In connection with the current crisis it has been criticised that the rescue operations do not adress the real problem: Farmers don’t earn money.
For the last 50 years f.i. Danish farmers have been in a profit squeeze – could have been farmers everywhere.
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On the surface of things it looks about right; but on a level with more insight: Dead wrong!
1) Farms cannot service debt. No of course they can’t:
- a) When food prices are high farm prices tend to be high as well – which leaves a larger debt to be serviced.
- b) When interest rates are low, then farm prices are high – making it difficult to serve debt when interest rates rise again.
Thus both good food prices and low interest rates boost land prices with the inevitable result of recurring agricultural crisis.
2) Rationalisation of food production is a long term process.
- a) The best farmers invest more in both land and machinery.
- b) The best farms with large investments are the most efficient.
- c) The large and efficient farms produce more food. As food has inflexible demand it means that increased production automatically gives lower food prices.
3) Affordable food prices is a target for low income consumers. The result of these booms and busts of agriculture is non-service of agricultural debt and lower food prices.
The growth perspective in this is: Consumers get more money for industrial goods and social services (medicare is not cheap). These latter commodities have more flexible demand – which means a disproportionate industrial growth with lower food prices.
It is tedious to hear the political correct moan about having to save the farmers yet AGAIN. It is in the deepest interest for urban population to overpay farmers for their food. Rest assured: The farmers will plough back the profit into things they know about – farming.
Farm sizes will increase and farmers will be forced out of business. It is a painful process. If you don’t realise that the best farmers are those in deepest debt