Ken Goudy thinks there is more evidence than ever that the greatest threat facing farmers is global overproduction of food.
Goudy heads Focus on Sabbatical, the group trying to convince farmers that sustainable grain prices are possible only if they manage supply.
He argues that overproduction was bad enough when FOS began, but it will become worse now that it appears the production potential of Brazil, Russia and Ukraine were badly underestimated.
Cheap land, government policy and weak currency in those countries will fuel grain production, outpacing demand and pushing prices down. Market theory would say that lower prices would shrink supply. But the experience is that when prices drop, farmers try to maintain income by raising production.
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Goudy notes that the lower production costs of Brazil and the former Soviet republics could also help fuel livestock production.
To avoid this, Goudy says North American farmers should pay Brazilian farmers not to grow. The cost would be more than made up by higher oilseed prices.
For the plan to succeed, Goudy thinks the owners of 80 percent of land in production in the United States, Brazil, Canada, Argentina and Australia would have to sign on to the plan. They would take 35 percent of their land out of production, forcing, Goudy estimates, a doubling of grain prices. Buyers would come to respect the grain growers’ cartel as they do the Organization of Petroleum Exporting Countries.
The trouble is that while it might help farmers collectively, individuals could benefit from breaking the agreement, expanding production and selling at the high price created by those playing by the rules.
Who will enforce the rules? In OPEC, each member-government forces its oil producers to conform. But the Focus on Sabbatical proposal has no role for government.
Goudy replies that if nothing is done, grain prices will become so dismal all farmers will naturally see that their true self interest lies in collective action to reduce production.
Still, it is hard to see how such a global undertaking would succeed, even if there is some rationality to it.
If nothing else, the Focus on Sabbatical group shows that farmers’ problems, and perhaps solutions, have a global dimension.
It is increasingly important to see producers in other countries not as competitors, but as fellow farmers with the same ultimate goals.
