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As we contemplate the ride of the black horse, I would like to discuss the manipulation of the American farmer by the power elite represented in the grain companies. This is a classic case study of manipulation by the fallen angels in embodiment. They are pushing an agricultural policy in the name of helping the farmer while they are really lining their own pockets.
Many of the United States agricultural policies originated with large multinational grain companies, such as Cargill, Continental Grain Company and ConAgra,1 and then were sold to Congress as being in the interest of the farmer and the public. But far from being in the public interest, these policies transfer wealth from the farmers to the grain companies, cost the taxpayer a fortune, and are likely to cause food shortages or famine in the near future.
For the most part, neither Congress nor the American people understand these policies. Mark Ritchie, agricultural trade policy analyst for the Minnesota Department of Agriculture, and Rod Leonard, a former United States Department of Agriculture (USDA) official2 who is now the executive director of the Community Nutrition Institute, explain how they work.
The grain companies have enormous economic and political power. They have greater control of the grain trade than the big oil companies have of the oil market. And they are even more secretive. But most importantly, they control USDA policy. They finance candidates for Congress who support their objectives and lobby them once they get to Washington. And although grain company representatives have never been elected to office, Ritchie says that "it's grain company people who write the policies and go to work for the USDA and administer them."3
Congress, through legislation formulated at the behest of the grain companies, sets the price for wheat, corn and other grains by fixing what is known as the "loan rate." Barring shortages, the loan rate becomes the domestic market price. Here's why.
Each year following the harvest, the USDA lends farmers money at the loan rate - let's say $1.50 for each bushel of corn a farmer produced that year, using his crop as collateral. If the grain companies, which buy virtually all the grain produced in the United States, drive the market price below the loan rate, the farmer can forfeit (sell) his crop to the government for $1.50 a bushel. As a result, the farmer will never sell his corn for less than $1.50 a bushel since the government has already tacitly agreed to buy it at that price. Therefore, the loan rate establishes a minimum price, or floor, below which the farmers will not sell to the grain companies because the government is a ready buyer at that price.
But the loan rate also establishes a price ceiling, because the grain companies will not buy grain at much above that price. They don't need to, because American farmers are so productive (especially when driven by the artificially low prices) that there is always a grain surplus, which keeps prices low, except when unusually bad weather causes a shortage.
Not only does the loan rate become the domestic price but it also becomes the world price. The reason for this is simple. The United States dominates the world grain market. It supplies an even larger share of grain to the international grain market than OPEC supplies oil to the international oil market. Over the last decade the United States has typically supplied 60 to 70 percent of the corn, 60 to 80 percent of the soybeans, and 35 to 45 percent of the wheat to the international grain export market annually. Thus the loan rate, set by Congress for the grain companies, becomes the U.S. domestic price and the world price.
We would like to be able to agree with those who say this system could be helpful to farmers. But there is a catch. The grain companies, working through Congress and the USDA, set the loan rate below the farmer's cost of production.
Since farmers cannot produce grain at a loss for long, Congress also sets a "target price," which in the early 1970s was roughly the cost of production. Then the government (that is, the taxpayer) pays the farmer a subsidy called a "deficiency payment" to make up the difference between the loan rate and the target price in order to keep the farmer from going out of business. Farmers could stay in business (just barely) but they could not make a decent profit.
In the mid-1970s the rules changed. Congress began setting the target price for grain below the cost of production. Then many farmers could not make any profit at all. And if they wanted to stay in business, they were forced to operate at a loss and to borrow heavily - literally another year older and deeper in debt. The farm debt grew from $100 billion to $224 billion and the stage was set for the farm crisis of the 1980s.
Contrary to what many have been led to believe, the billions of dollars in subsidies paid out annually to farmers are not a political payoff to a powerful constituency. Nor do government funds keep large numbers of inefficient farmers in business. Ritchie says, "This system is aimed at taking commodities from farmers at prices far below the cost of production and giving them to multinational corporations and then making up for part of the loss that the farmers suffer by a payment from the taxpayers to the farmers. It's a brilliant system because it makes it look like farmers are the ones who are being subsidized."4
The Grain Export Market: Profiting from Low Prices
Why do the grain merchants go to so much trouble to set low prices? Simple economics. Grain companies make money on every bushel they handle. The lower the price, the more bushels they export, the more money they make.
Because of the heavy subsidies and low prices, grain companies can sell American grain more cheaply than farmers in other nations can grow it. This helps some of our biggest customers like the Soviets and the Chinese.
But subsidized American grain also puts farmers in developing nations out of business. In fact, developing countries such as Egypt, Tunisia, Liberia and Senegal have become dependent on exports from the United States because many of their farmers, unable to grow grain as cheaply as the grain companies sell subsidized American grain, can't afford to farm. So not only do the low prices hurt the American farmer, but they also keep other nations from becoming self-sufficient.
There is a second reason why the grain companies like low prices. Grain companies are no longer simply grain exporters. They have become the biggest domestic grain users for their burgeoning livestock industry.
"These big corporations - Cargill, Continental, ConAgra - are now among the biggest beef raisers, the biggest chicken feeders, the biggest pork raisers, the biggest producers of corn-based sweeteners," Ritchie says. "They set low prices and use taxpayer subsidies to keep farmers going, using the promise of more exports to justify them. But the truth of the matter is that they want to set the price very low for their own internal domestic buying and consumption of these products."5
Barring a drought or a famine that pushes prices up, the farmer cannot earn a decent profit for his labor. As a result, 200,000 to 300,000 farms went out of business due to foreclosures and unmanageable debt between 1980 and 1988.6 And with so many farmers selling out, the price of farm land dropped 60 percent by the mid-1980s and destroyed much of the value of the land, making it even more difficult for farmers to borrow to stay afloat.
At its peak in the '80s, the farm debt was $224 billion. Now it is $136 billion. That means that $88 billion worth of farm debt has already been liquidated, mostly by bankruptcies, foreclosures and the sale of assets to pay off loans. The Farmers Home Administration, a federal agency set up to lend money to farmers, estimates that its losses from bad debts between fiscal years 1990-92 will total $22.2 billion. "That's roughly three times the losses estimated from the HUD scandal," reported Newsweek on September 18, 1989, "and compares to the taxpayers' $100 billion-plus bill for the S&L debacle." Newsweek went on to say that "as with the S&L and HUD scandals, the taxpayer will pick up the tab."7
But losses could be even larger. About one-third of all farmers have 40 percent more debt than assets and could easily go under. And there is a complicating factor. In the farm shakeout of the 1980s, 299 agricultural banks failed. That exacerbates economic conditions in depressed farm areas because farmers and businessmen in those areas have no readily available source of credit to finance their investments.
Most of the farmers who are left just hang on, hoping for exceptional weather that will bring them a bumper crop or for shortages elsewhere that will drive the price up and allow them to make good money. That happens occasionally, perhaps once in five years. But farmers can't count on luck or the caprice of nature.
Older, established farmers with more equity in their land have an easier time staying in business. Younger farmers go out of business and lose their land more easily. But young or old, most farmers are now operating at a loss. They tighten their belts and try to cut corners by squeezing an extra year out of a tractor, canceling health insurance, putting off dental work or cutting costs in other ways. They also try to produce a few more bushels per acre by using more fertilizer or pesticides. But farmers can only cut costs in this way for so long.
Besides devastating the farmer, this system robs the taxpayer. In 1986, for example, taxpayers (via the U.S. government) paid out $12 billion in subsidies in order to enable the grain merchants to export $4 billion in corn. Likewise, taxpayers paid out $4 billion in subsidies to export $3 billion of wheat. And for every dollar of rice we exported in 1986, we spent two on rice subsidies.8
Besides being touted as good for the farmer, the government's agricultural export policy is often defended as helping to decrease the trade deficit. We do export about $25 billion to $40 billion worth of food annually, mostly grain. However, we could be exporting a higher dollar value of grain if the government would simply allow the farmer to sell his product for the cost of production plus a reasonable profit based on whatever the market would bear.
Without artificially low prices, we would export less grain but we would take in more money - and not have to pay out billions in subsidies. The farmer would make more money, the trade deficit would be lower, the treasury would be richer and more farmers in developing nations would be able to produce grain locally. Only the grain companies stand to lose from higher, market-oriented prices.
Higher grain prices would not seriously affect most food prices at the supermarket cash register since the price of grain makes up a small percentage of the cost of packaged foods. For example, the corn in cornflakes makes up only 10 percent of the cost; the rest is processing, packaging, marketing and advertising.
There is yet another reason why artificially high export volume hurts the balance of trade. In order to meet export demand, the government pressures farmers to get ever higher yields from their land. But this requires that farmers purchase extra fuel, petroleum-based fertilizer and chemical-based pesticides, much of which is imported, thereby increasing the trade deficit.
And there are environmental side-effects. The extra pesticides needed to increase yield per acre contribute to an environmental problem of staggering proportions. As it is, 40,000 people are poisoned by pesticides each year in the United States. Three thousand of those are hospitalized and 200 die. A National Academy of Sciences study estimates that "pesticides contaminating the most common American foods may be responsible for as many as 20,000 cancer deaths a year."9 And pesticides are poisoning our agricultural water supply.
In addition to the subsidies paid to farmers, the federal government pays the grain companies subsidies of about $500 million to $750 million a year under the Export Enhancement Program to enable them to further lower grain prices and make sure that U.S. grain is "competitive" on the world market. In other words, the government increases exports on behalf of the grain companies at the expense of farmers and taxpayers. As James Bovard explains in The Farm Fiasco:
Between 1986 and 1988 the Reagan administration provided over half a billion dollars in subsidies for sales to the Soviet Union, China, Bulgaria, Poland, Hungary, and Rumania to buy American crops. American wheat is cheaper in Moscow than it is in Kansas City, and traditional American customers such as Japan are being discriminated against in order to attract communist customers. The United States has provided a subsidy for Russia that is equal to half of the annual subsidy that the Soviets provide to Nicaragua. Even though Poland effectively defaulted on a billion dollars in previous USDA loans, Poland benefited from almost $100 million in USDA export subsidies in 1987. The USDA provided almost a billion dollars of credit to Iraq in 1988, thereby allowing American taxpayers to underwrite the Iraqi war machine.10
Because USDA policy is designed to export the maximum volume rather than the highest dollar value of grain, little thought is given to ensure the safety of our own food supply. Although most people think the United States is continually burdened by food surpluses, we are vulnerable to shortages.
Unfavorable weather conditions have reduced world grain surpluses to dangerously low levels. World grain consumption is about 1.7 billion metric tons a year. In mid-1987 the total world carry-over stock (or surplus from the previous year) of all grains was 458 million tons. As of February 1990, it is 287 million tons - enough to feed the world for 62 days.11
That is a dangerously low supply. "The experts figure 60 days is a threshold because at that point you don't have enough grain to supply the pipeline," says Leonard. "What happens at 60 days is that the countries that are buying wheat or relying on imports for some part of their grain supply will buy it up at any price, which will drive up the prices and further reduce the pipeline stock."12
If the world grain supply drops to 60 days, nations will hit the panic button. In 1973, after huge sales of U.S. grain to the Soviet Union lowered world grain reserves, the world supply dropped to about 60 days and buyers frantically bid up the price of grain.
In the United States, food prices rose more than 20 percent. Dairy products were up 22.5 percent; meat, fish and poultry rose 26.4 percent; and cereals and baked goods went up 28.2 percent.13 Food prices rose sharply again in 1974. While this did not cause widespread starvation in the United States, the price increases strained family budgets and hit poor families and people with fixed incomes the hardest.
The decrease in world grain stocks is related to the decline in U.S. grain surpluses. The United States is the only grain-exporting country that normally carries reserves. Other grain-producing nations keep pipeline stocks that are exhausted by annual consumption. But they don't carry surpluses or reserves. Thus, most of the world's grain reserves, not including pipeline stocks, are in the United States.
But U.S. reserves are dwindling, in part because of the obsessive drive to export. In 1986 the United States had a carry-over stock of 2 billion bushels (54.4 million tons) of wheat. But in 1987 the carry-over stock declined to 1.8 billion bushels. In 1988 it dropped to 1.2 billion. And in 1989, following the severe drought of '88, it dropped to just 700 million bushels. Experts expect it to drop to 435 million bushels (about 11.8 million tons) by June of 1990. And due to low levels of soil moisture, the U.S. carry-over stock of wheat is expected to drop again in 1991, with or without a drought.
But drought conditions, which by 1988 had reduced world grain stocks to their lowest in 15 years, continued in the winter wheat belt in 1989 and 1990. The 1989 Kansas winter wheat crop, which experts had hoped would rebuild diminishing supplies, was 34 percent smaller than the 1988 crop. And as a result of persistent drought and low ground moisture, crop yields in 1990 and 1991 are expected to be down in both the winter wheat and Western corn belts.
To make matters worse, in 1988 and 1989, the federal government reduced reserves even further. It used 3 million tons of a 4 million-ton "Food Security Wheat Reserve," a strategic reserve set aside for emergencies, for the government's Food for Peace program, which supplies grain to developing countries such as the Philippines, Iraq, Morocco, Egypt, Pakistan and Bangladesh.
We are now dangerously close to the 60-day threshold. A two percent drop in world production could drop us below the 60-day mark and spark panic buying. If we have a bigger loss, we could have a global catastrophe.
And that is almost certain to happen. Ethiopia is in the midst of a drought and is suffering from food shortages. These are exacerbated by an ongoing civil war between the Soviet-backed government of Mengistu Haile Mariam and guerillas in the northern provinces of Eritrea and Tigre. The combination could cause a famine in the 1990s as deadly as the famine of 1986.
Somalia and the Sudan also have serious drought conditions. There are droughts in parts of the Philippines and in agricultural areas of northern and eastern Australia. Large areas in Western Europe and the Balkan states are very dry. And the Soviet Union, as usual, will have trouble with its grain harvest no matter how the weather turns out.
Things in the United States could reach crisis proportions quicker than most people think is possible. Don Wilhite, director of the International Drought Information Center, says that as of March 1, 1990, 26 percent of the nation has either severe or extreme drought - and that includes the nation's spring and winter wheat belts and the western corn belt. If you add in the areas troubled by moderate drought, then 50 percent of the nation is affected.
Since our grain stocks are very low and drought persists in some of the most important U.S. agricultural areas and weather is likely to be erratic in the near future (see part 5), we may be due for food shortages, double-digit food price increases or even famine.
Don't count on the U.S. government to figure out what's happening and save you in the nick of time. Wilhite says that our government, like most governments, responds poorly to droughts, does not learn from its mistakes in handling past droughts, and does not coordinate its drought planning with its export policy.
"In fact," Wilhite says, "there has been a great deal of concern about the USDA downplaying the severity of the droughts of '88 and '89 in order for there not to be an impact on some of the export markets." Wilhite says that he thinks the USDA intentionally downplayed the potential impact of the 1989 drought on the winter wheat crop so that it would have minimal impact on the amount of grain that the grain companies would be allowed to export. "They finally revised some of their estimates [to come in line with reality]," Wilhite says, "but it took them up to the last minute to do that."14
Meanwhile, much of the U.S. grain reserves had been sent overseas for the profit of the grain companies.
"Prophecy for the 1990s III" is based on a lecture given by Elizabeth Clare Prophet May 21, 1989, Sheraton Centre Hotel, New York, updated for publication in the 1990 Pearls of Wisdom. Throughout these notes PoW is the abbreviation for Pearls of Wisdom.
Decree for Freedom's Holy Light
Mighty Cosmic Light!
My own I AM Presence bright,
Proclaim Freedom everywhere -
In order and by God control
I AM making all things whole!
Mighty Cosmic Light!
Stop the lawless hordes of night,
Proclaim Freedom everywhere -
In justice and in service true
I AM coming, God, to you!
Mighty Cosmic Light!
I AM Law's prevailing might,
Proclaim Freedom everywhere -
In magnifying all goodwill
I AM Freedom living still!
Mighty Cosmic Light!
Now make all things right,
Proclaim Freedom everywhere -
In Love's victory all shall go,
I AM the wisdom all shall know!
I AM Freedom's holy Light
Nevermore despairing!
I AM Freedom's holy Light
Evermore I'm sharing!
Freedom, Freedom, Freedom!
Expand, expand, expand!
I AM, I AM, I AM
Forevermore I AM Freedom!