Tuesday, May 22, 2007

The farmer buyout trend gains momentum...

While the US is contemplating various buyout schemes to end ag subsidies, we may just be part of a global movement.
The EU Commission wants to offer wine-growers cash incentives to voluntarily take land out of grape production. After cries of protest, she this week cut the proposed scheme from 400,000 hectares to 200,000 hectares. [More]
This idea: Big-Money-Now, just might work. After all they are dangling the incentives in front of Baby Boomers - arguably the most selfish generation in history.

Regardless, I think a pattern is being molded for farm policy. And I'm not so sure it is misguided.

9 comments:

Anonymous said...

You know, I wonder though if the buy out has credence. Consider this, government announces buyout over "x" years then no more government funding. In those years could we perhaps see individuals enter production in some way to capitalize on the "free" money then run after the buyout? What about new producers? If an individual is looking to enter production after the buyout how would they compete for rent, capital, equipment, etc against someone flush with buyout money. We say now rents are elevated due to farm payments, what happens when instead of the current direct payment producers receive a lump sum that they can then jockey position with. Some days I look at the programs and think a little tweaking and we could be there, other days New Zealand has it completley right, and it really is more of a 40/60 split.

Anonymous said...

As I understand it, the voluntary buyout proposal is focused just on the Direct and Countercyclical Payment (DCP) program, so really it is a buy out of base acres and the payment would go to the landowner. Once those base acres are gone, that land ought to rent for something less than it does today, which might actually make it easier for someone starting out, albeit they would do it without DCP payments. And if you believe corn and beans are going to stay high, then countercyclical payments won't be there anyway.

John Phipps said...

All: Interesting thoughts. I agree with VA as the payments would be linked, like now, to acres. The impact on land prices and rents would be a function of how realizable the any payment stream will be in the future.

For example, if we all think the government will cave in the future as it has in the past at the first sign of hard times on the farm, acres that have been "mined" for payments and are "temporarily" ineligible may cost or rent for the same. (After all, we eventually let everyone sign up for CCP's)

But if we really, really buy in and become convinced those acres will never see another AMTA, they may sell/rent at a discount.

Although to tell ya the truth, if they were right next to me I probably wouldn't quibble about a few hundred bucks per acre or $30 in rent.

In fact, my guess right now is the courageous and fiscally prudent thing to do is take the money immediately. The present value of an income stream as funky as CCP's (or whatever emerges this year) is a questionable calculation.

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