No Quick Subsidies Fix for Food System

Over the last decade, the sustainable food movement has brought much needed attention to U.S. agricultural policy and how it influences which foods Americans grow, buy, and consume. From chefs and policy wonks to teachers and bloggers, everyone interested in food has an opinion on subsidies and how to craft the 2012 Farm Bill. One of the most common focuses is moving subsidies away from commodities like corn and soy, which are used to make junk food and factory farmed meat, to fruit and vegetable production. This simple fix misses the bigger picture—the consolidation and the inability of diversified farms to compete in our industrialized food system.

Stop blaming farmers

For far too long criticism of agricultural subsidies has focused on large, “greedy” farmers who gobble up the majority of subsidies in the form of direct payments. This is an over-simplified analysis of both the data and the impacts of subsidies. According to the Environmental Working Group, just 10 percent of farms collect nearly 75 percent of federal farm subsidies. But what this statistic doesn’t reveal is that between 1995 and 2009, nearly half of the top 20 recipients of farm payments were cooperatives, Indian tribes, and conservation trusts—organizations that often divvy up payments amongst their members.

The database also uses the inaccurate USDA statistics on the number of farms—one that includes lifestyle farmers who do not rely on farming for their family’s income. While the bulk of the money goes to large farms and associations, over 80 percent of small and mid-sized family farms growing commodity crops receive and depend upon subsidies for survival. In 2007, a year of record high crop and input prices, mid-sized family farms earned an average of $26,000 from farming—more than a third of which was subsidy payments. Most of these farms would not survive without subsidy payments and off-farm income. We need to focus on making sure family farms survive, so that they can transition into a sustainable future.

Subsidies didn’t cause HFCS, cheap meat, or obesity

Contrary to popular belief, subsidies are not to blame for cheap junk food. First, subsidies don’t make commodities cheaper. Overproduction is an inherent problem of commodity markets—one that existed long before the current subsidy system was put in place. A University of Tennessee study found that if subsidies were eliminated, farm incomes would fall by 25-30 percent, but the supply and price of commodities would remain virtually the same. Second, the impact of commodity prices on the final retail prices of most junk foods is quite small. High fructose corn syrup (HFCS) represents just 3.5 pecent of the total cost of soft drink manufacturing and the corn content of HFCS represents only 1.6 percent of this value. Middlemen, not farmers, capture the vast majority of the retail price.

The real winners are factory farms and corporations

Factory farms, meatpackers, food processors, and grain companies like Cargill and Archer Daniels Midland are the real beneficiaries of farm payments because government payments to farmers allow these buyers to pay less for the crops that are their raw materials. Essentially, subsidies have become a way of laundering money through farmers to factory farms and agribusiness. A Tufts University study found that factory farms saved $34.8 billion between 1997 and 2005 because they were able to buy feed at below-production costs.

Supporting a healthy, sustainable food system means taking a more nuanced view of subsidies that acknowledges their role as a safety net for small and mid-scale farms and calls for policies that help create a robust, diverse farm economy. The next Farm Bill should:

  • Restore common-sense practices that manage the supply of commodity crops, including establishing crop reserves.
  • Level the playing field for farmers by re-invigorating antitrust enforcement and breaking up big food monopolies.
  • Restore the safety net for farmers by ensuring farmers are paid more for their crops than it costs to produce them to stop the cycle of price volatility that agribusiness buyers use to their advantage.
  • Restore the financial infrastructure needed to provide a safety net for family farmers in the form of loan and credit programs and access to loan restructuring services.
  • Rebuild local infrastructure like grain processing, small slaughterhouses, and regional distribution systems that midsized farms need to survive.

Ultimately, we need a Farm Bill that is as good for farmers and the land as it is for eaters.

For more info on the Farm Bill, go here.

6 thoughts on “No Quick Subsidies Fix for Food System

  1. How do subsidies simultaneously not make commodities cheaper (corn, for example) and allow for companies like Cargill to buy their primary ingredients (corn, for example) at a cheaper price?

  2. The problem is that various sugars (beet, cane, etc.) are heavily taxed and imports are restricted, artificially raising their market price. Due to other agricultural policies (along with subsidies), farmers are incentivized to overproduce and manufacturers are incentivized to switch from sugar to HFCS.

  3. Sorry, but commodity markets don’t inherently lead to overproduction. That’s not how markets work, and I challenge you to find a single economist who will agree with you on this. Common sense itself says that commodity markets won’t lead to overproduction. Corn farmers grow so much corn because the government pays them a fixed price even though the market price itself is below the cost of production. There is no market in the world where people will continually sell goods for less than the cost of production (I.e. losing money) if the government doesn’t make up the difference.

    Subsidies, on the other hand, inevitably lead to overproduction. Again I challenge you to find a single economist who would say otherwise.

    I think I actually agree with you ultimate conclusions, which makes me sad to see absurd arguments being made in their favor. But you can’t go saying things like this if you want credibility.

  4. Actually, there is a quick fix: Stop the subsidize.

    Stop subsidizing oil which is prime subsidy of agriculture and a whole lot of sectors. Let the price of gasoline rise to its natural $10/gallon. When the price goes up people get serious about conservation. It has always worked and will work again.

    Stop subsidizing grain which is a prime driver and subsidy for the confinement animal feeding operations (CAFOs). If they had to pay full price for energy and grain they would have to charge more for their product and food should be more expensive – just look at the health problems we’re seeing.

    Stop subsidizing urbanites with the mortgage deduction, real estate taxes on farm and forest land. Real estate taxes are quite simply a transfer of wealth from the land owners to the home owners – land makes no burden on the towns or schools).

    Stop subsidizing the government with the inheritance tax on small businesses and farms. Because land gets over valued at “Best (developement) use” and it takes a lot of land to farm the farms get broken up when taxes are demanded at the death of the previous generation. We already paid our income taxes, sales taxes, land transfer taxes to buy this land. Every year we pay real estate taxes. The government shouldn’t be stealing what we’ve saved up in the value of our land.

    If you’re going to tax land then start taxing 401K’s, IRAs and all other assets. Those are all ways that the urbanites hide their savings from taxation while the farmer and forester have to pay through the nose each year with taxes on the land, taxes not to pay for any services for the land but to pay for services for the urbanites, the home owners, their kids educational system, etc. If you’re going to tax land then tax all assets. Think how you would feel if your IRA and 401K had to pay a 3% tax every year on it’s gross worth?

    There are a lot of subsidies that people don’t even see. I don’t get any agricultural subsidies yet Big Ag who I must compete with is subsidized up the wazoo. The result is they get to charge a lower price at the checkout counter. The reality is people pay for it in their taxes. Get rid of the subsidizes and let the food, energy and other prices rise to their natural levels and let us all have an even playing field in the market.

    It really is a simple fix – stop the subsidies. Yes, it will hurt at first but then in time you’ll keep more money in your pocket book and be able to decide how YOU want to spend it rather than having Big Government, Big Corp, Big Energy, Big Ag making those choices for you.

    Little things you can do now: spend wisely to support your beliefs.

  5. Perhaps Wenonah wasn’t clear enough on the subsidies point. Subsidies do NOT cause cheap grain. Tim Wise of Tufts university shows examples on p. 21 of The Paradox of Agricultural Subsidies. Daryll Ray found that corn prices would go down slightly with subsidy elimination, and the other studies often find low percents, not nearly enough to bring us back to fair trade levels. Historically it was lowering price floors that caused the lower prices. I show charts of this in the YouTube video, “MIchael Pollan Rebuttal 2.” Pollan often makes the same mistake as Walter Jeffries. Farm commodities do not self correct in free markets, as has often been shown. So stopping subsidies does not fix the CAFO problem. That requires a return to adequate price floors and supply reduction (as needed). We should also support price ceilings and reserve supplies. These policies are in NFFC’s Food from Family Farms Act.

    Ok, so stopping farm subsidies without price floors, etc., would devastate farmers (ie in the market conditions following the 70s price spike,) without helping stop CAFOs, but with the good NFFC policies, no subsidies would be needed. And there were none, under the good policies of the past (ie. 194201952).

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