How Farm Policy Affects Us All

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Photo courtesy DAVE CHANNON
Big Agriculture’s destructive ways rake in the cash. Our flawed federal agricultural policies are long overdue for a major overhaul.

Like a barnyard sow basking in the glow of attention at a county fair, the U.S. farm bill — that monstrously complex, multi-billion dollar, five-year plan for federal agriculture policy — has suddenly gained a high profile.

Most U.S. citizens are far removed from the land that sustains us (less than 2 percent of the population currently farms), but whether you know where your food comes from or not, this bill — set to be signed into law by Sept. 30, 2007 — has a huge impact on your life. It affects not just the quality and cost of our food, but also the quality of our land, water and even our air.

Food production is such an important activity, so critical to life and health, that we as a society would be wise to support farming on some level. The questions then become: Does current farm policy work to bolster farm health and enhance food security? Does it promote a food supply that is produced in sustainable ways and contributes to the health of all who consume it? Does it work to provide all our citizens with a steady, nutritious diet? If not, what would a farm policy that did look like?

The Evolution of Farm Policy

No one can accuse the United States of failing to commit significant resources to agriculture. Between 1995 and 2005, U.S. taxpayers paid farmers almost $165 billion in direct payments, according to the Environmental Working Group. That averages to approximately $16 billion per year — the majority of which went to the biggest growers of major crops, such as corn, wheat, cotton, soybeans and rice. The group estimates that in 2002 alone, taxpayers paid more than $12 billion to about 35 percent of America’s farms — this was an average of more than $17,000 per farm.

Given that level of commitment, it’s worth asking what taxpayers are gaining in return. A well-funded but sound national farm policy should be expected to promote an economically vibrant farm sector that produces a bounty of nutritious food, while carefully managing natural resources. But despite lavish cash outlays, U.S. farm policy fails on all of those fronts.

Indeed, existing farm policy, as embedded in the current farm bill, actively works against those goals.

For example, nearly a third ($51.3 billion) of total farm payments from 1995 to 2005 went to corn growers. As grown by U.S. farmers, corn seems an unlikely candidate for massive public support. It causes significant environmental damage in the growing phase, and more than half of U.S. corn production is used as feed for concentrated animal feeding operations (CAFOs) — a “factory farming” system whose environmental and social depredations are breathtaking.

Now that discussion is underway on the 2007 farm bill, a hard look at how our subsidy system evolved is in order. By tracing the roots of current dysfunction, we can perhaps find a way toward a farm policy that serves the public interest.

A (New) Deal Gone Sour

A common problem faced by farmers is the tendency of prices for their goods to fall over time. U.S. farmers have often churned out food faster than Americans can consume it, and this leads to ever-lower prices.

According to classical economics, farmers should respond to the “signal” of lower prices by cutting production, which would cause prices to stabilize. Instead, they’ve tended to respond by scaling up — investing in land and technology to boost production dramatically. They hoped to make up in volume what they were losing in price — creating a vicious circle of rising productivity, lower prices and recurring farm crises.

That situation came to a head during the Great Depression, when an extended bout of overproduction led to falling prices and a severe farm crisis. While millions of Americans went hungry due to lack of funds, farmers were stuck with huge food surpluses. Overall farm income fell by half during the early years of the Depression, and thousands of farmers defaulted on loans.

In response, the Roosevelt administration made farm support a linchpin of the New Deal. To keep prices reasonable, the government tried to manage farm output. The program worked like this: When farmers began to produce too much and prices fell, the government would pay farmers to leave some land fallow, with the goal of pushing prices up the following season.

There was an additional New Deal mechanism that sought to stabilize prices: In bumper-crop years, rather than allowing the market to be flooded with grain, the government would buy excess grain from farmers and store it. In lean years — say, when drought struck — the government would release some of that stored grain, mitigating sudden price hikes. The overall goal was to stop prices from falling too low (hurting farmers) or jumping too high (squeezing consumers).

Now, you don’t have to be a free-market zealot to identify some problems with this setup. First of all, it concentrated a tremendous amount of authority within the U.S. Department of Agriculture (USDA), whose director came to occupy a kind of “Agriculture Czar” position, wielding power over food production roughly equal to that of the Federal Reserve chair’s sway over interest rates.

But there was a deeper problem: The technological revolution in farming that blossomed in the second half of the 20th century — the cascades of synthetic fertilizers and pesticides, the explosion in petroleum-powered heavy machinery, the advent of hybridized seeds — overwhelmed the government’s ability to limit supply.

In short, the government could pay farmers to take acres out of production, but it couldn’t stop farmers from milking every last drop from each remaining acre. In 1935, U.S. farmers devoted 100 million acres to corn, yielding 2 billion bushels. By 1975, farmers were squeezing about 6 billion bushels out of less than 80 million acres. Given such leaps in productivity — meaning quantity, not quality — it was inevitable that the New Deal paradigm would break down.

And break down it did.

In the early 1970s, with grain prices low, farmers growing restive and a presidential election looming, the USDA took a new approach. Rather than focus on supply management to boost prices, the agency moved to jack up demand. This was a radical idea, because demand for food doesn’t tend to rise fast; people don’t normally eat more when prices drop.

Earl “Rusty” Butz

Since farmers were producing more food than Americans could possibly eat, the USDA aggressively sought overseas markets. Seeking, in part, to coalesce Midwestern support for President Richard Nixon in the 1972 election, USDA Secretary Earl “Rusty” Butz engineered a 30 million-ton grain sale to the Soviet Union, financed with $700 million in “export credits.” Yep: U.S. taxpayers loaned the Soviet Union money to buy our grain.

As a price-boosting strategy, the Soviet grain sale was a success. Wheat and corn prices surged. But a Midwest drought the following year exerted further upward pressure on prices. Inflated grain prices rippled through the food system, driving the price of meat nearly beyond the reach of middle-class U.S. families. Along with the 1973 OPEC oil embargo, the Soviet grain sale helped spark the “stagflation” that gripped the U.S. economy into the next decade.

Butz responded to the crisis he had helped set in motion by urging farmers to plant “fence row to fence row” and flood the market with the whole harvest. And if such a strategy were to lead to overproduction and low prices, Butz offered two solutions. In the short term, the government would support farmers with direct payments (subsidies) when prices dipped below the cost of production. In the long term, if U.S. consumers didn’t eat their way through the surplus, new markets would be opened overseas.

In the decades since, these reforms have proved a failure. The United States has worked to open markets for our goods overseas, but export growth, too, has failed to keep up with ever-rising yields. Direct subsidies (introduced as a short-term solution, yet never replaced with a more economical alternative) continue to promote the interests of industrial farms.

Meanwhile, we’re becoming a nation of overweight citizens, thanks to the flood of cheap refined sugars and grains we’re urged to consume.

The 2007 Proposal

The agenda released by the Bush administration on Jan. 31, 2007 seeks to carefully balance its own need to trim the federal budget and further its free-trade agenda with its desire to appease an important farm-state voter constituency. What the proposal doesn’t do is address the massive health, environmental and social problems haunting U.S. food production. It’s another push down the same old road.

Until the recent spike in grain and oilseed prices caused by surging ethanol and biodiesel production, farmers have for years been selling commodities such as corn, soy, cotton, wheat and rice for less than the cost of production, with taxpayer subsidies paying the difference, and the biggest farms getting the majority of the subsidies, according to research by the Environmental Working Group. Owners of the largest 20 percent of farms received nearly 90 percent of the $165 billion in taxpayers’ money over the past decade. The real winners were the big grain-buying firms, which made billions by buying up cut-rate grain and turning it into dubious “value-added” goods such as high-fructose corn syrup and ethanol. Large meat-packers also thrived, turning cheap, taxpayer-subsidized corn and soy into food for animals that don’t even naturally eat grains. As a result, beef, poultry and pork markets became highly profitable. Meanwhile, U.S. farms failed by the millions. Since 1950, the number of U.S. farms has plunged from around 5.5 million to just over 2 million.

Federal farm policy has not just been stubbornly ineffectual at achieving its aim of bringing supply and demand into line, despite annual cash infusions routinely in excess of $10 billion. It also has given rise to, or at least done nothing to check, a food production and distribution system that inflicts vast environmental and public health destruction. According to the USDA, diet-related maladies such as diabetes and obesity cost us some $70 billion per year.

Apologists for U.S. agricultural policy point out that these titanic taxpayer subsidies and external health and environmental costs buy us the world’s cheapest food system; we spend a smaller percentage of disposable income (which does not include subsidies) on food than any other nation on the planet. But even on these grounds, U.S. food policy fails. The USDA reports that 11 percent of U.S. families — representing some 35 million people — chronically lack access to sufficient food. And most of the rest of us are eating too many calories, and the wrong kinds of food.

Moving Forward

Given the depth of these dysfunctions, the Bush administration’s agenda for the 2007 farm bill is weak medicine indeed. It offers nothing substantial to remedy agriculture’s structural supply/demand imbalance, nor does it seriously address the gaping public health and environmental damage wrought by the food production system. The Bush proposal, for all its claims of fiscal restraint, would still cost taxpayers $87.8 billion over the next five years, USDA chief Mike Johanns acknowledged.

Rather than paying out cash directly to farmers, what if we invested it in rebuilding local food infrastructure, helping farmers transition to organic production, and research into increasing the productivity of sustainable agriculture?

The time has come to reject old models and demand policies that align the needs of farmers with those of consumers (including those with low incomes), and with public health and environmental protection.