Corn $12.00 per bushel
Soybeans $28.90 per bushel
Wheat $18.30 per bushel
Beef cattle $292.00 per cwt.
Hogs $160.00 per cwt.
Milk $52.10 per cwt.
(Note: Dairy prices are to be set at 75 percent to 90 percent of parity, so a $52 parity price would be adjusted to $39 to $47.)
Parity prices for a multitude of other commodities are calculated monthly by USDA statisticians in the National Agricultural Statistics Service. The November 2012 report of commodity prices contains parity prices on pages 30 and 31.
Parity prices are part of an economic base for agriculture using the relationship between market prices and the cost of production between the years of 1910-1914. While this formula worked 100 years ago, there are few, if any, who believe it would work today. Nevertheless, that is where we are.
What does that mean for 2013?
That is very interesting to contemplate. If we don't amend the permanent legislation, the 2013 crop will be covered by an ancient non-recourse loan program. A floor would be put under prices at between 50 and 90 percent of parity. Parity is based on a 1910-14 purchasing power index. That means we have a 100-year-old policy.
“Parity prices for 2013 include wheat at $18, corn at $12, beans at $27, cotton at $2 a pound, milk at $52 a hundredweight. Secretary of Agriculture Tom Vilsack will be required to hold producer referenda by April on marketing quotas and production controls on wheat and cotton.
“Who loves this? Our competitors. Our Canadian friends think it's great because we'll put a floor price down and they'll beat us on prices and our grain will be in government storage. I don't think agriculture has awoken to this. I don't think they know how inept this is."
One of more immediate issues is the impact of the lack of farm policy on the U.S. dairy program. Beginning January 1, 2013, the lack of a dairy program will force the USDA to begin implementing the 1949 Permanent Law for dairy producers. In brief, that will require the USDA to purchase milk, store it as cheese and powdered milk, and remove enough of it from the market to cause prices to rise from the current $18 per cwt to the adjusted parity price of $39 to $47 per cwt. Such a shortage of milk is expected to push consumer prices to $6 a gallon or more.
One of the more outspoken critics of the lack of farm policy inaction is U.S. Senator Patrick Leahy (D-Vt.) who addressed the Senate on Dec. 21. He said, “The Secretary of Agriculture and his staff have been -- quite literally -- dusting off old paper files and mimeographed notes from the 1940s and 50s to review the Agricultural Act of 1949….This archaic law will force the Federal Government to spend billions of dollars to buy and store dairy products to help raise the price of fluid milk for dairy farmers. The Secretary will have to keep spending until he is able to raise the price of fluid milk by 60 or 70 percent…..Never before has the Farm Bill expired like this. And now on January 1 we will implement market-distorting dairy policy so old that 49 current members of the Senate -- including the Chairwoman of the Senate Agriculture Committee -- were not even born when it was signed into law by then-President Harry Truman.”
The Sept. 30 expiration of the 2008 Farm Bill without a replacement was not a crisis on Oct. 1. However, three months later, it is beginning to look like that. On Jan. 1, the U.S. dairy industry will see prices determined by parity, which is based on a 1949 law that uses economic formulas developed 100 years ago and will push milk prices to the $6-8 per gallon range. As commodity marketing years expire, the 1949 Permanent Law will take effect and raise prices as the government is forced to impose production quotas to keep enough of the commodity off the market that will allow prices to rise to established levels that are two to four times current market prices.