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The Global Farm Market: A Crony Socialist Nightmare Mess

by Seton Motley

Our Congress may be on the verge of extruding yet another terrible farm bill.  Which has been for seventy or so years a Government-Knows-Best train wreck.  To alter slightly Ronald Reagan’s line:

Government’s view of the (farm) economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

Seven decades later, we have a worldwide Crony Socialist nightmare mess.  For instance, sugar – we are the world’s fifth largest producer.  The four above us are at least as awful as are we.

1)    Brazil.

Brazil’s gi-normous sugar industrysubsidies: $2.5 billion worth (in 2012) alone….

Has Brazil grown their government-sugar industry with decades worth of these multi-billion dollar subsidies and regulatory mandates?  Yes….

Does Brazil cut direct checks to sugar farmers?  Yes….

Does Brazil give sugar farmers loans – and then forgive and forget them?  Yes….

Does Brazil give sugar preferential treatment in the country’s pension program – essentially giving the farm sector a special break on social security taxes?  Yes.

2) India.

India Poised to Boost Sugar Exports to Asia, Mideast

India appears set to increase sugar exports to Asia and the Middle East if, as expected, the government extends production incentives to cash-strapped mills….

Jonathan Kingsman, head of agriculture at data provider Platts, said there was market talk that the government could move to give incentives to mills equivalent to up to $50 per tonne (3,000 rupees) as long as the sugar is exported….

It is difficult to know how much of this has already been priced in the market,” Kingsman said.

(Indian) Cabinet Okays Guidelines for Interest-Free Loan to Sugar Mills

The government made it clear to sugar mill owners on Thursday that the interest-free loan of Rs 6,600 crore is meant “exclusively” to pay the cane price including arrears to farmers.

3) China.

Brazil’s Sugar Ship Line-Up May Signal ‘Surprise’ Chinese Demand

China brought in 3.8 million tons of raw sugar in 2012-13, estimates Kingsman SA, a unit of McGraw Hill Financial Inc.’s Platts. That’s almost four times the amount a U.S. Department of Agriculture unit forecast at the start of last season. Purchases beat estimates as a government stockpiling program attracted more shipments….

China may phase out its stockpiling program and partially replace it with direct subsidies to cane and beet farmers as early as the crop starting October 2014, Zhao Lihua, a director at the economy and trade division of the National Development and Reform Commission, said last month.

4) Thailand.

(Thai) Sugar Subsidies Poised to Rise

Delayed reforms and the government’s plan to encourage farmers to switch from growing rice to sugar cane will drive up state sugar subsidies, says the Thailand Development Research Institute (TDRI)….

“The prime minister wants farmers to switch to growing cane, hoping that it will ease the burden on state subsidies, but she does not know that in reality the reform is unlikely to happen this year,” said….

Subsidy Spotlight: Thailand

Price supports for sugar producers that totaled nearly $10 billion in 2010, as well as low-interest loans to sugar producers.

So we have Brazil dumping money into the sugar industry in a million different directions.  India uber-subsidizing production.  China gaming the system – stockpiling product, then shifting to direct payments.  And Thailand providing multi-billion dollar price supports.

All of this central-planned directing of farm traffic – Government-Knows-Best micromanagement of the sector.

And these are just some of the myriad ways these nations – and many others – are directly and indirectly manipulating the global market.  None of this has anything to do with a free exchange of goods.

The solution? Negotiate a global across-the-board reduction in government.

This is where the World Trade Organization, usually a colossal waste of space, can actually be of some good use….

The world’s sugar-producing nations need to sit down together, each with a copy of everyone else’s lists of protectionist sugar policies. And start horse trading.

Brazil – how about if you get rid of this subsidy, we’ll each get rid of one.

Mexico – if you get rid of this tariff, we’ll each get rid of one.

Let the subsequent discussions ensue. Lather, rinse, repeat.

And then we do it on corn.  And rice.  And….

We get the idea.  Here’s hoping they do.

(Seton Motley is a consultant and the founder and president of Less Government.)