Many on Capitol Hill are quick to point out that “if it walks like a duck and talks like a duck, it’s a duck.”
What they never add is that this little blinding glimpse of the obvious has never stopped legislative quackery in the past, and it’s not stopping it now.
For example, as you read this, 2012 crop insurance payouts are likely growing by $1 billion or more per week because of the spreading drought in the corn-soybean Midwest. The disaster means short crops, tall commodity prices and certain-to-rise food prices.
It also means crop and revenue insurance payments of “ginormous proportions,” says Bruce Babcock, an economist at Iowa State University.
How big is ginormous?
If the drought continues to spread, “we’re talking tens of billions — maybe $30 billion, $40 billion or more — in crop insurance payouts this year,” says Babcock.
In Illinois alone, the payout could be $3.2 billion, estimates University of Illinois economist Gary Schnitkey.
And that’s just for corn.
Toss in the state’s soybeans, then add the drought’s effect on corn and bean yields from Ohio to Kentucky and Nebraska to Minnesota and, quickly, Babcock’s “ginormous” estimate is more realistic than fantastic.
While most farmers buy crop insurance (which is actually crop revenue insurance), it’s a terrific bargain — taxpayers picked up $7.4 billion of last year’s $11.9-billion national cost. That means insured farmers can recover a substantial portion of their lost income but consumers, the same folks who paid 62 cents of every dollar of crop insurance premium in 2011, aren’t insured against anything — especially not against higher, drought-driven food prices.
And food prices will climb. Central Illinois cash corn prices rose from $5.80 per bushel on June 1 to $7.73 on July 9, an explosive 35 per cent spike in five weeks. Cash soybean prices were up 23 per cent over the same period.
Additionally, nothing in current crop, weather or government stocks reports show any evidence of retreat. Indeed, in its July 11 outlook, USDA estimates fell 12 per cent for corn and nearly eight per cent for soybeans.
Even if the weather moderates, commodity and food prices likely won’t because the government’s cupboard is as bare as Mother Hubbard’s.
In its latest report, the Commodity Credit Corporation (USDA’s commodity warehouse manager) reports there is not one teaspoon of sugar, one pound of peanuts, one slice of butter, one wheel of cheese, one bushel of wheat or even one chickpea in the USDA’s pantry. So it has nothing — nada, zip, goose egg — to release into the marketplace to slow or moderate what’s certain to be fast-climbing food prices in the coming months.
Worse, all that bad news will soon be compounded by more congressional quackery. Both the Senate and House versions of the not-yet-passed 2012 Farm Bill use crop insurance as their new tool to “reform” farm-program spending.
Only Congress could come up with a core farm and food policy tool — crop insurance — that doesn’t insure crops and doesn’t ensure adequate food stocks. And then sell this “reform” as a “cost saving” in the year when, in fact, crop insurance payouts will demolish any and every record.
Hey, if it walks like a duck and talks like a duck, it’s probably a Farm Bill.