Apr 24, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin

Perspective: Spot the Flawed Business Model

January 8, 2014
By: John Phipps, Farm Journal Columnist
 
 
John Phipps

The long-term consequences of the government shutdown, debt-limit debates and farm bill delay are unknown. Congress’ favorability ratings have fallen to all-time lows. President Obama’s ratings have dropped to less than 40% but are lower in farm country, given the overwhelming Republican bias.

Now, add these facts. If you grow sugar, cotton or rice, government actions might provide nearly all or a majority of your profit through subsidies or protectionist trade policies. Certainly sugar, and probably cotton and rice, would be globally non-competitive without legislative support. Dairy, too, would require a massive transition to free markets but would certainly survive.

Corn, soybeans and wheat are somewhat less dependent on government programs, with one major exception: the ethanol mandate. However, recent studies suggest the industry has matured enough to survive without mandates. Still, as prices drop, government supports become significant fractions of profits.

Growers don’t just admit this; they actually justify it, anxiously pointing out that without taxpayer support, their farms would suffer.


"Even as we denounce and often loathe big government, farmers lobby for more of the same."


What kind of business plan centers on the actions of people we disapprove? We are betting the farm on people we don’t trust or even like.

Psychologists and economists find more evidence that happiness and life satisfaction depend on a sense of control. By giving our futures to people we hold in near contempt, we ensure any outcome will produce less of both. Either we lie to ourselves about doing it on our own, or we fume about the incompetence of others affecting our lives.

Even as we denounce and often loathe big government, farmers lobby for more of the same. Can we press for entitle­ment reforms and spending cuts and then simply imagine the budget cut angel will pass over us?

Meanwhile, the tools that have allowed our congres­sional patrons to deliver government dollars are slipping away: linkage to food stamps is in serious jeopardy, no earmarks to grease the vote swapping with urban representatives and compromise has become an electoral hazard. The new politics of scarcity means there is not enough to go around from the start, so the traditional pot sweetening will not be available to reach an accord.

Gerrymandering bulletproof districts made too many House members deaf to all but narrow views. If the Supreme Court duplicates unrestrained campaign donations from individuals, farmers need to Google what the Koch brothers and their cohorts think about ag subsidies. Our "legislative water carriers" are operating in a desert.

Distance D.C. Now imagine pitching this business model to a group of investors. Not even a masterful PowerPoint presentation could sell it. Here’s a crazy thought: What if farmers distanced themselves from actions in D.C.? Suppose we developed a private crop insurance system instead of the "Medicare for farmers" we now demand?

After land costs (where all subsidies eventually go) have adjusted, we would have a system that could be tailored to individual farms, be subject to vendor competition and market forces, and be virtually immune to tomfoolery in Washington.

For heavily subsidized crops, such changes will be painful. But this is a risk and cost handed down by predecessors who thought they could forever depend on a disappearing style of politics. It might be time to consider tobacco-style buyout lifeboats.

Business plans can appear to defy logic for a while. Remember pets.com? However, when the wheels come off, the results can be cataclysmic. My guess is that future farmers will look back on our deliberate economic dependence on the wrong people and say, "What were they thinking?"  TP

John Phipps, a farmer from Chrisman, Ill., is the TV host of "U.S. Farm Report." Contact him at johnwphipps@gmail.com. For local station listings, log on to www.USFarmReport.com.

See Comments

FEATURED IN: Top Producer - January 2014

 
Log In or Sign Up to comment

COMMENTS

No comments have been posted



Name:

Comments:

Legacy Newsletter

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
Ask Kevin
 

Follow Us

Facebook Twitter You Tube
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions