Bailout Economic Madness as Congress Seeks to Bailout Pork Belly Farmers

By: Mike_Shedlock

24 Senators and 63 House Representatives have completely lost their minds over pork bellies. Apparently the free market does not work, hog farmers are not making enough money, and the government owes farmers a profit no matter how much stuff they grow or raise.

The U.S. Department of Agriculture must make funds available immediately to buy pork to keep hog farmers in business, the head of the second-biggest U.S. producer told a House of Representatives subcommittee.

Government pork purchases worth $100 million have won the backing of a bipartisan group of 87 lawmakers to support prices for farmers, who have lost money since 2007. Hog futures have dropped about 25 percent in Chicago since April 23, when swine flu began making headlines, depressing consumer demand and curbing exports to major markets including China and Russia.

Lawmakers need “to encourage and work with the Secretary of Agriculture to immediately make available” funds for government pork purchases, said Rod Brenneman, the chief executive officer of Seaboard Foods LLC, a unit of Merriam, Kansas-based Seaboard Corp. He testified before a House Agriculture Committee panel that oversees the livestock industry.

Lawmakers led by Senators Al Franken, Democrat of Minnesota, and Richard Burr, Republican of North Carolina, asked Agriculture Secretary Tom Vilsack to increase U.S. spending on pork in letters earlier this month.

The group of 24 senators and 63 representatives asked Vilsack to buy more pork in the year that began Oct. 1 through government food programs. The U.S. Department of Agriculture bought $165 million of the meat a year earlier, including $30 million announced on Sept. 3, according to Justin DeJong, a USDA spokesman.

The USDA may have less to spend on pork this year because of fiscal restraints, Vilsack said in an interview last week. He said the department is reviewing its plans for this year with an eye toward maximizing available funds for pork producers.

“We have to be sure we husband our resources and use them wisely,” he said last week.

No One Owes Farmers A Profit

It is absurd to think the government or anyone else owes farmers a profit anymore than computer consulting corporations or real estate agencies are owed a profit.

Yes farmers have a rough life. But everyone unemployed or underemployed has a rough life now. Farmers are raising too many hogs and prices are low. The solution is to raise fewer hogs, either voluntarily or involuntarily via bankruptcy.

When government steps in and offers price supports it keeps weak producers alive when they should go out of business, it encourages more production of unwanted goods, those goods stockpile up and then finally the US government dumps the excesses on foreign markets at whatever price it can get. The latter is an enormous source of aggravation for struggling emerging market countries.

Economic Madness Is Repeatedly Endless

It is not just the US gone insane over hogs. Please consider Economic Madness Is Repeatedly Endless.

Mad Facts

• The Japanese Government is buying 70,000 swine carcasses even though stockpiles are the highest in 20 years.
• Japan is the world's largest pork importer, stockpiling supplies.
• Japanese consumers are switching to chicken because it is cheaper.
• Japan's "remedy" is an attempt to force pork prices higher.

Does this make any sense at any level?

Lean Hog Futures


The chart shows hog futures are at the low end of a range it has been in for quite some time. In summer of 2008 prices were at the high end of the range. Now farmers have overproduced relative to demand. Left alone the free market would cure this problem in a hurry.

Agriculture Secretary Tom Vilsack said “We have to be sure we husband our resources and use them wisely.”

Wise use of funds is no use at all. The right measure of crop supports is always $0.

Yes farmers have a hard life. One I would not choose. But they chose it, not me. And neither I nor anyone else owes them a profit.

The U.S. Population Clock Projection shows there the estimated population of the US to be 307,758,086 as of 10/22/09 at 18:21 GMT.

That means 308 million people benefit from lower hog prices. How many benefit from higher hog prices?

Here's the deal: we all benefit from a free market where everyone has an equal chance. Policies that give farmers or anyone else an uneven chance are bad for everyone. The US government has no idea what the fair price for lean hogs or pork bellies should be and should stay out of it.

The only possible mission for the USDA would be in regards to health issues and safety, not determination of prices.

Michael Moore vs. GWU student

Michael Moore speaks at George Washington University about his new film "Capitalism: A Love Story". Chad Swarthout, senior at GWU, asks a question about free market economics and the government's role in it, and Moore admits easily that the system we have now is not true capitalism

Moore fails to ever address the original question, so here it is again, Michael, in paraphrase:

Is a free market and a system of private property, which is essentially capitalism, really the problem? Or is it really the fact that we give too much power to the government in which big businesses have a heavy hand in?

In regards to the free market and capitalism, that GWU student would rip Moore to shreds in an actual debate. Unfortunately it was only Q&A with Moore doing all the talking, most of it nonsensical.

For more on Moore please see Death of the 'Soul of Capitalism', a discussion involving opinions of Jack Bogle, Marc Faber, and Michael Moore.

Moore is a socialist parasite dependent on the very free market he criticizes to get his views across. It is very easy describe Moore's socialistic views as well as the views of those those seeking price supports in a single word: Hogwash.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

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