Tuesday, June 17, 2008


Flooding And Food Prices Not Related

Special Series Commentary

(June 17, Muscatine, IA) This gritty eastern Iowa city is a departure point for much of the grain produced within a 75 mile radius. Sitting on the banks of the Mississippi River, many large grain elevators load barges that will carry their cargo to points south specifically down to the Port of New Orleans. Likewise, the north bound traffic on this river is also vital to agriculture. Barges laden with tons of fertilizers, dry and liquid, come up, are off loaded here to be stored, distributed and ultimately applied to crop land. Oddly, the majority of agriculture related traffic on the “Mighty Mississippi” today is the result of the global economy. Grain is exported and fertilizers are imported. It appears to be a year round cycle with hundreds of semi trucks entering and exiting this otherwise nondescript city daily.

The recent flooding in Iowa and elsewhere in the upper Midwest is being cited as a prime cause for the increases in food prices to come. Indeed, the interruption of local commerce and production agriculture resulting from the extensive flooding only provides a partial, after the fact, explanation for the skyrocketing costs Americans are paying (and have been paying for months) for groceries. Food, of all sorts, will continue to increase in price but this is the continuation of a disturbing trend that was in full bloom prior to the first corm field being lost to flood waters.

In a sense, the flood, as devastating as it is and will be for thousands of Iowans, is a convenient cover story for agribusiness. The commodity markets have responded, speculators are salivating and farmers will collect their subsidies, crop insurance and other forms of government aid. The truth is that food prices began to increase as the agricultural industry saw a more lucrative, more subsidized, more appealing market for corn and soybeans. Iowa has experienced a boom of sorts as the idea of renewable energy, Ethanol and soy bio-diesel have been embraced as the golden calf. Suddenly, growers were planting hybrid, genetically modified seed corn and beans containing traits that would make these crops more suited for industrial use rather than livestock or human consumption. High starch and fructose corn was out, high alcohol corn was in.

While corn and soybeans have long had a wide variety of industrial uses, the infusion of federal money, grants, FDA low interest loans, private venture capital, as well as local investors, accelerated the rush to jump aboard the Ethanol and soy Bio-diesel bandwagons. This year alone Iowa farmers took over 127,000 acres out of the Conservation Program that used to pay them NOT to farm. These acres were returned to production agriculture, apparently farmers, “The Original Environmentalists” realized there was more money to be made in production than in conservation. The CRP payouts, as they are known, were just another federal handout under the guise of preserving natural resources, wildlife and allowing nature to have her way albeit 10 or 40 acres at a time.

As the federal government was literally paying farmers not to farm, they were also stuffing their mailboxes with subsidy checks. The giant agribusiness concerns were also busy giving out rebates to dealers and farmers alike. The federal crop insurance program was, and remains, a charade. In many cases simply by purchasing crop insurance, whether there is a crop lost or not, results in a payout to the policy holder. Even a farmer producing a bumper crop and selling his yield can still collect crop insurance under the well hidden fine print that only they seem to be aware of.

Now, the outcry that the price for food, of groceries of all sorts is steadily increasing across the country, there is a flood to blame it on? This is beyond disingenuous; it is hypocrisy at its best.

The Iowa farmers will fair well through this crisis. The average Iowa won’t. They haven’t access to the federal coffers as do their neighbors. All Americans will continue to pay ever ballooning prices for food as long as the “system” incentivizes farmers to produce an industrial product rather than a source of food, food stuffs and ingredients.

This commentary is part of the TBC series investigating American agriculture with our team of correspondents and contributors in Iowa.

We wish the citizens most impacted by the floods all the best.

Fritz Bingell, in Iowa, writing for TBC

Copyright TBC 2008 © All Rights Reserved

No comments: