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Wednesday, November 09, 2005

Ind. Econ. Dev. - Mountains of Corn and a Sea of Farm Subsidies

"Mountains of Corn and a Sea of Farm Subsidies" is the headline to a very interesting (and long) front-page story in the NY Times today. Those who recall the "mountain of corn" photo from the NWI Times last week can compare it with this one from Ralston, Iowa photo in the NY Times story. Some quotes:

For critics of the American subsidy system, the record corn production highlights the tenuous assumptions underlying the program. Farmers are encouraged to produce as much as they can with the idea that greater exports will soak up the excess production. More recently, there are high hopes for using corn to produce ethanol for gasoline, but the infrastructure to produce large amounts of ethanol will take time.

But the huge volumes in recent years have not been matched by greater demand for American corn, and the woes created by two big harvests, along with the stifling effect of Hurricane Katrina on the transport of grains, have kept exports in check, analysts and grain traders said.

"We are still in a condition of grossly overproducing for what the market can pay, at least what the market can pay that is acceptable to our corn producers," said Ken Cook, president of the Environmental Working Group, an environmental research group based in Washington that has been critical of farm subsidies. "We can't make up the difference in the export market, and the taxpayers are on the hook."

The government spent $41.9 billion on corn subsidies from 1995 to 2004, according to the Environmental Working Group.

So far, current and future corn shipments of 550 million bushels are running 11 percent behind last year's level of 640 million bushels in early November, according to government figures. But lately foreign and domestic buyers, sensing fire-sale conditions, have started to snap up corn at historically cheap prices, said Steve Bruce, a grain trader with Man Financial in Chicago. "We have reached the saturation point where the grain elevator managers have said we just have to sell the stuff," he said.

With corn spilling out everywhere, the Agriculture Department predicted last month that American corn growers would receive an average of $1.85 a bushel for their new corn, which would be the lowest price since the late 1990's. The government is expected to release new estimates for crop production and exports on Thursday.

Thise photo and this photo are also pretty overwhelming in terms of lack of storage space.

Posted by Marcia Oddi on November 9, 2005 01:27 PM
Posted to Indiana economic development