
As Climate Changes, Taxpayers Will Shoulder Larger U.S. Payouts to Farmers - pseudolus
https://www.npr.org/sections/thesalt/2019/07/24/744541143/as-climate-changes-taxpayers-will-shoulder-larger-u-s-payouts-to-farmers
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cagenut
IMHO a strategy of deliberate over-provisioning for food makes eminent sense,
so I have no qualm with that "market" being artificially supported.

Naively modeled as a service, if humans "timeout" for food at about two weeks,
and there are 7.5B of us, I would want a system who's p99.9999999999 < 14
days.

The problem w/r/t climate change is we're taking the existing system we have,
which already does not meet that target, and we're dialing the Chaos Monkey up
and up and up.

~~~
wongarsu
As the chaos monkey dials up speculating on food becomes more profitable too,
mitigating at least some of the risk. If I expect harvests to fail on a
significant scale, buying up huge warehouses of grain (or other storable food)
and selling it when prices soar is a great investment strategy.

As climate change makes disruptions more frequent I wouldn't be surprised if
some investment fonds started launching their own cubesats to feed their
prediction models to spot such opportunities before everyone else.

~~~
dalbasal
In theory... In practice, if you think harvests will fail, futures contracts
make the whole warehousing thing moot.

Arbitrage and clever tradable (or even non tradable) contracts (eg contract
for difference) give you an opportunity to speculate on the price of grain
without you (or anyone) actually holding any wheat.

In practice, you just bet someone else that the price will go up, and they pay
you the difference if you're right. No wheat has to be stored.

There is very little relationship between derivative markets and the quantity
of commodities siloed.

If you want an emergency "buffer stock," you need to buy and hold actual
commodities.

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mrfredward
If enough people bet on wheat prices to rise, futures contracts get expensive
compared to the current price of wheat. This opens the opportunity for someone
to rent a warehouse, fill it with wheat, and then take the opposite side of
the futures contract (i.e. lock in a high future selling price for your
wheat), yielding a guaranteed profit.

So if futures prices ever show a price increase greater than the cost of
storage, people will start filling warehouses with wheat everywhere. It's just
that normally commodities don't increase in price at a rate that exceeds the
cost of storage.

~~~
dalbasal
The warehouse is a theoretical construct, in practice. Whatever the market
does and whatever investors want their position to be (long, short..), they
can take that position without any physical wheat actually entering or leaving
a silo.

~~~
dragontamer
But the arbitrage is settled physically.

When oil-storage was filling up, oil-futures drop in response (because the
market knows that physical space was running out).

That's the thing about the world: people exist in it, and can change the
world. Increasing the number of warehouses (to make more money) is a good
strategy, and the futures contracts provide a means for allocating these
investments more efficiently.

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thinkcontext
I found the last few paragraphs about most of the study's authors leaving USDA
because of relocation of their agency to be pretty poignant. Looks like a last
hurrah in the face of this administration's campaign to shutdown independent
science in general and climate science in particular.

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bamboozled
I'm quite surprised indoor farming powered by renewable energy isn't being
taken more seriously.

I remember seeing these concept towers where food was grown inside in what was
essentially a 40 stories of hydroponic grow rooms co-located inside cities so
transporting of food was easy.

I guess I'm insanely naive about growing food at scale and indoors (I've
dabbled with produce on a small scale) but why hasn't this approach taken off?

~~~
dangus
Farmers in Ohio basically plow empty, undeveloped land, plant seeds, use
pesticides sometimes, and nature does the rest. They don't even irrigate, rain
comes down from the sky and waters the crops.

The purchase price of farmland in Ohio is about $5000-6000 per acre.

You're talking about building a skyscraper as if crop production can generate
enough revenue to justify that expense and somehow compete with all the other
farmers who are just using the land as the found it a couple hundred years
ago.

The cost to build a parking garage space is $20,000-$30,000 - and parking
garages are just a slab of concrete. You'd still have to add in the costs of
irrigation and artificially light the crops.

And then, how do you efficiently harvest vertical farms? Farmers in Ohio drive
a giant vehicle over the generally flat and square field. How are you
harvesting a vertical farm without huge labor costs in comparison?

There's actually nothing "green" about this vertical farm idea when you think
about the extra power, concrete, and construction material requirement needed
to realize it.

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ianai
You comment is a good reasoning to combat climate change as an existential
threat.

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dangus
Yes - this year in Ohio is a great example, many farmers are rained out of
planting much of anything at all.

Hit up the Ohio turnpike around Toledo and notice that at least half of the
fields aren't even planted (just an eyeball guess on my part, take that "at
least half" with a grain of alt). Rain has been too heavy this year and a lot
of wheat and corn either couldn't be planted or the crop looks absolutely
pitiful.

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Ensorceled
Hopefully, the necessity to deal with climate change will cause the government
to run out of money for the ludicrous subsidies of corn for ethanol, cheap
HFCS, large agribusiness, etc.

It might also cause the U.S. government to be forced to start to acknowledge
and deal with climate change.

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sneak
The government can’t run out of money unless you do.

~~~
OmarIsmail
A government that prints and thus creates its own money can't run out of
money.

~~~
hylaride
A government that prints too much money eventually makes it worthless and then
"runs out" of it, though. See also: Venezuela, Zimbabwe, Weimar Germany.

~~~
pjc50
Both of these are right, rather than contradictory: a government can always
keep printing its own currency. What it can't print is _foreign_ currency. So
hyperinflation shows up as a forex and balance of trade phenomenon first. As
was the case in all three of those examples:

Zimbabwe's land reform destroyed the productive export-led farming industry,
so the cost of required imports such as oil drove the Zim dollar into the
ground. Similarly Venezuala trashed its oil export industry and failed to
develop others.

Weimar Germany was required to pay reparations in gold to France. The postwar
destroyed industry wasn't able to export enough goods to pay for the gold, so
yet again other imports became prohibitively expensive.

The US is very, very unlikely to experience these kind of problems; it is
large enough to not be so dependent on imports, and in recent years not even
on oil. The last inflation spikes were due to OPEC: yet again import-led
inflation.

~~~
hylaride
I disagree. You don't get 79,600,000,000% (in Zimbabwe's case) inflation long
after your farms had been idled. The price of goods in foreign "hard" currency
actually remained relatively stable after some initial shocks, but the actual
inflation was in Zimbabwe dollars after the gov't printed more Z$, which the
majority of people there got paid in.

If you study monetary history in the US, you'll find that the OPEC angle of
the 1970s inflation was a scapegoat, and the real causes were politicians (in
that case Nixon) refusing to raise interest rates (which indirectly slows
monetary growth) because it would cool the economy and affect his popularity.
It's a prime reason why the Fed (and most central banks in the world) now have
"independence" to set rates. If the high cost of oil was all it took, we'd
have had higher inflation during the oil spike a decade ago. Heck Germany,
which has to import 100% of it's oil, saw it's inflation levels DROP in the
1970s as they raised rates to tame inflationary pressures.

~~~
effie
That is interesting. Can you recommend some good sources on these economy
laws? How can I convince somebody that increasing interest rates, an unpopular
move, should prevent large inflation, which is something people want?

~~~
pjc50
It's a complex subject, but the ECB seem to have a fairly decent explainer:
[https://www.ecb.europa.eu/mopo/intro/transmission/html/index...](https://www.ecb.europa.eu/mopo/intro/transmission/html/index.en.html)

Broadly, cheap credit -> more purchases by individuals and business -> demand
expands relative to supply -> prices and wages rise ; or vice versa. The
unpleasant side effect of this is that there is a minimum level of
unemployment for the policy to work (NAIRU, "non-accelerating inflation rate
of unemployment")

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gregoryexe
Just like all the profits made from the "war on drugs" government will just
view climate change taxes as a new source of revenue with no incentive to
truly end the problem.

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dsfyu404ed
Farming is an activity that is critical to the national economy and a
strategic asset. It's not like this is some boondoggle bridge to nowhere.
Seems kind of like FUD spreading to say that we spend $8B subsidizing crop
insurance and then saying we'll pay more (which is obvious, IMO) and acting
like this is a problem without even floating an number for that future cost.
And this is coming from someone who's against most farm subsidies.

~~~
wongarsu
I agree that farming as a whole is important, but how does subsidizing crop
insurance help? Why can farmers not just pay 100% of their insurance premiums
instead of only 40%?

~~~
RhysU
We can either pay for the risk via subsidized premiums (40%) or through
increased food costs (100%). Subsidizing the premiums is arguably less
efficient (bureaucratic overhead on taxation) but is progressive in a
progressive tax system.

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frankbreetz
Farm subsidies make us have less diversity in our diet because only a certain
short list of crops are insured. America makes way too much corn and soybeans,
and we should be using that land for something else that could create more
value. Not mentioned how soy and high fructose corn syrup get shoved into
every food item because of these.

Farm subsidies are anti-capitalist. Milk is a perfect example of how this is
an issue, I can get a gallon of milk for about 2 dollars in the USA. It should
cost about 8 dollars. The cost difference is made up by farm subsidies. There
are many cheaper ways to get the nutritional value provided by milk, but the
US government is choking these industries out. If the free market were to
decide milk would not be a beverage and only used for cooking because it would
be impractical to drink.

I am all for a safety net for farmers, but the farm subsidies need major
restructuring with the American consumer and the small farmer in mind, instead
of the farm industry and the profits of some of the biggest corporations in
the world.

~~~
jdhn
>It should cost about 8 dollars

8 bucks? I know that farm subsidies drive down costs, but a 4x increase seems
quite high to me.

~~~
germinalphrase
In trade negotiations, the Canadians argued that 73 percent of returns to milk
producers in the US are governmental subsidies, but not sure how that squares
with the store price.

~~~
jdhn
I'm willing to bet that even if farm subsidies went away, the price would at
most double. Milk is really popular, and there's no way that supermarkets
would let one of their highest volume products soar up in price like that.

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rks404
Socialism for Big Ag so they can insist on cut-throat capitalism for the rest
of us.

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foxhop
In permaculture we say, the problem is the solution. That farmer should take
1/4 of his land and have airplanes drop rice. The worst case it doesn't work
but he learns a lot, the best case is he has a new crop for when this
situation occurs.

When life gives you lemons, you make lemonade.

~~~
wongarsu
I don't know much about farming, but I wouldn't expect a corn farmer to be
equipped to suddenly farm rice. None of his machines really work for that, and
manual harvesting seems out of the question at US wages.

