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The Wall Street Journal
Thursday, October 4, 1984
A USDA Policy for the Birds
--
and the Bees
By James Bovard
Federal agricultural policy may have hit a new
low. The
Agriculture Department is buying half the entire U.S. honey
crop this year -- while imports are pouring in and replacing
government purchases almost pound for pound. The honey
program will cost taxpayers $94 million this year-roughly
equal to the market value of the entire U.S. honey crop. And
the problem is guaranteed to get worse next year.
Until 1949, honey producers got along just fine
without
any government price supports. During World War II, the
government exhorted beekeepers to increase production to
compensate for a shortage of sugar. When the war ended, a
honey glut occurred, and the obvious solution was a perpetual
government subsidy.
The honey price-support program had minimal
cost as long
as the government price-support level was below world market
prices. But, USDA price supports for honey have more than
quadrupled since 1972, from 14 cents to 66 cents a pound, and
are now far above world market prices. They will
automatically rise an added two or three cents next year,
further confounding the market.
Honey -- unlike most Agriculture Department
subsidized
commodities -- is not protected by stiff import barriers.
Thus, when the government drives up the price of domestic
honey, foreign honey oozes in. High U.S. price supports have
signaled foreign beekeepers to increase production and to
dump their surpluses on the U.S. market.
As a result, the department will buy up about
120 million
pounds of this year's honey crop, while Mexico, Argentina,
China and a few other countries will sell almost exactly the
same amount to U.S. consumers. Honey imports have soared from
49 million pounds in 1980 to 110 million pounds in 1983. Ruth
Fiefer, spokeswoman for the Valley Honey Association in
Stockton, Calif., says the high price supports "make it
difficult for American honey to compete in the marketplace."
The current program invites abuse. Some American
processors are reportedly buying foreign honey at 46 cents a
pound, claiming they produced it, and then reselling it to
the Agriculture Department for 66 cents a pound. Since there
are no obvious differences between U.S. and foreign honey,
this is an easy ruse.
The Los Angeles Times reports that the high
price supports
are "deeply disruptive to the basic structure of the nation's
insular beekeeping industry, the honey cooperative." Members
of cooperatives have revolted, refusing to sell honey to
their cooperatives and selling it to Uncle Sam instead. Ms.
Fiefer predicts that some of the smaller honey co-ops will
not survive.
How does Congress react to this sticky mess?
Congressmen
from honey-producing states propose boosting the tariff from
one cent to 10 cents a pound. This would only slow the import
deluge, not stop it. As long as U.S. support prices are 20
cents above world market prices, the U.S. will be a dumping
ground.
Because of low tariffs, the cost of high price
supports
shows up in the federal budget, instead of being hidden in
consumers' grocery bills. Farm protectionists want to
camouflage the honey subsidy the same way that the government
now camouflages much of the dairy and sugar subsidies.
Several congressmen insist that the Agriculture
Department
must continue bankrolling beekeepers because pollination is
vital to the agricultural sector. Says Sen. Larry Pressler
(R., S.D.), a leading protectionist, "With food costs in the
U.S. at over $100 billion annually, it is clear that bees are
vital to the American public. Without the honeybee to
pollinate crops, the diet of American consumers would be
limited to nuts, cereal grains and meat." This is the old
argument that since something is a necessity, the government
must pay to have it done. But, many beekeepers already rent
out their bees for pollinating, and more could do so.
The real honey problem is "parity."
The department is
buying half the honey crop in 1984 because of the relation of
the prices of peanuts and printing presses in 1914.
Contemporary farm policy is devoted to re-creating a mystical
balance of agricultural and industrial wages that supposedly
existed in the early 1900s. No matter that the parity formula
is a recipe for absurdity. As long as parity provides an
excuse for making farmers richer and taxpayers and consumers
poorer, congressmen will continue to invoke it.
Price supports are defended as a means to stabilize
markets and provide a guaranteed return to farmers. But,
instead of being given a key to the Treasury, honey producers
-- and other Agriculture Department subsidized producers --
should cover their risks by buying put-and-call options to
sell their crop at a set price in the future. Options would
provide the same type of insurance and security that price
supports were intended to provide.
There is no reason for the federal government
to disrupt
an industry, worsen our balance of payments, and squander
almost a hundred million dollars a year trying to do what a
private market could do at no cost to innocent bystanders.
But, as long as honey subsidies buy votes, congressmen will
have sweet tooths. So goes another chapter in Congress's
eternal struggle against the laws of supply and demand.
---
Mr. Bovard is a free-lance writer in Washington.