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Farm and Food File

By Staff | Aug 19, 2020

While most county and state fairs are Covid casualties this year, a giant, buzzing Ferris wheel-America’s relationship with China-continues to spin at such a dizzying pace that, sooner or later, it will break to harm riders and bystanders alike.

While that idea may fly in the face of current beliefs, it doesn’t fly in the face of current facts. China, after all, plays a bigger, more encompassing role on the world stage than just a market for U.S.-and increasingly, Brazilian-farmers.

In the last year alone, China has sparked or fueled new or ongoing trouble in Hong Kong, the South China Sea, India, and Taiwan.

These aggressive actions have become so overt that even the “Art of the Deal” Trump Administration has had enough. On July 13, Secretary of State Mike Pompeo “declared formal opposition to a swath of Chinese claims in an unusually direct challenge to Beijing’s efforts to assert control” in the South China Sea, reported the Wall Street Journal.

Unusual or not, two sharp-eyed China watchers beat Pompeo to the punch. Urban Lehner, the former editor-in-chief at DTN/The Progressive Farmer, spent nine years as a Hong Kong-based newspaper editor and publisher before taking over at DTN.

Now retired, Lehner used his July 10 column to ask a simple-and simply loaded-question: “Can the U.S. and China be both serious rivals and big-time trade partners?”

Part of the answer he offers comes from a “Chinese analyst with affiliations to the government” who told the Wall Street Journal, “‘You can’t keep asking us to buy your stuff and at the same time keep beating up on us. That’s not how it works.'”

Worse, Lehner writes, China’s “heavy-handedness” in Hong Kong “suggests the Chinese Communist Party has given up on acquiring Taiwan through peaceful persuasion.” That means “China’s only way of winning back Taiwan, which it clearly wants to do, is by force.”

Such an aggressive act by China would be an unfathomable disaster for the U.S., the Trump Administration, and China’s biggest, happiest grocers, American farmers and ranchers.

“I hope my pessimism proves unwarranted,” concludes the seasoned editor, and “I don’t know many China experts [that] share it.” But, he adds ominously, “I know some do.”

The next day, July 11, New York Times columnist Ross Douthat not only tackled China’s new taste for regional bullying, he also chastised U.S. presidents past and present for their “active collaboration” with “China’s ruling party” wherein China “reaped the benefits of globalization without paying the cost”

Douthat is no lily-livered liberal; he’s a bona fide conservative who, like Lehner, sees China’s aggression toward Hong Kong, Taiwan, and South China Sea neighbors as “an attempt to reach greedily for Greater China goals because the odds of success look better now than in the further future.”

In fact, he adds, “China itself is peaking” and its legendary iron-fisted control is slipping.

By the 2040s, Douthat notes, China’s “slowing growth rate may leave it short of the prosperity achieved by its Pacific neighbors” and its fast-aging population won’t be able to grow the economy quickly enough to ever catch up-especially to its hated rival, India.

He then delivers his swift coup de grace: “Instead of a Chinese Century the coronavirus might be ushering in a Chinese Decade, in which (General Secretary) Xi Jinping’s government behaves with maximal aggression because it sees an opportunity that won’t come again.”

That relatively good news-that China’s global influence may be cut short by its regional thuggery-could be bad news for American farmers and ranchers who would be on the wrong side of that fight.

In fact, maybe that’s why China is buying up every loose bushel of grain it can get its hands on right now: The bin doors might close soon and its leaders know it.

The Farm and Food File is published weekly through the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

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Farm and Food File

By Staff | Aug 19, 2020

It turns out that the old Chinese curse, “May you live in interesting times,” is neither Chinese nor a curse.

According to multiple sources, the adage’s roots reach back to a late-19th century member of Parliament commenting on how Great Britain’s expanding empire had made for “interesting times.”

True enough for the empire’s builders; not so much for their subjects.

Parallels abound in the powerful reach of today’s corporate empires. For example, Apple Inc.’s share price rose 10 percent, or $172 billion, July 31 on news that the company would offer a 4-for-1 stock split.

The staggering rise is, incredibly, more than two times the U.S. Department of Agriculture’s (USDA) estimated value of the 2020 U.S. corn and soybean crops combined.

Such are today’s interesting times: the expense, sweat, and risk required to grow America’s two biggest field crops this year are but half the value, about $85 billion, of a single corporation’s one-day stock rise.

The “times,” however, aren’t the culprit. American agriculture has been headed in this high yield, low value industrial direction for decades. This year’s pandemic, piled atop unwinnable trade fights and a renewed U.S./China shoving match, just moved up the arrival date.

Two other ag sectors, poultry and pork, are already industrialized and a July 2020 report from USDA’s Economic Research Service (ERS) confirms that a third, dairy, has joined their ranks. According to ERS:

  • In 1987, half of all U.S. dairy cows were in herds of 80 or fewer animals; half were in herds of 80 or more cows. In 2017, that mid-point was an incredible 1,300 cows.
  • “In 2016, total costs of [milk] production fell steadily as herd size increased, from $33.54/cwt. in the smallest herds (10-49 cows) to $17.16/cwt. in the largest herds (2,000 or more cows).”
  • That difference made all the difference. The cost to produce a gallon of milk “in the smallest herds” was about $2.89, or almost twice the cost, $1.48 per gallon, for “the largest herds.” (One cwt., or hundredweight, equals 11.62 gals. of raw milk.)

That wide gap was jet fuel for dairy’s expansion. Since 2002, says ERS, almost every dairy with less than 500 cows has lost money while most dairies with over 500 cows have remained profitable.

As the report makes clear, there is almost no possibility that family-operated dairy farms will survive another generation of today’s rapid industrialization without major changes in dairy policy and large government subsidies. Few, however, are advocating either.

In many ways, it’s 2002 for grain and soybean growers. Years of rising global competition, improved technology, and fair weather have brought nearly a decade of increased stockpiles, falling prices, and rising government intervention.

Those trends-especially rising government interventions-now appear semi-permanent. Indeed, a July 29 farmdocDAILY post sees this year’s nearly $30 billion in “ad hoc,” government farm payments as a “new plateau” that likely will “then be incorporated into the farm bill safety net.”

It’s happened before, its writers explain. The 1973 Farm Bill devised a target price/deficiency payment scheme that increased annual farm subsides from $1.5 billion a year in the 1970s to nearly $9 billion in the 1980s.

After Freedom to Farm became law in 1996, “average payments increased to $15.9 billion per year” from 1998 to 2006.

In 2019 and 2020, “farm payments [are] averaging $23.2 billion. Eighty-four percent were ad hoc”

The question now, they ask, is are these payments “a statement by policy that market-based farm prosperity remain(s) an attainable aspiration in the near future [or] an acknowledgement by policy that market-based prosperity is not attainable in the near, perhaps intermediate, future?”

Here’s a more different way to ask the same question: Since increasing the farm payment plateau in the 1970s and 1990s never brought “market-based farm prosperity” either time, why would a third increase work?

Maybe the answer isn’t more money; maybe it’s a different policy.

At least let’s consider it before independent corn and soybean farmers become as endangered as independent hog, chicken, and dairy farmers.

The Farm and Food File is published weekly through the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

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