Staffs Briefed on Policy from Wall Street Perspective

April 18, 2001

David C. Nelson, agribusiness stock analyst at Credit Suisse First Boston in New York City, says House and Senate Agriculture Committee staffs told last week that from Wall Street's perspective, odds "appear to be increasing for a change in farm policy this year rather than next." One reason is the importance of food policy to lawmakers; it is "clearly one of the most important of all (lawmakers') jobs."

"Look at the tragedy of our energy policy," says Nelson. "Imagine if we had roving black-outs of food or water supplies. Policy considerations must be long-term in nature as we can't change food supplies or production systems on short notice.

And although U.S. consumers have the highest quality, greatest variety, most abundant, lowest cost and safest food supply ever they "resent the bailouts and subsidies" given farmers and "farmers resent the need for them."

Nelson says with 10%-15% of farmers generating about 85%-90% of production, they represent the group dependent on farm income. "The others rely on off-farm income (and are the ones) for whom almost nothing you can do will help. The definition of farmer and who and what farm policy should be geared for is critical."

Agribusiness is concentrating and integrating due to market forces, he continued. "Economic returns in agribusiness have been poor. Key drivers include consumer demands for quality and consistency and retailer demands for scale. If you increase costs by imposing greater requirements and restrictions on agribusiness, that will drive capital investment further away from agriculture and agribusiness."

He also noted that soybean acreage is "structurally shifting" from the United States to South America and that has implications "in and of itself," although not for policy making this year. That also " exacerbates our excess corn and sugar supply issues."