Since the 1970s, American farmers have been urged to produce as much as possible at all times. Earl Butz, the Secretary of Agriculture under Presidents Nixon and Ford, famously ordered farmers to plant their crops “fencerow to fencerow,” and most have taken the order to heart ever since. Overproduction of grains, dairy, and other commodities has left the market perpetually flooded, causing farmer prices to plummet to well below their costs of production.
Harwood Schaffer, director of the Agricultural Policy Analysis Center, says that many of the crises facing rural America today—from the low prices driving farmers out of business to factory farm runoff polluting water supplies—are caused by this overproduction. Schaffer was a rural pastor in the 1970s, and says that just a few years after the order from Butz, farm prices dropped to crisis levels, demonstrating that conventional free market models of the day simply did not work on the ground for agriculture.
“In the 30 years I was in the parish, [nothing that] agricultural economists said made any sense to me. It didn’t match up with what was going on with my farmers,” he says. Schaffer, who is now an agricultural economist himself, is “absolutely delighted” as he watches the 2020 presidential campaign unfold. For the first time in over two decades, several Democratic candidates have proposed putting a stop to overproduction.
The approach is called supply management. It involves keeping production under control with conservation measures and a grain reserve and setting a price floor for commodities, which ensures that farmers are paid more for their goods than it costs to produce them. Called “Soviet-style socialism” by former Republican Speaker of the House John Boehner, critics of the system say it can result in global trade distortions, excessive government intervention, or rising food costs. But supply management is also a proven way to incentivize conservation, dramatically reduce taxpayer costs, and make agribusiness pay the real costs of raw goods.
Senator Bernie Sanders (I-Vermont) draws on these principles in his rural platform, released in May, which calls for enacting supply management programs, fair farmer prices, and a grain and feed reserve. His Green New Deal plan introduced last week nods to the considerable emissions implications of the current mode of farming, and pledges to “discourage overproduction and ensure farmers receive a fair price for their products by matching the supply with demand, [starting] with source reduction.”
Senator Elizabeth Warren’s (D-Massachusetts) rural platform, released this month, includes considerable details on how her supply management program would work, including short-term loans for farmers at a price based on costs and a grain reserve. Her plan has an option to transition land now growing commodities into conservation programs, with compensation rates “based on the environmental benefit,” recognizing the financial value of the ecosystem services that farmers can provide through practices like rotational grazing.
A spokesperson for the Warren campaign told Civil Eats, “Elizabeth believes that a new supply management program will guarantee farmers a fair price, save taxpayers billions of dollars, and protect our environment for generations to come.”
Two other candidates—Representative Tulsi Gabbard (D-Hawaii) and Marianne Williamson (D-California) (along with former candidate Jay Inslee, the Democratic governor of Washington)—signaled support for the idea in a recent candidate survey.
The proposals from Warren and Sanders are bringing hope to some in an economically battered farm country.
“As a dairy farmer, I’m happy that people are talking about it,” says Sarah Lloyd, who farms with her husband near the Wisconsin Dells. Their 350-cow dairy has been in her husband’s family for over 100 years, but this year, they’re losing money every day as milk prices too low to cover their costs erode their formerly strong balance sheet. Lloyd calls supply management “the structural reform that [farmers] really need.” She is also the director of special projects for Wisconsin Farmers Union (WFU), which has been building a movement for supply management as a solution to the dairy crisis. Seeing the policy reflected in presidential politics, she says, is unexpected good news.
Flooded with Grain
Farmers overproduce when prices are low in hopes of breaking even. Then, when prices rise, they produce more to take advantage of the increase. All of this production over-saturates the market, and has led to economic, environmental, and public heath crises in rural America and beyond.
Seventy percent of farmers make less than a quarter of their income from farming, relying on off-farm jobs and subsidies for the rest. This year’s median farm income is projected to be negative $1,449. With prices so low, many smaller farms have sold out and large farms have grown even larger. As land and profits have consolidated, there are fewer opportunities in rural areas; fewer jobs leads to shrinking populations and many grocery stores, schools, hospitals, and churches have closed.
The quest for higher yields also leads farmers to plant on hilly, wet, erosion-prone, and otherwise marginal land. They apply fertilizer to ensure the highest possible output, often at rates greater than the crops need, and excess runs off into waterways. Nitrogen pollution flowing out of Iowa has grown by 50 percent in the last 20 years, and is a major contributor to the annual dead zone in the Gulf of Mexico. Today’s agriculture is also one of the biggest contributors to climate change, through loss of carbon-storing soil, food waste, and livestock confinement operations.
Meanwhile, farmers’ low prices are a boon to agribusiness: food manufacturers and the owners of large livestock operations are able to buy raw materials and animal feed for cheaper than they cost to produce. One study found that between 1997 and 2005, confinement livestock operations saved about $3.9 billion annually because they were able to buy feed grains at prices well below production costs. The total savings to the livestock industry from below-cost grain was $35 billion over nine years.
Farm subsidies and crop insurance are intended to make up the difference between farmers’ costs and the low market prices they receive. In reality, these taxpayer-funded payments make up only a fraction of the difference—and yet, without them, even more farmers would exit the business, unable to survive on market prices alone. By maintaining the system of overproduction and low farm prices, subsidies instead effectively prop up large agribusinesses.
Managing Supply and Farmer Prices
It hasn’t always been this way. For more than half a century following the New Deal, farm policy aimed to stabilize prices for farmers and consumers and rebuild prairie soils following the calamity of the Dust Bowl—all by keeping a handle on production. New Deal supply management was imperfect; it was designed to support larger farmers, favored white farmers, and for decades, was administered by officials hostile to its very tenets. Despite the flaws, for 60 years, it was also crucial to the ongoing survival of a wide range of farms, and its basic structure could revitalize the rural economy and environment today.
Supply management programs set a floor price for commodities—like a minimum wage for farmers, ensuring they were paid at least as much for their goods as it cost to produce them. Unlike today, agribusiness buyers paid the full cost of goods, taking taxpayers off the hook. In this scenario, explains Schaffer, there was no need for subsidies. “The users pay the market prices,” he says.
Simple mechanisms managed supply from year to year. To curb production coming off the farm, farmers were required to leave some fields fallow and practice a variety of conservation measures. Post-harvest, a grain reserve, much like the strategic oil reserve, was established to take surplus off the market in high-yield years and release it in cases of shortages. Prices never dropped too low for farmers in years of a large harvest or spiked at the grocery store in years of drought or flooding.
For the years the program was in effect, farmers received a fair price, on-farm conservation was normalized, and consumer prices were steady. But starting in the 1950s, under pressure from agribusiness interests, presidents of both parties steadily eroded the program, lowering the price floor, shrinking the grain reserve, encouraging more acres be brought into production—and beginning a system of taxpayer-funded payments to make up for the lost market revenue.
The 1996 Farm Bill, known as the “Freedom to Farm Act,” finally removed the last vestiges of supply management for commodity grains. (It was ended for dairy in 2014.) By 1999, with previously fallow lands planted and no grain reserve to take up surplus, soybean and corn prices had fallen by 40 to 50 percent. Farmers referred to the legislation as “Freedom to Fail.” Congress authorized “emergency” farm payments to farmers that climbed to $20 billion, which were made permanent in the 2002 Farm Bill.
While these ballooning taxpayer-funded subsidy payments were institutionalized, a 2011 study by National Farmers Union (NFU) found that if a supply management system had been in place from 1998 to 2010, rather than the Freedom to Farm Act and its successor, farmers’ net incomes would have been higher and consumer prices more stable, while taxpayers would have saved a whopping $96 billion in farm spending.
But by then the numbers didn’t matter; the issue was dead. The sharp turn toward neoliberalism in the 1990s made deregulation the order of the day across the economy; supply management was seen as excessive government intervention. As time went on, the fundamental shift in the structure of agriculture became invisible to all but a few, while farm subsidy payments were increasingly obvious—and so the conversation shifted in that direction. Harwood Schaffer, who co-authored the NFU study, says that for years, discussion of supply management has “been off the table and unacceptable in any company.”
In politics until very recently, says Sarah Lloyd, “if you started talking about supply management, you’d be laughed out of the room.”
Over the last 25 years, NFU, National Family Farm Coalition, and other progressive farmer organizations have continued to call for a return to supply management programs, but for political expediency, that advocacy often took a back seat to more viable positions. (Full disclosure: I have been writing, thinking about, and advocating for supply management farm programs in a variety of professional capacities for the last decade. This is the first time I’ve seen it enter the public discourse in any real way.)
The fact that this model disappeared so completely from public debate for so long also may have led to a lack of understanding of exactly how the farm system was broken, even on the part of those who have wanted to improve it. Policy proposals from the sustainable agriculture and good food movements often focused on adjustments to the status quo such as capping subsidies for commodity growers and increasing support for conservation practices. More ambitious proposals like subsidizing fruits and vegetables instead of grains or the complete elimination of subsidies misunderstand the structure of the current system and the function of subsidies. When those ideas gained traction, they also often alienated farmers who rely on government payments to make ends meet.
Back on the Table
Adam Mason, State Policy Organizing Director of Iowa Citizens for Community Improvement (ICCI) Action, is thrilled with how “the center of gravity around farm policy is shifting.” The group, which calls itself the largest community organization in Iowa, has been organizing against concentrated animal farming operations (CAFOs) for years and has supported fair price and supply management farm programs since its inception. Its staff held several briefings on rural issues with policy staffers from both the Warren and Sanders camps. Both candidates’ rural plans were developed in consultation with farmers, rural organizers, and agricultural economists like Schaffer.
Sadly, he and Lloyd both see the current farm crisis as a major factor in finally bringing supply management back into the political discourse. Over 2,700 dairy farms went out of business in 2018, and commodity crop prices are still at historic lows, exacerbated by spring flooding and President Trump’s trade wars.
The dairy crisis emerged just as Congress was finalizing the 2018 Farm Bill, which offered very little help for struggling dairy farmers. To build a base of support for what it sees as the only viable solution for the U.S. dairy industry, the Wisconsin Farmers Union has been educating farmers and building a national movement around supply management in dairy, similar to the Canadian system. WFU’s Dairy Together coalition has played a key role in putting the model on the table in both rural and urban spaces. In a surprise move, the regulation-adverse Wisconsin Farm Bureau Federation, the state chapter of the pro-agribusiness trade group, passed a resolution to consider the policy.
Those advocating for supply management today are quick to note that it should not be a replica of the 1930s program or a copy of Canada’s dairy policy. Rather, the pairing of fair farm prices and conservation practices makes it the best mechanism for rebuilding rural America and addressing climate catastrophe—and this time, the details must include support for small and midsize farms, racial equity, and low barriers to entry for new farmers.
Indeed, supply management isn’t just resurfacing because of the farm crisis. It’s a larger response to the corporate control that ripples through the entire economy. The recent candidate survey by ICCI Action revealed some unexpectedly bold positions, such as support for a proposed CAFO moratorium in Iowa. But the move left isn’t just on farm policy; it’s on healthcare, climate, and worker’s rights as well—which are all rural issues, too. Mason says ICCI Action staff and members, like rural organizers around the country, are ready to take advantage of the fact that all these issues are on the table in new ways.
“We’re hopeful, we’re encouraged, and we’re going to keep working our asses off … to move us closer to the food and farm system we need,” he says.