Farm subsidies and high prices

NY Times:

Americans are in sticker-shock over grocery prices, while people in developing countries are rioting over food shortages. And across the heartland, American farmers are enjoying record incomes, but losing sleep over rising expenses and turbulence in the commodity futures markets.

Here on Capitol Hill, though, it is pretty much farm politics as usual.

As Congress works toward final passage of the farm bill, it is poised to continue most of the existing farmer subsidy programs, including about $5.2 billion a year in so-called “direct payments” that will be disbursed even as net farm income is projected to hit a historic high in 2008.

The farm bill, which comes along once every five years and will cost upward of $300 billion, in fact will do little to address many of the most pressing concerns. It will not change biofuel mandates that are directing more corn to ethanol and contributing to a global rise in food prices.

It will do little to ease worldwide food shortages. And at a time of high volatility in the futures markets, it will not require tougher regulation.

In other words, Congress seems oblivious. And longstanding critics of American policy are piling on.

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I really have not notice sticker shock at the Super Walmart. A few weeks ago I bought a five pound bag of rice on sale for around one dollar. If it were two are three times that now, I would not think it unreasonable. I got two pound bags of black beans on sale for about fifty cents. The prices of most frozen items seems stable, as does the price of most produce.

It is possible that the current shortage caused by a drought on Australia is only being felt in recent weeks. I have seen stories where Walmart and other large retailers are limiting the amount of rice that may be purchased. I haven't had reason to test that for obvious reasons, but at this point I think the sticker shock argument is inflated. If you have had different experiences, fell free to comment.

As for the farm bill, it has long since lost any relationship to what happens at the end of the supply chain. It is all about special treatment for a special interest group that wants to make sure it gets its special treatment regardless of market realities. The only thing shocking about this story is that the NY Times is pretending to be surprised.