| Robert "I Heart Monsanto" Paarlberg is at it again, with a new column called "The Inconvenient Truth About Cheap Food and Obesity: It's Not Farm Subsidies. First off, what's inconvenient about that? It'd be downright GREAT if the subsidies weren't our problem, given how dang hard it is to convince Congress to change them. Paarlberg says:
Any complaint that food prices are too low might seem bizarre today, since world grain prices hit their highest levels in 30 years in 2008 and are now back up again. Yet this did not stop columnist Mark Bittman from reminding his New York Times readers that the price we pay for corn, soy, chicken, pork, beef, and high-fructose corn syrup is "unjustifiably low" because of farm subsidies.
Nothing could be farther from the truth. Our federal farm programs are designed to supplement the income of farmers, not subsidize the production of food. Most federal farm support programs either give cash to farmers whether they grow more crops or not, or boost farm income by raising crop prices through import restrictions, market controls, or temporary land set-asides, all of which make food artificially expensive, not artificially cheap.
Much of what he says is true. This is typical of Paarlberg, to blend truth and BS seamlessly. Yes, commodity prices are at record highs, and they were in 2008 too. Prior to that, however, they were often quite low (years back, corn got down around $2/bushel... now it's up around $7/bushel). If Paarlberg had consulted researcher Timothy Wise of Tufts University, he would have received data proving that our subsidy system more or less provided savings of billions of dollars to the factory farm industry in the form of underpriced commodities over a recent period.
|As Paarlberg mentions, our subsidies consist of "direct payments" (money farmers get whether they need it or not, based on historic production), conservation programs (mostly programs that pay farmers to set aside marginal, environmentally sensitive land), and, in rare cases, import quotas. (Paarlberg's next paragraph after the ones I quoted is about our sugar quota system which keeps sugar prices artificially high. But that is a system that is ONLY for sugar, not for any other crop. It's a poor example since it's the exception and not the rule.)
As for the direct payments, since those are based on historic production, there is still an incentive for max yield and max production, it's just a less immediate one because you'll receive the benefits from it later. It depends on which years the USDA bases your direct payments on, and if they allow you to change which years they use to tabulate your payments.
But there are two subsidies Paarlberg fails to mention. First, there are the subsidies that are EXACTLY what Michael Pollan wrote about, that DO allow our food to be artificially cheap and DO encourage overproduction. Obviously, with high prices like we have now, farmers aren't receiving these. But that doesn't mean they never will again. Prices go up and down over time. Next time they go down, this subsidy will be there, encouraging farmers to grow as much corn, soy, and wheat, as they possibly can.
Second, there's crop insurance. Nobody calls this a subsidy. It's kind of the dirty little secret of agriculture right now. I like to defer to ag policy genius Daryll Ray on this one. He says:
We grew up at a time when the only kind of crop insurance available was hail insurance. In deciding on the purchase of this insurance, farmers decided on the chance that they would be hailed out against the cost of the premium. Farmers also had, and still have, of course, access to hail, wind, and fire insurance on their buildings and liability on their property...
These companies stayed away from insuring risks that were systemic, that is, risks that could affect all or a large share of their policy holders in a given year. Risks like these include crop prices and yield. If there were a drought, it is likely that it would affect most of the farmers in the county or even in the state or broader sections of the country. As a result, for a private insurance company to insure yield, the premiums would typically have to be higher than most farmers would be willing to pay.
The same is even more true for price because experience shows that crop agriculture has experienced long troughs of low prices punctuated by price bubbles and that-in contrast to hail-all farmers experience the price declines. There is virtually no way that insurance companies could build up large enough reserves to pay costs that could run into the billions of dollars for four or more years at a time.
Got that? Historically, insurance companies did not insure farmers against low yield or low prices because that would be stupid and unprofitable. Unless the insurance companies charged insanely high premiums. Now enter the government.
The WTO says that we can't have market-distorting subsidies so our government is trying to get away from our traditional subsidy system. So they essentially outsourced - privatized - their subsidies. The government now subsidizes crop insurance, which farmers can choose to buy (or not) but it seems like a good many - if not most - buy it. If you don't buy crop insurance, you're ineligible for any disaster relief from the government, should you need it.
Now, when your field floods and you lose your crop, or when prices drop so low you are losing money, the insurance pays you back. Daryll Ray says:
Second, farmers in higher risk areas began to plant crops like corn. Without the insurance subsidy, the production of corn in a number of marginal areas was too risky, so farmers planted crops or pastures more appropriate for the area. With crop insurance they couldn't lose. If the crop survived, they had the more valuable corn to sell. If the crop failed, they could collect crop insurance. As a result, they had a guaranteed income that was higher than they would have with traditional crops for that area.
In other words, crop insurance - which is a bad deal for taxpayers - encourages farmers to grow more corn and soy. Even with the high prices we see now, the extra corn and soy they will grow will lower the prices from what they would have otherwise been.
Farmers are also kicking and screaming to get out of the conservation programs they are in because they want to grow corn and soy on their conservation lands as well. You sign up for a long period of time, like a decade, when you enroll in a conservation program in which you set aside environmentally sensitive land. Often that is land where the yields would not be great anyway, and in years with low prices, it wouldn't be profitable for the farmers to plant there. But with today's high prices, the farmers could make a killing, even if they don't get great yields.
Where I agree with Paarlberg (and it hurts me to say that) is that subsidies are not the ONLY thing that makes junk cheap. First of all, the cost of our food is a small percentage of what we pay for when we buy food. We pay for the commodities - corn, soy, etc - but we're also paying for advertising, packaging, grocery store slotting fees, corporate overhead, and stuff like that.
Second of all, part of the price has to do with perishability. The processed foods made with commodities can sit on the shelves forever. Fresh fruits and veg can't. Built into the prices of fresh fruits and vegetables are the refrigeration and the quick transportation required to get them from the field to the grocery store before they rot. Additionally, you pay for the percent of fruit and veg that DOES rot, that the grocery store throws away. That's not part of the price when you buy a bag of chips.
Another thing: the lack of environmental, animal welfare, and health regulations on both commodity farmers and factory farms contributes to the low cost of junk food. Meat was once a luxury. When you produce it sustainably, it's expensive. The factors that allow it to be cheap are 1) artificially cheap commodities and 2) allowing the farms to treat their animals poorly, drug them even when they aren't sick to promote growth and prevent disease, and dispose of manure irresponsibly. If you changed all of that, McDonald's wouldn't be so cheap, and people wouldn't be able to eat it so often. Maybe then it would be cheaper to eat a salad.