At dinner Sunday night, I asked my friend Prasad if he knew about the new farm bill and what it means for average Americans. He didn't.
I wasn't surprised. With the election, the war, and rising prices to fret about, not many people are pondering legislation about farms. But they should, because it has huge implications for the country's nutrition, environment, and health. Here are three reasons why we all should pay closer attention to the 2007 farm bill: food, fuel, and fat.
First, some background.
The farm bill, which is renewed every five or six years, is a vast set of laws and policies that governs how our food is produced and priced. Recently, it has included conservation programs aimed at setting aside land to aid ecosystem recovery and improve water quality, but historically it has provided huge payments to just a handful of crops including wheat, soybeans, cotton, and corn.
The first farm bill, passed during the Depression, established price supports to protect farmers and rural communities. The Agricultural Act of 1938 mandated price supports for corn, cotton, and wheat; the Agricultural Act of 1949 established supports for other commodities including wool, mohair, honey, and milk. These two laws form the backbone of today's farm bill, and this is part of the problem. A system established in an agricultural landscape vastly different from today's is still in place, and the effects are profound.
Let's look at how one particular crop has helped change American life and how retooling government supports for it could be a boon for all Americans.
The problem with corn: How the fat of the land is helping make us fatter
Corn is so prevalent in American food that you're likely to be eating it even if you don't know it. Chug a Coke, chomp on a chicken nugget, bite into a burger, and most likely you're ingesting processed corn.
Why is corn everywhere? Part of the reason is a subsidy system that has helped glut the marketplace with corn and left the government to find ways to use it. Nowadays, ranchers feed corn to their cows and chickens, and food companies sweeten their foodstuffs with it. This not only affects the price of strawberries and broccoli at your local farmers market; thanks to recent government mandates for ethanol, corn affects what you pay at the pump.
Some nutritionists and researchers are even starting to trace a link between the high prevalence of corn in our diet and our weight problems -- and, by extension, a host of health issues stemming from being overweight.
According to the National Institutes of Health, 64.5 percent of U.S. adults are overweight or obese. That's up from just 25-45 percent of Americans in 1992, according to the International Journal of Obesity. A number of conditions of our modern lifestyle contribute to our weight problem: sedentary jobs make us less physically active, we eat out more than in, and portion size has ballooned. But corn may also play a role.
Government subsidies make sweet food very cheap, says Marion Nestle, a nutrition professor at New York University and author of Food Politics: How the Food Industry Influences Nutrition and Health, pointing to one of the most prevalent sweeteners: high fructose corn syrup, which sweetens most soda pop while upping the calories. (Read a PBS interview with Nestle.)
In a recent article in Environmental Health Perspectives, Barry Popkin, a professor of nutrition at the Carolina Population Center of the University of North Carolina, argued that an artificial price gap created by subsidies makes nutritionally valuable foods more expensive than nutritionally poor food and thus more attractive to penny-pinched consumers.
Writer Michael Pollan is blunt about the problem: "We're subsidizing obesity," he told the Christian Science Monitor.
How corn is skewing the marketplace and abetting environmental problems
One might conclude that corn growers and other beneficiaries of government subsidies have been playing on an uneven playing field for more than five decades. What happened to free markets?
Because government subsidies have kept corn prices low, farmers need to plant more of it to make money. In his compelling book, The Omnivore's Dilemma, Pollan tells the history of how America made the move from rich, diverse farmlands to a monoculture of corn, and how this has perverted the marketplace. Pollan writes:
Government farm programs, once designed to limit production and support prices (and therefore farmers), were quietly rejiggered to increase production and drive down prices. Put another way, instead of supporting farmers, during the Nixon administration the government began supporting corn at the expense of farmers. Corn, already the recipient of a biological subsidy in the form of synthetic nitrogen, would now receive an economic subsidy too, ensuring its final triumph over the land and the food system.
The farm bill, like other New Deal public-support systems, grew out of needs tied to difficult conditions, but as farming and economic circumstances have changed, the law has not kept pace with evolving needs of lands and the people who work them.
Meanwhile, lobbying around the crops getting the subsidies has strengthened. Those on the receiving ends of the monies don't want to give them up. The system stays largely stuck in the past.
Some major changes did occur in the 1980s, though. As scientists and politicians saw increasing environmental degradation of agricultural lands, conservation programs were designed to protect natural resources and to reward farmers. The 2002 farm bill ramped up conservation payments.
But corn threatens to throw a wrench into this progress. With farmers growing more and more corn, land formerly cultivated in soybeans or set aside as conservation reserves is now being cultivated for corn.
Why? In part because after years of slumping prices, the price of corn is now growing by leaps and bounds. You see, our representatives in Washington, D.C. have mandated a huge increase in the amount of ethanol in our gasoline. They have also made it all but impossible to import sugarcane-based ethanol from countries like Brazil. So our only viable source is corn. Demand for corn as food and corn as energy has helped its price skyrocket. (Some believe this is contributing to a world food shortage that threatens political stability throughout the developing world -- but that is another story.)
Less corn means more conservation and better health
The rush to corn is exacting a serious environmental toll. One of the country's most resource-intensive crops, corn requires huge amounts of fertilizers and water. As Pollan put it, "Hybrid corn is the greediest of plants, consuming more fertilizer than any other crop." Nitrogen from fertilizers applied to cornfields eventually finds its way to our waterways, degrading water quality and choking out fish.
Eventually that nitrogen finds its way to the ocean where it can cause huge dead zones -- large patches of the ocean depleted of oxygen and virtually all life.
The need for irrigation is also of concern. While most crops need irrigation, corn is particularly thirsty. Consider the Ogallala Aquifer, the huge underground reservoir underlying eight states from Texas to South Dakota. According to the USGS, the Ogallala supplies about 30 percent of all our water used for irrigation. Corn-based biofuels draw even more -- anywhere from three to six gallons of water per gallon of ethanol, according to Environmental Defense Fund.
The aquifer was formed millions of years ago, and the water there today has been around for thousands of years. However, we are pumping water out of so fast that we are in danger of pumping it dry. By some estimates, the Ogallala could be used up in as little as 25 years. From a water point of view alone, our rush to corn does not seem sustainable.
Now, eating and growing corn are not bad in and of themselves, but producing too much corn has wide-ranging negative effects. So we should take note of how our tax dollars are helping flood and pervert the marketplace with easy corn, because we're paying a really high price in terms of nutrition and environmental problems. This is where the farm bill comes in.
As farmers naturally look to boost profits, Congress should take the long view of our country's health. Rather than supporting subsidies that create a kind of gold rush for corn, perhaps the government should consider diversifying its support for a whole range of crops that not only need help but would also provide across-the-board benefits for Americans.
Boosting conservation programs and evening the playing field among growers of different crops -- like broccoli, carrots, apples, almonds, and spinach -- could lead to trimmer, healthier bodies and an environment that provides good water quality and promotes affordable food. Next time you sit down to dinner with friends, ask them what they think they're eating. Whatever it is, the chances are, it contains corn. Maybe we should think about changing that.
Carl Levin (D-Mich.) [UPDATED]
Arlen Specter (D-Pa.) [UPDATED]
Comments
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bharshaw Posted 6:03 am
24 Apr 2008
And, in case you haven't noticed, it's not simply the price of corn that's soaring, soybeans, wheat, and rice are also rising. In today's market environment, the levels of government subsidies don't determine which crop a farmer will grow.
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Bill Chameides Posted 8:36 am
24 Apr 2008
Would you not consider the federal government's mandate for ethanol in gasoline a subsidy for the corn industry? After all, is it not true that without the government mandate, we would not have seen the American farmer's great rush to corn over the last couple of years? And there has clearly been a rush -- for example, according to the National Agricultural Statistics Service, acreage planted in corn in the U.S. increased by about 15% between 2005 and 2007. Much of that increase appears to have occurred at the expense of acreage planted in soybeans.
So does it not follow that, even in "today's market environment," government policies/subsidies can affect a farmer's choice of what to grow. And if government policies influence what farmers grow, should we not consider whether those policies make sense?
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Bill Chameides Posted 11:53 am
24 Apr 2008
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otocco Posted 12:38 pm
24 Apr 2008
Yes, the government subsidy DID and to a lesser extent is driving the planting of corn prior to the price surge. Payments to farmers for planting corn are divided into two types. The first, called Direct payments are allocated by acreage at the onset of a farm bill (ie. every 5 years). The farmer says, "Of my 100 acres, 50 are base corn acres." A farmer only gets paid for the acres he plants. If he plants all 50 of his corn acres, he gets paid a small amount per acre for these acres. If he plants more than 50 acres, he doesn't get paid for any more acres than the 50 he declared.
The second type of payment is called a counter cyclical payment. The Farm Bill was designed to deliver most of its farmer subsidy in this payment. This payment establishes a floor under which the farmer is reimbursed, per bushel, for the price of corn he pays. The arbitrary price set in 2002 was $2.40. If the actual price of corn was $2.00 and the farmer produced 100 bushels per acre, the farmer would be paid $40 per acre to offset the price. The lower the actual price of corn, the greater the subsidy.
As you're aware, the prices have been above the 2002 base price ($2.40) for some time. This has led to the unspent largesse falling back to the USDA.
As was noted in the initial post, these payments only apply to commodities, which prevents, say, a grain farmer from suddenly switching to onions or tomatoes. The actual price of commodities,coupled with the availability of inputs is now primarily driving planting decisions. The subsidies provided by the goverment as direct payments can hardly offset the spike in input cost and will do very little to sway farmers this season.
Another thing that ought to be mentioned is that at least 30% of Farm Bill funding is made up of WIC, food stamps, Farmers Market Nutrition Program (and its senior counterpart), National School Lunch Program and other programs designed to get fresh fruits and vegetables in the hands of the nation's most needy. That's what makes this piece of legislation so important to EVERYONE!
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bharshaw Posted 4:20 am
25 Apr 2008
"Price relationships have changed between corn and beans since the USDA intentions report, says marketing specialist Jim Hilker at Mich. St., and he says it favors corn now, but weather is still a threat for a reversal. He says producers need to keep more in corn than the USDA forecast, because the US will have less carryout at the end of the year.
Hilker says make some forward contracts if you can to lock in prices for your 2008 corn. Recognizing the fact some elevators will not offer forward pricing, he says farmers may have to use the options market. He knows put options are expensive, but offer downside protection from deep drops. He also says selling a call option reduces the cost of the put.
Regarding soybeans, Hilker says, "If you look at new crop soybean prices only being twice new crop corn prices, versus a more normal 2.3-2.5, even with the high fertilizer prices, that means higher returns to corn per acre for most producers." And he adds, "It is hard for me to explain soybean prices given the projected world stocks. Does the market know something we don't?
Now, I've seen estimates, maybe from the same site, that the ethanol mandate raises the price of corn by about $.40 a bushel (corn is currently $5-6, used to be $2.50/2.80 was pretty good). So yes, the ethanol mandate has raised corn prices and no, I won't argue it makes much sense. But consider--you, by following Pollan, end up arguing that a farm lobby that supported farm programs since 1933 has supported low corn prices while now they support high corn prices (through the ethanol mandate). The fact is the farm lobby has always opted for price stability and higher prices (not necessarily compatible) and Pollan and others misinterpret the history of farm programs, particularly in the 1970's. They also assume, wrongly, that farm programs are always effective in reaching desired ends--they aren't.
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bharshaw Posted 4:30 am
25 Apr 2008
"Direct payments are not based on producers' current production choices, but instead are tied to acreage bases and yields. Because direct payments provide no incentive to increase production of any certain crop, the payments support farm income without distorting producers' current production decisions."
Because direct payments are the only ones likely to be made this year (assuming a farm bill), the farm program doesn't favor corn planting as opposed to soybean, or wheat.
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Bill Chameides Posted 7:04 am
25 Apr 2008
Does anyone question the notion that government subsidies for ethanol have:
1. led farmers to plant more corn, and
2. helped drive up the prices for corn?
And as I describe below, the rush to corn has likely driven up the price of soybeans as well since many farmers are converting land cultivated in soybeans to land cultivated in corn.
This is what Chad Hart, an economist at the Center for Agriculture and Rural Development at Iowa State, predicted in September 2006:
Increased feed demand and increased ethanol demand translate into higher expected futures prices for both corn and soybeans. The market wants more of both commodities, but there is a limited supply of acreage. Current market signals indicate that the market wants corn acres more than soybean acres. If this trend continues, expect Iowa corn acreage to grow, Iowa soybean acreage to decline, and the proportion of Iowa acreage enrolled in the Conservation Reserve Program to shrink.
And this is what actually happened between 2006 and 2007:
» corn acreage in the U.S. increased by 19%;
» soybean acreage decreased by 15%; and
» 2.1 million acres of land in the Conservation Reserve Program were taken out of the program.
Certainly these changes are driven by market and price signals. But we need to drill down and figure out what is driving the shifts in market and price signals. Increased demand for ethanol is one of those drivers and without the federal government's mandate for and subsidy of ethanol there would not be significant demand because ethanol is not economically favorable.
Bottom line: government subsidies, mandates, and other policies are directly affecting what farmers grow.
Dr. Bill Chameides is the dean of the Nicholas School of the Environment at Duke University.
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sideshow1979 Posted 7:14 am
25 Apr 2008
While current policies incentivize corn production, so did the supply management policies of the past. I agree that the emphasis moved production over price in the 70s (for whatever reason). But as long as farm programs have existed, corn (and other eligible commodities) have received an economic subsidy. The amount of that subsidy is worth discussing, but it has been there since the 30s. I get tired of the view that somehow farm programs before the 80s created some sort of farmer and consumer paradise.
There are three main types of farm programs- directs, countercyclicals, and marketing loans (LDPs). The current target price is $2.63 (though the farmer does not get a countercyclical payment until the price falls to $2.35, because the direct payment is subtracted from the countercyclical target price). Usually, the USDA does not get to keep the money that is not spent as a result of high prices; that money is taken out of the budget baseline for the next farm bill, though the budget forecasts are occasionally behind the times.
The ethanol tax credit is 51 cents per gallon. A little under 3 bushels of corn make a gallon of ethanol. Therefore one could argue that the ethanol tax credit adds $1.50 to the price of corn, but that credit is for the blender (ie oil company) so it doesn't all pass through. The RFS standard is another discussion.
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Ron Steenblik Posted 7:22 am
25 Apr 2008
Bill Chameides says, "yes, but what about the ethanol subsidy? That's very distorting", and Sideshow1979 points out that they do raise the market price for corn. It looks to me that B. Harshaw agrees.
So what's there to argue?
These are only my personal opinions.
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sideshow1979 Posted 7:38 am
25 Apr 2008
The broad point I would make that as long as farm programs are subsidizing certain crops only, those crops have an advantage. And while direct payments are the only ones being paid, there is still a safety net below those that are bound to influence planting decisions now and especially if prices ever fall again, which is inevitable.
Perhaps even more broadly, after decades of farm programs subsidizing a short list of crops, in many places the infrastructure for growing any other crop has disappeared. Pollan makes that point, and Tom Philpott has written about it as well in some great posts.
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