Export and Die
Trading topsoil for VCRs
December 9, 1982
The importance to Illinois farmers, and thus to Illinois, of the export market for grains was underlined by the Chinese government’s cutbacks in purchases in response to the Trump administration’s clumsy meddling in global trade. But farm exports have been an issue since the 1980s, when I wrote this piece that marshals evidence—not hard to do even for a reporter of even my middling skills—that a farm policy based on exports costs the U.S. more than it costs any of our customers.
At first glance the near-disappearance from Illinois fields of the ringneck pheasant would seem to have very little to do with unemployment in North Carolina. Nor is the destruction through siltation of Lake Decatur often linked with the debate over the sale of gas pipeline technology to the USSR. But it does, and the links which bind them are made of corn and beans.
Unpleasant as it is, I ask you to recall some recent remarks by the regrettable Mr. Reagan. It is okay for the U.S. to ban the sale of pipeline equipment to the USSR while at the same time selling that nation much-needed grain because (he reasoned) the pipeline will earn badly needed hard currency for the Soviets while the purchase of U.S. grain deprives them of it. Our European allies didn't buy that argument, but U.S. farmers did, including those from Illinois, who export a disproportionate amount of their grain each year.
One can understand why. If Mr. Reagan's assertions are correct, selling grain to the Ruskies affords the farmer a chance to make profit patriotic. (There has always been something unseemly about our farmers trading so earnestly with our ostensible enemy, after all.) Soviet purchases of Illinois grain thus indubitably help the farmers. But do they also hurt "the Russians?"
Not in the opinion of Jan Vanous, an economist with a Washington consulting firm. Last month Vanous reminded readers of the New York Times that supplies of oil and especially natural gas in the USSR are plentiful and relatively simple to extract. This is not true of food, for the growing of which the Soviet Union is ill-equipped by both climate and ideology. As a result, said Vanous, "From an economic point of view, it is extremely profitable for the Soviets to import grains and food in exchange for energy."
How profitable? Vanous calculates that the value of the grain which the Soviets imported in 1981 was the equivalent of 29.2 million metric tons of crude oil. Had they produced that grain themselves, it would have cost them labor and capital equal to 159 million tons of crude. The savings? Roughly $32 billion. "By importing rather than producing grain and other food," concluded Vanous, "the Soviets can divert their capital and labor resources to other uses . . . and in fact use the increased export earnings to buy more of other goods from the West."
The President, of course, is an amiable blockhead who has added two plus two on topics such as Social Security, tax policy, and defense and gotten five every time. It should not surprise us that his export arithmetic should also be faulty. But I am less worried about how much the grain trade is costing the Soviets than about how much it is costing us.
Since 1973, when the Soviet grain deal and the abandonment of massive U.S. farm subsidy programs set them free to deal on the open world market, farmers have looked to exports to absorb the surpluses which in the '50s and '60s they had sold to the taxpayer. That brief flourish of demand pushed grain prices up—for a while. Eager to tap this gold mine, farmers everywhere rushed to buy more land and bigger equipment. To cover their rising costs, farmers had to produce more and more bushels.
The resulting surpluses drove down prices, forcing them to plant even more. Already laboring under the burden of their folly, farmers in the late '70s also had to contend with ruinous increases in fuel and fertilizer costs, a slump in grain prices caused by their own furious overplanting, and zooming interest rates—the last an especial burden at a time when many crops had to be planted using money borrowed against the hope for a better year next year. Embargoes forced foreign buyers to alternate sources of supply, yes, but the export boom was doomed anyway; born of drought, it was smothered by bumper crops abroad.
The economic effects of the over-extension of grain production are apparent. Farm-state banks are perilously stretched, delinquencies are on the rise, land prices are falling, and Washington is trying desperately and at great cost to the taxpayer to figure out someplace to put all the unwanted grain. But there have been other effects, mostly environmental, that are less visible if no less unfortunate. The rush to plow more ground has decimated the countryside. Hedges in central Illinois were ripped out, fields plowed right up to the fences, land in pasture or forage crops planted instead in corn or beans. (Farmers which had run diversified grain-and-livestock operations sold off their animals in order to specialize. Cash receipts from grain sales and livestock had been roughly equal in Illinois until 1970; by 1980 cash receipts for crops were double those for livestock.)
The result has been a calamitous increase in the rate of soil erosion from Illinois farms. Row crops by their nature are more erosive than forage or pasture; in addition, some soil conservation devices such as grassways and terraces built in the '30s were too small to accommodate today's bigger machines and so were simply plowed under. The vanished hedges, pastures, and timber took with them wildlife and game like the ringneck pheasant. Water pollution, including siltation of streams and lakes, has increased as well.
Last fall I filed away this interesting statement: "Expanding grain production has not only destroyed forests but has extended to conversion of grasslands and filling of lakes, resulting in higher soil erosion rates and widespread ecosystemic disruption." No, the author—a Dr. Vaclav Smil, a geographer from Winnipeg—was not speaking about Illinois, although he could have been. He was speaking about China and the impact on that country of its "grain first" policies. The point is obvious: Land use and farm policies in the U.S. increasingly resemble those in the Third World. We trade raw farm products for finished goods from more advanced industrial nations, in effect exporting topsoil in return for video tape recorders and cars.
There are further costs. Last week in Chicago the president of the U.S. Feed Grains Council, a Mr. Stolte, proposed in effect that the U.S. sell its surplus grain abroad at subsidized bargain prices. Besides reducing price-depressing overstocks, such a scheme would "tantalize countries to start using U.S. grain." Stolte explained by way of example that in the '50s and '60s South Korea made use of such imports, and was able to fund its developing textile and high technology industries because, like the USSR today, it didn't have to spend all its money on food.
South Korea today has one of "the most vibrant, aggressive, competitive economies in the world," concluded Stolte. You bet it has. Ask any of the tens of thousands of U.S. citizens in the textiles and electronics industries who have been put out of work by imports from places like South Korea. A policy which subsidizes the farmer at the ultimate expense of workers in other segments of the U.S. economy would seem madness in any administration but this one.
Of course, not all foreign governments invest their aid as wisely as the Koreans did. In many countries—Iran comes unhappily to mind—the availability of cheap imported food abets the urbanization that attends industrialization. The countryside is denuded, the cities crammed, and society tears under the strains. All sorts of revolutions become possible during such upheavals—all sorts.
Some restructuring of our farm economy is inevitable. What form it will take—and the collapse of the farm economy is merely a drastic form of restructuring—is impossible to say. There are ways to reduce the farmer's dependence on exports without reducing his income, but their adoption will require more intelligence than the farm community in Illinois and in Washington have shown so far. One way to start would be to admit that a farm policy based on exports costs the U.S. more than it costs any of our customers. ●
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