Travelling scholars field report
Posted by: Brent Alexander	Date: 18 April 2004

It's a sharp contrast flying from NZ to the US. We left a small country with an abundance of water and very few people and landed in a state facing a huge urban sprawl problem and an ever increasing water supply problem.

California has a current population of around 35 million and this is expected to grow to 50 million by 2020. Everyone in America, like Australia, wants to live on their º acre block and this is creating huge problems.

California has already lost 10 million acres of farm land since 1950 and most of this has been (as the Americans put it) paved over. This trend is only going to continue if the current situation remains.

There are some programmes put in place by the state government to try and arrest the problem, but they will at best only slow the expansion or guide its location. One of these programmes sees developers having to purchase one acre of farmland for every acre of land they develop. This land must then stay in farming for perpetuity. Really this has no affect on current development, but I guess in the future there will be some land locked away for farming, at least until voter pressure becomes so strong that this locked up land is released.

This programme has provided a unique opportunity for some investors who are buying up farm land to sell the development rights to developers. They are then free to keep farming the country and take some tidy profits on the sale of the rights.

The environment is again a very big issue here in the US. The San Joaquin county (California) has the dirtiest air in America. This is literally dirt, suspended in the air, mostly from cultivation. Some of the vegetable and rice farmers over here are cultivating their ground 16- 17 times. There is also a lot of dust put into the air from traffic and construction.

All rice stubble burning has been outlawed in California, because of pollutants, although special permission is given if disease problems can be proven. There is very little control on surface water in California and none on groundwater. Surface water is allocated on a "first in time, first in line" basis, which basically means if you were granted a right to use water in 1914, you get your water before someone who was granted their water right in 1935.

Northern California, at present has ample amounts of water, but there is an increasing amount of pressure coming from the drier south where a great proportion of the population live and farmers realize that the cities will always have priority.

The question of who pays for the preservation of the environment is one that arises quite frequently. The Americans seem to be the only country that is prepared to share it around and not leave it entirely up to the farmer. There are number of philanthropists willing to put big money into the environment. We saw a property developer, who owned a rice farm and was turning huge dollars into the preservation of wetlands (1000 ac of a 7000ac farm were constantly kept under water). The government was also much more inclined to push money into the environment and a large amount from the farm bill is being shifted across to the "green box". This is of course, to satisfy W.T.O. regulations, but I guess the environment still wins.

The effects of the mad cow disease (BSE) outbreak in America had been substantial. The closure of the border with Canada was causing a lot of friction and was also raising the cost of cattle replacements in the US, as Canada is a major source. The BSE outbreak has also put the Americans into a panic regarding electronic ID for their cattle industry.

Congress was talking about making it compulsory and requiring it to be implemented within 60-90 days, of course an impossibility. The other major problem facing them on the BSE issue was what to do next? With the finding of their first case they implemented an increased testing regime, to satisfy the consumers, but this will of course lead them to finding more cases and also leave them with very few options to take on their next step.

A lot of the mundane and physical work in the US is covered by South Americans. This gives farmers in the US access to a very cheap, hard working labour force. In some cases I think it is limiting their move into new technology. Dairy farmers, after being questioned on robotic milking were very dismissive and could not see the benefit of outlaying huge amounts of capital, when they had access to this cheap labour force. I wonder how long it will be until Australia is using the large labour force to the north of us, as our work force tends to be getting more and more reluctant to take on the hard, physical work at home.

The end of the US tour took us to Washington, where we had a couple of intense days talking trade and the US Farm Bill.

Australia is always going to struggle in freeing up agricultural trade with the US. We have very little bargaining power to bring to table (only our single desk) and we have many more products that we'd like to bring into the US, than vice versa. We are also up against a growing anti trade sentiment within the farming ranks, that hasn't been helped by the fact that Canada gets the blame for the US outbreak of BSE and the fact that the American farmer still has a very strong political presence. The American Farm Bureau is rated in the top 25 political lobby groups and the only one within in this range who does not contribute financially to election campaigns.

Fran Freeman from the Australian Embassy told us that there are some radical farmer groups in the US, who are very anti Aust/NZ and are prepared to stop at nothing to end our trade. The US Wheat Associates have been quoted saying the AWB is giving kickbacks to Saddam Hussein to get wheat into Iraq.

Those producers that are looking for an end to the US subsidy programme, will be sadly disappointed. The Americans are currently spending $US20billion on direct subsidies, without taking into account tariffs and quotas and there is still pressure from many quarters to increase this payment. A lot of the drive is coming from the fear of the developing countries such as Brazil and China cutting into the lucrative US market. These countries have huge production of agricultural products and have the added bonus of cheap labour and very little care for the environment, which of course helps to reduce their costs.

I guess the only bright spot on the subsidy issue, is the fact that the payments are moving out of production based payments and into environmental payments. This will be slightly less price distorting, but as I see it, will still result in more money in the pockets of the US producers and ultimately make them more competitive.