While health care issues take center stage about once every 20 years, it is an issue that we hear farmers talk about year-in and year-out. For many farmers, the concern is not universal coverage, it is their coverage and the coverage of their children who have come back to the farm or might be considering a return to farming.

This ongoing concern on the part of farmers caused us to think about the stake that farmers have in the current debate.

Some farmers or their spouses work for an employer who offers group health care coverage as a part of employment. At times, health care coverage is the primary reason for seeking off-farm employment and staying with it until Medicare kicks in.

The advantage of these employer offered group plans is that they don’t require a health examination and generally have a limited period of exclusion for pre-existing conditions as long as the plan is signed up for within a specified time limit, often 90 days, from the date of employment.

Farmers who don’t have access to one of these plans face challenges in finding an affordable health care plan. To start with farmers—and others without access to an employer sponsored plan—finding themselves buying a single (as opposed to group) plan for themselves and their family. Almost always these plans cost more than group plans for similar coverage.

The overhead expenses, like advertising and sales commissions, take up a greater portion of the health care premium for single plans than they do for group policies. In addition, a single purchaser does not have the same bargaining power as a large employer with hundreds or thousands potential policy holders.

Even when farmers purchase health care coverage through a plan offered by their farm organization or other intermediary, they face higher costs because, on average, farmers are older than the population as a whole and require more health care services.

In addition they may face higher costs because farming is a more hazardous occupation than working in an office or even on a factory floor.

As a result of these higher costs, we have observed that younger farmers tend to take the chance on going without coverage until they begin to raise a family or are faced with a serious illness. When they try to purchase insurance at that point, they are faced not only with higher premiums, they find that a variety of pre-existing conditions are excluded from their coverage.

In attempt to make the health care premiums affordable, farmers often end up buying policies with very high deductibles. As a result, they may avoid getting routine health care unless the problems become serious or life-threatening.

Farmers and others living in rural areas discover that the choice of health care plans are more limited than they are in urban communities or areas adjacent to these communities. In general, the fewer the competitors the higher the price for comparable policies.

Health care coverage also can impact the decision of a child to remain on, or return to, the farm after a period of further education. These children are often willing to accept lower and more variable disposable income than they might experience from a job in an urban area.

But the issue that can tilt the decision is not income, it is health care coverage. If they take or keep a job in the city they can receive health insurance for themselves and their family through their employer at a more affordable cost.

As we listen to farmers and the national debate it is clear that health care delivery problems have been identified across the political spectrum. The differences lie in the means that should be used to address those problems.

What is also clear is that under the status quo or under new legislation affecting health care issues, farmers are greatly impacted—often disproportionately—by private rules and public regulations affecting health care delivery.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). (865) 974-7407; Fax: (865) 974-7298; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ; http://www.agpolicy.org. Daryll Ray’s column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

Reproduction Permission Granted with:

1) Full attribution to Daryll E. Ray and the Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN;

2) An email sent to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it indicating how often you intend on running Dr. Ray’s column and your total circulation. Also, please send one copy of the first issue with Dr. Ray’s column in it to Harwood Schaffer, Agricultural Policy Analysis Center, 309 Morgan Hall, Knoxville, TN 37996-4519.

China Takes Care of China

By: Daryll Ray
Published: January 8, 2010

It would not be a stretch to assert that Chinese imports have driven the recent growth in soybean production and exports by the US, Brazil, and Argentina. Between 1995 and 2009, Chinese imports of soybeans grew by 1.459 billion bushels (from 0.029 to 1.488 billion) while the rest of the nations of world increased their imports by 0.183 billion bushels (from 1.168 to 1.351 billion). 

China now imports 53 percent of all raw soybeans in world trade. While Brazil and Argentina have captured the lion’s share of the import growth, any change in the rate of growth in Chinese soybean imports would have serious price and production-growth consequences for the US as well as Brazil and Argentina.

When it comes to decade-long growth rates the size of those recently experienced by Chinese soybean imports, it is always dangerous to extrapolate such rates years and decades into the future. In this case, it is likely even more dangerous to make continued high-growth assumptions because, well, because it is China we are talking about.

China’s imports of soybeans stand in contrast to its behavior in virtually all other major agricultural commodity markets. In the case of grains, China exports more than it imports, shipping between 1 and 2 percent of its major-grain crops out of port in 2009.

While not trying to suggest that we understand the spectrum of considerations that influence the behavior of the Chinese in agricultural markets, we do think it is important to understand the use of grains and soybeans in China.

Rice is one of the traditional mainstays of the Chinese diet and virtually all of the 136 billion tonnes of production (2009) is used either for food, seed, or additions to carryover stocks. Less than 5 percent of China’s 115 billion bushels of wheat production is used for animal feed, with the rest used for food, seed, and changes in carryover stocks.

Unlike rice and wheat, which are primarily grown for food, 75 percent of China’s 2009 corn production is projected to be used for feed with the rest divided up among food, seed, industrial, and changes in carryover stocks.

In addition to the high use of corn for animal feed another difference between it and rice and wheat is the increase in production that has taken place since 1995.

In 1995, more rice was produced than either wheat or corn. In the years since then rice production has increased by 6 billion tonnes to 136 billion tonnes. During that same period wheat production increased from 102 billion tonnes to 115 billion tonnes in 2009.

Corn on the other hand has increased over that period by 43 billion tonnes to 155 billion tonnes in 2009 with the proportion of corn production used for animal feed increasing over time. Corn production now exceeds that of rice by 19 billion tonnes.

Soybean production is significantly smaller than the three major grains coming in at 14.5 billion tonnes just 1 billion tonnes more than was produced in 1995. Over that period the use of soybeans for human food has increased 5.6 billion tonnes to 8.8 billion tonnes.

The use of soybeans for crush has increased from 7.5 billion tonnes in 1995 to 44.1 billion tonnes in 2009, an increase of 488 percent. Most of the meal that resulted from the crush was used for animal feed with the oil being used for human consumption.

The increase in the use of corn and soybean meal for animal feed has supported a 38 percent and 68 percent increase in the production of pork and broilers respectively over the 1995-2009 period.

Looking over the last 15 years, the data suggest that the Chinese have focused on self-sufficiency in rice, wheat, and corn production to the exclusion of soybeans. In addition, the data show that the Chinese have used increases in corn production and soybean imports to increase their production of pork and poultry, maintaining a near self-sufficiency in the production of those meats.

The future of soybean imports by China depends upon the willingness of its leaders to continue that pattern. Another key issue is whether or not the increase in Chinese imports will keep pace with net production increases—production in excess of domestic demand—in the US, Brazil, and Argentina. Just as soybean producers have benefitted from increasing Chinese soybean imports over the last 15 years, they could face price pressures if future increases do not keep up with the growth in supply. A movement on the part of the Chinese to focus on increasing domestic soybean production could be problematic for the three major soybean exporters.

The data also suggest that a significant increase in the level of imports of pork and poultry would require a change in current public policy. US pork and poultry producers hope changes in Chinese trade policies will result in larger markets for them. In the long-term, if large quantities of US pork and poultry are imported by China, it most likely will be because China believes it is in China’s long-run best interest to do so. Otherwise, not.

To us, the evidence is strong that—above all else— China takes care of China.

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Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). (865) 974-7407; Fax: (865) 974-7298; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ; http://www.agpolicy.org. Daryll Ray’s column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

Reproduction Permission Granted with:

1) Full attribution to Daryll E. Ray and the Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN;

2) An email sent to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it indicating how often you intend on running Dr. Ray’s column and your total circulation. Also, please send one copy of the first issue with Dr. Ray’s column in it to Harwood Schaffer, Agricultural Policy Analysis Center, 309 Morgan Hall, Knoxville, TN 37996-4519.

Development Policy Driven by

Common Sense not Edicts 

By: Daryll Ray
Published: December 4, 2009

A last ditch effort to conclude the Doha Development Round of World Trade Organization negotiations was held in the summer of 2008 in the hope that George W. Bush would sign it and be able to get it through a Republican House and, with help from a few Democrats, the Senate. For many reasons, the negotiators were unable to come to an agreement that satisfied the various nations of the world.

The idea behind the Doha Development Round was the belief that increased trade liberalization would lead to increased development in the least developed countries of the world. It was argued that they would gain through the comparative advantage of cheap labor, cheap production, cheap land, and cheap resources.

Early economic models showed that the bulk of the gain from liberalized trade would be enjoyed by developing countries, including the least developed, and millions would be lifted out of poverty. Many analysts including the authors of this column pointed out the structural weaknesses of these early models.

Later models showed a much lower level of economic gain from the Doha round and even noted that as much as two-thirds of the gains would be enjoyed by developed countries with developing countries, which constitute most of the world’s population, left to share the remaining third. Because of the differential distribution of benefits, many less developed countries showed a loss as a result of trade negotiations that were supposed to be designed to help them develop.

In most of the less developed countries the bulk of their population consists of farmers, pastoralists, and fishers—people who wreak their livelihood from the land and waters of the earth. In recent columns we have laid out a broad plan for development in these societies—a plan that starts at the grassroots by taking local people seriously, respecting their traditions when it comes to food and food production.

Recently we came across a paper in The Journal of Peasant Studies titled “Rethinking public policy in agriculture: lessons from history, distant and recent” by Ha-Joon Chang a member of the economics faculty at the University of Cambridge, UK. In the paper, Chang argues that, with regard to developing and less developed countries, “trade liberalization has led to increased import penetration, which has threatened the livelihood of many farmers. [The] simultaneous push for agricultural exports in a large number of countries that specialize in the same products has often resulted in falling prices and even export earnings.”

Chang starts by examining the New Conventional Wisdom (NCW) which is a more benevolent face of the Washington Consensus that focused on fiscal austerity, privatization, and trade liberalization. He notes that “the persistent theme of the NCW is the need to ‘eliminate distortions’ because they create market inefficiencies.

He continues, “At one level it is impossible to disagree with this view. If prices are ‘distorted,’ by definition they lead to ‘distorted’ outcomes, which, by definition, cannot be good… . However, if markets are not working well, distorting the prices that prevail may be a good thing, if that is done for the right purpose.”

“Agricultural tariffs certainly can impose short-run efficiency costs,” he writes, “but they may promote agricultural growth and overall economic growth in the long run, if the tariff revenues are invested by the government in improving agricultural productivity…and/or if the increased agricultural incomes create offsetting extra demand for local industries.”

Chang then develops a series of recommendations based upon an analysis not of textbook Washington Consensus recommendations but of how the current crop of developed and increasingly prosperous countries improved their economic situation.

His first recommendation is what he calls “Inputs policy” and involves land policy, land (tenure) reform and land quality improvement. Chang notes that most countries “in the early states of development…have problems with landless rural populations. Land reform, he argues, is the fastest way to give them an opportunity to earn a livelihood in the absence of “rural off-farm employment [and]…industrial employment.”

As part of this recommendation he argues for access to finance, rules that prevent re-concentration of land, the creation of non-farm jobs to absorb a growing population, measures to stabilize farm prices and income, research to raise the productivity of the land, the prevention of land degradation, and policies to enable the consolidation of dispersed plots in order to increase agricultural efficiency.

The second recommendation concerns “knowledge: research, extension, education, and information.” While many national research and extension efforts were dismantled as the result of the Structural Adjustment Program that was imposed on the basis of the Washington Consensus and moderated a little with the NCW, the gap that was created was not filled by the commercial sector. As a result farmers were left with a lack of information and guidance. Chang gives special attention to education, citing the Morrill Act of 1862 which set up the land-grant colleges in the US.

Chang’s other recommendations include credit; physical and infrastructure inputs (irrigation, transportation, and electrification); divisible inputs like fertilizers, seeds, and farm machinery; and outputs policy (measures to increase farm income stability including trade protection).

He points out that most of the recommendations he identifies are drawn from the actual practice employed by many of the leading countries of the world as they went through the development phase in their history. In the absence of global institutions, these countries had the political and economic space that allowed them to experiment and draw on the agricultural policies of other nations’ policies as they designed their unique development path.

As trade ministers begin to rethink their strategies for getting the current “development” round back on track, they would do well to consider Chang’s analysis which argues for a more flexible approach than is currently being advocated.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). (865) 974-7407; Fax: (865) 974-7298; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ; http://www.agpolicy.org. Daryll Ray’s column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

Reproduction Permission Granted with:

1) Full attribution to Daryll E. Ray and the Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN;

2) An email sent to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it indicating how often you intend on running Dr. Ray’s column and your total circulation. Also, please send one copy of the first issue with Dr. Ray’s column in it to Harwood Schaffer, Agricultural Policy Analysis Center, 309 Morgan Hall, Knoxville, TN 37996-4519.

 Will Meeting Food Needs in 2050 be Effectively

Addressed or be More of the Same?

By: Daryll Ray
Published: November 27, 2009

The current situation in production agriculture reminds one of the writers of this column, Harwood, of a question he often heard in his former profession as a country parish pastor. The question: “Is there a shortage of clergy to serve the churches?”

His answer updated for today goes like this. There is a surplus of clergy who want to serve suburban churches that pay $55,000 per year plus a generous housing allowance and that have a staff to carry ut youth work and visitation of the elderly.

At the same time there is a shortage of clergy who are willing to serve rural churches in which they are the only staff person—they have to type their own bulletin—and they earn $25,000 per year and, perhaps, have a parsonage to live in.

Let’s now take those ideas to the topic of agricultural production. Is there a shortage of agricultural production in the world today, and, come 2050, when the world adds 3 billion people to the current population, will we be able to feed everyone?

Among the developed countries, including the major crop exporting countries of Brazil and Argentina, there is the capacity to significantly increase production to the point that crop and livestock prices will sit in the basement.

At the same time, unless there is significant farmer and government investment in agriculture and the development of agricultural policies that pay attention to the needs of small-holder producers in the developing countries of the world—especially in Africa—, the population in those countries will continue to suffer from high levels of chronic hunger and an increased number of deaths of children under five. The poor in developing countries simply cannot afford to buy the excess production of developing countries.

What we have are two distinct problems that require different solutions, and yet at the same time are linked together.

In recent columns, we have discussed policies that we believe will lead to increased food production and food security in the least developed and most food-insecure countries of the world.

In this column we want to talk about the other side of the problem—the ability of farmers in the developed countries to increase production at a rate faster than the increase in demand, leading to prices that fall to levels well below the cost of production.

One of the current examples of this is the dairy industry. With weather problems that led to reduced milk production in New Zealand and Australia, prices began to rise as importers began to look for alternate sources of cheese, butter, and dry milk powder. US producers responded to the increase in demand by ramping up production to meet what they saw as a growing export market. Meanwhile, a booming USeconomy sustained a steady increase in demand for milk and cheese.

With high milk prices, dairy farmers were able to cover the increased cost of feed grains, and diary farms showed a handsome profit.

Then more favorable weather returned to New Zealand and Australia, and their milk production recovered. At the same time, the USeconomy took a nose dive, triggered by the mortgage crisis, among other factors, and domestic demand tightened up. Suddenly there was more milk, cheese, and dry milk powder than the market could handle, so prices took a major tumble.

Because of a wet year with late planting and a killing frost arriving before the corn crop was at physiological maturity, grain and oilseed prices remained high. These events combined to put dairy farmers in a serious bind as the price dairy farmers were being paid for their production fell well below the cost of production. As a result, they were losing a bundle on each hundredweight of milk they sold.

Presently, dairy farmers have funded a diary herd buyout in an attempt to adjust production capacity to demand at a price that allows them to regain profitability. It may take an additional herd reduction to achieve that goal.

While developing countries have the challenge of increasing agricultural production, and thus the livelihood of a mostly rural population where farming is the only available occupation, developed countries face the problem of managing productive capacity.

It turns out that in developed countries it is relatively easy to increase production. Dairy farmers can take advantage of a technology that sorts semen so that cows give birth to 90 percent heifers and 10 percent bull calves instead of the usual 50-50. Using that technology, the size of the dairy herd can be increased quickly.

Likewise, the technology that is being bred into seeds today allows farmers to grow a near record yield corn crop under the terrible growing conditions we have seen this year.

Given a positive price signal from either exports or domestic demand, agricultural producers in developed countries can ramp up production quickly to meet the new demand. As we see from the low prices in the dairy industry, easing off production to a profitable level is much more difficult.

While each farmer has an incentive to increase production when prices are high, an individual farmer has little reason to be the one to reduce production when prices are low. Instead, the farmer hopes either for a return in demand or a decrease in production by farmers somewhere else.

Given this situation, we read some sage advice from Ohio State University Extension dairy economist Cameron Thraen. He said, “When you see milk prices move up quickly, you need to be prudent with what you do with that extra income. First thing you do is get your financial house in order, You don’t look at it as if it’s going to last because it doesn’t. You are going to have these boom and bust periods and during the boom periods you should follow sound financial advice, pay down debt, and build a cash-flow cushion.”

He went on to say, “If the industry wants to be a part of both domestic and international markets you need to be ready to accept more price variability. International markets are more volatile than domestic markets. You have to be thinking of management strategies to implement when that international partner walks away and you are stuck with a supply with not enough demand to support it.”

We couldn’t have said it better ourselves.

Another point to ponder: much of the unbridled-increase-production emphasis being promoted to solve the food security concerns of today—but especially the concerns for tomorrow—may end up throwing a blanket of chronically low prices on commodities produced primarily in the developed world while continuing to aggravate the productivity problems of small-holder producers in the developing world.

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Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). (865) 974-7407; Fax: (865) 974-7298; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ; http://www.agpolicy.org. Daryll Ray’s column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

Reproduction Permission Granted with:

1) Full attribution to Daryll E. Ray and the Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN;

2) An email sent to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it indicating how often you intend on running Dr. Ray’s column and your total circulation. Also, please send one copy of the first issue with Dr. Ray’s column in it to Harwood Schaffer, Agricultural Policy Analysis Center, 309 Morgan Hall, Knoxville, TN 37996-4519.

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