The terms of debate around the 2007 farm bill's controversial commodity title have gotten rather narrow.
On the one hand, you've got the House subcommittee on ag commodities, which essentially cut and pasted commodity language from the subsidy-heavy 2002 farm bill into the 2007 version now being drafted.
On the other hand, you've got a chorus of critics, ranging from Oxfam to the Cato Institute to the Environmental Working Group, demanding an end to ag subsidies. This group would like to see an unfettered market work its magic on agriculture.
Straddling in between we find the Bush administration, which chastised the House subcommittee for failing to reform subsidies. Last winter, USDA chief Mike Johanns floated his proposal, which wouldn't abolish subsidies but rather tweak the program a bit to give it a "more market-oriented approach." Language in the proposal hinted strongly that subsidies would eventually be phased out.
Forced to choose, the Oxfams, Catos, and EWGs of the world throw their lot with the Bush Administration. If they can't get the subsidy-free bill they want, they'll take the Bushies' slow-motion reforms.
In last week's Victual Reality, I weighed in on the debate by rebuking the Oxfam/Cato/EWG aproach. I argued that "abandoning farmers to the clutches of a highly consolidated food-processing market ... won't solve our enormous social, public-health, and environmental troubles related to food."
I acknowledged that the subsidy system was a mess, but was vague about what I would put in its place. Several people asked me what kind of farm bill I'd like to see. Given the alternatives on the table, answering that question is a purely theoretical exercise. But here goes.
First, let me address what I see as widespread misapprehension. When the commodity subcommittee decided to preserve the 2002 commodity programs last week, they weren't doing the bidding of the big agribusiness firms like ADM and Cargill.
ADM and Cargill are multinational firms with vital interests in South America, Mexico, Asia, Europe, and Africa. (ADM even announced its entry into the Brazil sugarcane ethanol market last week.) These companies want a more market-oriented approach -- precisely because they have so much control over food and ag markets.
These firms know well that U.S. farm payments are a serious impediment to the Doha Round of global trade talks. If Doha succeeds, these companies will benefit. Doha would pressure countries in the global south to remove any remaining barriers to U.S. agribusiness -- just as Nafta opened Mexico's corn market to control by ADM and Cargill.
So if the House commodity subcommittee isn't doing agribiz's bidding, then who is?
A couple of weeks ago, I was in Washington D.C., and stepped into the Sustainable Agriculture Coalition's office to talk with its director, Ferd Hoefner, who has been closely watching farm bills get drafted since the mid 1970s. I asked him what agribusiness was pushing for in the 2007 Farm Bill, and he said, "just read the Johanns proposal."
In other words, the Bush administration is essentially pushing the agribusiness agenda (surprise, surprise). Agribusiness, Hoefner says, wants to slowly phase out the subsidies and make the 2007 farm bill as "Doha-friendly" as possible.
Thus there really isn't much distance between the Oxfam/Cato/EWG position and ADM's.
As for the House subcommittee members, these Congressmen hail mainly from ag-heavy states, and they're likely just trying to get the best deal possible for the big commodity growers among their constituents.
Agribusiness companies now frown on subsidies because they interfere with their access to some foreign markets; but they still tolerate subsidies, because paying farmers to grow as much as possible holds prices down.
What would really send agribusiness into revolt -- and thus never happen -- is precisely what I'm about to propose: a serious supply-management policy.
Supply-side economics
Let me explain. In stable, food-secure societies, agricultural productivity grows faster than population. When people reproduce at a greater rate than farmers can grow food, trouble comes knocking. Societies need farmers to produce a little more than people consume over a given period and hold it in storage; you never know when a drought, a flood, or some such calamity is going to come along.
Now, in the past half-century, U.S. farmers have certainly managed to meet this requirement; whether they've done so in a way that's sustainable in the long term is another question.
But all farmers, whether they use petrochemicals and combines or compost and hoes, are always trying to make their land more productive -- and their efforts underpin human societies.
But in doing so, they subject themselves to ever-falling prices. To explain why, let me pull something from a Victual Reality published in February:
To put it in economists' jargon, [agricultural] productivity outruns demand. What does this mean? Simply that farmers -- and the petrochemical, biotechnology, and heavy-machinery industries that cater to them -- keep figuring out new ways to squeeze more and more food out of less and less land, but the human body's caloric needs don't change much. Food demand, in economists' terms, is pretty inelastic. Between 1948 and 2002, total U.S. agricultural output rose by a factor of 2.6, while population didn't quite double. Since the food supply grew faster than population, it's no wonder that the prices farmers fetch for their goods have steadily fallen. Now, this steady downward pressure doesn't mean prices don't sometimes rise. Recently, for example, corn prices surged, bolstered by growing ethanol demand and Wall Street speculation. Again, though, external factors, and not farmers' own planting decisions, sparked the rally. Moreover, farmers will likely respond to the windfall by scrambling to plant more corn -- a factor expected to bring corn prices back down. As University of Tennessee agricultural economist Daryl Ray put it in an influential 2002 paper [PDF], technologies that increase supplies and put downward pressure on prices are quickly adopted. The lower prices then encourage the adoption of more cost-reducing technologies, and prices continue their slide. In other words: you can't win.
In this arrangement, societies benefit from food security and low prices while farmers face ever-lower incomes. Society can compensate farmers for this service through direct payments, as is happening today -- but that only sustains the price problem. It also encourages farmers to produce as much as possible without regard to quality or environmental concerns -- as is also happening today.
But rather than compensate farmers directly, the government could organize them to manage supply and maintain a surplus. That's the policy that held sway between the Great Depression and the early 1970s. I described that program in another old Victual Reality column:
To keep prices at a reasonable level, the government tried to manage farm output. The program worked like this: When farmers began to produce too much and prices began to fall, the government would pay farmers to leave some land fallow, with the goal of pushing prices up the following season. There was an additional 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).
Why would the agribusiness lobby rebel if supply management came back? Simple: it would give farmers pricing leverage in a market now controlled by buyers. In short, it would ensure that they always pay a fair price for the corn and soy they consume -- and not just in times like today, when a government-engineered ethanol boom is pushing up grain prices (and benefiting agribsussiness simultaneously.) Now, the New Deal farm policies came under severe pressure by the late 1960s. In short, because of mechanization and ever-greater doses of petrochemicals, farm productivity grew so fast that it overwhelmed these FDR-era schemes. Before long, the government abandoned supply management and switched to the direct-payment regime in force today.
And rather than try to manage supply, the USDA's new role was to boost it. In the early '70s, Nixon's USDA chief Earl "Rusty" Butz urged farmers to plant "fencerow to fencerow," and that's essentially been government policy ever since.But times have changed. Ag productivity isn't rising nearly as fast now as it was in the first few decades after the war. Returns on dumping chemicals and poisons onto the land are diminishing, and more consumers are demanding food grown with sustainable methods.
In short, it might be time to give supply management another chance.
By all means, end the subsidies. But revive the old New Deal programs in their place.
Such a setup would be much cheaper than the current $12 billion-to-$20 billion per year subsidy system. And if we really want to move to a more sustainable and local-centered food production, use the savings to reinvest in local-food infrastructure.
In Omnivore's Dilemma, Michael Pollan asks renegade Iowa corn farmer George Naylor why, if the economics of corn and soy are so dismal (this was before the latest ethanol craze), why he didn't simply grow something else?
Naylor replied: "We have a long-term investment in growing corn and soybeans; the elevator is the only buyer in town, and the elevator only pays for for corn and soybeans."
All over the Midwest over the past four decades, as agribusiness has tightened its grip, infrastructure designed to process and distribute anything besides corn and soy has essentially vanished.
Let's help farmers manage supply of corn and soy down to reasonable levels, and -- where there's demand -- rebuild the infrastructure for selling fruits, vegetables, and pastured meat and dairy products to their neighbors.
All of that, plus a competition title, and I'd be more or less happy with the 2007 farm bill.
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Comments View as Flat
Biodiversivist Posted 5:13 am
24 Jun 2007
Forgive me, Tom
This is a little off topic but the following comment got me to thinking:
"Food demand, in economists' terms, is pretty inelastic. Between 1948 and 2002, total U.S. agricultural output rose by a factor of 2.6, while population didn't quite double."
In other words, we grow about 2.6 times more food calories now than we did fifty years ago and people can only eat so much. Biofuel demand however, has the potential to grow exponentially.
There are 300 million Americans using enough gasoline to fuel about the same number of cars. The average American eats about 1.2 million calories a year.
The average American driving a car would consume over 6,000 times more calories per year than they eat.
Our agricultural output increased 2.6 times over half a century but (if my calculations are correct) feeding plants to our cars would require an agricultural productivity increase (of some kind of monocrop) of about 6000 times (2.6 verses 6000).
If my numbers are even close then there is not enough room in this country for both agrofuels and food. Sorry, carry on.
84400 BTU/gallon of ethanol
0.00396566683 BTU/Calorie
3,200 Calories per person per day
12,000 miles driven per year
24 miles per gallon
141 billion gallons of gasoline used last year
70% of the food energy in a unit of corn is lost making ethanol
30% of the energy value in a car gas tank lost to ethanol
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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birdboy Posted 6:17 am
24 Jun 2007
food's true value
If we paid the true cost of producing our food, if it was enough to provide decent wages to those willing to work in the sun, we could use more human labor on small, local organic farms. We would have plenty of jobs for anyone healthy enough to pick tomatos and bugs, and smart enough to tell the difference. The true value of farmable land might then be realized, and urban sprawl would stall.
If only serving your community by working the land was accepted as being more important than 'serving your country' by taking up arms. Having a 'green card' would mean you work in the fields, to help feed your people, and would qualify you for benefits like access to transport or energy credits. I can dream.
a liberal in redsville
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eutopianow Posted 7:10 am
24 Jun 2007
And Don't Forget Doha
The subsidies figure presented by Mrs. Susan Scwhab last week (eventual cap at $17 billion when farmers now receive $11 billion) won't be enough to open up world markets to our goods......
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Ron Steenblik Posted 8:59 am
24 Jun 2007
Huh?
I assume you are referring to agricultural goods, Eutopia Now, in which case, on what basis do you make that statement? Export subsidies (which are mainly used by the EU) have been reduced over the last 12 years, and will be reduced even more. Other countries, too, will have to reduce their Amber Box Subsidies. Otherwise, market access is determined by tariffs, which will also fall multilaterally. So what in the world are you talking about?
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SustainableGreen Posted 10:46 am
24 Jun 2007
Is There an Error Code for this?
Hey, all:
Hey, Tom: At the risk of seeming rude, I should point out the glaring errors that render all of what you say fruitless. By the way, I have the Jun/Jul 2007 issue of MEN with your and Willie's articles--and you are in the very best of company.
The errors are assuming that BushCo. and Big Ag care about "ag policy as if people mattered", or that they tell the truth. While I agree in principle with with the ideas you present, nothing the political appointees or the Big Ag reps can be trusted--nothing.
I have heard in the past couple of days about a move to extend the current Farm Bill. It probably is just as well, to take it up again in Spring 2009, after we work our asses off and create some larger, populist, progressive change in the government.
Again, I am sorry to dismiss your thoughtful efforts, but there are such fundamental problems with the band of criminals in charge, that until we address those problems, any and all honest efforts to get things done will be pretty much wasted. There are roots of evil to be attacked.
David
Sustainability For Life
Messages done with sustainable energy, with Wind and Sun!
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eutopianow Posted 12:24 am
25 Jun 2007
Clarification
Dear Ron,
I am referring to this report:
http://www.nytimes.com/2007/06/22/business/worldbusiness/ ...
This is about the US position on agricultural subsidies.
Hope that clears things up.
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Tom Philpott Posted 12:40 am
25 Jun 2007
Sustainable Green,
Huh?
You write: "The errors are assuming that BushCo. and Big Ag care about 'ag policy as if people mattered', or that they tell the truth."
Where did I assume those things? Reread the post.
Victual Reality
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Ron Steenblik Posted 1:12 am
25 Jun 2007
Nope
Actually, it doesn't. The article says nothing about "the subsidies figure presented by Mrs. Susan Schwab last week for the USA not being enough to open up world markets to our goods" -- unless you mean the offer to reduce subsidies doesn't go far enough to induce key developing countries to reduce their tariffs.
If, on the other hand, you mean that the subsidies aren't enough to overcome those barriers ... well, that's the point of the WTO negotiations: to get away from such thinking. If every country subsidizes their farm sector to boost exports, everybody (except net food-importing nations) loses.
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SustainableGreen Posted 2:47 am
25 Jun 2007
That's all.
Hey, all:
Hey, Tom: Aw, gee, I did read the message, thank you, and I had no intent to criticize you, but to point out the duplicity of BushCo. and Big Ag. And we both know you don't have to be explicit about assumptions, rather they can be a priori.
I enjoy your writing and your position, but the overriding problem is the soulless crooks in charge. That's all.
David
Sustainability For Life
Messages done with sustainable energy, with Wind and Sun!
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JMG Posted 2:48 am
25 Jun 2007
Speaking of Ag policy: The Great Biofuel Hoax
http://www.alternet.org/environment/54218/
Save the world: Reduce greenhouse gas emissions 5% annually.
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Farm Bill Girl Posted 4:19 am
25 Jun 2007
Food from Family Farms Act
It is a pity that Tom neglected to mention the work of progressive groups like the National Farmers Union, American Corn Growers Association and the National Family Farm Coalition who are truly working on a sustainable agriculture policy that helps our family farmers, the environment and reorienting our agriculture systems. Family farmers are caught in between big commodity ag/agribiz groups (which do NOT represent family farmers) and these so-called reform groups (Cato, Oxfam, EWG) with their misguided approach. meanwhile, the voices of family farmers are lost amid the hubbub and support for boneheaded proposals like Ron Kind's which are basically radical social security privatization for farmers w/o addressing corporate consolidation and concentration issues.
Supply management is the only solution that makes sense, but it will take time to change the "free trade globalization" mantra of the WTO.
Please check out the Food from Family Farms Act put forth by the National Family Farm Coalition to see a true progressive vision for our farm policy and what a supply management/price floor approach would look like.
www.nffc.net
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Samuel Fromartz Posted 4:32 am
25 Jun 2007
Third World
What got lost here is that Oxfam has advocated reducing subsidies to give Third World farmers a means of competing in agriculture. Subsidies depress prices and drive farmers who don't get them out of farming. So Oxfam views their elimination as a means of alleviating poverty. They don't advocate it in order to increase the ROI of ADM, though obviously, if trade increases, that may well be the effect.
Samuel Fromartz Author Organic Inc.
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Tom Philpott Posted 5:20 am
25 Jun 2007
Oxfam
Sam,
I understand that about Oxfam. They've done great work analyzing, for example, the effect of cheap U.S. corn flooding Mexico. But I think they're being naive to assume that ending U.S. and European ag subsidies, and enshrining Doha, is going to automatically benefit farmers in the global south. Farmers, especially commodity farmers, don't respond to price signals like other economic actors. Take away subsidies,and farmers might well respond by planting more of the commodity crops, in an attempt to offset lost income.
Anyone with an interest in ag policy should check out this 2002 paper by Daryll Ray that pretty much obliterates Oxfam's position. Ironically, Oxfam funded it.
Victual Reality
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Tom Philpott Posted 5:22 am
25 Jun 2007
Farm Bill Girl
Agreed. i should be mentioning these groups when I write about the Farm Bill, etc. i will in the future.
TP
Victual Reality
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Farm Bill Girl Posted 6:36 am
25 Jun 2007
Oxfam misguided
Oxfam has the right analysis--there is a LOT of devastating dumping into developing countries, but they are wrong on the diagnosis and the solutions. Subsidies do not cause overproduction. They are the sympton of a rotton system, not the cause. Farmers are geared to max out production and commodities are inelastic goods. Also, Oxfam also buys into the dangerous myth that third world countries can "export" their way out of poverty. Exports geared toward the First World's tastes and consumption only devastates their own food security as well as destroying the environment (see Palm oil in SE Asia and soybeans in Brazil/rainforest).
Also, look at the example of coffee, which is not subsidized or grown in the First World, but still suffers from record low commodity prices due to a worldwide glut. A supply management agreement was put into place in the 1960s--the International Coffee Agreement, because the West was terrified of "Castroism" taking over Latin America and believed we needed to throw a bone to Latin American peasants. the Agreement was dismantled by Reagan and thus we now have worldwide misery for coffee farmers everywhere.
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Tom Philpott Posted 7:32 am
25 Jun 2007
You go, Farm Bill Girl
"Also, Oxfam also buys into the dangerous myth that third world countries can "export" their way out of poverty. Exports geared toward the First World's tastes and consumption only devastates their own food security as well as destroying the environment (see Palm oil in SE Asia and soybeans in Brazil/rainforest)."
Couldn't have said it better myself.
Victual Reality
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sideshow1979 Posted 2:10 pm
25 Jun 2007
Supply Management
While I completely agree with the goal of maintaining farmers, I have serious doubts that a supply management strategy is feasible. And I agree that ADM and Cargill would prefer the most WTO friendly farm bill possible, but let's not forget the mass market livestock industry that loves the current setup, and the big commodity groups who somehow have gotten to the point where they advocate for plants rather than the farmers who grow them.
As you mention, supply management is not going to happen. That argument was lost a couple of decades ago and we're not going back. But there is a determined groups of advocates still pushing supply management, and the subject is worth taking a look at. The most complete supply management policy today is being offered by the National Family Farm Coalition (www.nffc.net), George Naylor is a big gun with them. I have one enormous issue with their plan, and the gist of it is captured in this quote from their position paper:
Prosperity for U.S. farmers must not come at the expense of farmers and peasants in other
nations. The United States must take the lead in promoting international commodity
agreements aimed at setting floor prices and equitable sharing of responsibility for
international reserves and supply management, thus eliminating the destructive practice
of dumping.
Not only do we have to reverse decades of US ag policy, we must convince the rest of the world to buy into supply management as well. Because if you don't, eventually those giant multinationals will just be buying their grain from Brazil, Central Asia, etc. But getting other countries to adopt supply management is NOT going to happen. In fact, that is so much NOT going to happen that I question why people are still pushing for it. The other large grain producers- primarily Brazil- already believe they can produce grain for cheaper than the US, and they can. They would rather have more of a free market and let comparative advantage go to work. They're not going to buy into a plan that reduces the amount they produce. They're locking up 10 and 20 year contracts with China for soybeans already.
Second, I'm not a huge fan of WTO by any means, but I think the logic of creating international supply management agreements to replace pro-trade international agreements is a least a little flawed. How is this going to work? Are we going to create an international supply management organization? Wait a minute, doesn't that violate the food sovereignty we're trying to promote? And you know that each country involved will try to set the rules so it can make the most money, usually at some other country's expense. The only way I see this working is if we have some sort of international supply management czar or council that decrees how much corn, etc. can be produced in each country each year. Not likely to happen, and probably wouldn't be all that great anyway.
Last, I love Michael Pollan's book and the parts with George Naylor are the best parts of that book. One of the devastating criticisms is that we are subsidizing a plant that makes us unhealthy- corn. George Naylor's plan to solve the farm income problem- supply management- still subsidizes corn. In fact, it subsidizes pretty much the exact same crops we're subsidizing today. Sure, we might have a little less of them, but we're still going to be spending money to ensure that feedlots have enough corn to feed their cattle. If we want to move to a new mode of food production, or back to the small, diversified family farms we have had in the past, we need to stop subsidizing the same old system. And who, exactly, is going to determine what the cost of production plus a reasonable profit is? Is that for organic farmers? Industrial farmers who buy enormous amounts of input at a discount? Smaller, nonorganic farmers who don't get those discounts? Conventional farmers with a certain amount of conservation practices? Do you include the cost of tech fees on GM crops in the cost of production?
A friend of mine once said that George Naylor wants to grow 400 acres of corn and soybeans for the rest of his life and have the government guarantee him enough of a profit to live on. No other sector of the economy gets that kind of guarantee, and it kills innovation. It also allows crappy farmers to stay in business while punishing farmers who are really talented. Today, it doesn't take a whole lot of brains to grow 160 bushel an acre corn, that's for sure. But there is an appropriate role of government in agriculture, and Philpott could not be more correct about the need for local processing facilities and a competition title in this farm bill. We also need to figure out ways to stabilize the farm economy while simultaneously promoting innovation, crop diversity, and a type of farming that is protected from the harmful laws of ag economics while giving an advantage to the methods of production that are truly sustainable- and profitable.
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Tom Philpott Posted 3:56 am
26 Jun 2007
Great comment, sideshow...
It's true that the globalization of ag markets provides agribusiness a card that easily trumps any supply management scheme. There are still vast swaths of Brazil's savanna that can and will go under the plow for soy, and Argentina is churning out plenty of GM corn.
Plus, hell, subsidies for corn are going down, but we're probably going to see the biggest harvest in US history this year, because subsidy for corn has shifted from a direct payment to the tax credit and other goodies lavished on ethanol production. I didn't even get into the whole ethanol debacle in this post. Sigh.
With the ethanol program, we're getting more environmentally ruinous corn than ever, more expensive food for low-income folks, and no new investments in local-food infrastructure that would make local, organic food cheaper. It's a Gordian knot of regressive, pro-agrobiz policies.
Seen from that perspective, I'm reminded that small-scale projects and solutions are the way forward, and wonder if all the energy going into reforming/obsessing about the bloody farm bill might be misguided.
2002 Woodbury, Iowa, isn't waiting on the federal government to come up a food policy that makes sense; nor is Red Hook, Brooklyn. The rest of us should do the same.
Victual Reality
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Samuel Fromartz Posted 7:09 am
26 Jun 2007
Simplification - Oxfam
I just got off the phone with Oxfam and they emphatically made the point that they are not against taxpayer funded support for farmers in the US. What they are against is the current system of subsidies that encourages over-production and low prices - a point that has been made numerous times.
"Also, Oxfam also buys into the dangerous myth that third world countries can "export" their way out of poverty."
You'll always have dueling studies but see the most recent one on cotton farmers in West Africa, that was in the Times and Post. Exports do offer vital income, even for those at the bottom of the ladder, creating an income stream for subsistence farmers.
This isn't about the "free trade" agenda that the ADMs of the world seek but "fair trade" - and that is clearly better than no trade. Or at least, that's the way the developing world sees it.
Samuel Fromartz Author Organic Inc.
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Tom Philpott Posted 5:02 am
27 Jun 2007
Re: Oxfam
Fair point, Sam. My response is that Oxfam is naive if it thinks merely removing subsidies is going to boost commodity prices for farmers in the global south. By making that assumption, Oxfam is joining ranks in policy terms with the agribiz right -- who no full well that removing subsidies will do no such thing.
Victual Reality
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Biodiversivist Posted 1:11 am
28 Jun 2007
Correction
Calorie with a capital C is a thousand times different than calorie with a small c. So, ag production would have to increase about 6 times to feed our cars ethanol (instead of 6000 times). I new something was wrong.
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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GreyFlcn Posted 2:29 am
21 Jul 2007
Farm Bill Passes House Agricultural Committee
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