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Economist tells farmers to grow more corn in face of bulging Brazilian bean production, Iowa farmer calls it 'over-simple' analysis

(Tuesday, March 11, 2003 -- CropChoice news) -- via The Agribusiness Examiner issue #228

PEORIA JOURNAL STAR: Instead of worrying about rising South American production numbers, Illinois soybean farmers should turn to corn, said a University of Illinois Extension agricultural policy specialist.

''Anyone who even remotely follows the commodity markets realizes that South America has changed the supply fundamentals in a dramatic way over the past ten years,'' said Robert Hauser. While the United States remains the world leader in soybean production, South American nations like Brazil have made huge gains in recent years.

Brazilian soybean production has more than doubled from an average of 18.5 million metric tons in 1991 to an estimated 41.5 million metric tons in 2001, according to American Farm Bureau figures.

Since soybean production in Brazil has expanded faster than domestic use, the South American nation is aggressively seeking exports. That puts the United States and Brazil head-to-head when it comes to supplying soybeans to the world market, he said.

Hauser is bothered by reactions of U.S. farmers after visits to South American bean fields. ''We lose perspective when we talk about the need to beat Brazil or Argentina,'' he said.

A number of factors are responsible for the rise of soybean farms in South America, said Hauser. He cited tropical climate, soil fertility and cheap land as some of the reasons for the rise in soybean production in Brazil.

''Economic conditions and inflation (in South America) have stabilized over the past eight years. These factors not only have made it possible for South America, particularly Brazil, to engage in soybean production in a big way, but there are strong signs that the expansion is far from over,'' said Hauser.

After comparing a number of costs, South America has a distinct advantage in growing soybeans over the United States, he said.

''We have to take the economic signals as given. The market is telling us today to shift away from soybeans towards corn,'' said Hauser.

U.S. farm acreage devoted to soybeans has zoomed since the 1930s when soybeans began to be processed industrially for edible oil and proteinmeal. Soybean oil is now the most widely grown protein/oilseed crop in the world.

While corn has long been king in the Midwest, the number of acres devoted to soybeans has continued to expand. In Illinois, for example, farmers planted 11,500 acres of corn this year along with 10,400 acres of soybeans.

But Hauser doesn't expect U.S. farmers to stop producing soybeans. ''The transition will take place over a long period of time. It will be a gradual shift,'' he said.

While both corn and soybean prices have been depressed in recent years, corn offers the better opportunity for profit at this time, he said.

''Current market prices are signaling U.S. farmers to move to a crop in which they enjoy a comparative advantage --- corn. Without the soybean loan rate program, this signal would be much stronger,'' he said.

Hauser recognized his proposal isn't universally popular. ''This idea (of switching acres from soybeans to corn) is not well received by many groups in the United States,'' he said.

But the U.S. soybean producer is like a busy executive who employs a typist, Hauser said. ''The motivation is to free the executive to do other, productive things,'' he said.

''In the case of soybeans, U.S. producers may find themselves in the same situation as the executive, letting South America grow the soybeans because of greater incentives in the United States to produce corn,'' he said.


Dear Dr. Hauser:

I read in an article from the Peoria Journal Star (November 19, 2002, see above)) where you suggest family farmers like myself are supposed to grow more corn and less soybeans because Brazil will be growing more soybeans at less cost. With all the tools in your economics toolbox, surely there is something more for people to understand. Here in Iowa, many farmers already went down that road in years past resulting in predictable problems with crop diseases.

Now that the corn-soy rotation has been in place for so many years, soybean diseases are rearing their ugly heads, so your suggestion is already being adopted. But what will happen when the corn diseases proliferate again, and even more nitrates pollute our waters? Your over-simple analysis may suggest monocropping, but mother nature will dictate deeper analysis and solutions.

Actually, this situation perfectly illustrates the inadequacy of the free market to achieve a beneficial, long run outcome, and the need for 21st century policies to avert an ever-looming disaster. According to your theory, farmer behavior should only be determined by market prices --- prices being driven down by unecological, subsidized production far, far away.

First, costs to the environment or rural society are not being factored in to market prices. Second, since the corn and soybean markets are really feedstuff markets that want protein and energy at least cost, producing corn or soybeans will be the only choices in many farming areas, and now you say corn must dominate. A more ecological but less profitable solution involving crop rotations with hay, pasture, and small grains is obviously precluded.

These crops fit a diversified operation that includes livestock, but the cheap corn and soybean meal, instead fuel livestock production in corporate livestock factories all over the world. Meanwhile, when family farmers close their barns for the last time (very apparent in dairy country), pasture and hayland gets plowed up to produce more corn or soybeans to add to that ever growing global stockpile. This is a downward spiral --- a race to the bottom.

Following the signals of a "free" market will only mean a legacy for our children and grand children of empty rural communities, diminished biodiversity, and loss of our most precious and democratic institution, the family farm. I beg that your valuable skills as an economist be used, together with democratic values and a sense of history, to offer deeper analysis and help our modern global society out of this alarming dilemma.

The National Family Farm Coalition believes a sensible farm program and international commodity and environmental agreements to set up pricefloors, conservation goals, and grain reserves are what will serve family farmers, consumers, and the environment. If you can lend us a hand, we'd be much appreciative.

George Naylor, President of the National Family Farm Coalition
Corn and soybean farmer from Churdan, Iowa