Here Comes the Farm Bill

A new farm bill is expected in 2012, which means 2011 will put us right back into the thick of the debate about reforming U.S. farm policy. Bread for the World worked on farm bill reform in 2007-08. In the end, the bill that passed didn't look much like reform.  

Much has changed in farm country since then. The 2012 Hunger Report, which will come out in November 2011, will be about food and farm policy and have the obvious intent of influencing the farm bill debate. Over the next year, here at Institute Notes we'll be blogging regularly about issues related to the farm bill.

Currently one of the most interesting farm-bill issues to me - flying relatively quietly under the radar for now, but one that could emerge as a useful lever for reformers - is the extraordinary rising cost of farmland across the Midwest. We may be seeing an asset bubble building, mostly due to high grain prices and the effects of ethanol subsidies.

From the Wall Street Journal, came this ominous sounding editorial yesterday:

“The overall U.S. economy may be struggling, but you wouldn’t know it from a visit to the Farm Belt. A boom is under way across much of the rural Midwest, with agricultural land prices growing at a double-digit clip and farm auctions in certain counties fetching record sales.

“One question to ponder: Is this boom rooted in genuine economic gains, or is it another Federal Reserve-induced asset bubble? We lean toward the bubble view.

"After a very detailed analytical look at several economic variables, we hope Fed Chairman Ben Bernanke is right when he says asset bubbles and price spikes in commodities are nothing to worry about. Of course, he said the same thing about housing and oil in the last decade. We’re not predicting an imminent bust, but we do hope someone at the Fed is watching prices grow in farm country.”

So what's this got to do with farm bill reform? Given how we got into the Great Recession, I think the expression "asset bubble" has about as toxic a connotation as you can get these days. The Journal editorial seems to be putting the blame on the Fed Chairman, but the real reason for the asset bubble are the government policies designed to prop up wealthy farmers and ethanol blenders, which have the knock on effect of articifically elevating the land values where the subsidies are going. If the bubble bursts, or rather when the bubble bursts, that means everyone living in those areas will suffer the effects. 

I believe this can be a lever for reformers to grab onto.