A new way to do farm policy? Crop insurance savings accounts

Debates over government shutdown and the debt ceiling have recently overshadowed the drama surrounding the farm bill.  The farm bill will eventually be back on the table, and when it is, the time for fresh ideas has arrived.

In 2012, $14.9 billion were paid out by the USDA in farm subsidies, with Oklahoma receiving $382 million.  The latest iteration of the farm bill is moving more in the direction of "crop insurance" rather than direct subsidies (although those are still left on some level for some commodities).  Crop insurance sounds like a move in the right direction.  The trouble is that it is hardly anything like the insurance you and I pay for our car our house.  The insurance payments are heavily subsidized and benefits often flow to large insurance companies. 

According to this article in Bloomberg: 

The government subsidies show how a program created to safeguard the nation’s farmers has evolved into a system that in most years all but guarantees profits for insurers. In 2012, taxpayers spent $14 billion paying more than 60 percent of farmers’ insurance premiums, the companies’ operating costs and the lion’s share of claims triggered by a historic drought, according to the Congressional Research Service (.pdf).

What is to be done?

An interesting idea was recently proposed by Octavio Ramirez and Greg Colson, agricultural economists at University of Georgia.  They write: 

Given the escalating costs of crop insurance to taxpayers and the lingering doubts of whether it can provide an effective and equitable safety net for all producers, the natural question emerges: Is there an alternative safety net scheme that could be broadly applicable at a lower cost to taxpayers? One possibility, which has been debated off and on during farm bill discussions since the mid-1990s, is a system based on individually owned savings accounts that would serve as a backstop in times of negative revenue shocks.

They describe further: 

The proposed CISA system is similar to programs already used in the United States and internationally for health and unemployment insurance, but is designed to mimic the current crop revenue insurance programs with which farmers are now so familiar. Under CISA, producers would be eligible to annually deposit a pre-determined percentage of their before-tax income in an interest-bearing personal savings account. Farmers could then withdraw money from the account when their revenue in a particular year falls below a pre-specified threshold. For example, akin to traditional crop insurance, if a producer's revenue is just 65% of his or her past five-year average and the pre-selected revenue guarantee was 75%, then he or she would be able to withdraw an indemnity equal to the 10% difference. If the farmer, at some point, does not have a sufficient CISA balance to cover a justified withdrawal, the required funds are lent to the account by the overseeing government agency at the same interest rate earned on savings.

As with any proposal, there are some downsides, but this is just the kind of free-er market thinking needed in food and agricultural policy.

China just bought 9% of all Ukraine's arable farmland, or did it?

Yesterday it was reported that: 

China has inked a deal to farm three million hectares (paywall), or about 11, 583 square miles of Ukrainian land over the span of half a century—which means the eastern European country will give up about 5% of its total land, or 9% of its arable farmland to feed China’s burgeoning population.

and  

Given its dwindling available farmland and expanding population, China has been among the most aggressive. The country eats about one-fifth of the world’s food supplies, but is home to just 9% of the world’s farmland, thanks to rapid industrialization and urbanization of the formerly agrarian nation. Its deal with Ukraine is its biggest farmland investment yet. Since 2007, China has bought farmland (pdf) in South America, Southeast Asia and Africa.

But, an update was posted this morning: 

Ukraine’s KSG Agro released a statement today, Sept. 24, denying reports that it had reached an agreement to sell 3 million hectares to a Chinese firm. Hong Kong’s South China Morning Post had reported a deal between KSG Agro and China’s Xinjiang Production and Construction Corps, (XPCC) in which China would be able to farm the area for up to 50 years. 

 

How to Make Beef without Killing the Cow

An interesting video on how to make meat in the lab

The perfect American pig?

My wife forwarded me this story, which is interesting for a number of reasons.  It begins:

From California's Silicon Valley to the cornfields of Iowa, former computer engineer and now pig farmer, Carl Blake is reinventing the way that Americans eat their pork. Through his technology-based approach and good ol’ fashioned farming, he says he has bred the perfect tasting American pig.

There are a couple things to like about this guy's approach.  First, it shows that small-scale niche farming doesn't have to imply a rejection of modern technology.  

The quality of the pork also has to do with what the pigs are fed. Blake uses hydroponic technology, which grows fresh food in water. He is able to pay about $100 for seeds that will grow one-ton of food in six days. Compare that to the price tag of conventional feed prices of $500-$600 per ton. Blake said he doesn’t understand why more farms don’t use the same technology but hopes that it will eventually catch on.  

I'm a little skeptical about the claim that feed from hydroponic technology is substantially cheaper than typical hog feed, once one factors in the cost of labor, capital, etc.  But, more power to him if he can make it work.  And, if it is really increases quality and reduces costs, there's a good chance Tyson, Smithfield, and other large hog producers will be following shortly behind.

There are two things about this story that are worth picking on.  First, is something of a clarification.  Blake is right that meat from the so-called "heritage breeds" of pork are often juicier and tastier (and fatter) than what you'll normally find in the grocery store. As Blake put it:

If you wanted white meat, you buy a chicken. Pork is not meant to be a white meat,

But, we need to ask why the large hog producers make pork this way.  One is that it is probably healthier (at least in terms of fat content) and because, for most people, price trumps quality.  It is easy to decry "chicken-like pork" in the grocery store, but I think it is useful to take a step back and ask why this is the pork we have, and it is a result of a grand competitive process of consumers trying to tell hog producers what they want via their wallets at the store.  We all want cheaper pork.  We all want tastier pork.  That's not controversial.  The interesting thing is to see how that trade-off is manifested in the market, and at least have some respect for the outcome that has emerged.  Now, that's not to say there isn't merit in trying to grow a different kind of pork for someone who particularly values quality or has a few more $ to spend.  

Finally, I was intrigued with the farmer's claim that: 

This is an American pig that I developed in America and I developed it here in Iowa.

I think I know what he's getting at, but a little history is useful too.  Did you know hogs are not native to America?  They came over once Europeans started trekking back and forth in a process referred to as the Columbian exchange.  Here's a neat picture (taken from here) of some of the foods that are "new" to America:

Does Being Fat Make You Poor?

It is often asserted that obesity is associated with all kinds of bad outcomes, one of which is lower wages.  There had been several studies (such as this one) finding such a correlation.  I even mentioned the obesity-wage-penalty in The Food Police  when asking whether obesity is a private or a government matter (a wage penalty would suggest yet another personal, private reason why one would worry about their own weight).

However, a new research paper suggests the wage-penalty story may be wrong, or at at least misinterpreted.  Here's the abstract:

Women's wages and employment probabilities do not follow a linear relationship and are highest at a body weight that is far below the clinical threshold of obesity. This indicates that looks, not health, is the driving force behind the adverse labor market outcomes that overweight women are subject to. Further support is lent to this notion by the fact that wage penalties for overweight and obese women are only observable in white-collar occupations. For men, on the other hand, bigger appears to be better.

In short, heavier women in white collar jobs earn less than thin women in white collar jobs, but it is mainly a "beauty premium"  rather than an "obesity discount."  Men, apparently, can eat what they want without fear of reduced wages.