Former Ag Economist Questions Ethanol Boom's Impact on Farmers

Will grain farmers who rent land wind up worse off?

Published on: Mar 29, 2007

No one ever accused Howard Doster of being shy. While maybe not quite meeting the definition of flamboyant during his long career as an ag economist at Purdue University, Doster was never at a loss for words. And he was never bashful. He's still not, on both counts.

With no less than U.S. Secretary of Agriculture Mike Johanns on a panel on the stage last week at Purdue, along with USDA chief economist Keith Collins, Doster grabbed the microphone when it came his turn. The discussion during the presentation preceding questions was about the future of renewable energy, and how important it was to farmers in Indiana and across the country.

Doster, who now works with his wife, Barbara, as a private farm management consultant, shared concerns that farmers may wake up this fall and find themselves with less land to farm in '08, and not even know it's coming. He based his comments on corn prices rising so high that landlords are wanting more money, and are seeking tenants who will pay higher cash rents.

His question: what can the government do to prevent farmers from becoming like 'serfs' of the Middle Ages, little more than servants working for low wages? Johanns didn't duck his question. Instead, he pointed to various proposals the administration ahs made for the '07 Farm Bill that might help address the point, including drastically lower payment limitations a party can receive from USDA. Under their proposals, a person would 'graduate' from subsidy payments once his adjusted gross income reached $200,000. Currently, the limit is much higher.

"We're talking about 2.3% of those who receive payments, or about 38,000 people nationwide," Johanns said.

Congress, in fact, is already looking at payment limitation adjustments. An Iowa Senator introduced legislation last week that would lower farm bill payment limitations.

Ketih Collins, the USDA chief economist, got right to the point of Doster's question.
"Everything is not hunky-dory in the biofuels world- we know that," he began. Then he noted that we're headed for near-record crop prices, and added that '07 could be the most lucrative year for crop farmers in history, based on expected commodity prices.

"It's hard to make a case to the public that crop farmers are in trouble in that type of environment," he says. "However, his (Doster's) point is legitimate from the livestock side. Ethanol producers argue that they're not turning food into fuel because what they don't use in the kernel is available for livestock feed. But to be fair, what's left and available is only 30%.

"Livestock producers are already seeing higher feed costs and margins are already being squeezed for them. The only advantage for livestock producers now, compared to the last time corn hit $4 per bushel in the mid-90's, is that feeder cattle prices, for example, are significantly higher now than they were then. But there is still some cause for concern here."