tag:blogger.com,1999:blog-82108062024-03-14T05:25:49.455-05:00Grandpa's GrumblesComments, Issues, and Questions about life from a Grandfather.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.comBlogger121125tag:blogger.com,1999:blog-8210806.post-42286927970141257682012-01-07T15:51:00.001-05:002012-01-07T15:53:13.664-05:00<h2 class="date-header">
<span>Thursday, April 19, 2007</span></h2>
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<a href="http://grandpa-rdr.blogspot.com/2007/04/escaping-from-farm-programs.html">Escaping from Farm Programs</a>
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Since the 1920's, economists,
policymakers and farmers have been at odds over the need for programs to
deal with the tendency for output to increase faster than consumption
and with the large variation in commodity output. For the most part,
economists have argued for reliance on the free market and the
competitive system to cure these problems. However, farmers have
asserted that they were at a disadvantage in the market compared with
other industries and needed help to get a fair deal. Policymakers
listened to their farmer constituents and sold their ideas to consumers
and taxpayers. They justified market interference on the basis that
family farmers were the backbone of our society. They pointed to
depressed farm incomes and suggested that our food security should be
guarded. They argued that an income transfer to farmers was, thus, a
good idea.<br /><br />Policymakers and their farmer constituents designed
intervention programs to raise total income for the sector and average
incomes of commercial producers of program commodities above free market
levels. The programs control prices, hold stocks, idle land and
transfer income. As the various administrations have operated the
programs they have provided annual price floors for program commodities.
During most the past 65 years, these floors exceeded short run market
clearing levels. Over the entire 65 year period, they have exceeded long
run free market prices. Thus, the price floors have encouraged
production which was larger than the market could clear. The excess over
sales accumulated in government storage programs, and resulted in
attempts to reduce production to avoid further accumulations. For
producers of program commodities, incomes and asset values were higher
than they would have been in the absence of the programs. Producers of
program commodities became dependant on, or coupled to, income support
programs.<br /><br />The Food Security Act of 1985 (FSA) moved a step toward
market orientation by allowing price floors and commodity prices to
decline. Income support to producers of program commodities was
maintained through direct payments based on program yield and program
acreage. The income support was achieved at a substantial increase in
budget cost because the direct payments replaced hidden transfers from
consumers.<br /><br />As a result of the increased budget cost, the
variability and size of the program budget became a major policy issue.
The purpose of the income transfer and effectiveness of the program in
achieving income stability was questioned and was considerable debate
over whether these income transfers should continue.<br /><br />At issues as
we move toward a new Farm Program is whether commodity producers
deserve a larger than free market share of income? Does the government
have a role in providing for market stability even if it does not
provide an income transfer? Such questions will only find answers in
Congress through legislation.<br /><br />Since the beginning of commodity
programs economists have rather consistently argued for market
orientation in agriculture with prices free to signal the need for more
or less resources committed to production. However, the lack of a
clearly defined statement of the sources of market failure and lack of
sound economic programs to address the fundamental problems has often
blunted their arguments for program reform.<br /><br />The following
evaluates how a free agricultural market diverges from the
economists'competitive norm and to suggests how Federal programs could
ease long run price discovery in a market oriented system.<br /><br /><span style="font-weight: bold;">THE COMPETITIVE MARKET NORM</span><br /><br />At
the center of the agricultural policy issues is the underlying faith of
our society in the value of the free market in allocating resources and
returns. Economist rely on competitive markets as a norm or standard.
The assumptions of competitive market theory are a scale against which
they measure economic performance. They argue that only in cases of
market failure would an economy be better off with Government
intervention. Pressure to cut government interference and move to a free
market stems from a belief that competitive markets are effective,
efficient and equitable. That is, competitive markets will result in
just the right use of resources to produce just the right quantity of a
commodity. And, according to the competitive theory free trade results
in countries producing according to their comparative advantage.<br /><br />Most
economists believe that it would be desirable for the market to pass
the "appropriate" economic signals through from consumers to producers
concerning the quantity of resources to use in the production of
commodities and how much to produce. They seldom specify the type of
signal, but most infer that prices are the appropriate mechanism. In a
free and competitive market the market price adjusts to bring about an
equilibrium between the quantity supplied and the quantity demanded.
Price provides the signal for adjustments in production and consumption.
This competitive theoretical framework assumes perfect knowledge and
instantaneous adjustment to equilibrium for long run and short run
positions. That is, there is no short run. Capital, labor and current
expenditures adjust eliminating excess resources. And, no stocks are
carried in the system.<br /><br /><span style="font-weight: bold;">DEPARTURE FROM FROM THE NORM</span><br /><br />Although
the competitive model is a useful tool for analysis, the market for
farm commodities departs from the rigid assumptions of the perfect
market model. Specifically, there is a lack of perfect knowledge;
production and consumption do not adjust simultaneously; random shocks
affect production; there is not a fixed relationship between units of
input and units of output; and production is seasonal, but consumption
is continuous. Although producers can plan for an expected output and
estimate how that output might vary, they have no basis for determining
how output will vary in any one year. Producers make planting decisions
on the basis of an expected price and an expected set of cost
relationships. These would permit them to earn a return over variable
cost sufficient to cover some or all of fixed cost. However, it would be
coincidence if expected cost and actual cost or expected price and
actual price coincided.<br /><br />Probability theory offers no assistance
in bringing expectations together with reality. It merely consists of
the mathematics of the distribution of possibilities for situations
which can not be empirically identified. (1) Thus, the quantity shock
that occurs because of yield and weather variability is a non trivial
condition. We can know the likely hood of a particular shock, but we
have no information at planting time on whether that shock will occur in
a particular year. Although nothing else changes, weather will bring
about a mismatch between expected and actual yield and therefore
expected and actual prices. Because the market allocates actual supply
among demands rather than allocating expected supply among expected
demands, determining the existence of fundamental shifts in demand or
supply caused by economic forces requires several production periods.<br /><br />Although
many argue that market orientation will strengthen agricultural
markets, some evidence shows that fitting agricultural production more
closely to the competitive norm may not be good for the agriculture in
either the short run or long run. McCalla and Carter argue that "... if
production agriculture is a competitive island surrounded by varying
degrees of concentration in markets, then deducing conclusions about the
advantage of a return to a free market from theoretical constructs may
not be valid"(3). However, consequences of government price fixing
include (1) a heavy burden on the public treasury, (2) higher taxes, (3)
higher cost of living, and (4) over stimulation of production for the
protected commodity. In spite of these problems, agriculture programs
from 1933 to 1985 have by one means or another established a floor price
for program commodities by acquiring stocks and limiting production or
marketings to set prices. A persistent problem remained through the
existance of the programs. Policymakers could not establish a floor
price belowr the long run market price and they therefore had difficulty
clearing out stocks from farmer or Government held reserves. This is
not surprising because income support through price supports, with out
relying on the public treasury, requires that demand be inelastic and
prices must be higher than the long run average free market price.<br /><br />Although
the legislators and program managers usually assumed the problem to be a
chronic excess production problem that resulted in a low income
problem, they relied on weather related production variability to
extract them from the long run problem of stock accumulation. The stock
accumulation was the result of excess production created by the price
support effort. However, production variability is an ineffective
procedure for emptying out storage bins, unless large acreage reduction
programs restrict production to a level short of expected demand.<br /><br />Using
price as the trigger variable to initiate a Government action prevents
the price from serving as a true measure of the need for production in
future periods. Fixed current prices do not provide a sound base for
forming expectations concerning future prices. Fixed prices also distort
market allocation of the current year's crop and truncation of the
expected price distribution on the lower end causes the expected price
faced by the consumer to be higher than the price floor.<br /><br /><span style="font-weight: bold;">CONTINUING MARKET AND POLICY FAILURE</span><br /><br />D.
Gale Johnson, in an evaluation of agricultural policy, said "The
policies of the 1950's were concerned with attempting to protect
agriculture from changing conditions."... "The policies of the 1960's
were reasonably effective in aiding agriculture to adjust to the
inevitable resource transfers and the relative contraction of the farm
sector."(2) In the Johnson context, policies of the 1980's tended to
protect the sector from changing conditions rather than allow the sector
to make the inevitable resource transfers.<br /><br />Speaking to the
subject of policy failure, Johnson has said: "If my analysis of the
flexibility of resource allocation in agriculture is approximately
correct, small errors in program formulation will very soon result in
substantial cost to taxpayers, and possibly in difficulties in
maintaining our pre-eminent position as a great agricultural exporter."
In other words, it is relatively easy to create significant excess
capacity in agriculture. if prices or payments are inconsistent with the
underlying demand and supply situation. When agricultural output is
greater than the demand, at politically acceptable levels of prices, a
long time and large income transfers are required to eliminate the
excess productive capacity and avoid major shocks to the production
sector.<br /><br />Price floors above long run market price levels are a
major cause of excess production, but removal of such floors will not
result in a stable market for agricultural commodities. Changing
technology will result in a continuing expansion of production with a
given set of resources. Producers have no means of retaining the
benefits of cost reductions and real prices will trend downward as
output increases faster than the combined effects of population and
income shift demand.<br /><br />In addition, a lack of homogeneity in the
costs of production and marketing, resulting from differences in size,
management, technology and location, will produce continuing excess
capacity disequilibrium. Loss of resources from the sector will occur
regardless of the form of policy. Because costs vary among firms, any
price level below the average variable cost of the highest cost firm
will in the result in the inevitable resource adjustment. Some firms
will leave the sector while others continue to earn returns above of
their variable and, perhaps, total production cost. Unlike industrial
assets under excess capacity situations, land retains it's basic
productivity. Frequently the assets of the exiting firms are recombined
with those of the more profitable firms and production expands or cost
decline or both. With no change in demand, or with demand shifting more
slowly than supply, price will decline forcing additional firms to exit.
However, production does not, necessarily, fall, because continuing
consolidation of assets will occur. In the very long run, with firms
exiting the sector a homogeneity of sorts may be achieved, permitting an
equilibrium. Or, as concentration continues an oligopolistic system
will be developed which permits some control of output at a level
allowing the least competitive firm to remain in production because
allocation of market shares has occurred.<br /><br /><span style="font-weight: bold;">ADJUSTING TO THE MARKET</span><br /><br />Past
price support policies caused more resource employment in crop
production than the level needed to meet domestic and export demand at
current prices. Stocks have accumulated. Removing excess capacity from
the sector requires that real prices for output and real earnings must
fall to force disinvestment from the sector.<br /><br />Allowing real
earnings to fall to the point that forces many of resources out of the
sector is a painful treatment of the problem. In 1922, Henry A. Wallace,
discussing the problem of heavy production against slack demand and
addressing the possibility of market intervention said: <span style="font-style: italic;">"...
in the long run every economic evil creates its own cure. If prices of
farm products continue sufficiently long enough below cost of
production, there will eventually be forced into bankruptcy enough
farmers so that there will be no longer a disastrous surplus. At the
same time there will be readjustments of land values, wages, etc., which
will lower the production costs. </span>"Henry A. Wallace, (4).
However, avoiding the adjustment is impossible on a long term basis and
easing the adjustment process becomes complex. Expansion of demand
(shifting demand) at a fast enough rate to keep prices from falling
seems economically and perhaps biologically impossible. Arbitrarily
establishing a rigid price floor or a target price results in price
certainty and provides the wrong information about future profitability.
Tying price floors to current production costs results in distortion of
returns in a manner that escalates future costs. This results in higher
support levels in the future, higher production costs and an upward
ratchet effect on support prices.<br /><br />On the other hand, allowing the
market to set prices without accounting for random disturbances from
weather distorts the longer run economic signals. Prices changes from
changes in demand or changes in technology and output are the
economically determined signals that we wish to have transmitted.<br /><br /><span style="font-weight: bold;">WORKABLE OPTIONS</span><br /><br />The
critical aspect of any market oriented system is that the programs
should not directly set prices and induce greater disequilibrium
conditions. Providing protection against random shocks to the system
need not distort long-term market signals if the shocks are due entirely
to weather and yield quantity triggers rather than price triggers are
used to initiate stock acquisition and dispersal. Also, stock
acquisition must be limited to the yield increment.<br /><br />Preventing
the dynamic effects of the heterogeneous structure from driving prices
down is difficult to achieve without inducing greater excess production.
However, the most likely feasible solution may be some type of resource
diversion (long term acreage diversion program) that diverts resources
from production without fixing prices. With prices free to move
according to true demand and supply shifts the cost of resource
diversion program would be diminished.<br /><br /><span style="font-weight: bold;">CONCLUSIONS</span><br /><br />Without
price fixing programs, the agricultural sector would continue to
experience a high degree of quantity and price variability from yield
shocks. Also, the sector would continue to experience price
disequilibrium, because of heterogeneity, even after the excess capacity
induced by current programs is removed.<br /><br />To achieve improved long
run price discovery flexibility in prices is essential. To treat
chronic excess capacity through Federal programs resources must leave
the sector through positive adjustment programs and prices must adjust
to economic stimuli. Prices must react to rationalize the market if
income declines as a result of a change in the business cycle or if
demand shifts as a result of a change in foreign exchange rates.<br /><br />Programs
that attempt to provide for price stability must use quantity changes
as triggers and prices must be free to move with long run supply and
demand conditions.<br /><br /><span style="font-weight: bold;">REFERENCES</span><br /><br />1.
Boulding, Kenneth E., "Normative Science and Public Policy", Economic
Analysis and Public Policy, ed. Day, Richard H., Iowa State Press, Ames,
Iowa, 1982<br /><br />2. Johnson, D. Gale; "Food Production and Marketing: A
Review of Economic Developments in Agriculture"; Food and Agriculture
Policy; American Enterprise Institute for Public Policy; Washington
D.C., March 10-11, 1977<br /><br />3. McCalla, Alex F. and Carter, Harold O.
"Alternative Agricultural and Food Policy Directions for the U.S. with
Emphasis on a Market-Oriented Approach.<br /><br />4. Wallace, Henry A., "Adjusting Production to Demand Benefits Both Farmers and the Public", Ames, Iowa, Dec. 28, 1922<br />
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<span>Wednesday, April 18, 2007</span></h2>
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<a href="http://grandpa-rdr.blogspot.com/2007/04/excess-capacity-in-agriculture.html">Excess Capacity in Agriculture</a>
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Two fundamental problems in
agricultural markets result in the inability of agriculture to arrive a
long run economic equilibrium. The first, yield variability, has been
address in separate papers. The second, structural excess capacity, is
the subject of this blog.<br /><br /> INTRODUCTION<br /><br />"<span style="font-style: italic;">I
clearly recognize that in the long run every economic evil creates its
own cure. If prices of farm products continue sufficiently long enough
below cost of production, there will eventually be forced into
bankruptcy enough farmers so that there will be no longer a disastrous
surplus. At the same time there will be readjustments of land values,
wages, etc., which will lower the production costs. Economic affairs
always work themselves out if you leave them alone. However, it is
equally certain that they will work themselves out even though you
tamper with them. The disadvantage of tampering is that those who do the
tampering are likely to be reviled by about half the population.</span>" Henry A. Wallace, Dec.28, 1922 (17).<br /><br />Discussions,
seminars, and symposiums have been conducted prior to consideration of
every new farm bill. For the most part, the arguments focused on the
desirability of providing for a market orientation in agriculture,
although there has not been agreement on the meaning of market
orientation. During the discussions, the term has been allowed to remain
ambiguous, perhaps in the hope that consensus could be reached without
clarity of definition. However, lack of an agreed upon definition of
market orientation and a clear statement of the intent of commodity
programs, has made it difficult to determine how to modify programs to
achieve a more market oriented condition or, to determine how non-market
oriented diverges from the "norm" or standard of perfect competition.<br /><br /><span style="font-weight: bold;">Digression on Programs vs Policies</span><br /><br />What
we call farm policy is, instead, a collection of programs to control
price, hold stocks, and transfer income. In fact, the only consistent
aspect of the programs has been the attempt to support incomes. The
record of the programs, as they have been administered over their 40
year history, is that they have provide a price floor for program
commodities and this floor has resulted in excess production which was
stored and which resulted in attempts to reduce production. The net
result was that incomes and asset values were higher than they would
have been in the absence of the programs. From the record, one would
conclude that the major goal of the programs was to keep income above
free market levels. Despite this, however, protection against price
variability has often been cited as a major objective. But no consistent
policy has been articulated by Congress, farm groups or the several
Administrations since the 1930's. The collection of programs has been
variously interpreted by economist and policy analysts as providing
income support, price stability, protecting the food supply, and
protecting the family structure of agriculture.<br /><br />The argument has
been frequently made that current commodity programs are not
working(12). However, since no statement of purpose has been articulated
for the programs, it is difficult to evaluate how well they are or are
not performing. The evidence available suggest that the cost of the
programs has been higher than some thought desirable. Also the benefits
of the programs went to producers with large farms. And, programs
supported income but did little to lessen price variability or provide
for stable budget cost. In fact, it is the variability and size of the
program budget that appears to have been at issue rather than the
effectiveness of the income transfer or the effectiveness of the program
in achieving market stability.<br /><br />This paper identifies issues
associated with commodity policy; develops a rationale for and suggests a
possible definition of market orientation; examines how the sector
would behave under market orientation; evaluates the process of
transition; and evaluates whether there is a continuing need for
Government involvement in agriculture, because of the potential for
market failure. No attempt is made to provide empirical estimates of the
effects of alternative programs. These will be reserved for succeeding
reports. This report relies on economic theory to suggest interactions
and directions.<br /><br /><span style="font-weight: bold;"> COMPETITIVE MARKETS</span><br /><br />Competitive
markets are a norm or standard by which economists measure economic
performance. The argument is made that only in cases of market failure
would an economy be better off with Government intervention. The
pressure to move to market orientation stems from a belief that
competitive markets are effective, efficient and equitable allocators of
resources and output. That is, competitive markets will result in just
the right amount of resources used to produce just the right amount of a
commodity with equitable compensation for resources.<br /><br />Past
intervention by Government to support incomes of certain groups of
producers above market clearing levels was based on the premise that
market failure caused incomes in the farm sector to be below those in
the non farm sector. It was deemed equitable, therefore, to provide a
larger income to farmers by transferring it from taxpayers and
consumers. Presently there is considerable debate over whether these
income transfers should continue. That is, over whether commodity
producers still deserve a larger share of the pie or whether the actions
of Government to support producer incomes is causing the sector to be
less profitable than it would be under free market conditions. Also at
issue is whether there is a role for the Government to provide for
market stability even if it does not provide for an income transfer.
And, if market stability is a concern how can it be provided?<br /><br />Some
farm groups tend to support continued income transfers to the sector
and in particular to producers of specific commodities. Others tend to
suggest that the sector is no longer deserving of income transfers but
rather deserves some protection from the capriciousness of the market
which comes about through variability induced by weather and by the
actions of foreign Governments (17).<br /><br />Although it is often argue
that a market orientation will strengthen agriculture, there is
considerable evidence that making agricultural production more
competitive may not be good for the sector in either the short run or
the long run. McCalla and Carter, citing Dorfman, Samuelson, Josling and
Galbraith; argue that "... if ... production agriculture is a
competitive island surrounded by varying degrees of concentration in
markets, then deducing conclusions about the advantage of a return to a
free market from theoretical constructs may not be valid"(8). They argue
that the evidence is not clear that agriculture will be better served
by a return to a free market. Also, it is not clear that domestic
consumers would benefit.<br /><br />There dose seem to be agreement, among
those involved in the debate, that a market oriented agriculture does
not mean a total withdrawal of Government from commodity markets. What
is missing, however, is a reason why continued involvement of the
Federal Government would be required or why it would contribute to
better market performance.<br /><br /><span style="font-weight: bold;">Market Signals from Competitive Markets</span><br /><br />Most
economists suggest that it would be desirable for the market to pass
the appropriate economic signals through to producers concerning the
quantity of resources to use in the production of commodities and, by
inference, how much to produce. They also suggest that it would be
desirable for signals to be sent to the consumer about how much to
consume. The type of signal to be sent is seldom specified but most
infer that prices are the appropriate mechanism to provide the signal.
In a free and competitive market, where no buyer or seller is large
enough to affect the market price and where everyone has equal and
perfect information, output will be allocated among consumers
efficiently by the changing market price signals. The market price
adjusts to bring about an equilibrium between the quantity supplied and
the quantity demanded. That is, it provides the signal that adjustments
must be made. However, this theoretical framework assumes perfect
knowledge and instantaneous adjustment to equilibrium which is
simultaneous for long run and short run positions, ie., there is no
short run. Capital, labor and current expenditures adjust so that no
excess resources are used in production.<br /><br /><span style="font-weight: bold;">Non Simultaneity of Price and Quantity Changes</span><br /><br />The
market for farm commodities has several aspects that depart from the
rigid assumptions of the perfect market. Specifically, imperfect
knowledge; production and consumption do not adjust simultaneously;
production is stochastic; and, to the extent that it is affect by
weather, random and normally distributed; and, there is not a fixed
relationship between units of input and units of output. Although
producers can plan for an expected output and, given sufficient
experience, estimate how that output might vary, they have no basis for
determining how much, or in what direction, output will vary in any one
year. Planting decisions of producers are made on the basis of an
expected price and an expected set of cost relationships that would
permit them, under expected conditions, to earn a return over variable
cost sufficient to cover some or all of fixed cost. However, because of
the random nature of yield variability, it would be coincidence if
expected cost and actual cost or that expected price and actual price
coincided. Probability theory is of no assistance for it, according to
Boulding, "... is merely the mathematics of the distribution of
'possibilities' ... in situations which can not be empirically
identified"(1). Thus, the quantity shock that occurs because of yield
and weather variability is a non trivial condition. If no other changes
occurred, weather would distort the market by bringing about a mismatch
between expected and actual yield and therefore expected and actual
prices. As a result, it often takes several production periods to
determine the existence of fundamental market changes, that is, shifts
in demand or shifts in supply caused by economic forces. This is so
because the market determined price allocates the actual supply with
demand rather than allocating expected supply.<br /><br /><span style="font-weight: bold;">Floor Prices</span><br /><br />Agriculture
programs from 1938 to 1985 have by one means or another attempted to
establish a floor price for program commodities to address what was
perceived to be a low income problem for the sector as a whole. A
defense of the floor price was conducted by acquiring stocks and
limiting production or marketings. But, a persistent problem remained.
That is, it was exceedingly difficult, if not impossible, for
policymakers to establish a floor price to protect income, which would
allow the long run market price to be above the floor by a sufficient
amount to clear stocks out of farmer or Government held reserves. This
should not be surprising. In order to support income through price
supports in a market, demand must be inelastic and prices must be higher
than the long run average free market price. The inelasticity of demand
has been a major source of problems in setting program parameters
because an implicit assumption of the programs has been that variability
would be sufficient to empty out the storage. However, this cannot
occur unless supply (production) is somehow restricted. Thus, although
the legislators and the program managers assumed the problem to be a low
income problem, they relied on variability to extract them from the
long run excess capacity problem, which they had, in part, created by
the supply control effort. For most of the historical period, long run
prices appeared to be below the floor price. As a result, stocks
accumulated in Government ownership as nonrecourse loans were forfeited.<br /><br />The
focus on price as the trigger variable to initiate a Government action
prevented the price from serving as a true signal for production in
future periods. That is, current year prices were not a sound basis for
forming expectations concerning future prices. Also market allocation of
the current year's crop was distorted because the distribution of
expected price was truncated on the lower end and the expected price
faced by the producer was necessarily higher than the price floor.<br /><br />D.
Gale Johnson has said that "The policies of the 1950's were concerned
with attempting to protect agriculture from changing conditions."...
"The policies of the 1960's were reasonably effective in aiding
agriculture to adjust to the inevitable resource transfers and the
relative contraction of the farm sector."(6) The policies of the 1980's,
thus far, have again tended to "protect" the sector from changing
conditions.<br /><br /><span style="font-weight: bold;"> CONDITIONAL POLICY</span><br /><br />Stepping
back from current programs and considering the prospects for a long
term policy for agriculture, it is possible to conceive a framework with
both income support and reduction in price variability as objectives.
It is also possible to develop programs to support either of these
objectives. However, a clear articulation of the policy is required. D.
Gale Johnson calls this to our attention quit forcefully. "The most
critical assumption is the future level of net income of agriculture.
For the years ahead we can not rule out a decline in net agriculture
income of 10 percent and a decline of farm operator income of somewhat
more. If this were to occur there would probably be some downward
pressure on real estate values, unless the income decline were thought
to be temporary." He continues: "If my analysis of the flexibility of
resource allocation in agriculture is approximately correct, small
errors in program formulation will very soon result in substantial cost
to taxpayers, and possibly in difficulties in maintaining our preeminent
position as a great agricultural exporter. It will, in other words, be
relatively easy to create significant excess capacity in agriculture by
providing incentives, through prices or payments that are inconsistent
with the underlying demand and supply situation. Experience has shown
clearly that when agricultural output is greater than the demand at
politically acceptable levels of prices, a long time and large income
transfers are required to eliminate the excess productive capacity."(6)<br /><br />Just
and Rausser have provided a basis for a new look at commodity policy
(7,8). They argue that inflexibility in commodity programs has resulted
in policy induced variability [instability] in commodity markets, making
decision making by farmers and policymakers even more risky than it
would be without commodity programs. They conclude that policy that is
conditional in its response to economic conditions will be more likely
to result in the transmission of appropriate signals to producers and
consumers. Daft concludes that "The principle strength of the chapter by
Richard E. Just and Gordon Rausser is its non traditional view of
commodity policy. The authors assume that the reduction of risk and
uncertainty is the principal justification for commodity policy. After
reviewing the recent track record, they find that commodity policy,
itself, has often been a source of instability rather than a cure for
it. They attribute much of this policy failure to the attempt by
legislators to establish future legislation on past economic conditions.
When future conditions deviate from the assumed state, as they
inevitably do, policy failure has resulted." "...Just and Rausser
conclude that legislators should stop trying to anticipate conditions
and, instead, adopt policies that would respond automatically to changes
in sector economic variables." "As an illustration, they suggest that
the Government agree to purchase 1 million bushels of grain for every
one cent per bushel that the market price falls below a specified target
price."<br /><br />While Rausser and Just have performed a major service in
providing a new perspective on commodity policy, a further extension of
their approach will clarify the fundamental farm policy problem.<br /><br /><span style="font-weight: bold;"> INSTABILITY, VARIABILITY, RISK AND UNCERTAINTY</span><br /><br />According
to Offutt and Blanford, "An unambiguous definition of instability would
provide the ideal starting point for the selection of an appropriate
empirical indicator [of risk]. Unfortunately the concept of instability
is nebulous because the perception of what constitutes unstable behavior
is largely subjective." "... Variability and instability can not
necessarily be equated and require an implicit or explicit judgment be
made as to what constitutes 'unacceptable variability'."(11)<br /><br />For
our purposes, it is not necessary that a judgment be made concerning
whether or not variability is or is not acceptable. Rather, the issues
are: is it measurable, is it reducible and to what extent are
variability and uncertainty separable.<br /><br />For the purpose of this
paper it will be convenient to view risk as the measurable variation in a
normal random variable, such as yield, with a quantifiable probability
distribution of the "possibilities". Uncertainty will be considered as
being exemplified by supply or demand shocks to the system that are the
result of policy or economic variables where the result is expected to
be a systematic change or structural change. Such actions are
unmeasurable in an expectations framework and no probabilistic statement
can be constructed concerning their occurrence or outcome.<br /><br />Much
of the research related to variability is associated with the stock
holding function and the potential for determining an optimal level of
stocks with a concept of covering negative supply deviation 80, 90, or
95 times out of 100. In reality, there can be no optimal stock level for
any particular year. Because output for the coming season is a random
variable, the optimal stock level must also be a random variable. Given
an expectation of production variability one can construct an
expectation of the level of stocks that would offset the production
deviations. One cannot however anticipate, identify and offset supply
and demand shifts as a result of policy or production changes.<br /><br />The
Just and Rausser argument, that conditional policy will allow the free
market to function while providing stability, presumes that it is
possible operate as though it was possible to control price and still
allow the market to clear because of quantity variability. The
conditional policy response suggested by Just and Rausser reacts to both
physical and economic phenomenon and attempts to shield the producer or
slow the effect of real supply and demand changes as well as the
effects of random yield shocks. They presume that conditional control of
the effects of other economic forces on price will reduce the
likelihood of policy induced instability. However, Just and Rausser do
not consider the possibility and implications of policy induced excess
capacity as the result of conditional intervention which prevents the
full impact of supply and demand shifts from being realized because of
the manipulation of the market price.<br /><br /><span style="font-weight: bold;">Pass Through of Market Signals</span><br /><br />While
it is possible to mathematically estimate a number for the coefficient
of variatation of price, the number is meaningless unless the price
variation is random and normally distributed with mean zero. Historical
price data contain both random and systematic changes and there is
little reason to believe that the deviation will be normally distributed
or that the estimate will be unbiased. There is, however, reason to
believe that in the absence of market intervention policies the effects
of weather would, over time, be normally distributed and it would be
possible to remove the weather related effect from prices. It would also
be possible to estimate the effects of a stocks management program that
reacted to weather variation by acquiring, for example, yield in excess
of expected normal and disposing of stocks if yield is less than
expected normal.<br /><br />Under conditions where long term supply and
demand were in balance the smoothing effect on quantity would result in a
stablity of domestic consumption and a stable supply for export. Such a
stocks management policy would minimize the impact of domestic weather
variation on commodity prices. All other factors would be reflected in
the market including demand and supply shifts as a result of technology
or changes in financial or macro policy variables. The effects of
weather in importing countries and on competing exporters would also be
transmitted through the market. Also the impact of their policies would
be felt.<br /><br />Some have viewed the wide price changes of the 1970's as
an indication of increasing variability in the market and concluded
that the random forces causing such disturbances may increase in the
future. However, many of the events of the seventies appear to have been
systematic structural changes which, in connection with random yield
disturbances resulted in a confusing set of prices. For example, entry
of the Soviet Union into the market on a major scale to aquire grain for
livestock feed was a systematic change rather than a random event, as
was the decision by the Chinese to buy wheat rather than tighten their
belts, and the decision of the U.S. to raise loan rates and target
prices rather than let farm income decline in the late seventies. Even
the weather shocks on foreign yields are transmitted to our markets
through a set of systematic filters that distort the random nature of
the yield variability. Thus, the most truly random influence in the
market is the effect of domestic weather on domestic yields. All other
changes fall into the category of uncertainty or instability. And, it is
these changes that are structural or systematic in nature that should
be reflected in market price signals.<br /><br /><span style="font-weight: bold;">Implication for Stock Holding</span><br /><br />Numerous
studies of price variability and variability of quantity marketed,
through domestic and export channels, have been conducted. Most have
assumed that deviations in price from trend or deviation of production
from trend were normally distributed random variables with mean zero
(12,14,15). Therefore, the analysts also assumed that the probability of
the actual deviating being less than a specified number is also a
normally distributed random variable. However, the normal random
variable assumption does not appear to be a correct specification of the
behavior of either production or price. Many of the forces in the
market are systematic and result in deviations that do not have zero
mean. This is not to say that a mathematical representation with the sum
of the deviations equal to zero cannot be constructed. But that such a
construct is an erroneous representation of the forces causing market
prices and quantities to change.<br /> <br />Under conditions where long
term supply and demand were in balance, the smoothing effect of a
reactive policy to acquire positive increments to trend yield and store
them until they could be disposed of in periods of low yields would
result in stability of supply for the domestic and export markets. Such a
stocks management program would minimize the impact of domestic weather
variation on commodity prices. All other factors would be reflected in
the market including demand and supply shifts as a result of technology
or changes in macro or policy variables.<br /><br />Sharples and Slaughter
suggest that "Adding to or releasing from buffer stocks in response to
changes in quantity produced would stabilize the major source of food
price variance in a closed system. That is, if operated world wide, such
a program would provide reasonably stable food supply and prices.
Theoretically, a buffer stock managed by such a quantity rule would
stabilize prices with minimal interference with the allocation function.
Prices would be free to respond to changes in demand [and changes in
supply], and the allocation signals so generated would not be clouded by
the noises of price changes in response to production variances
occasioned by weather vagaries." However, they dismissed the quantity
rule because production worldwide is difficult to measure and the size
of the quantity buffer stock may preclude the response required. While
they suggest that the price rule may be appropriate, they recognize that
it runs the danger of obscuring allocation signals generated by
non-random supply and demand shifts. "This suggests that the programs
have built in self corrective features in order that the reserve
acquisition and release prices adjust in accordance with the long un
moving equilibrium."<br /><br />Worldwide rationality on stockholding policy
would imply that all producing countries would store the positive
deviations from trend yield and dispose of them during periods of
negative deviations. Storing more than the positive deviations from
trend would require that in some year the market would have less
available than had been planned for by producers or expected by
consumers. Storing less than the positive deviations means that the
probability of incurring a shortfall in stocks is increased because the
positive increment from yield has not been stored but consumed and
future consumption must be reduced below what it could have been if
stocks had been retained.<br /><br />If the U.S. changes its' policy from
encouraging excess production with supported prices to free market
pricing, then the appropriate response to changes in export demand would
be to allow the market to clear, with the exception that the U.S. would
stand ready to buy or sell the additions to or shortfalls from trend
yield on whatever acreage was planted. Under such conditions the U.S.
would not export its' domestic variability from weather on to the world
market.<br /><br /><span style="font-weight: bold;"> THE ARGUMENT OF CONTINUING MARKET FAILURE</span><br /><br />Heterogeneity
in the cost of production and marketing, which is the result of
heterogeneity in size, management, technology and location will result
in continuing excess capacity disequilibrium and loss of resources from
the sector regardless of the form of policy. Because costs vary among
firms, any price level within the range of total cost will result in
some firms being driven out of the production while others continue to
earn returns in excess of their production cost. As a result the assets
of the exiting firms will be recombined with those of the more
profitable firms and production is likely to expand or cost decline or
both, because of the efficiency of the acquiring firm. With no change in
demand, price is likely to decline and additional firms will be forced
to exit. Continuing consolidation of assets will occur until a
homogeneity of sorts is achieved or until an oligopolistic system is
developed which permits some control of output that will allow the least
competitive firm in the production structure to remain in production
because allocation of market shares has occurred.<br /><br />Policy analysts
have identified two basic factors that have been important for
agriculture policy determination in the United States. One is a tendency
for output to increase faster than consumption. The other is a high
degree of variation in commodity output and price variation, which
results in variation in earnings. The purpose of this analysis is to
explore the causes of excess capacity and price variation and identify
how various types of policies and programs might be used to assist in
overall adjustment of the farm sector.<br /><br />The following analysis
attempts to separate the various reasons for price and income changes
and suggests how particular policy tools may relieve or exacerbate price
and income stability and excess capacity problems.<br /><br /><span style="font-weight: bold;"> SUPPLY/DEMAND SHIFTS CAUSE CAPACITY AND VARIABILITY PROBLEMS</span><br /><br />Prices
are the result of the simultaneous interaction of supply and demand.
Therefore, before corrective policy actions are taken, it is important
to understand whether the changes in price are the result of shifts in
supply or demand or some combination of the two. It is also essential to
understand whether the shift is a result of short-term or long-term
phenomena. Lack of clarity in identifying the source of the change in
price or in the reason for a particular price level can lead to a choice
of policies that exacerbate rather than correct the perceived problem.<br /><br />The
unique aspects of agriculture are that agricultural production is
subject to the random impact of weather and food is basic to survival.
There is, thus, a general concern that some groups within the population
(either domestic or world population) will have insufficient income to
acquire sufficient nutrition for their existence at market determined
prices.<br /><br /><span style="font-weight: bold;">Humanitarian Aspects</span><br /><br />A
humanitarian goal of society is that no one starves regardless of their
ability to purchase food. To achieve this goal, output must be greater
than the free market would be expected to achieve. This can be achieved
by a shift in demand by transferring income to the disadvantaged (for
example, through food stamps or other direct income transfers) or by a
shift in supply making commodities available to certain segments of
society at subsidized prices or through donations. This aspect of
agricultural puts it somewhat in the nature of a public utility which
must provide service to all segments of society.<br /><br />Enhancement of
the effective demand or expansion of the quantity marketed, is
complicated by the biological nature of the production process, the
random disturbances in the market created by weather and the
inelasticity of demand for the product. These biological factors produce
short-run changes in market supply (quantity available for consumption)
that make discovery of long run prices extremely difficult and
therefore longer term investment and subsidy decisions are frequently
made from erroneous price expectation. Improvement of long run price
discovery is the primary focus of the remainder of this paper.<br /><br /><span style="font-weight: bold;"> BIOLOGICAL NATURE OF THE PRODUCTION PROCESS</span><br /><br />Because
agriculture is a biological process, it is subject to seasonality,
perishability of output, weather related problems and environmental
problems including insects, disease, and weeds. Environmental
consideration preclude agricultural production in some regions and
enhance it in others and alter the feasible output mix in a particular
geographic area. To some extent these biological considerations are
manageable. That is, we have the ability to modify the environment so
that supplies can be obtained at prices that permit adequate returns to
the producer for investing in the environmental modification technology.
In the following sections, the various biological factors and the
implications of allowing the sector to deal with them under free market
conditions were considered in a paper presented to SAEA in Feb 1987.<br /><br />To
this point the discussion has focused on the impact of biological
factors and weather changes on farm prices and farm income. This section
focuses on supply and demand shifts resulting from economic forces.<br /><br /><span style="font-weight: bold;">Demand Shifts</span><br /><br />Demand
shifts occur because of changes in population, taste and preferences,
and income. They may also result from policy decisions made about, and
applied to, other sectors of the economy. The demand shifts may be
temporary (a few quarters) or they may be permanent. Whatever the cause,
a decrease in demand (a shift to the left of the demand schedule)
results in consumers buying less of the commodity at any schedule of
prices. If no change in the supply occurs, the result of the demand
change will be that the price will fall and some smaller quantity will
be consumed. In order to achieve an equilibrium some resources must be
removed from production. In a free market this occurs because revenue is
reduced to the point where it is unprofitable for some producers to
produce the commodity and resources are transferred to other employment
or underemployed. Setting prices above the new equilibrium level, to
maintain producer revenue, results in the accumulation of stocks
(inventories). If the demand reduction is permanent or extended, a rigid
price floor results in continuous stock accumulation.<br /><br /><span style="font-weight: bold;">Supply Shifts</span><br /><br />Changes
in supply occur primarily because of changes in technology, changes in
the relative price of inputs or changes in the real price of inputs
relative to output. For example, adoption of a new technology may result
in the ability to produce more grain from the same resources and lower
the cost of grain per bushel. Such a change means that at any schedule
of prices more grain would be offered for sale. As in the case of a
reduction in demand fixing the price above new equilibrium will result
in accumulation of stocks.<br /><br /><span style="font-weight: bold;">External Policy Impacts</span><br /><br />In
addition to the impact of normal economic forces in a free market
economy, the farm sector is subject to the impact of Government
intervention in other sectors. For example, supply shifts occur as
result of tax policy changes that encourage businesses to make
investments. In particular, the use of investment credit and accelerated
depreciation cause more resources to be employed in the production of
crops than would be used without these investment incentives. Tax policy
that allows the write off of farm losses against other income provides
an incentive to continue farm production even though losses are being
incurred. The net effect is to keep more resources employed in
production than would be employed without the tax incentive.<br /><br />Credit
policy also encourages the employment of more resources in the sector
to the extent that it provides interest subsidies or makes loans
available to producers who could not obtain funds through commercial
channels.<br /><br />Monetary and fiscal policy have a substantial impact on
the demand for commodities though their impact on business cycles and
domestic income and though their effect on foreign exchange rates. Under
a restrictive monetary policy which keeps U.S. interest rates above
those in other countries the dollar tends to valued higher relative to
the currency of potential importers. Thus, prices for U.S. commodities
are inflated in the export market and the net effect is the same as if
the U.S. supply was shifted left or as if an export tax were imposed on
U.S. goods.<br /><br />Presented with such problems policy makers are often
disposed to create exceptions to a policy or to provide for offsetting
special conditions. For example, to offset the impact of restrictive
monetary policy on farm commodities, export subsidies may be instituted.
The result is that the consumer and the taxpayer pay a higher price for
the commodity, transfer income to the farmer and subsidize the foreign
buyers.<br /><br />Using farm commodity policy to protect farmers against
price and income variability or against "low" incomes is to treat the
symptom rather than the problem. Price and income changes occur in
response to shifts in supply or demand . The cause of the problem must
be uncovered be for a treatment can be proposed. If the source of the
problem is outside the sector then perhaps that is the place to develop
corrective policy, if such policy is needed. If tax laws are encouraging
excess resources in production then a change in the tax law would be in
order. If the problem occurs because of forces that are the result of
random weather shocks then appropriate tools can be developed to react
to but not anticipate weather changes.<br /><br /><span style="font-weight: bold;"> ALTERNATIVE FUTURES AND THE IMPLEMENTATION OF POLICY</span><br /><br />The
need for and the effectiveness of agricultural policy will be
determined by the continued certainty of yield variability and by the
relative change in output and consumption trends.<br /><br />If consumption
is rising coincident with or faster than output, real prices will tend
to remain flat or rise slightly. On the other hand, if output is tending
to rise faster than consumption, real prices will tend to fall.<br /><br />In
part, because of past price support policies, more resources are
employed in crop production than the level needed to meet domestic and
export demand at current prices and stocks are tending to accumulate. To
remove the excess capacity from the sector, real prices for output and
real earnings must fall to levels which force disinvestment from the
sector, resources must be acquired from producers and removed from
production, or demand must grow more rapidly than output for an extended
period.<br /><br />Allowing real earnings to fall to the point where a
large number of resources are forced out of the sector is a painful
solution. Expansion of demand (shifting demand) at a fast enough rate to
keep prices from falling appears to be economically impossible. The
most feasible solution appears to be some type of resource diversion in
combination with stability programs. Achieving the appropriate balance
is complicated by the random variation of weather which results in
highly variable yields and therefore highly variable prices which gave
inappropriate signals for long-term resource commitments. Arbitrarily
establishing a rigid price floor or a target price without regard to
longer term market forces results in price certainty and has a high
probability of providing the wrong type of information about future
profitability. Tying price floors to current production costs results in
distortion of market signals in a manner that tends to escalate future
costs. This results in higher support levels in the future, higher
production costs and in a rachet effect on support prices. On the other
hand, allowing the market to set output prices without accounting for
random disturbances from weather distorts the longer run economic
signals that occur from changes in demand or changes in technology and
output. These are the economically determined signals that we wish to
have the market transmit.<br /><br />Providing protection against random
shocks to the system need not distort long-term market signals if the
shocks are not the result of economic forces that is, if they are due
entirely to weather. However, if income declines as a result of a change
in the business cycle, providing price protection against the shift in
demand will result in commitment of more resources in production than
would be required. Or, if demand shifts as a result of a change in
foreign exchange rates, establishing a price floor could result in a
greater reduction in trade than would result from a market determined
price.<br /><br /><span style="font-weight: bold;"> SUMMARY</span><br /><br />The
previous discussion suggests that, farm commodity producers are subject
to the risk of low levels of income because of the impact of weather
and economic forces on the production, marketing consumption and prices
of the commodities they produce. Because agricultural production is a
biological process which results in the disassociation of the commitment
of resources to the production process and the output of those
resources, and because rainfall and temperature are not subject to the
control of the producer the relationship between committed inputs and
output is not fixed. Because the input/output relationship is not fixed
and the impact of weather is random in nature, the producers best
expectation of the price for the next crop year is likely some average
of historical prices. If resources are committed with the expectation of
normal yields and prices and the output results in a significantly
better or poorer crop, prices and incomes can be dramatically altered,
although the producers planned appropriately given their limited
information.<br /><br />Historically, society has recognized this risk and
has attempted to protect producer from the most severe aspects of a
random loss of income and consumers from the loss of the commodity. In
the l930's, programs were established to put a floor under prices and
thus prevent farm income from falling during periods of excess
production. In order to support prices, nonrecourse loans were made. The
loan rate became the price floor and crops not sold were forfeited to
the Government.<br /><br />As income increased, production at the supported
price increased and stocks accumulated in Government storage as markets
failed to clear and loans were forfeited. To limit stock accumulations,
various marketing controls and production controls--largely through
acreage diversion and acreage allotment programs--were instituted. In
the l970's, with acreage diversion and export subsidy programs in place
to help clear stocks, supplies diminished and prices rose rapidly. To
prevent rapid price increases in the future, a farmer-owned reserve was
introduced. A set of target prices and deficiency payments were
established to, in part, guarantee an income transfer to producers who
cooperated in supply control and stocks management programs while the
loan rate or price floor was to be set near market-clearing levels.<br /><br />Although
there may be differing points of view as to how farm policy should be
accomplished, the basis for a future farm policy appears to be linked to
the following premises.<br /><br />l. There is a societal belief and
general consensus that farmers should receive some degree of protection
from the random force of weather.<br /><br />2. There is a need to hold some
level of stocks against the possibility of a shortage of production but
stocks should not be permitted to accumulate to the point where they
will not be removed by short crop years.<br /><br />3. Current year market
prices do not allocate resources to the production of commodities in an
efficient manner in the short run because of the temporal dislocation of
inputs and production and because output is to some extent random. In
the long run, resources will tend to be allocated by output prices if
long run market signals can be determined.<br /><br />4. Neither the
Government nor the farmer can correctly anticipate or forecast the
outcome of a specific crop at planting time except by chance, therefore,
programs should be designed to be reactive to crop output rather than
anticipate crop output.<br /><br />5. Because commodity prices have been
supported above market clearing levels in the majority of years since
the l930s the sector currently employs excess resources in the
production of price supported commodities.<br /><br />6. Market prices will efficiently allocate output among consumers.<br /><br />7.
Protecting farmers from downside income risks requires two forms of
programs. One to protect individual producers from the loss of a crop
due to random weather events that are localized in nature and another to
protect all producers from the price depressing impact of an
exceptionally large crop.<br /><br />8. Consumers desire some form of protection against scarcity from a short crop.<br /><br />9. Tax payers desire to minimize Government expenditures.<br /><br /><span style="font-weight: bold;"> REFERENCES</span><br /><br /><br />1.
Boulding, Kenneth E., "Normative Science and Public Policy", Economic
Analysis and Public Policy, ed. Day, Richard H., Iowa State Press, Ames,
Iowa, 1982<br /><br />2. Brake John R., "Short Term Credit Policies for
Dealing With Farm Financial Stress and Their Impacts on Structure and
Adoption of New Technologies. Speech ;Cornell, Ithaca, N.Y., 1985<br /><br />3.
Daft, Lynn M., Discussion Alternative Agricultural and Food Policies
and the 1985 Farm Bill; Ed. Rausser, Gordon C. and Farrell, Kenneth R.;
National Center for Food and Agricultural Policy, Resources for the
Future, Washington, D.C.p 135<br /><br />4. Harl Neil E., "Proposal for Interim Land Ownership and Financing", Iowa State University, Ames, Iowa Jan."1985<br /><br />5.
Hathaway, Dale E. "Grain Stocks and Economic Stability: A Policy
Perspective ;Analysis of Grain Reserves: A Proceedings "ERS, USDA,
Washington, DC, August, 1976.<br /><br />6. Johnson, D. Gale;"Food
Production and Marketing: A Review of Economic Developments in
Agriculture";Food and Agriculture Policy; American Enterprise Institute
for Public Policy; Washington D.C., March 10-11, 1977<br /><br />7. Just,
Richard E."Automatic Adjustment Ruless For Agricultural Policy
Controls", American Enterprise Institute of Public Policy Research,
Washington, D.C., Nov 1987<br /><br />8. Just, Richard E. and Rausser,
Gordon C.; Uncertain Economic Environments and Conditional Policies;
Alternative Agricultural and Food Policies and the 1985 Farm Bill; Ed.
Rausser, Gordon C. and Farrell, Kenneth R.; National Center for Food and
Agricultural Policy, Resources for the Future, Washington, D.C<br /><br />9.
McCalla, Alex F. and Carter, Harold O. "Alternative Agricultural and
Food Policy Directions for the U.S. with Emphasis on a Market-Oriented
Approach.<br /><br />10. Miller, Thomas A., "Increasing World Market
Fluctuations and U.S. Agriculture: A Summary of Implications", NED, ERS,
USDA 1984, ERS Staff Report #AGES 84920<br /><br />11. Offutt, Susan E. and
Blandford, David, "A Review of Empirical Techniques For the Analysis of
Commodity Instability" Department of Agricultural Economics, Cornell
Uni, Ithaca, New York 14853<br /><br />12. Sharples, Jerry A. and Slaughter,
Rudy W.Jr, "Alternative Agriculture and food Policy Directions for the
U.S. With Emphasis on Stability of Prices and Producer Income:
Alternative Directions for the United States and Implication for
Research" Policy workshop Washington DC, Jan 1976, ERS, Farm Foundation
and W.A.E.R.C.<br /><br />13. Spitze, R.G.F. and Martin, Marshall A.
Analysis of Food and Agricultural Policies for the Eighties. No. Central
Regional Res. Bull. 27l. Ag. Expt. Sta., Univ. of IL, Nov. l980.<br /><br />14.
Walker, Odell L and Nelson, A.Gene, "Agricultural Research and
Education Related to Decesion-Making Under Uncertainty: An Interpretive
Review of Literature", Agri.Exp.Sta., RR P747 March 1977, Oklahoma State
Uni., Stillwater, OK<br /><br />15. Walker, Rodney L, Sharples, Jerry A.
and Holland, Forest, "Grain Reserves For Feed Grain And Wheat in the
World Market" Analysis of Grain Reserves A Proceedings, ERS, USDA
Washington, DC, Aug 1976<br /><br />16. Walace, Henry A., "Adjusting Production to Demand Benefits Both Farmers and the Public", Ames, Iowa, Dec. 28, 1922<br /><br />17.
Weber. Mark F. "Views on 1985 Farm Legislation of Agricultural and
Consumer Organiziations", Policy Research Notes, Issue 19a, ERS, USDA,
Feb 1985<br /><br />18. Zelner, James A. and Price, J. Michael;"Automatic
Adjusters and Farm Commodity Programs: The Case of Stock Triggers";
Speech presented at Southern Agricultural Economics Association
Meetings; Biloxi, Mississippi, Jan, 1985<br />
</div>
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<span>Monday, April 16, 2007</span></h2>
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<a href="http://grandpa-rdr.blogspot.com/2007/04/evolution-of-programs.html">The Evolution of Programs</a>
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Historically agriculture has been subject to periods of surplus and
scarcity. During periods of "shortage" and strong demand farmers have
responded to strong prices and prospects of high income levels by
expanding production. Production increased through advances in
productivity and the addition of land, labor and capital. As supply
growth outpaced demand growth - prices and farm income declined.
Similarly, during bust periods, characterized by low commodity prices
and farm income, resources were removed or idled inorder to reduce
production and bring demands and supplies into balance.<br /><br />This is
characteristic of U.S. agriculture prior to the 1930s - boom and bust
periods. During the Civil War prices and income were high. However, as
the war ended supplies grew and prices and income fell. Similarly strong
demand and high prices stimulated by World War I provided the necessary
incentives to expand production. After WW I and through the 1920s
commodity prices and income trended downward.<br /><br />Agricultural
policies are the result of the resolution of conflict. They begin with
divergent views about what should be done and end with a compromise
between groups. They are carried out through compromises between the
apparent or understood intent of laws and regulations and the personal
philosophies and interest of policy administrators. Policies are,
therefore, ambiguous to some degree. They leave room for interpretation.
Policies are often rationalized to some unintended program objective
after programs are written into law or regulation. Programs that were
undertaken as an implimentation of a policy in dealing with some acute
economic, social or political problem acquire a body of data and
arguments in their defense that may be quite different from the original
justification for the program or policy. Programs whose functions have
been fulfilled are often continued for reasons quite different from
those intended at the start of the program. Programs thus evolve over
time, taking on different purposes and often supporting policies far
different from their initial purpose.<br /><br /><span style="font-weight: bold;">Pre World War I</span><br /><br />Prior
to the First World War policies affecting agriculture were largley
development policies focused on developing the fontier and expanding
production. This single objective was facilitated by land settlement
programs, support of the family farm concept, and increased agricultural
productivity. A sound and expanding agriculture would complement
industrial growth and economic prosperity. In 1862, a number of acts
were passed that "opened the west" and established the importance of
agriculture, from a Federal perspective. The Homestead Act granted
acreage to those willing to improve the land and live on it for 5 years.
The Morrill Land Grant College Act established agriculture as a
mainstay at Colleges and Universities. The U.S.D.A. was established in
1862. Also, Congress subsidized development of the transcontinental
railway system - to assist in transporting agricultural commodities.
Eventually legislation was enacted to support research at agricultural
experiment stations (Hatch Act 1887), extend the land grant college
concept to black colleges in the South, and to provide Federal funds for
agricultural extension (Smith-Lever Act - l914).<br /><br />Three
additional acts that significantly influenced agricultural development
in the early 1900s were the Reclamation Act of 1902, the Federal Farm
loan Act (1914), and the Capper-Volstead Act (1922). The Reclamation Act
provided federal funding for irrigation development which enabled
agriculture to expand in the West. The Federal Farm Loan Act established
the Farm Credit System which gave farmers access to subsidized credit.
The Capper-Volstead Act exempted agricultural cooperatives from the
Sherman Antitrust Laws and allowed these organization to increase in
number, size and power.<br /><br /><span style="font-weight: bold;">The 1920's -- Program Initiated</span><br /><br />To
a large extent today's farm commodity programs are a result of the
economic chaos that affected agriculture in the 1920's. As the result of
a decline in exports, the introduction of mechanical power for hauling
freight and people, and the introduction of the tractor for agricutural
production the capacity of agriculture to produce far exceeded the
demand for its output. As the result of the shift to mechanical power
some 50 million acres were released from production of feed for draft
animals. At the same time land was being added to the productive base
through expansion onto the plains and grass land and through massive
irrigation and reclaimation projects. These forces along with the
declines in both domestic consumption and exports in the early 1920's
resulted in a rapid fall in farm prices while prices of manufactured
goods continued to rise.<br /><br />Farmers sought relief from, what they
percived to be, selective economic depression in agriculture through the
introduction of bills in Congress to support prices through the
purchase of commodities. A more complex approach to price support was to
be achieved through the McNary-Haugen Bills which were primarily
programs to remove surpluses from domestic markets through export
dumping. Although the bills failed to pass in Congress or were vetoed by
the President, they brought a focus to the farm policy debate. The
quest for "economic justice" for farm people, for "Equality for
Agriculture", was lead by George Peak who believed in a natural balance
between agriculture and industry and felt that agricultural commodities
should be priced such that their puchasing power was maintained on a par
with industry.<br /><br />In 1929, Congress created the Federal Farm Board
and povided it with $500,000,000 to purchase commodities in order to
support their prices. The funding proved to be inadaquate and the Board
with no ability to control production was seen to be a failure. In 1932,
the Board recommended legislation which would "provide an effective
system for regulating acreage or quantites sold" inorder to raise prices
and incomes for producers of commercially traded commodities.<br /><br />The
forerunners of current commodity programs were created in the 1930's to
raise the income of producers of "basic" commodities (commodities which
were important in commercial markets) by restricting market supply. The
Agricultural Adjustment Act (AAA) was to be a self supporting program
to bring about supply restriction through processor taxes. Revenues were
to be use to make allotment payments to producers who set aside up to
20 percent of their acreage. The Secretary of Agriculture proclaimed a
15 percent acreage reduction for contracting farmers to be eligible for
payments on the 1934 crop.<br /><br />In the Case of the U.S. vs. Butler,
often referred to as the Hoosic Mills decision, the Supreme Court on
January 6, 1936 declared the processor tax and production control
provisions of the AAA unconstitutional. Thus, the self-financing
provisions were eliminated and supply control was disrupted for a short
period. To responed to the short-term crisis and replace the production
control provisions of the AAA, Congress rushed through the Soil
Conservation and Domestic Allotment Act of 1936 by February 29, 1936,
less than 2 months after the Hoosic Mills Decision. Under the 1936 Act,
acreage reduction was to be achieved through conservation programs,
however, the program failed to restrict output.<br /><br />The Agricultural
Adjustment Act of 1938 brought about stronger Federal intervention in
the market. The term parity was introduced into legislation for the
first time and the Secretary was required to make nonrecourse loans for
producers of corn, wheat and cotton. Nonrecourse loans were at the
option of the Secretary for rice and tobbacco. Loans were set at a fixed
percentage of parity. In addition, producers were to receive parity
payments to bring their return as close to parity as possible with
available funds. Because program benefits, from higher prices and parity
payments, were tied to production, the larger and the more efficient a
producer the larger the benefits to that producer.<br /><br />The Commodity
Credit Corporation was established by executive order in 1933, which
provided loans to cotton producers enabling growers to hold their cotton
until prices improved. For fruits and vegetables, production controls
were supplemented by marketing agreements. Quotas were implemented for
sugar.<br /><br /><span style="font-weight: bold;">1940s - Abortive Attempts of Price Support Flexibility</span><br /><br />Despite
the use of acreage allotments and marketing quotas, commodity
inventories began to increase in the late 1930s, particularly those
owned and controlled by the government. Yield growth helped to make
production controls ineffective. By 1939, direct government payments
accounted for 35 percent of net cash income and 30 percent in 1940.
However, WW II stimulus improved export demand and as a result prices
strengthened and direct government payments fell to 13 percent of net
cash income in 1941. WW II postponed the need to address growing
surpluses and government costs in the 1940s.<br /><br />Government price
supports which were set between 52 and 75 percent of parity in 1938 were
above market cleaning levels as surpluses started to become burdensome.
However, the improvement in the industrial sector provided Congress
with the impetus to raise support for agricultural commodities up to 85
percent of parity (for those commodities which producers had not
disproved marketing quotas). Later legislation over 1941 and 1942 period
raised support to 90 percent for some commodities and extended the
level of support at these high levels to 1948. By 1945 more than l00
commodities were supported at high (above market clearing) levels.
During the war years supports rose and supply control requirements
declined.<br /><br />As the war ended debate arose as to what direction
supports should take - high fixed supports as in the War years or
flexible more market oriented dependant on existing supplies. The
Agricultural Act of 1948 favored flexible supports over time. However,
supports would remain at near the 1948 levels for 1949 plantings. The
1948 act also revised the parity price formula specifying farm - nonfarm
relationships dependant on current (10 years) period to account for
productivity and then faster changes since the early 1900s. This would
also support levels to decline beginning in 1950. The surplus problem
facing policy makers in the late 40s was contributed to by the adoption
of hybrid seed for corn and the full transition to "tractor power" as
opposed to horse power.<br /><br />Because prices were expected to collapse
following the close of the war the Steagall Amendment was enacted in
1941 to keep prices at war time levels for two years. The amendment
expired December 31, 1948. Although there was a growing bipartisan and
multi-commodity group consensus that flexible price supports were
desirable, the Agricultural Act of 1948 extended high price supports for
one more year, after which flexible price supports based on a
percentage of parity were to become effective. However, surpluses
accumulated and in an act of expediency the Agricultural Act of 1949
pegged price supports at 90 percent of parity through 1950.<br /><br />After
1951 cooperating producers of basic commodities could receive support
levels between 75 an 90 percent of parity (if marketing quotas were not
disapproved). Additional refinements to the parity pricing formula were
made on the 1949 Act which general merged the price index level.<br /><br />The
outbreak of the Korean War on June 25, 1950 lead to a continuation of
high price supports through 1952 for national security purposes and
neither acreage allotments or marketing quotas were in effect for the
1950 or 1951 crops of wheat, rice, corn or cotton and stocks held by the
CCC accumulated rapidly.<br /><br /><span style="font-weight: bold;">The 1950's -- Recognition of and Dealing with Excess Capacity</span><br /><br />Flexibility
in price supports was again deferred by Congress in July 1952 though by
passing legislation to provide for 90 percent of parity for the 1953
and 1954 crops, if producers had not disapproved of marketing quotas.<br /><br />Acreage
allotments were reinstated for corn for the first time since WW II and
marketing quotas were proclaimed for wheat and cotton and continued for
tobacco and peanuts. Yet, 90 percent of parity loan rates resulted in
the rapid accumulation of stocks by the CCC. The application of acreage
allotments to a crop like corn caused expansion of production of
nonallotment crops and depressed prices. It was becoming apparent that
the rigidity of allotments did not allow for efficient production
adjustment.<br /><br />In recognition that rigid and high loan rates were
incompatible with real economic conditions, the Eisenhower
Administration moved to implement the adoption of flexible price
supports. The Agricultural Act of 1954 set price supports at 82.5 to 90
percent of parity in 1955 and 75 to 90 percent of parity thereafter. A
portion of CCC stock holdings were to be set aside and disposed of by
export, donation and disaster relief.<br /><br />The export market was first
considered by Congress in the passage of Public Law 480 in 1954. This
Act proved to be of major importance in assisting in the disposal of
stocks yet it was limited in scope to sales for soft currencys,
emergency relief and bartering for strategic material.<br /><br />Although
support prices were made flexible, the range of flexibility was not
sufficient to slow the growth in output to an equilibrium situation with
demand growth. Pressure from increasing stocks resulted in the
establishment of the Soil Bank by the Agricultural Act of 1956. Because
prices were above world levels, direct sales in world markets were not
occurring and output restrictions seemed imperative. The Soil Bank was
designed to take cropland out of production. Composed of an Acreage
Reserve and a Conservation Reserve, the soil bank attempted to deal with
both short-term and long-term problems.<br /><br />The Acreage Reserve was
an annual program that replaced the acreage allotment. Under the program
farmers could reduce the acreage devoted to a crop below their
allotment and be paid for diverting it to conserving uses. In 1957 the
program had 21.4 million acres out of production, but it was terminated
after 1958 because it was condemned as a high cost program that was
ineffective in controlling production.<br /><br />The Conservation Reserve
was viewed as a measure to deal with the longer term adjustment of
resources out of agriculture. Contracts were signed for a maximum of ten
years for whole farms and for cropland to be diverted to conservation
uses. By 1960, 28.6 million acres were under the program. The last land
left the reserve in 1972. The 1956 Act also began a two tiered pricing
system for rice with export rice supported at a different level that
domestic rice.<br /><br /><span style="font-weight: bold;">The 1960's -- Direct Payments and Acreage Reduction</span><br /><br />By
1960, the high price supports of 1953 had given way to generally lower
and more flexible prices however neither the lowering of prices nor the
restrictions on acreage had been able to bring about an equilibrium
between output growth and demand growth. The export market while
increasing slowly, through PL-480, was not moving grain at prices as
high as our domestic support levels. Stocks reached record levels.<br /><br />The
decade year of the 1960 saw a fundamental shift in programs from price
support to direct income support payments and from voluntary acreage
reduction to diversion programs.<br /><br />Beginning in 1961 Congress
passed a bill giving the Secretary of Agriculture authority to make
payments to producers in cash or certificates to achieve acreage
reduction of at least 20 percent for corn and grain sorghum. Payments
were made on 50 percent of their normal yield. If they withheld an
additional 20 percent they were paid on 60 percent of normal yield.<br /><br />The
Food and Agriculture Act of 1962 continued the voluntary acreage
reduction program but broke new ground by separating price support and
income support payments. Loan rates on corn were allowed to decline to
near the world price level. A direct income supplement of $.18 a bushel
of normal yield was made to support farmer incomes if farmers complied
with acreage reduction programs. The combination of large acreage
reduction programs and world level loan rates resulted in a significant
decline in grain stocks during the 1960 and by 1970 CCC stocks were
approaching zero. However, the cost of direct income support payments
rose rapidly and reached $3.8 billion in 1969.<br /><br /><span style="font-weight: bold;">The 1970's -- Foreign Market Dependency</span><br /><br />Throughout
the 1970's production capacity and export growth were issues. Farm
programs increasingly built in inflation adjustments.<br /><br />In the
early 1970's a combination of acreage reduction and export subsidy
programs, a series of devaluations of the U.S. dollar, and short crops
in the USSR and India emptied the U.S. bins. Because of the Russian
grain sale in 1972, grain prices rose rapidly. The Agriculture and
Consumer Protection Act of 1973 expanded the concept of market
orientation and introduced target prices and deficiency payments to
replace the price support payments of the previous 10 years. Deficiency
payments were to be made only when prices fell below the target price.<br /><br />The
short run situation of strong export demand and low stocks gave rise to
a concern about the long run availability and stability of the market.
General inflation in the economy and rising prices for fuel and
fertilizer created increasing concern over costs of production. The
initial target was fixed abitrarily by legislation and had no
relationship to market conditions. In later years they were to adjusted
by an index of the cost of production.<br /><br />Yet, there was an effort
to maintain the market orientation of the programs by keeping loan rates
low relative to market prices. For cotton, loan rates were set at 90
percent of the price of U.S. cotton in world markets. Corn loans were
well below the market. As the export market remained strong, more and
more people came to believe that the future would be a period with more
years of scarcity than of surplus. On the strength of tight markets
lenders provided money to farmers to by land and machinery at higher and
higher prices.<br /><br />The Food and Agricultural Act of 1977 was an
accommodation to the general inflationary spiral raising loan rates and
target prices well above previous levels and above the recommendations
of the Administration. Target prices changes were tied to changes in
cost of production. A Farmer Owned Grain Reserve (FOR) was created to
provide for the possibility of extended nonrecourse loans to farmers in
order to provide for a buffer stock to encourage farmers to manage
stocks. To encourage participation in the FOR farmers were offered an
advance storage payment. Stocks were to remain in the reserve until
market prices exceeded release prices.<br /><br />Although exports remained
strong in the late seventies grain was rapidly accumulating in the FOR.
Market prices fluctuated with several shocks to the export market and
program management became a complex game of balancing the entry and exit
of stocks from the FOR.<br /><br /><span style="font-weight: bold;">The 1980's -- Changing Direction; Liberalization</span><br /><br />The
1980's brought about the full realization that farm programs cannot be
developed in isolation of macroeconomics and international
competitiveness. Domestic policies have been clearly seen to have
international market implications that alter the actions of consuming
and and competitor nations. The beginning of the 1980's saw a reversal
of world market conditions.<br /><br />The value of the dollar rose sharply.
Production increased in the consuming nations and our competitors were
under-pricing the the U.S. in the world market.<br /><br />In order to keep
grain off the market and out of the CCC the loan rate on FOR grain was
increased above the rate for regular CCC loans. Market prices declined
and in 1981 dropped below the FOR loan rate for corn and approached the
FOR rate for wheat.<br /><br />Initial efforts toward a 1981 Farm Bill
recognized the need for greater market orientation and a reduction in
budget costs. However, with the export market turning sour, farmers were
applying pressure for greater income protection. The farm sectors
performance in 1981 was worse than expected and prices were well below
1980 levels. The grain provisions of the 1981 Act were a Congressional
experiment in legislated prices base on expected rapid inflation in
production cost.<br /><br />World wide recession, a continuing strong
dollar, and large increases in output dashed hope that the market would
recover in 1982. Season average prices for corn and wheat were below the
loan rate. Deficiency payments rose sharply. Rigid price floors were
again creating stock piles as U.S. commodities were priced out of the
market.<br /><br />PIK, the largest acreage reduction program in the history
of farm programs, was introduced in 1983. A total of 82 million acres
wase enrolled under the PIK program with payment at 80 percent of
production for all crops but wheat and at 90 percent of production for
wheat. A combination of PIK and drought in 1983 cut stocks sharply and
prices rose much more than anticipated. The bins were refilled in 1984.<br /><br />The
Food Security Act of 1985 introduced a general realization that world
markets are a controlling factor in U.S. agriculture. Price supports
were reduced from levels projected in the 1981 Bill and farmer incomes
have been upheld by direct government payments. Export enhancement
programs along with the declining value of the dollar and a modest
recovery in world market have resulted in a turn around in exports.
Acreage reduction programs and payments in CERTs have reduced stocks.
Marketing loans for rice and cotton have made us competitive at world
prices.<br /><br />The evolution of programs has been conditioned by
short-term economic and political conditions. Emergency measures once
enacted have evolved into long-term programs that often had different
objectives and impacts than those intended in the original legislation.
Throughout most of the history of the programs the importance of market
pricing has been stressed on a bipartisan basis. Yet, political
expediency has resulted in a 55 year history of price support programs. A
full recognition that income support through ridged prices is
unfeasible over the long term is required in order to move to a market
oriened program.<br /><br />Multilateral efforts to bring about rationality
in world markets by removing domestic and export market programs that
interfere with prices and distort trade are essential to remove the
excess capacity problem.</div>
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</div>Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-65991718551961511002012-01-07T13:14:00.002-05:002012-01-07T13:26:27.273-05:0020121/52 of 2012 is history.<br />When I was a teenager I never expected to live beyond the year 2000.<br />More than 10% 0f the 21st century is gone and I'm still here. I feel as good as I did at age 50. Maybe even better.<br />With any luck and perhaps some good judgement and the right health care I could make it to 2020 or even 2030.Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-79105678591127976902010-02-18T16:25:00.002-05:002010-02-18T16:27:28.762-05:00Items to considerThe Universe is about 13.7 billion years old.<br /><br />Our solar system is about 4.6 billion years old.<br /><br />On the surface of the Earth, the oldest rocks are about 3.8 billion years old.<br /><br />The earliest fossils, are about 3.5 billion years old."<br /><br />Fossil evidence first reveals living cells about 570 million years ago.<br /><br />First mammals appeared 200 million years ago.<br /><br />First Primates appeared about 65 million years ago.<br /><br />Prosimians appeared 60 million years ago.<br /><br />Early monkeys appeared 33 million years ago.<br /><br />Hominids appeared 6 million years ago.<br /><br />The oldest homo sapiens fossils are about 195,000 years old.<br /><br />Evidence of farming appeared 10,000 tears ago.<br /><br />Written language known to exist 5,000 years ago.<br /><br />Plato and his student Aristotle in 2,400 years ago promoted the geocentric model of the Universe.<br /><br />Claudius Ptolemaeus in the 2nd century AD espoused the geocentric universe.<br /><br />Nicolaus Copernicus (February 19, 1473 – May 24, 1543) proposed a heliocentric cosmology.<br /><br />Galileo Galilei (15 February 1564[2] – 8 January 1642) Espoused a heliocentric universe but was forced to recant by the church.<br /><br />Sir Isaac Newton (4 January 1643 – 31 March 1727) removed the last doubts about heliocentrism and advancing the scientific revolution.<br /><br />Charles Robert Darwin’s (12 February 1809 – 19 April 1882) 1859 book On the Origin of Species established evolution by common descent as the dominant scientific explanation of diversification in nature.<br /><br />Edwin Hubble propose the Big Bang theory of the Universe in early 1900s.<br /><br />Hubble Space Telescope's launch in 1990 allowing us to observe the borders of the Universe.<br /><br />In 2007 there were 28 known planets outside our solar system.<br /><br />Humans could perhaps survive another 100 million years, when it will likely become too hot for them to survive on earth, or they may be part of the 6th major extinction that is currently occurring.<br /><br />In roughly 4 billion years the earth will be vaporized by the sun.<br /><br />What do you think?Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-72148480090908522012009-09-22T12:58:00.001-05:002009-09-22T13:02:15.224-05:00The Reinsel FamilyNew genealogy site for the Reinsel Family<br />http://reinsel.tribalpages.com/?userid=reinsel&x=9&y=8Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-21964995167738423362009-04-22T12:53:00.000-05:002009-04-22T12:54:23.535-05:00Proposed tripProposed trip<br />Day 1<br /><br />Fly to Seattle<br />Rent Car<br />Drive to Mt Rainier 102 miles<br />Over night Paradise<br /><br />Day 2<br />Hike at Mt Rainier<br />Drive to Port Angeles 206 miles<br />Over night<br /><br />Day 3 <br />Ferry to Victoria<br />Over night Victoria<br /><br />Day 4<br /> Ferry to Port Angeles<br />Over night<br /><br />Day 5 <br />Drive to Hurricane Ridge 25 miles<br />Drive to Hoh 92 miles<br />Drive to Kalalock 31 miles<br />Overnight at Kalaloch<br /><br />Day 6 <br />Drive Kalaloch to Astoria 158 miles<br />Over night Astoria<br /><br />Day 7<br />Drive to Mt St Helens 58 miles<br />Drive to Vancouver 40 miles<br />Overnight Vancouver<br /><br />Day 8<br />Drive to Richland 231 miles<br /><br />Over night with Ted and Peggy<br />Day 9 <br />Overnight With Ted and Peggy<br /><br />Day 10<br /> Drive to Grand Coulee Dam 162. Miles<br />Over night<br /> <br /><br />Day 11 Drive to North Cascades Newhalem Creek<br />Over night<br /><br />Day 12 Drive to Seattle<br />Over night<br /><br />Day 13 <br />Fly homeBob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-44322324261786338882009-04-19T07:56:00.004-05:002009-04-19T15:17:23.858-05:00The DreamEverything in sepia color <br /><br />Scene I<br />I'm one of a group of people<br />all in their twenties <br />Somewhere in Europe WWII<br /><br />Bombers coming <br />Run out of village<br />hide in fields <br /><br />Scene II<br />In building looking at files<br />find packets of pictures and postcards<br />someone's ID<br />someone is coming<br />We think it is Nazis<br /><br />Scene III<br />In room<br />2 US troops in charge<br />I tell them they need more files to hold documents<br />They don't pay much attention<br /><br />Scene IV<br /><br />Sitting in old world cafe with group<br />Rough tables and chairs<br />dusty <br /><br />Looking at pictures from packet<br />charcoal drawings and sketches<br />beautiful artwork <br /><br />photo images and portraits <br />on sepia colored paper<br />discussion about value and how to handle <br /><br />Scene V<br /><br />I wakeup!<br />Where did that come from?<br />I was 8 years old in 1945.<br />How did I get to be 20 years old?<br />In Europe?<br />Who were these people?<br /><br />It was one of those dreams that makes you want to go back to see how it ends. And find out how you got there in the first place.Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-89745632526725857902009-03-03T14:47:00.000-05:002009-03-03T14:47:18.420-05:00Obituaries from Clarion Newspapers ... - Google Book Search<a href="http://books.google.com/books?id=zezCvVETfgsC&pg=PA138&dq=reinsel+clarion+pa&lr=&ei=mEutSbaIMKD2Muu-lJIF&ie=ISO-8859-1&output=html">Obituaries from Clarion Newspapers ... - Google Book Search</a>Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-22671508398938249392009-03-03T14:44:00.001-05:002009-03-03T14:45:02.563-05:00Obituaries from the Clarion Democrat ... - Google Book Search<a href="http://books.google.com/books?id=xJaOp2bc4_UC&pg=PA182&dq=reinsel+clarion+pa+obituary&lr=&ei=zkutSZiRKoLeyAT6_qmeBQ&ie=ISO-8859-1&output=html">Obituaries from the Clarion Democrat ... - Google Book Search</a>Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-77624359159797548692008-12-13T10:54:00.001-05:002008-12-13T13:06:19.611-05:00Dinner at Gunson HallWe had a great dinner and a tour of Gunson Hall.<br /><br /><a href='https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx4VVijUIfEswqGnqqAlb3jImjnBLzzo-lrlp83nv9VMTltXqgLLn2WAAge45evGe13gCtLLV_xPhNTkcWih853vABU9jri-KeORNX0aiKglz0MeuQPQHoJe91urHh4REJCjtfLQ/s1600-h/IMG_3572.JPG'><img src='https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx4VVijUIfEswqGnqqAlb3jImjnBLzzo-lrlp83nv9VMTltXqgLLn2WAAge45evGe13gCtLLV_xPhNTkcWih853vABU9jri-KeORNX0aiKglz0MeuQPQHoJe91urHh4REJCjtfLQ/s320/IMG_3572.JPG' border='0' alt=''style='clear:both;float:left; margin:0px 10px 10px 0;' /></a> <div style='clear:both; text-align:LEFT'><a href='http://picasa.google.com/blogger/' target='ext'><img src='http://photos1.blogger.com/pbp.gif' alt='Posted by Picasa' style='border: 0px none ; padding: 0px; background: transparent none repeat scroll 0% 50%; -moz-background-clip: initial; -moz-background-origin: initial; -moz-background-inline-policy: initial;' align='middle' border='0' /></a></div>Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-8144217660093389412008-10-30T14:15:00.001-05:002008-10-30T14:16:06.762-05:00For Obama: Dad's 3 seconds of Fame<object height="394" width="448"><param name="movie" value="http://www.nbcwashington.com/syndication?id=33540449&path=%2Fnews%2Felections%2Flocal"/><embed src="http://www.nbcwashington.com/syndication?id=33540449&path=%2Fnews%2Felections%2Flocal" type="application/x-shockwave-flash" allowscriptaccess="always" wmode="transparent" allowfullscreen="true" height="394" width="448"></embed></object>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-68680356612053566652008-03-17T09:45:00.001-05:002008-03-17T09:58:23.895-05:00GrandchildrenThese are pictures from January to March 2008<br /><embed type="application/x-shockwave-flash" src="http://picasaweb.google.com/s/c/bin/slideshow.swf" flashvars="host=picasaweb.google.com&RGB=0x000000&feed=http%3A%2F%2Fpicasaweb.google.com%2Fdata%2Ffeed%2Fapi%2Fuser%2FBReinsel%2Falbumid%2F5178715839995571921%3Fkind%3Dphoto%26alt%3Drss%26authkey%3DUV38_mECeNY" pluginspage="http://www.macromedia.com/go/getflashplayer" height="267" width="400"></embed>Bob Reinselhttp://www.blogger.com/profile/06216263674478224611noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-17294357651234988602008-01-22T13:27:00.000-05:002008-01-22T15:15:43.774-05:00The FightThe Fight: as told by Coxie Minich<br /><br />"It was Halloween evening in 1920 and Bob and Joe and their cousin, Charlie Daugherty, were in New Bethlehem at a bar. The place was full and there was a lot of tension between the town fellows and the farm boys. Charlie was wearing a clown hat because it was Halloween and Vince Radecker from Fairmount got pushy and knocked the hat off of Charlie's head. Well that was the beginning of the fight.<br /><br />The Bartender told them to take it outside so the whole crowd went out and went up the street to the ball park to settle the fight. Well charlie and Radecker squared off and were about to fight when Bob saw Radecker slip on a set of knuckles. He said, 'Don't fight him Charlie. He has a set of knuckles on.' Well Charlie backed off and Radecker swung around to Bob. He said, 'Do you think you want do try me?' Bob didn't say a thing . He just stood there for a second and then swung a right uppercut. Well he hit Radecker on the jaw and knocked him out cold! They had to carry him off the field.<br /><br />There was only one problem, Bob broke all the bones in the third joint in his right hand.<br /><br />That should have been the end of it, but the next week Bob and Joe were back in town in the same bar. And Radecker was there. Bob's hand was in a cast and and Radecker started to mouth off saying he wanted to rerun the fight but Bob said he couldn't fight then but would as soon as his fist healed. Well Joe, who was wearing a new suit said. 'I'll settle it right now.' They went out in the back lot of the bar where Joe and Radecker got into a boxing and wrestling fight. When it was over Joe had ruined his new suit, but he had made Radecker give up and say uncle.<br /><br />I guess that is one reason they called Bob and Joe the mean Reinsel boys."RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-23933419732404830612008-01-20T14:17:00.000-05:002008-01-22T10:14:08.045-05:00Me and Charlie and the AmishmanMe and Charlie and the Amishman As told by Grandpa Bauer<br /><br />"One day me and Charlie and the Amishman was working in the forest along the dirt road cleaning the culverts and ditches. Well we came up to this one culvert and we seen that a groundhog had run into the pipe. Charlie said, 'Lets see if we can catch him.' So we decide that we would have the Amishman stand on the lower end of the culvert with a bag and we would pour some gasoline in the other and light it. We thought for sure that the groundhog would run into the bag and we would have him.<br /><br />Well I poured some gasoline on the one end and the Amish man stood on the other with the bag and Charlie threw a match into the end with the gasoline. Well you should have seen it! There was a big explosion and the whole culvert lifted about 6" in the air. The dust flew everywhere and sure enough the groundhog came out the other end. His hair was on fire and he was traveling so fast that he ran between the Amishman's legs and knocked him over and kept on going down through the woods. It's a wonder that he didn't set the leaves on fire. All we could do was laugh.<br /><br />Well just a little bit later the boss come along and said, 'What all that dust and smoke about? What are you fellas doing? We knowd that we would would catch it if we said what we did. But Charlie spoke up. Him been a fast talker and said, 'There was a nest of bees in the culvert and we burned them out'. Well that satisfied the boss and we didn't get in trouble that time.<br /><br />If someone had got hurt or we'd set the woods on fire we really would have catched it for sure."RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-71542797693651111422007-10-25T12:51:00.000-05:002007-10-25T12:55:13.039-05:00The rainThe rain, it falls upon the just, and the grass and the trees and the flowers. Two inches of rain in the last day. Soft rain, gentle rain, soaking rain.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com1tag:blogger.com,1999:blog-8210806.post-48785632296063571692007-10-23T14:39:00.000-05:002007-10-23T14:42:41.440-05:00New 10 Commandments1 Do not do to others what you would not want them to do to you. . <br />2 Treat your fellow human beings, your fellow living things, and the world in general with love, honesty, faithfulness and respect. In all things, strive to cause no harm.<br />3 Do not overlook evil or shrink from administering justice, but always be ready to forgive wrongdoing freely admitted and honestly regretted. <br />4 Live life with a sense of joy and wonder. <br />5 Always seek to be learning something new, test all things; always check your ideas against the facts, and be ready to discard even a cherished belief if it does not conform to them.<br />6 Never seek to censor or cut yourself off from dissent; respect the right of others to disagree with you. <br />7 Form independent opinions on the basis of your own reasoning and experience; do not allow yourself to be led blindly by others, question everything.<br />8 Do not discriminate or oppress on the basis of sex or race. <br />9 Do not indoctrinate your children. Teach them how to think for themselves, how to evaluate evidence, and how to disagree with you.<br />10 Value the future on a timescale longer than your own.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-20141710441645444172007-10-04T07:48:00.000-05:002007-10-04T08:49:23.840-05:00FogIt was extremely foggy when I went for my walk this morning and that made me think about other fog experiences. Three times stand out. <br /><br />In 1976, when we were on our way back from Nova Scotia, driving down I 81 past Scranton and all the way to Harrisburg, the fog was so thick that you could hardly see 50 feet in front of the car. It took hours and hours at 15 to 20 miles per hour to get from the northern Pennsylvania line to Harrisburg. Most of the time I followed a semi, staying back far enough to just see his brake lights. <br /><br />In April of 1957, I had been out visiting my future spouse and had started the 25 miles home at about 1:00 am. It took me until 5:00 am to travel the 25 miles because the fog was that thick. My brother-in-law was coming up the road in front of his house from the other direction. And I stopped to see what he was doing in this fog. He said that he was coming home from the Hospital. My sister had had a daughter about 1:00 and he was just getting back to do the milking.<br /><br />In September of 1954 I was doing the milking on the farm. One morning I got up at 5:00 am to go down to the barn. When I looked out, all I could see was a little spot of light in the fog, from the light on the pole down by the road. I went down to the milk house and got the milkers ready and then went over to the barn. Usually the cows would come up out of the pasture field when they heard me moving about in the barn, but this morning they didn't come. I stared down through the field to fined them but the fog was so thick and it was so dark that I was walking blind. I really couldn't see one step in front of me. I could tell by the slope of the land that I was not near the creek at the bottom of the field. When the land flattened out I knew I had about 75 feet to the stream but I still couldn't see any cows, so I took about 10 more steps and fell headlong over a big brown swiss cow. I was there in the middle of the herd and couldn't see them. The cows had all been laying down and they didn't move until I fell. That cause enough commotion that they got up and I could hear them but still could only see the one I fell over because I was standing right beside it. Once they got up, they walked up to the barn and I walked along with them.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-21397394171029242282007-09-26T07:37:00.001-05:002007-09-26T12:05:20.587-05:00Drought<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhxuaLF9S37fIFCQHrRzKBkjdoTPtafC7BHBURaGSp4MG28FNrfHbdAM72zQ4laQ0PxYmp5tHUlWA5Qu51N4rwhlJ3MeVEL_RiOftu4LSTHtiPDCXAGQsMnKCJM8RDvt88InCu6A/s1600-h/sdohomeweb.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhxuaLF9S37fIFCQHrRzKBkjdoTPtafC7BHBURaGSp4MG28FNrfHbdAM72zQ4laQ0PxYmp5tHUlWA5Qu51N4rwhlJ3MeVEL_RiOftu4LSTHtiPDCXAGQsMnKCJM8RDvt88InCu6A/s320/sdohomeweb.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5114558768036643810" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFj3IyK4d5UDKCkxAWihSFcrxs9H8KPR6j-JH8ziZmEhqRrqXXcIxnlg0kZWFe8v8XXPFSLuC6pRgkpof79_-2T3dcyLkk66sUKUewUSCX96V9gzMrUj20eXixeXVDQ9VlicSn7g/s1600-h/currend-3rain-pg.gif"><img style="float:LEFT; margin:0 0 10px 10px;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFj3IyK4d5UDKCkxAWihSFcrxs9H8KPR6j-JH8ziZmEhqRrqXXcIxnlg0kZWFe8v8XXPFSLuC6pRgkpof79_-2T3dcyLkk66sUKUewUSCX96V9gzMrUj20eXixeXVDQ9VlicSn7g/s320/currend-3rain-pg.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5114557741539460050" /></a><br />Mom and I went for a walk last night and found that the stream behind our house is dry for the first time in the 32 years since we have lived in this house. Oh, there are a few puddles but no water is flowing and the rocks in the stream bed are dry. It will take 15 to 18 inches of rain to get us back to a normal situation.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-73994833241613524242007-09-18T14:32:00.000-05:002007-09-18T14:46:53.720-05:00Defensive drivingMom and I are taking our 3rd defensive driving class this week. If we take the class every 3 years we get a discount on our insurance and since we are not doing a lot of other things it is a good thing to do. And, we do learn or relearn a few things about driving. Like the 3 second rule. What you may ask is the 3 second rule? Vell, I'll tell you. It is how far you should stay behind the vehicle in front of you on the highway. Oh. But how do you know? Well, you pick a marker that the vehicle is passing and see if it takes you 3 seconds to get there.<br /><br />Also, when you are stopped behind another car in traffic, how far back should you be? You should be far enough back to see its tires on the road. That allows you room to pull around the car if it is stalled and maybe enough room not to get smashed into it if someone hit you from behind.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-66651247674977712902007-09-16T07:44:00.001-05:002007-09-16T08:06:22.295-05:00Learning to DriveWhen I was 14 I was working on the farm and drove the tractor all of the time. Sometimes on Sunday afternoon I would take the tractor over to my friends house about a mile and a half away and we would just sit around and shoot the breeze. <br /><br />But there was another way that I got around. My sister Peggy was living at home and working in the Sylvania plant at Brookville. She bought a 1942 Ford Coupe to use to get to work. It had a high speed differential which meant that it didn't have much power but once you got moving it would run like a sacred rabbit. Since we lived on the back road and I knew every road in the township I would ask her to borrow it when I wanted to go to a 4-H club meeting at Shanondale or to visit another friend somewhere in our part of the world. Several tmes I took the back roads to Summerville on Sunday afternoon, or to Limestone to go swiming.<br /><br />I took my drivers test the day after I was 16 and the cop said it seemed like I had been driving for a while. I said yes I learned to drive on the farm.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-16745828297249639102007-09-15T14:22:00.000-05:002007-09-15T15:02:55.105-05:00Road workUntil 1952 the road past our house was dirt (mostly clay) and in the winter and spring of the year it got deep ruts whenever it was wet and the ground was not frozen. Sometimes it got so bad that we had to park the car up at the T (about 2/10s of a mile away from the house. For a month or more in the spring the only vehicles that got through were the mailman in his Model A Ford and the Milk truck that picked up the milk. Whenever the road dried enough we would hook the drag to the tractor and fill in the ruts so we could get the car in to the house. <br /><br />In the wintertime the road often drifted shut with snow and sometimes the Township did not plow us out for a week or more. In 1944 we were snowed in for 5 weeks before they brought in bulldozers to open up the road. Dad had to park the car at the main highway, about a mile away,and walk out to get to work and he had to carry in groceries. My oldest sister had to walk through the snow to get to the bus to go to high school. <br /><br />Things began to change in the summer of 1952. Dad convinced the Township Supervisors that the road needed to made passable in the winter for the school bus, mail, and milk truck, so they agreed to haul in sandstone to build a base for the road. That summer, in June my friend Roy and I were still 14, but old enough to get work permits, and the Township hired us to work on the road breaking the big rock into little rocks that the roller could crush in to the dirt. We worked about 4 weeks busting rocks on a little over a mile of road from Pumptown to the T. We got $1.00 per hour and worked about 8 hours a day. I was in pretty good shape when we finished. Of course we still had hay making and grain harvesting and chores to do but we were happy to have some money of our own.<br /><br />With a solid stone base on the road the Township made an effort to keep the road open all winter and that made things a lot better.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-42302337432689428642007-09-14T17:44:00.000-05:002007-09-14T17:49:03.797-05:00Contractors In IraqAccording to an article in Harpers magazine over 1,000 private contractors(mercenaries) have been killed in Iraq and over 13,000 have been wounded. This increases the american deaths by 25% and wounded by about 1/3.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-25185549292972947152007-09-05T09:05:00.000-05:002007-09-05T09:06:47.005-05:00Emerson on ThinkingBeware when the great God lets loose a thinker on this planet.<br /><span style="font-style: italic;">-Ralph Waldo Emerson-</span>Bobhttp://www.blogger.com/profile/02209346705787188567noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-22725280302663654122007-09-04T10:11:00.000-05:002007-09-04T10:12:17.376-05:00Quote of the day"The only reason some people get lost in thought is because it's unfamiliar territory."<br />Paul FixRDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-75846492694398264572007-09-01T14:56:00.000-05:002007-09-05T06:55:38.147-05:00Age 13When I was 13 years old my dad worked 8 hour shifts on the gas wells: midnight to 8 am, 8 to 4 and 4 to midnight. My brother was away at college so I had a lot of responsibility on the farm. Every Third week I got up at 5:00 am and milked 25 cows, then fed the calves, chickens, and pigs and then washed the milkers. I washed up and ate breakfast at 7:00 and then set the milk cans out for the milk truck and got on the bus at7:20.<br /><br />The next week when dad had the 8 to 4 shift he did the milking morning and evening and I did the feeding and washed the milkers. When dad worked 4 to midnight, I came home from school at 4:20 and changed clothes and started milking at 5:00 pm. We ate supper at 6:00 pm and I was usually in bed by 8:30.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0tag:blogger.com,1999:blog-8210806.post-51011264485232593462007-08-18T14:19:00.000-05:002007-08-18T19:09:54.074-05:00The Farm Bill Again<a href="http://www.cfra.org/blog/2007/08/14/">The Senate Side</a><br /><br /><a href="http://www.cfra.org/blog/2007/08/14/">The Senate Side Barbara Boxer wants to protect California Farmers</a>.RDRhttp://www.blogger.com/profile/05268637693917336948noreply@blogger.com0