demand.

So these three elements, price floor, price ceiling and supply management, were the key components of that program in the 1930s and 40s. But in the early 1950s we saw a throwing out, the abolishing of this program. And it was the end result of a very intense lobbying effort by the corporations. Keep in mind that although this particular program was quite good for farmers and very good for rural communities, and was at a time when there was an explosion of soil conservation efforts--there were a lot of good things that came out of this set of policies--it tended to be viewed unfavorably by the same segments of the business community farmers faced in the 1800s. For those corporations who supplied chemicals, fertilizers, seed, tractors, etc., they viewed the supply management provisions as somehow restricting their sales. The farmers were reducing their plantings of wheat by 10 percent, a supplier could then argue that they were selling 10 percent less wheat seed, 10 percent less chemicals, 10 percent less fertilizer, etc. So they viewed it as a restriction on their ability to sell more products. At the same time, the companies [that] were buying grain to sell it overseas or to turn into breakfast cereal viewed government intervention to maintain a minimum price the same way that industrial corporations viewed the government intervening to set minimum standards for labor--they opposed it. They believed that it drove up their cost of corn, or meat, or whatever, [and] that it was in some way restricting their ability to make a profit. Now these forces combined in a very intense lobbying effort. And that effort culminated in the early 1950s, and although it was fairly unsuccessful in the 1940s, basically arguing that we should throw farmers to the free market, most people didn't believe that was going to be a better solution. But in the early 1950s these opponents of this program--the Roosevelt farm programs, or the Parity farm programs, as they were called-- picked up on a new tactic, which was to label the Roosevelt era programs--not just farm programs but others, but especially the farm programs as being 'socialist,' 'Bolshevik,' 'central planning' in agriculture. They used this terminology, and tied it in with the overall McCarthy era, the red-baiting era, this whole anti-communist hysteria, and turned that into their main tool for getting this program abolished. And in 1952 and 1953, in the Eisenhower administration under the leadership of Ezra Taft Benson, who was the secretary of agriculture, the Roosevelt farm program was essentially abolished.

In the first couple years, they attempted to mask the change by describing it as more flexible. In fact they called the new farm program the 'Flexible Parity Program.' But what this essentially meant was they were removing the strong, effective supply management provisions so that there was a tendency to build up surpluses, and they gave the secretary of agriculture the authority to lower the prices in hopes of making 'the U.S. more competitive.' From the early 1950s to the early 1970s we went through a real roller coaster and chaotic period in U.S. farm policy. Year after year, we would have an unstable situation where some years we would build up surpluses and some years the government would feel so compelled to act that they would shut down whole counties. We had the land bank program at that time, where a whole county would be shut down and couldn't farm. But by 1970, 1971, 1972, it became clear that this was just too chaotic to continue this kind of roller coaster effect, and the government began to debate farm policy again in a serious way. The farmers basically said to the government, 'Look, we can't live on these low, minimum prices you've been establishing,' because the secretary of agriculture had been lowering the price floor from the Roosevelt era days, when it was set at the cost of production, to a fairly low level. The corporations would say to the government, 'Look, you can't raise the price you pay to farmers, because we can't be competitive in the international market if you do that.' So in the spirit of the Great Society, which [had] the mentality of spending the public's money to kind of patch over a problem rather than confronting the corporation challenge that was creating the problem, the government chose a solution that they felt would satisfy everyone. They set the floor price paid to farmers, the support loan rate, at a very low level. They set it at the level the corporations told them they needed to be competitive. And then they promised the farmers a cost of production level, which they created through a new program called the 'Target Price Program,' so that the loan rate became the price the corporations wanted, the target price became the price the farmers said they needed to survive, and the difference between the two would be made up by the taxpayers, in the form of a direct payment to farmers called the 'subsidy payment.' Now this was a very clever policy because it meant that the taxpayers were handing out money to farmers, so they were called farm subsidies. But the purpose of those subsidies was to keep farmers alive who were selling their crops to corporations at prices far below the cost of production, which in fact meant that the real subsidies were going to the corporations, and, ultimately, the consumers. And from the 1970s until today, this has been essentially our program, with one very large difference. In the early 1970s up through 1976, 1977, 1978, the spread--the cost to the government, the difference between the target price and the loan rate--was not that large, and not that expensive. But by the late 1970s, with the impact of budget deficits, which were building, [the value of] the dollar, and many other factors, the cost of maintaining this program, like the costs of maintaining other Great Society programs, became prohibitive. And instead of the government asking the question, 'How much do the farmers need to survive?' and making sure that the payments to them were adequate to bring a fair income to farmers, the Congress began asking the question, 'How much can we afford to spend on the farmers?' And again, it indicates that the corporations were able to shift the focus onto the farmers. They didn't ask, 'Well, how much can we afford to cheapen the cost of wheat to Continental Bakeries and Wonderbread?' And they essentially began reducing the target prices to whatever levels they thought their budgets could handle, with no consideration as to whether that would provide the cost of production. And in fact, by the late 1970s, those target prices had been cut below the cost of production.

MM: When a farmer gets a CCC loan does CCC take control of the farmer's grain?
Ritchie: During the first nine months of each of those loans, it is strictly a loan. Farmer[s] maintain the grain in their own bins, pay for the storage, or maybe it is stored at a local elevator in town. When the grain companies needed that grain, they would bid the price above that level, farmers would then sell to the grain companies and repay the loan with interest. Now as the government has dismantled supply management programs and we've gotten larger and larger surpluses, grain companies have been able to buy all the grain they need for a year out of surplus stocks and essentially outlast the farmers, so that ... the grain companies still aren't forced to buy, because they don't need the grain. So the farmer then faces a choice, [and] generally the farmer can only choose one option economically, which is that they look at their grain and [realize that] the grain isn't worth enough today to sell it and repay the loan with interest, therefore, the only other option is to forfeit that grain to the government, in lieu of payment on that loan. This is what we call a forfeiting of a loan. And at that moment the government must accept the grain as payment for the loan. The government has acquired millions and millions of bushels in recent years because we've had in the past some very large crops produced, over and above what could be sold, and they acquired those at very low prices, because the loan rate, or the minimum rate, has been quite low. Today that grain has doubled in price or value, so the government stands to make a fairly large profit on some of that grain depending on what it's paid to store it. But in general the program is designed in such a way as to attempt to avoid that. The government should not be acquiring a lot of grain beyond what we normally need to maintain emergency reserves, and in general the grain is typically sold into the market and the loan is repaid.

MM: What are Payment-In-Kind (PIK) programs?
Ritchie: In the PIK program there are essentially two almost completely different programs that have the same name. One was the very large acreage reduction program of 1983, where because of enormous surpluses that had built up in 1981 and 1982--the first two years of the Reagan administration--the government, although their rhetoric is anti-government intervention day in and day out, was forced to face reality, realize that the government had to step in and help reduce production. The program was one where farmers could sign up and not plant about half of their farm and they received in return not cash but certificates which could be exchanged for grain held by the government.... [N]ow, in subsequent years, this setaside kind of program and the whole supply management element of that first PIK program has been abandoned. But the concept of paying farmers in certificates for grain has become a much more institutionalized part of the overall government program. Today ... farmers receive a sheet of paper which says you are entitled to so many dollars worth of grain, and at each county elevator it says on the wall how much grain those certificates can buy today. Now, in general, the government has been involved in a wide range of land set-aside programs primarily for supply management purposes. And again, the Reagan administration will day in and day out rail against supply management as this 'lunatic,' 'Bolshevik,' idea. But the fact of the matter is that the government is involved in supply management in various ways and has been since the 1930s and before.

We tend to have two forms of supply management: one based on reducing the number of acres or the number of cows or the number of production units that you have, and the other form based on farmers actually reducing the amount of milk or crops that they deliver to the marketing system. One is called acreage based, the other quantity based. We've used different programs--for example, in tobacco, there is a strict limit to how many pounds of tobacco you can deliver, and that's how supply management is accomplished. Or on wheat, it's an acreage reduction program. And there are pros and cons to both systems. Certainly the quantitative one is more precise and it has many environmental advantages. Within the acreage reduction [approach] ... there are two kinds of acreage reduction programs: a paid diversion, where farmers are paid to not grow certain land, and an unpaid diversion. So, for example, the ability to use the CCC loan program is generally extended only to farmers who sign up for and agree to set aside a certain portion of their land. So, for example, next year the land set aside is about 10 percent ... on wheat and corn. In prior years it's been as high as 35 percent. In general, these diversions are unpaid. You get the benefit of participating in the loan program and the target price program if you set aside a certain portion of your land.

There is one very strong disadvantage to this program. If you are being asked to set aside a certain portion of your land, and then you are going to receive a subsidy on all the bushels you produce on the land that you do farm, then there is a pressure for you to try to extract every bushel possible from the land that you are farming. You can apply more chemicals and fertilizers, for example; you can farm more intensively. But if you're reducing your planted acres by 35 percent and then you're going to get a target price payment from the government on every bushel you produce on that 65 percent of the land that you're still farming, there's a very strong incentive to farm more intensively, which generally means more environmental damage.

The other kind of set-aside program is the paid diversion. Occasionally, there will be paid diversions as part of the general farm program. But really the most important and the most significant paid diversions are newer programs that fall under the general category of conservation reserves. We have these at both the federal and the state government level. What this means is that on land that's deemed as fragile, or valuable from an environmental or wildlife perspective, farmers are paid so much per year over a long period of time to not farm the land. There may actually be other elements--there may be conservation easements so that a certain portion of the land remains in its exact same condition, but the point is that in addition to the unpaid land diversions, which are primarily in the supply management area, we are now developing a whole range of paid land diversions, which are [the] conservation ... reserve kind of program.

MM: Doesn't it seem that, for an administration so philosophically committed to imposing market discipline, that supply management just makes more common sense?
Ritchie: In fact, the way to frame the question is, Is the government's role in supplying income to farmers directly from the taxpayers or through price manipulation, or is the government's role more appropriate in helping millions of farms to coordinate their production so that they're in line with the needs of the small number of corporations who are going to take their product?' Food and food security is much more central than anything else we have to face. Supply management doesn't just mean helping farmers get it together to reduce production in times of [surpluses], it means maintaining a reserve large enough when we have a disaster like the drought this year. What we're facing at the national level is that we're going to have shortages and very sharp price increases next year, along with being unable to meet the export demand that we've generated. Now, some would say this is because of the drought, and certainly the drought is a precipitating factor. But droughts are natural occurrences and they happen all the time. Why we are going to face consumer shortages, price increases and basically become again an unreliable export supplier is not because of the drought--it's because the government failed to maintain reserves large enough and in the right quality to then be able to manage the supply in times of drought. So supply management has a logic in surplus years and shortage years, a logic that the 'market,' pure and as defined in college economic textbooks, simply cannot play. I think in terms of farming, if farm policy is designed from a business point of view rather than an economic theory point of view, it tends to be much more successful.

MM: Price supports were roughly $6 billion a year all through the 70s. Why are they $25 billion a year now?
Ritchie: Well, the cost of these programs is primarily the spread between the target price and the loan rate, or the minimum price. Why you see these sudden, very large jumps in the cost of farm programs is that in the 1981 farm bill and in the 1985 farm bill--and again, these tend to be the large, omnibus farm bills that set the general parameters for four or five years at a time--both of these farm bills very drastically reduced the price, the loan rate, the price that ended up being charged to the grain corporations and the foreign buyers, while attempting to maintain roughly the same target price level that they had before, because of course in 1981 and 1985 farmers were in crisis, and to go into Congress and argue that we have to cut the price to farmers sounded crazy. Of course it was crazy, in fact it needs to be increased. In fact, the loan rate on corn, which set the price, was lowered from roughly $2.60 to $1.70. So you added about a dollar more 'subsidy' to each bushel of corn simply by lowering that loan level roughly by one dollar.

MM: It sounds like 'supply-side farming.
Ritchie: It's totally supply-side farming. And, of course, one of the problems with supply-side farming, like supply-side economics, is that it has nothing to do with reality. For example, if you're Brazil, or Thailand, or some country with a very large external debt, you're trying to pay that debt by selling farm commodities into the world market. The World Bank ... loans [countries] billions of dollars to produce corn, rice, whatever, to sell on the world market to pay [its] bills. So the U.S. comes along and cuts the price of rice in half, for example--we did this. ... Thailand, which is the world's largest exporter and depends on rice for its foreign currency to pay its bills, its foreign debt, and to pay for its imports, suddenly saw its export earnings from rice cut in half. Well, we had riots outside the U.S. embassy in Bangkok in April of 1985 against the U.S. farm bill. Now, one might ask, why weren't there riots in the U.S. against the farm bill? But it's because the government of the United States had the money to shell out to farmers to basically allow them to die slowly, quietly.... In Thailand it was [a] sudden cutting of their export earnings in half and throwing their economy into chaos. So, we were, year after year, from 1981 until today, lowering the price that the corporations had to pay for the commodities, and trying to maintain roughly the same price levels paid to farmers. And in each year, that would add to the cost of farm programs.

MM: What is the biggest problem facing family farms today?
Ritchie: Income does not equal expenses. The shortage of income this summer has a lot to do with the drought and the lack of any kind of crop for the drought. It may also have to do with the fact that the Reagan administration has abolished some of the farm programs, or attempted to, which took income out of farmers' pockets. Even with the drought-induced price increases that we've seen on the Chicago Board of Trade--and some prices are now double what they were a year ago--even today, prices on the Chicago Board of Trade for wheat and corn are below the cost of production, and soybeans are slightly above the cost of production. This gives you an indication of how far down prices were last year; they were roughly half the cost of production. MM: In 1980 there were over 2.8 million farms. How many farms have disappeared in the last eight years? Ritchie: In the 1980s, we will have lost between 700,000 and a million farms. We don't know exactly what the figure will be or what the definition--how many people will stay in their homes but not be able to farm their land. There are just many things about it that we don't know. But we will lose approximately one- third in the course of the 1980s.

MM: Does that include the large, corporate farms?
Ritchie: In the United States, we don't have very many of what you would call 'agribusiness' farms. There are families who own very large chunks of land, particularly in dry regions. The only sector where agribusiness owned farms are really an important factor is in livestock. In those instance you tend to have a very small number of poultry processors who contract, generally with family farmers, but control it through the contract process. But it's in beef where ... not only do three corporations control between 70 and 80 percent of retail beef sales, but those same three corporations now, either directly or through direct feeding contracts, control about half the production of beef. But it's not because they own huge tracts of land where they run cows, it's because they own tracts of land where they have feedlots with 100,000 cows and the feedlots buy this cheap grain from the Midwest, thanks to the government subsidy program, and feed a lot of the cows on their own.

MM: What can farmers do?
Ritchie: I think the model is the one that's common to all of our society... When you have a problem which is based on a conflict of economic interests, of class interests, as we have here with relations between production agriculture, meaning farmers, and the corporations on both sides, you have to look to the political arena as the place where you can find some help in re-establishing the balance of power .. . In terms of actual solutions, . farmers have sat down and gone over this throughout the 1970s and 1980s, and there is basically one piece of legislation that reincorporates cost of production price floors with supply management, and that's the Harkin-Gephardt farm bill, as it's called now under the current Congress. It will be updated and reintroduced ... in the next Congress, perhaps with new sponsors. But essentially it says that we still need ... a floor that keeps the price above a minimum [and] we need supply management to protect our land and to keep surpluses from building up, and we need some kind of ceiling to make sure that consumers are protected by maintaining an adequate national food reserve. I think the thing that has changed slightly, although it's been common since our country was first colonized by Europeans, is that we're part of an international economy. The United States has made many countries [that] buy their grain and food supplies from us very dependent on us. We need to have adequate export reserves, and food aid reserves, to meet those demands that we have created. But, at the same time we are in an international market where countries [which] are driven by the need to repay their foreign debt are willing to underprice us no matter how low the price is, so the United States cannot continue to try to operate on the international market based on the idea that by being one penny cheaper we're going to take away the market from everyone else, because that will never happen. It means that we're going to have to shift from a confrontational stance of waging trade wars against Brazil, Argentina, Europe and whatever, to a stance of being in consultation with other exporters, being in consultation with importers ... establishing a system of some kind of minimum reference price globally ... negotiat[ing] [an] end to the trade war that we're engaged in over market share, [and making] some kind of an arrangement on market share. It is in this international area that perhaps there is some new ground to be broken. . . . Farmers in the United States have been, since the early 1980s, actively meeting with and strategizing together with farmers in other countries, who basically all face the same problem, and proposing very positive, creative, well-thought-out solutions--international agreement solutions to some of these problems, which probably will get played out in the GATT [General Agreement on Tariffs and Trade] negotiations, because that happens to be the most important of these international government-to-government negotiations going on at the moment.

MM: Can farmers band together and work cooperatively to cut crop production in order to bring commodity prices up to the cost of production?
Ritchie: On a localized level, where you have a processor or supplier who does not have the capacity to bring in a product from a distance, from somewhere else, you have some potential local opportunities, although you would put that processor at a hell of a disadvantage against other people if you were to enforce higher prices for one processor and not for the others. The problem is that two-thirds of the world's population are farmers, and not all of those are subsistence farmers, producing for themselves. A significant portion of them are, with the help of modern technology and hybrids ... and World Bank financing, producing big crops. Farmers banding together in this country to try to get a baker to [pay a higher] price for wheat [would push] the baker to turn to Argentina or to Australia or to wherever, and just buy the commodity and bring it in. Then you'd have to have the government step in and control your borders, which you have to have anyhow, but no matter how you describe the scenario, your next thought is that there's a problem and there's going to have to be intervention or laws at some level. On the other hand, we're not about to let food corporations operate without government intervention at the level of health and safety. We've had too much poisoning of people, inadvertently and occasionally on purpose. We would never consider the notion of government abandoning the food supply to the dictates of the five or ten corporations which control the food production in this country. Likewise, government getting out of agriculture or getting out of trade or extracting itself, essentially means turning over the food supply to the dozen corporations who control 90 percent of the world's food trade. So when we talk about the government getting out of agriculture, what we have to think about is who does that mean turning it over to? It certainly doesn't mean turning it over to the two million farmers in the United States who are all dispersed, living in different places. It doesn't mean turning it over to the two-thirds of the world's population who are living in the countryside and farming. What it means is turning it over to the dozen corporations who control 90 percent of the world's food supply. When we discuss trade and trade negotiations, we often use the terminology, 'the U.S.-Japan trade relations.' Or farmers are told that they are dependent on exports. But what's missing is the fact that trade by definition is a class matter. Corporations are engaged in trade, not countries, not farmers, not consumers. In agriculture, trade isn't the province of the country's two million farmers. It's controlled by 12 corporations, and so trade negotiations are primarily to set the rules of conduct of the dozen corporations involved in trade, and when we're discussing imports and exports and all that, we have to always come back to the idea that, in fact, we're discussing the activities of, literally, a dozen corporations. So the idea that government can get out of agriculture is basically to say that government should abandon agriculture to a dozen corporations without any rules, regulations, or any intervening, and let the farmers figure out if they have a way to unite in large enough blocks to confront that multinational challenge.

MM: Will drought-induced commodity price increases help farmers?
Ritchie: Well, in terms of prices going up, we've seen a lot of price increase at the retail level, and of course those products were all made from grains and cereals that were bought last year under cheap prices. Whatever we've seen in retail price increases already has no basis in commodity price increases, and is strictly gouging, or, as [food processors and retailers] call it, 'anticipatory' price increases. And, again, even if the wheat in the loaf of bread was from this year's crop, where the price has essentially doubled from last year, that would add three cents to a dollar loaf of bread. I know bread in my local store has gone up a lot more than that already, and they keep telling me it's because of the drought. We're going to see price increases. But as we saw in 1972 and 1973, price increases far beyond anything justifiable in terms of increases of commodity prices. But, has this been of some help to farmers? Well, there are a lot of different ways to look at the question, but primarily, there are a few instances where farmers got full crops and thus will have a full crop times the new higher prices. But let me say again that [in 18 months] corn and wheat [almost] doubled in price, [and] are still below the cost of production. So, anyone who got a full crop and is selling corn for $2.65 is just losing a little less money. But, the point is that there is going to be some unevenness, where some people lost their whole crops and will have no income, some people lost half their crop and will sell their crop at roughly twice the price. Some people got half the crop, but that crop is very damaged in terms of quality. So although the Chicago Board of Trade may say that corn is $2.65, the drought will have caused damage to the quality so that there will be a 20 percent or more discount off of that price.

MM: How have corporations responded to the Harkin-Gephardt bill and other efforts to do something about the problems of family farms and the high cost of farm support programs?
Ritchie: The corporations have shifted their strategy in the last year to a new demand, which they call 'decoupling.' For a long time they simply said, we'll get the government out of agriculture, but when it became apparent that what that meant was spending $30 billion rather than $6 billion on farm programs, the corporations realized that it couldn't keep up like that forever. So they came up with a new theory. It's no longer supply-side agriculture, it's the deregulation, the 'decoupling,' the government abolishing of farm programs, and paying farmers kind of a transition payment for four or five years to ease them out of this, but from there on it's absolute, unbridled free market from here on out. Decoupling gained a lot of credibility because it had addressed the question of high government costs. If you abolish government payments over a five year period of time, then year after year government payments will go down. And you can simply argue that after a few years of adjustment the free market and the invisible hand will everything right. Well, the drought has essentially destroyed this argument by reminding people that for something as necessary for human survival as food, the idea of just abolishing government involvement and turning it over to 12 food corporations simply isn't going to work. And that the idea that we can just let the free market be responsible for ensuring that every year we have an adequate food supply obviously is not going to work.