Last week's Victual Reality column startled a lot of sustainable-food advocates, particularly folks not immersed in the details of U.S. farm policy.
Subsidies, I argued, do not cause the ravages of industrial agriculture; rather, subsidies are a symptom of a food policy gone wrong.
Moreover, I continued, gutting subsidies won't end the ubiquity of cheap and empty calories in the U.S. diet; or stop the devastation of waterways from fertilizer runoff; or make CAFOs unprofitable; or treat any of the other ills of industrial agriculture.
I concluded that reckless attempts to end subsidies should not be seen as a panacea, or even as sound policy.
The column inspired angry and even anguished reader comments and emails, as well as a retort from Environmental Defense, a major critic of subsidies.
I understand the outrage. I myself despise the policy of using federal cash to underwrite environmentally and socially destructive agriculture.
No doubt, plenty of cynical people and organizations support ag subsidies. On Monday, the genetically modified seed and pesticide giant Monsanto disclosed it had hired Combest Sell & Associates to lobby Congress on the farm bill. Before waltzing through Washington's revolving door to lobbying nirvana, Larry Combest (R-Texas) chaired the House ag committee and essentially wrote the subsidy-happy 2002 farm bill. He's the toast of industrial cotton farmers (major users of Monsanto's seeds).
Presumably, Monsanto wants Combest to defend subsidies on the Hill. It makes me squirm to be aligned with Monsanto, a corporation I find repugnant, on this point.
Yet there's no easy alternative.
If subsidies have dubious supporters, they also have unsavory opponents. The WTO's Doha round of trade talks are currently stalled until the U.S. and Europe agree to reduce their ag payments. And the big grain-trading firms like Archer Daniels Midland and Cargill want Doha to succeed. Why? As The New York Times reported recently, a successful Doha would hardly result in a boon for nations in the global south, despite what high-profile subsidy critics like Oxfam say.
Here is the Times:
An analysis by the Carnegie Endowment for International Peace concluded that under the best circumstances, rich countries could gain more than $30 billion a year from a successful conclusion of the Doha round, about $30 a head. Middle-income countries, places like Brazil and South Africa, could gain up to $20 billion, or about $6 per capita. Poor countries would gain at most $5 billion -- which amounts to $2 a head.
ADM and Cargill would likely grab a big chunk of that windfall by gaining access to food markets in "developing countries," much as they made billions from NAFTA's liberalization of the Mexican corn market -- and pushed untold thousands of domestic farmers off the land.
Understanding that profit potential, and also realizing that doing away with subsidies will not likely end the overproduction of soy and corn on which they rely, the big grain-trading firms support an end to subsidies. (So long, that is, as the payments aren't replaced with mechanisms that help farmers manage supply.)
For someone like me -- who wants to see an end to ruinous overproduction and reinvestment in local food systems -- the policy options that dominate the farm bill debate offer little to get excited about.
I wish I could, like Ken Cook of the Environmental Working Group, thunder from the rooftops, "End the subsidies!" That would be a simple message that people could embrace -- and indeed have. But it's more complicated than that.
My rooftop message would go something like: "End the subsidies, which partially compensate farmers for selling commodities at less than the cost of production to big grain-trading firms, but figure out some way to help those farmers avoid overproduction, so that they can get a fair price in the marketplace and go easier on the land. And if we can't get these mechanisms in place, it isn't really fair to end subsidies, because most farmers who get them -- a few spectacular exceptions aside -- aren't getting rich, but just getting by."
Of course, by the time I got done, I'd be hoarse and staring at an empty street -- which is often how I feel after writing about the bloody farm bill.
And that's precisely the beauty of the farm bill debate, if you have an interest in maintaining the status quo. Whether the subsidies stay or go under the current terms of debate, ADM gets its cheap, overproduced corn and soy -- and robust profits.
In last week's column, I explained why farmers, particularly large-scale commodity farmers, tend to overproduce without organized mechanisms to coordinate planting decisions. Below, I'll respond to a few critics of my admittedly tortured position on subsidies.
In a guest post on Gristmill, Environmental Defense's Britt Lundgren penned a cogent critique of the subsidy system. But she barely addressed my central point: that subsidies don't cause overproduction, and the act of ending them won't by itself end overproduction.
In fact, she almost goes so far as to concede my point. Lundgren writes: "Tom Philpott's recent column on the ongoing debate over Farm Bill reform raises some interesting points, including the idea that commodity subsidies may not be the root cause of overproduction."
And that's the last we hear about overproduction; she never claims that the proposals she promotes will address it. But overproduction is key. It can be directly inked to the following ills (among others, no doubt):
- The ubiquity of cheap and empty calories in the U.S. diet;
- The explosive growth of CAFOs and their environmental and social ills;
- The stunning consolidation of the food industry;
- The "dead zones" in the Gulf of Mexico and Chesapeake Bay and other damage to waterways;
- The rise of corn-based ethanol as the federal government's major response to climate change;
- The despair of farmers in the global south as they lose their markets to cheap imports from the United States; and
- The ecologically devastating erosion of soil's ability to store carbon.
The Environmental Defense/Environmental Working Group crowd is rallying around Sen. Lugar's Fresh Act, a wholesale alternative to the farm bill version now under debate in the Senate. But if the Fresh Act wouldn't address the above list of ills, how can it be promoted as "fundamental reform"?
Indeed, the pitch for the Fresh Act (judging from Lundgren's piece) isn't an end to overproduction and its associated ills, but rather fairness. The bill would replace subsidies with an insurance scheme -- one eventually open to all farmers, not just ones that produce major commodities like corn, soy, and cotton.
The bill would certainly broaden federal support from areas like the Midwest (corn and soy), Southeast (cotton), and Texas (cotton), which now get the bulk of subsidies; and spread some love to places like California, which mass-produces vegetables.
But the bulk of support would still go to the largest farms, I reckon, because the Fresh Act would -- like the subsidy system -- pay out on a per-acre basis, meaning the more acres you have, the more support you get.
And since the insurance payouts are based on county-level ag revenues -- the policies would kick in when a county's ag revenues dipped below 85 percent of their five-year average -- the biggest beneficiaries would be farmers in ag-heavy counties in places like Iowa and California.
Counties where people are trying to jumpstart agriculture to rebuild local food systems -- say, on urban fringes -- would get little or no more support than they get now.
More fundamentally, such an insurance scheme would not likely slow overproduction of key crops like corn, soy, and cotton. As the agricultural economist Darryl Ray wrote in a must-read recent analysis of insurance schemes like the Fresh Act:
Converting the current program to an insurance-based program really solves nothing. Market distortions would continue. Farmers in developing countries would continue to accuse the US of dumping crops on the international market at below the cost of production, however defined. And commodity demanders/users [e.g., ADM] and input suppliers [e.g., Monsanto] would continue to be the real beneficiaries of farm programs.
On New Zealand and its farm program
Another reader, the economist Jason D. Scorse, raised what he saw as a fundamental critique of my position: that New Zealand several years ago abandoned both subsidies and supply management, subjecting their farmers to the free market.
And rather than see farm incomes plummet, farm losses surge, and overproduction continue -- as Darryl Ray and I say will happen if the U.S. follows the same course -- New Zealand farmers are thriving.
To back his position, Scorse pointed to a 2003 article in New Farm by Laura Sayre that documents the New Zealand miracle. The piece opens promisingly for Scorse's position:
What would the world look like without agricultural subsidies? What would the United States look like? If a crystal ball exists for those questions, its name is New Zealand, one of the first and still one of the few modern countries to have completely dismantled its system of agricultural price supports and other forms of economic protection for farmers.
Brace yourself: this is free-market faith to make Adam Smith proud. But the New Zealand experience is pretty persuasive. Well into its second decade of subsidy-free farming, New Zealand enjoys a worldwide reputation for its high-quality, efficient and innovative agricultural systems.
But the author never carefully compares and contrasts the situations faced by New Zealand and U.S. farmers. Buried at the bottom of the article, though, we do get this:
Around 90% of New Zealand's total farm output is exported. These exports account for over 55% of [the nation's] total merchandise exports.
That means that the New Zealand case offers little insight into what the U.S. farm belt would look like without subsidies or supply management. New Zealand's landscape is dominated by vast pastures ideally suited for the sort of grass-based meat and dairy production that people now demand; and the nation's population density is low. Neither condition applies here.
In short, New Zealand doesn't need supply management, because it produces mainly high-value products like meat and cheese that consumers in Europe and the U.S. will pay a premium for. (Indeed, imports of grass-fed New Zealand beef and lamb aren't exactly helping efforts to boost pastured meat production in this country.)
When he began to dismantle the New Deal supply management programs in the early 1970s, then-USDA chief Earl Butz urged grain farmers to produce as much as possible, assuring them he would find robust foreign markets for their goods.
But exports -- despite plenty of official energy spent over the decades ramming open foreign markets to U.S. ag produce -- have never been the panacea promised by Butz. In 2005, for example, U.S. corn farmers produced a then-record crop, for sale at rock-bottom prices. Still, they only managed to export 17 percent of it -- well below New Zealand levels.
Of course, those farmers responded to low prices and sluggish exports by planting yet more corn for the next season. (As it happened, they cashed in on that year's government-mandated ethanol boom, but that's a different story.)
In short, just as Brazil's ethanol "success" story offers little encouragement for our ethanol program, New Zealand's post-subsidy ag experience, while heartening, has little to teach us.
A word on Michael Pollan
In my column, I used as a starting-off point a quote from Michael Pollan's recent New York Times op-ed that seemed to portray ending subsidies as a panacea: "As long as the commodity title remains untouched," Pollan wrote, "the way we eat will remain unchanged."
But I know from talking with Michael and reading his work that his view is more nuanced than that, and I should have given him credit for it. Like me, Michael feels the agony of modern farm policy.
In that very same op-ed piece, for example, he writes:
For starters, farm bill critics did a far better job demonizing subsidies, and depicting commodity farmers as welfare queens, than they did proposing alternative -- and politically appealing -- forms of farm support.
Like me, he's groping for a viable policy agenda that fundamentally addresses overproduction while rebuilding local food systems. As this farm bill bumbles toward its finish, I'm afraid we don't have one.
It will be one of the sustainable food movement's major tasks to create one going into the next farm bill debate.
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Comments
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GreenEngineer Posted 9:34 am
14 Nov 2007
True, but not surprising. I'd say that the major triumph of this round was simply in bringing the Farm Bill to the public's attention. Previously, no one knew what it was. Hopefully we can build on that next time around, although the five-year period between farm bills is going to make it hard to sustain those gains.
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Jason D Scorse Posted 12:05 pm
14 Nov 2007
There are good social and economic reasons for subsidizing things that have positive externalities- where the social benefit is greater than the private benefit (e.g. education). Agriculture simply doesn't fall into this category. When I go to the farmer's market (as I do every week) I pay for healthy food that supports local farmers and I get the benefit that I pay for. People who don't care about local food don't buy it and they probably don't pay much attention to agricultural issues. And in fact, farmers throughout most of California receive zero subsidies.
I can live with investments in basic R&D and quality control and regulatory efforts but that's all. New Zealand's example is not a 1-1 for U.S. policy, but the lesson is still instructive. I have faith that American farmers could be competitive and healthy without government help. Anything else is in my view essentially an insult to farmers, saying that they need government welfare in order to make a living- they really don't. One day we'll get there and we'll wonder why we wasted so much money for so long.
I teach environmental economics and blog at http://www.voicesofreason.info.
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GreenEngineer Posted 3:24 pm
14 Nov 2007
Unlike a manufacturer, a farmer only has limited control over how much product he will produce every year. There are good years and bad years, and they tend to effect whole regions, so it means you've usually got too much of a crop, or too little.
If you let the price drop arbitrarily in the good years (due to surplus), then some farmers go out of business, and some will plant less the next year, and attempt to optimize their production for maximum economic efficiency, in your model.
Generally speaking, this sort of optimization is good for the healthy functioning of the economy, providing the things people want, etc. But with farming, if you cut too close to the optimal production level, then in a bad year you will wind up dramatically underproducing.
For a non-staple crop, this is not such a problem. If the apple harvest is bad, eat pears. Or whatever.
But with staple crops (which tend to be the commodity crops), you're talking about the thing which provides a substantial fraction of your society's total calories. If you come up short, people starve (or spend a fortune just keeping themselves fed). Pricing basic caloric intake on a pure supply-and-demand model does not seem like the basis of a particularly just or good society. But that's what I think you get to, when you treat farming as a pure laissez-faire market.
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meander Posted 4:07 pm
14 Nov 2007
I also hope that the awareness built during this year's farm bill debate will be around in 2012. But we don't have to wait until then to be active. Each year's agriculture appropriations bill offers a chance to affect food policy. For example, Congress has the habit of promising big dollars for conservation in the farm bill, then not fulfilling that promise in the following years. We'll need to remind Congress each year that they need to fully fund the conservation programs (and other non-mandatory programs). There is also lots of work to do at the state and local level (like that preposterous ban on labels about antibiotics and growth hormones in Pennsylvania).
To Jason's point about farmers producing things that people want, a few weeks ago the SF Chronicle had a front page story about the lack of subsidies in California has allowed the farmers to be daring and demand-driven:
They operate on a simple concept that mystifies Washington.
"The first mistake a lot of farmers make is to figure out what they can grow and grow that," said Jim Cochran, an organic strawberry and vegetable grower on the coast north of Santa Cruz. "Which is a really big mistake. The first thing they need to figure out is what they can sell."
In fact, if California vegetable farmers got crop subsidies, we might all still be eating iceberg lettuce, said Daniel Sumner, an agricultural economist at UC Davis. Crop subsidies discourage the innovation that is evident everywhere in California.
Imagine, Sumner said, what today's produce aisles might look like had Congress decided to subsidize salad in 1933.
"The payments are made for iceberg, and you think the market's going to demand romaine," he said. "You say, 'But I have to give up my payments to do that.' You can picture the scenarios."
In the San Joaquin Valley, farmers are planting tens of thousands of acres of almonds because prices are high. In Georgia, the market is calling for pecans, but Congress subsidizes peanuts - regardless of the market.
But if you have a barn full of specialized equipment and lots of debt on that equipment, it can be difficult to switch crops or diversify. Perhaps more government fund should be directed towards allowing farmers to transition to crops that local people want to buy, like vegetables in Iowa, or pastured chickens in Illinois, or pecans in Georgia.
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meander
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Jason D Scorse Posted 12:42 am
15 Nov 2007
An adequate food supply would exist without farm subsidies- in fact, we'd get production of more things people want and less production of things they don't- if anything, the current system is ripe with negative externalities- the exact opposite of what government should be paying money to support
Meander makes a good point- as part of a transition phase out of subsidies I could support some form of transition fund for diversification efforts or low-interest loans- this would be a one-time thing, not another special interest boondoggle that went on for decades- again, bottom line: farmers eventually should fend for themselves in the market just like the majority of people do- this isn't throwing them to the wolves, it's have the confidence and respect to know that in such an environment they will thrive, our food system will improve, and we won't have to have these ridiculous debates about how to dole out tens of billions in corporate welfare every 5 years
I teach environmental economics and blog at http://www.voicesofreason.info.
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GreenEngineer Posted 1:43 am
15 Nov 2007
I realize that what I'm saying violates your model of economic behavior, but unless you can explain to me where my model breaks down, simply asserting that your model is right and mine is wrong doesn't carry much water.
There are ways to avoid the problem I am describing other than price supports. One would be a diversification of staple crops. IF in addition to wheat, rice, and corn, we also grew alot of quinoa, amaranth, and other non-traditional grains, the impact of variations in production would be mitigated: a fat year for one crop is probably a lean year for another and an indifferent year for a third.
IMO, that would be a better way to go. However, it still probably represents a substantial degree of intervention in the marketplace, at least initially. Our traditional staples are traditional because they are what people are used to. It would not be economic to grow thousands of acres of quinoa in this country, until or unless a market develops for it. A variety of factors, including consumer taste but also including climate, the established body of farming knowledge, and the available equipment and material, make the production of a few staple crops economically favorable. If we want diversity in the face of these pressures towards specialization, we are once again most likely talking about some kind of intervention.
(It's also worth noting that if we did succeed in diversifying our base of staple crops, we would have done something that has never, as far as I know, been done before. Historically, societies tend to fixate on one or a very few staples. There's probably a reason for this.)
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SnoDragon Posted 4:13 am
15 Nov 2007
The only thing that will drive the market price up and kick our addiction to cheap corn and all its derivatives is crop scarcity.
Of course, tariffs against cheap incoming corn might then be in order. Which may not fly.
But then, how about subsidizing more biodiverse crops like barley or amaranth or fruits and veggies? Because I think we could all do with cheaper, local fresh fruits and veggies.
The "plant fencerow to fencerow" policy of Earl Butz has proven a disaster. Maybe subsidizing UNDERproduction would be a way to wean ourselves off of cheap corn and soy so that some day we might be able to do away with subsidies altogether.
Or we could adopt another throwback of the New Deal era: giving farmers low-interest-rate federal loans to keep afloat and hold their crop off the market if the price is not desirable, instead of paying them the market difference (as we do now, which means farmers sell their crop for less than it cost to produce). Then it wouldn't be subsidizing, it would be a loan that had to be repaid.
Of course, not having to spend ridiculous amounts of money on ag chemicals and GMO seed and mega-machinery would help farmers, too.
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mat Posted 5:17 am
15 Nov 2007
ok, i've read your column here 4 times, your previous column and all the responses over and over. i guess i sort of agree with you, but,
i mean REALLY, HOW did this get SO complicated???
(GreenEngineer seems to understand it, and has some good points mentioned also).
i'm not a farmer, it's obvious, unfortunately, but most people aren't. i'm very sure most regular Americans don't understand this issue very well at all. Most of us parrot what Oxfam thinks - they feed the hungry and support poor farmers after all - if we think anything about this issue at all.
like i said in my original response to your first column a few days ago, if i could vote AGAINST ADM and Cargill, etc.. i would, but i don't have that choice and i don't think that my gov't reps do either??? look what has happened with what Pennsylvania just did w.r.t. milk labeling of growth hormones - now milk can't say when it has no horrible homones in it? that can't be constitutional, but the big producers of the hormones given to dairy cows(other livestock too) just BUY PEOPLE OFF who make the decisions.
what to do?? doesn't look good for real Farm Bill reform legislation this go-round Tom...what a wonderful world it would be if we had a few billion less humans.
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jarmadi Posted 2:46 am
16 Nov 2007
Let's examine more closely the wheat subsidy. Our area is typical wheat growing country, and the subsidy is $14.35 per acre. This is taxable income, and a typical farmer in the 15% tax braket would owe back that 15% plus about 16% FICA taxes plus 6% state income tax......a total of 37%. This leaves $9.04 for the farmer to add to his loan payment or something. The $9 is a pitiful percentage of the farmers total investment on an acre of wheat, and the idea that he would obcess about how to retain this subsidy at all costs, or would shape his farming decisions around the existence of this subsidy, or to be in need of "weaning away" from this subsidy are all preposterous ideas.
The subsidies for corn and soybeans are greater than for wheat, but the land and equipment cost for these crops are proportionally higher, so I think the "subsidy snapshots" would look much the same. In some of these comments, I have gotten the impression that some believe that farmers "get rich" from collecting these subsidies, and become addicted to them, etc. Clearly that cannot be the case.
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Jason D Scorse Posted 4:28 am
16 Nov 2007
I teach environmental economics and blog at http://www.voicesofreason.info.
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occidentalpoppy Posted 2:26 pm
17 Nov 2007
We who believe the goal of farm policy should be affordable and abundant fresh produce with minimum environmental impact should be less concerned with the economics of commodity crops and more concerned with the economics of the fresh market. The cheap price of corn would not be a major nutritional issue if high quality fresh produce was available along side, and raising the price of corn will not change the availability of fresh produce in rural America or in the inner cities. If we subsidize either producers or consumers we will simply have more escalation of land prices and environmental problems in the prime specialty crop regions of the country and still no distribution networks serving marginal markets. What we need is investment in the cooling and distribution infrastructure that will make localized fresh market production viable. Farmers growing for the fresh market should be able to make tax deductible contributions to self insurance accounts from which they could withdraw tax free if crop or market conditions were certified as losses. Every school system should have money to contract for fresh procurement and processing (including cooking and distributing to individual schools,) there should be generous tax credits for new regional cooling and distributing operations, and grants and easy credit for cooling and marketing in the most marginal markets. These investments would improve the quality of the American diet and the economic health of our poorest and least economically diversified communities.
I agree with Michael Pollen's assessment that we have been long on critique of the current system and short on alternatives. The people who produce subsidized commodities have a stake in a food system that provides abundant affordable fresh produce and a stake in clean waterways and wildlife habitat, but they are more immediately motivated to preserve their livelihoods and the fragile economies of their rural communities. The direct subsidy system will not be overturned in a single Farm Bill. Entrenched industrial ag interests are going to fight for subsidies every step of the way, and many individual producers will support the status quo. Rather than taking on the rightness or wrongness of subsidies, we should do more to argue the benefits of investments in business that will support rural economies and improved diets. Pitting the urban public against an apocryphal Park Avenue welfare farmer is not the way to bring about a new vision of a food and farming system in the public interest; not in the city, not for specialty crop producers, and certainly not for the producers currently taking direct subsidies.
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