There's an old joke that asks, "What do you call 100,000 lawyers on the bottom of the ocean?"
The answer: "A great start."
I tend to think the same way about the entire U.S. crop insurance program. Until just days ago, it was slated for major cuts, although now it appears Congress has decided to fund it, backdoor, through a highway bill.
Crop insurance is one of the top enemies of beef production because it has brought about conversion of many grassland acres to higher-priced crop land and driven up all land values.
The ethanol boom, which was driven by a direct 50-cent subsidy to fuel blenders for using ethanol, is a prime example of a subsidy-driven boom. It ran wild 2005-2012, all the time pushing up corn prices, corn acres, soybean prices in sympathy, and land costs. Research was bought and designed to prove argument for and against, but anytime a "new" industry begins to take 30 percent and more of a commodity, it drives up the price. To argue otherwise is ridiculous.
Of course, I must quickly admit that farm programs such as crop insurance and crop subsidies are de facto a form of subsidy to beef and other livestock industries because they have historically driven down the cost of feedstuffs. On the other hand, I could argue that without them beef should actually gain advantage over its chief rivals, pork and poultry, because they are highly dependent on grain and beef can be much less so.
At any rate, I would always choose a market system less adulterated by subsidies, one in which the government in all its wisdom does not pick the winners and losers. History shows us -- if we read history -- that the gubmit ain't so good at it. In fact, taxation always robs from the winners (the profitable) and gives to the losers (the unprofitable). Look at the wind energy "industry" as an example, which likely wouldn't exist at all without massive subsidies and governmental mandates, which are also subsidies. But I digress.
Subsidized crop insurance tips the scales toward crop production on a limited land base because it reduces risk. Nothing in the beef cattle realm, neither Risk-Management-Agency-subsidized options nor drought insurance, can create comparable or competitive rewards to crop subsidies.
Several years ago, the USDA Economic Research Service used an econometric model on a study area that includes 77 North-Dakota and South-Dakota counties. It estimated that crop insurance, marketing loans, and disaster payments increased land in cultivated crops by 686,000 acres (the average effect between 1998 and 2007). This, ERS said, was roughly 2.9 percent of cultivated cropland acreage. Keep in mind this was mostly before the big corn-price increases beginning in 2005-2006.
Put simply, when a farmer and a rancher are bidding on land, the one with the most money wins.
In case you're doubting my land-price claims, a study in 2008 by Don Holfstrand of Iowa State University did a nice job explaining how subsidies always flow through to the most limiting resource, which in the realm of agriculture is land.
Further, Kansas State University economists studied and documented for years that a significant portion of the various farm payment programs were factored into land prices.
To further the explanation of competition from high-priced corn, in particular, let's look at a 2013 study of changes in land use in the western Corn Belt. One of the researchers, Christopher Wright, a landscape ecologist at South Dakota State University, said crop prices have clearly been the key driver of above-average rates of grass-to-farmland conversion.
However, he added the evidence is that most expansion is on marginal ground, often class 3 and worse, and that insurance mitigates the downside risk on such poor soils, which typically are more drought prone.
As I said ...
Perhaps just as interesting is the fact the Census of Agriculture shows that nationally we had a net decline in crop acres since the beginning of the ethanol boom and a net increase in grassland acres from 2007 to 2012.
But don't overlook the poignant facts therein. Only corn and soybean acres increased. Cotton, wheat, rice and more decreased more. However, it's likely those acres just went into forage crops to wait on the day they can be broken out again, when crop prices are higher and crop insurance will keep the risk to a bare minimum.