Do Farm Subsidies Cause Obesity?

8/3/2019 Do Farm Subsidies Cause Obesity?

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Do Farm SubsidiesCause Obesity?

Dispelling Common Myths About

Public Health and the Farm Bill

A Wh i t e P AP er b y F o o d & WA t er WA tch And t h e Pu b l i c h eA l t h i n s t i t u t e


2/19

The Public Health Institute

555 12th Street, 10th Floor

Oakland, CA 94607

T: (510) 285-5500

www.phi.org

Copyright October 2011 by Food & Water Watch and the Public Health Institute. All rights reserved.

This report can be viewed or downloaded at www.foodandwaterwatch.org .

Food & Water Watch

1616 P St. NW, Suite 300

Washington, DC 20036

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[email protected]

www.foodandwaterwatch.org


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Executive Summary 2

Introduction 3

FINDING:

Removing subsidies would not curb the overproduction o commodity crops 4

FINDING:Low commodity prices oer savings to the ood industry, but not to consumers at the grocery store 8

FINDING:

The ood industry has been the main driver o commodity policy, not armers 10

FINDING:

Removing subsidies beore commodity supply and prices have been managed will not stop

overproduction o corn and other commodities, but could harm small and midsized amily armers 11

Conclusion 12

Policy Solutions 13

Reerences 15

Do Farm Subsidies

Cause Obesity?Dispelling Common Myths About

Public Health and the Farm Bill

A Wh i t e P AP er b y F o o d & WA t er WAt ch And t h e Pu b l i c h eA l t h i n s t i t u t e


4/19

Execuve Summary

It is commonly argued that arm subsidies have led

to the overproduction o commodity crops, such as

corn, driving down the price o junk ood made with

commodity ingredients like high-ructose corn syrup

(HFCS) and partially hydrogenated soybean oil rela-

tive to healthier alternatives This cycle, it is sug-

gested, has led to increasing rates o obesity Remov-

ing subsidies, the argument goes, would help combat

obesity by discouraging overproduction o crops that

are the base ingredients o unhealthy ood This seems

like a logical argument, yet ew i any o those mak-

ing these arguments reerence academic ndings and

economic analysis to support their claims

This white paper examines the public health and

agricultural economics literature as well as primary

and secondary agriculture policy documents Basedon this analysis, there is no evidence o a relationship

between subsidies and the overproduction o commod-

ity crops, or between subsidies and obesity Instead,

this paper nds that the deregulation o commodity

markets not subsidies has had a signicant impact

on the price o commodities Deregulation also has

provided benets and incentives to the ood industry,

including processors, marketers and retailers, and

is one o a number o contributing actors impacting

the availability o high-calorie processed oods in themarketplace

Economic modeling o scenarios in which arm subsi-

dies are eliminated shows a continued overproduction

o commodity crops because o characteristics unique

to agriculture namely, that armers are slow to re-

spond to price signals and tend to overproduce regard-

less o price Federal policies enacted in the 1930s re-

sponded to these market imperections by encouraging

armers to idle land so that they would not overpro-

duce, and by requiring grain buyers and ood proces-

sors to pay xed prices or commodity crops However,

ater lobbying by ood companies, these policies were

dismantled between 1985 and 1996, and overproduc-

tion and oten-low prices ensued Subsidies were then

enacted to keep armers rom going out o business

The paper concludes that the public health and health

care communities can nd common ground with the

amily arm community by moving beyond the ocus on

subsidies and instead advocating or comprehensive

commodity policy reorm that reduces overproduction

and stabilizes price and supply, as well as policies

and programs that expand access to healthy ood in

rural and urban communities Advocating or subsidy

removal as a means to combat the overconsumption

o unhealthy oods and beverages is an ineective

obesity prevention strategy, as subsidy removal willnot aect the price or production o these products

The papers recommendations ocus on the need or

commodity policy reorm and on ensuring that agri-

cultural policies promote healthier options Specic

recommendations include:

Engaging in the long-term campaign to reorm

commodity policies by developing responsible

ederal supply management programs

Increasing consumption o ruits and vegetables,whole grains and other healthy oods through

strategies that promote increased access and

aordability or underserved communities

Expanding the supply o healthy oods by helping

armers diversiy their production and supply local

and regional markets with healthy ood

Building the inrastructure needed to better link

armers and consumers and aid in the delivery o

healthy oods


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Dispelling Common Myths About Public Health and the Farm Bill 3

Introducon

In the public debate over the ederal Farm Bill,

subsidy programs or armers growing commoditycrops like corn and soybeans receive the lions share

o attention There are two common and related as-

sumptions promoted in the media and echoed in some

public health circles regarding these subsidies The

rst is that they have resulted in commodity crops like

corn getting cheaper, which has driven down the price

o junk ood made with these ingredients relative to

healthier alternatives This cycle, it is suggested, has

led to increasing rates o obesity

The second and related assertion is that removingsubsidies will go a long way toward solving these

problems For example, in an ad run in the New York

Times by three doctors rom Mt Sinai Medical Cen-

ter in 2010 titled Why are we subsidizing childhood

obesity?, the authors state that [Commodity] subsi-

dies have led to enormous increases in production o

cheap corn starch commodity subsidies need to be

reexamined It is incongruous and wasteul or health

agencies to spend millions o dollars countering obe-

sity while the USDA spends billions in arm subsidiesthat indirectly promote it1

Although the argument is compelling, the literature

and the data tell a dierent and more complicated

story about the relationship between subsidies, arm

policy, ood costs and obesity Indeed, the evidence

suggests that the Farm Bill presents opportunities to

make policy changes that would go much urther

toward addressing high obesity rates than subsidy

elimination would

There is no question that the subsidy system is

broken, and there are signicant implications o that

broken system or the broader US ood system How-

ever, simply doing away with payments to commodity

armers will not result in signicant price changes or

healthy or unhealthy oods Furthermore, policy cam-

paigns that blame subsidies or the ood systems ills

also tend to demonize the armers who receive subsi-

dies, many o whom are actually small and midsized

amily armers The wedge that is driven between theamily arm community and other policy reorm advo-

cates over the subsidy issue only serves to weaken and

undermine a relationship that is vital or those who

seek policy changes to rebuild healthy ood systems

This white paper reviews the literature on the rela-

tionship between subsidies and unhealthy ood and

makes recommendations or policy reorms to sup-

port a more healthy ood system and increase ood

access It is hoped that this paper will contribute to

a more inormed and open debate about commodity

policy, moving beyond the current debate between

cutting subsidies or maintaining the status quo This

conversation can expand to include the role o a arm

saety net in a reormed ood system Such a system

could have a signicant positive eect on addressing

childhood obesity and could spur community economic

development through ood and agriculture


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4 Do Farm Subsidies Cause Obesity?

FINDING:

Removing subsidies would not curb the

overproducon of commodity crops.

There is no question that the United States has a

problem with overproducing commodity crops, par-

ticularly corn and soybeans, which in turn are pro-

cessed into corn syrup, animal eed and other ingre-

dients However, the literature suggests that it is not

subsidies that drive this overproduction; overpro-

duction has been a problem or decades, long beore

our current subsidy programs existed2 Economics

literature dating back to the rst hal o the 20th

century has ound that overproduction and low prices

are common in commodity markets when they are

not regulated3 The literature contends that unlike

other industries, agricultural producers do not tend

to respond to price signals by reducing the amount oa crop they are growing when prices are low

Agriculture is unique in several ways First, it re-

quires large upront investments in land and equip-

ment with a slow rate o return, which puts pressure

on producers to continue producing even when prices

all, hoping that they can wait it out until prices re-

bound Second, agriculture cannot simply be turned

on and o depending on market signals; once arm-

ers plant their crop, they cannot change the amount

they are producing even i prices rise or all Third,

the market is made up o a large number o small

producers, each o whom is unable to infuence price

through his or her individual planting decisions4

One armer planting less will not bring prices back

up

For this reason, individual armers may respond to

low prices by reducing hired labor, but they generally

do not reduce their production Instead, they contin-

ue to produce as much as possible in order to squeezeas much money as they can out o their land and

equipment, hoping to break even5 When all produc-

ers do this, overproduction continues and prices drop

even lower This treadmill o overproduction and

low prices plagues commodity markets

When prices drop so low that armers are unable to

remain in business, they generally sell their arms

DEFINITIONS

Small farmsare dened by the U.S. De-

partment of Agriculture (USDA) as farms

with annual sales of between $100,000 and

$250,000.

Midsized farmsare dened by the

USDA as farms with annual sales between

$250,000 and $500,000.

Commodies are raw agricultural materi-

als that can be stored or processed. In feder-

al policy, commodies refers to a group of

crops that have tradionally been the basis

of our food and agricultural system and that

the government has been involved in manag-ing to various degrees. The major commodity

crops are corn, wheat, soybeans, coon and

rice. Other commodity crops include barley,

oats, sorghum, dry peas and peanuts.

Commodity subsidies is a phrase usually

used to refer to payments made to farm-

ers who are growing commodity crops. The

government has long provided a safety net

to keep farmers growing these crops fromgoing out of business, but the support has

taken dierent forms. Today, the safety net

is limited to two kinds of payments made to

farmers: counter-cyclical payments, which

are made to producers only when commod-

ity prices are very low, and direct payments,

which are made to producers regardless of

the price of the crop based on the amount

of land that they have historically farmed.Together, these payments are generally

referred to as subsidies. These payments

have existed in their current form only since

the mid-1990s. Prior to the 1996 Farm Bill,

the government supported farmers in a very

dierent way (see pages 6 and 7).


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to another producer, leading to increasing concentra-

tion o armland in the hands o larger agribusiness-

es, and to continued overproduction6

In the 1920s and 30s, economists advised ederal poli-

cymakers to intervene in order to prevent the arming

sector rom overproducing itsel into bankruptcy7

Based on this advice, arm policies were designed to

serve two purposes: rst, to manage the volume ocommodities being grown in order to avoid overpro-

duction, and second, to ensure that armers, the back-

bone o the rural economy, could receive a air price

or their products

Starting in the New Deal, the government encouraged

acreage reduction and land set-aside programs to

restrict the amount o land being planted with com-

modities and thereby reduce overproduction8 Con-

gress also established the Commodity Credit Corpora-

tion (CCC), which was authorized to make loans to

armers whenever the prices oered by ood processors

or grain traders ell below armers cost o production

Farmers pledged their crops to the government as col-

lateral against the loans, which eectively orced the

processors and traders to pay armers a price that was

higher than the loan rate set by the CCC, or else the

armers would simply sell their crops to the govern-

ment

To hold these crops, the government established anational grain reserve, much like the Strategic Petro-

leum Reserve we have today The reserve was lled

when crops were abundant and released when they

were scarce In this way, the reserve prevented crop

prices rom skyrocketing during times o drought or

low production

Together, these policies helped to keep overproduc-

tion in check and to reduce commodity price volatility,

unctioning much like a minimum wage or armers

Implementing these policies cost ar less than thecurrent-day commodity programs; the CCC actually

made $13 million between 1933 and 1952 rom selling

crops out o the reserve when there were supply short-

ages9

Beginning with the 1985 Farm Bill and subsequent

Farm Bills, however, these ederal policies began to

be dismantled as the pressure grew or greater de-

WHAT IS THE FARM BILL?

The Farm Bill is a major agricultural and

nutrion bill that contains 15 secons, or

tles. These tles cover, among other things,

nutrion programs, on-farm environmentalconservaon, trade, rural development,

farm credit, commodity programs (those

targeng commodity crops like corn, wheat

and soybeans), agricultural research and the

markeng of U.S. farm products. The Farm Bill

is debated and passed by Congress roughly

every ve years and is implemented by the

U.S. Department of Agriculture. Each Farm Bill

has its own name the 2008 bill was called the

Food, Conservaon, and Energy Act of 2008.

Currently, two-thirds of the $300 billion

funding in the 2008 Farm Bill is directed to

nutrion programs, namely the Supplemental

Nutrion Assistance Program (SNAP, formerly

known as food stamps). But the bill also has

small amounts of funding available for much

less well-known programs, including a program

that helps farmers transion to organic

agriculture, programs that support small food

business and infrastructure development,

and programs to help low-income Americans

purchase food at farmers markets. The Farm

Bill truly inuences all aspects of our food

system and is relevant for both farmers and

consumers.


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regulation and less ederal involvement in markets

CCC loan rates were allowed to all below armers

cost o production, so armers were no longer guaran-

teed a air price by either processors or the govern-

ment The grain reserve was eliminated10

The 1996 Farm Bill, called the Freedom to Farm

Act, marked the culmination o this deregulatory

era The legislation was passed during a period ohigh commodity prices and tight ederal budgets

much like 2011 and was designed to phase out all

government intervention in commodity markets

The legislation eliminated the land-idling programs,

letting armers plant as much as they wanted, and

production increased over the next ew years11 Ad-

ditionally, because the government had eliminated

grain reserves, armers fooded the market with their

entire crop

As a result o this increase in production, crop prices

plunged and the treadmill sped up Between 1996

and 1997, real corn prices dropped 284 percent12

The crop price ree-all continued, and by 1999 the

real price o corn was 50 percent below 1996 lev-

els and the soybean price was down 41 percent

As prices ell, armers continued to plant as much

as possible to try to make up or their lost income,

which urther increased supply and depressed prices

All told, between 1996 and 2005, soybean prices

dropped 21 percent while production rose 42 percent,

and corn prices dropped 32 percent while production

rose 28 percent13

To quell criticism ater crop prices collapsed, in 1998

Congress authorized emergency payments to arm-

ers essentially grants to keep them in business

The cost o these payments reached $20 billion in

199914 But because there was no attempt to reduce

the amount o land in production or to shore up pric-

es with a grain reserve, overproduction continued

unchecked and commodity prices kept alling Evenwith the government payments, net arm income

declined 165 percent between 1996 and 200115 With

In most industries, when price goes down, producers respond by slowing producon. Agriculture works dierently. When soybean

prices plummeted aer supply controls were eliminated in the 1985 and 1996 Farm Bills, farmers connued to increase acreage

planted, leading prices to drop even further. This unusual relaonship was the raonale behind proposals in the 1920s and 30s to

have the government play a role in managing commodity supplies and prices.

SOURCE: USDA Economic Research Service, Oil Crops Yearbook, 1986-2010, accessed July 25, 201


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things still looking bad or many armers, Congress

made these emergency payments permanent in the

2002 Farm Bill The subsidy system we know today

was born16

This decision had wide-ranging consequences Rath-

er than address the primary cause o overproduction

and low prices by reinstating supply management

and price saety-net policies, Congress set the tread-mill on high speed and attempted to keep armers

rom alling o by paying them a subsidy As noted

below, this subsidy is oten not enough or small and

midsized armers to make a living The main ben-

eciary o the new system is the ood industry: the

ood processors and grain traders that are now able

to pay armers less or their crops than they cost to

produce, thanks to the unchecked treadmill, and that

are able to have the government attempt to cover the

dierence

Because armers collectively tend to overproduce

without some sort o government intervention, the

academic literature nds that subsidies themselves

do not cause overproduction Instead, the overpro-

duction we see today began when the government

withdrew rom actively managing agricultural

markets The literature in turn nds that removing

subsidies would not make commodities more scarce

or more expensive17 For example, one economic

modeling study rom the University o Tennessee

ound that the supply and price o commodities

would change very little i subsidies were removed

What would happen is that US arm incomes would

decline by 25 to 30 percent

In other words, armers would become poorer, but

commodities would still be abundant18 Some armers

would inevitably go out o business, but their land

would likely be sold to a larger agribusiness, so there

would be no reduction in supply19 Only a return to

common-sense regulations that include supply andprice stabilizing policies would reduce overproduc-

tion and raise prices

1930 1940 1950 1960 1970 1980 1990 2000 2010

Agricultural Adjustment Act of 1933:

created the Commodity Credit

Corporation (CCC), which set minimum

prices that processors and other

buyers must pay for commodity crops.Beginning of voluntary acreage

reduction programs to discourage

farmers from overproducing.

Agricultural Act of 1954:

authorized a CCC-run grain

reserve for foreign and

domestic food security.

Food and

Agricultural

Act of 1965:

authorized a

long-term

diversion of

acreage to reduce

overproduction.

Farm Security a

Rural Investme

Act of 2002:ma

Counter-Cyclical

Payments (CCPs

and direct paym

permanent.

Food Security

Act of 1985:

allowed CCC loan ratesto fall below farmers

cost of production,

effectively ending the

minimum-price program.

CCC grain reserve

eliminated.

Food and Agriculture Act

of 1977: established a

farmer-owned reserve for grain.

Federal Agriculture Improvement

and Reform Act of 1996:marked final shift

toward market-oriented farm policy. Eliminated

acreage reduction programs and farmer-owned

grain reserves, introduced direct payments to

farmers as a different kind of "safety net" that

allowed market prices to stay very low. Market

prices for corn and soybeans drop by nearly half.

Emergency Farm Financial Relie

Act of 1998 and FY1999 Omnibus

Consolidated and Emergency

Appropriations Act: created

emergency payments to farmers

because market prices were so low

but did not restore the old minimu

price or land set-aside programs.

Commodity Policy Timeline


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FINDING: Low commodity prices oer

savings to the food industry, but not to

consumers at the grocery store.

For ood processors, grain traders and meat compa-

nies, commodity prices matter a lot For a company

like Smitheld Foods, the nations largest hog produc-

er, eed can make up 60 percent o operating costs on a

hog operation20 For a grain trader like Archer Daniels

Midland (ADM), lower prices on the grain that the

company buys can mean larger prot margins And

Coca-Cola surely benets rom low-priced corn that

makes high-ructose corn syrup (HFCS)

These interests appear to have beneted signicantly

rom the deregulation o commodity markets that took

place between 1985 and 1996, since the literature

suggests that the removal o price and supply man-agement tools resulted in lower commodity prices

Researchers at Tuts University have estimated that

sot drink companies have saved $100 million each

year on their corn bill since supply controls were

dismantled, or a total o $17 billion in savings since

HFCS became commonly used in the 1980s21 Like-

wise, researchers estimate that large meat companies

saved nearly $4 billion on animal eed between 1997

and 2005 because corn and soybean prices ell as the

treadmill o overproduction sped up22 It is thus not

surprising that meatpacking interests support keep-

ing the government out o the supply

management business23

But it is important to note that sub-

sidies which were brought in later

are not identied as the source o

ood industry savings The literature

instead identies the benet to ood

companies as coming rom deregula-

tion, the removal o ederal policiesthat had previously kept overproduc-

tion in check and commodity prices

stable

While deregulation appears to have

worked well or the ood industry, the

literature suggests that the price o

commodities has very little relation to

the price o a nal retail ood product, so the savings

that accrued to the ood industry rom low-priced com-

modities were not refected in the grocery store When

one accounts or the cost o processing, packaging,

storing and shipping ood, plus an additional markup

by the retailer at the point o purchase, the share o

an unhealthy oods nal price that can be accounted

or by the cost o the raw commodity is quite low, and

its infuence over the price o the nal ood product is

insignicant This raises questions about the potential

to aect retail ood prices through changes to the price

o raw commodities

The lack o relationship between commodity prices

and retail prices can be illustrated by the act that

over the past three decades, grocery prices have gone

steadily up, even though corn prices have fuctuated

wildly up and down24 Food & Water Watch examined

our historical datasets o retail ood prices duringtimes when there were dramatic changes in the prices

that armers received or corn, and ound that ood

prices were completely unresponsive to changes in the

corn price Rising meat and milk prices did not ollow

rising corn prices, and alling corn prices did not lead

to declining grocery prices or these products Grocery

prices also sometimes rose when corn prices ell, and

sometimes ell when corn prices rose25

While ood prices or consumers have risen steadily,

the share o grocery revenues that goes back to the


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armer has been declining steadily Between 1984 and

2000, the share o the ood retail dollar that returned

to armers ell rom 35 percent to 19 percent, accord-

ing to USDA gures26 New data rom the USDA

reveal that armers now receive only 15 cents out o

every dollar spent on ood27 According to the USDA,

i armers received the same share o the retail ood

dollar in 2000 as they did in 1984, an additional $989

billion would have gone to agricultural producersinstead o to the agribusinesses that process, package,

market and distribute ood to children and other con-

sumers28 A growing share o consumers retail spend-

ing is going to processing, distribution and marketing

To see the insignicance o commodity prices to the

price o ood at the point o purchase, one need only

look at a ew specic corn-heavy ood products Re-

searchers have estimated that armers receive only

our to ve cents rom the sale o a box o corn fakes

and two to three cents rom the sale o a ull-sized bag

o corn chips29 High-ructose corn syrup, the most

common caloric sweetener used in US sot drinks,30

represents just 35 percent o the total cost o sot

drink manuacturing, and the corn content o HFCS

represents only 16 percent o this value31 The vast

majority o the retail price o soda is captured not by

armers, but by middlemen and retail outlets such as

restaurants Only two cents

o each consumer dollar spent

on soda returns to armers

growing the corn that becomes

HFCS, while ninety-eight cents

goes to the ood companies that

make, market and sell it32

Because commodity pricesconstitute such a tiny share

o the nal retail price o ood,

the relationship between

commodity prices and ood

prices is almost negligible33

It ollows that the potential

to aect consumers choices

through changes to commodity

prices appears to be low The

small commodity shares o oodcosts, write researchers rom

the University o Caliornia,

Davis, mean that small commodity price impacts

rom [changes to] arm policies would lead to very

small eects on consumer costs o ood and beverages,

especially or some o the categories most commonly

associated with obesity34 Their modeling also nds

that the subsidy program has not had a signicant

impact on caloric consumption Iowa State University

researchers estimate that a subsidy equal to 20percent o the price o corn would result in only a 03

percent decline in retail ood prices and a 015 percent

increase in the consumption o corn-based oods35

In todays ood system, commodity crops are little

more than raw inputs or grain traders and ood pro-

cessors The unhealthy output they create is then sold

to consumers The literature nds that these industry

middlemen were both the drivers and the main ben-

eciaries o the deregulation that took place between

1985 and 1996, when ederal policies to reduce over-production and keep commodity prices stable were

dismantled It was this deregulation, not the subsidies

that were instituted later, that brought the greatest

benets or the ood industry It is thus unsurprising

to learn that the industry lobbied or deregulation as

early as the 1960s


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FINDING: The food industry

has been the main driver of

commodity policy, not farmers.Although there is much discussion o the powerul

arm lobby behind subsidy programs, a review o the

literature and o primary policy documents nds that

the main drivers o our current-day commodity policy

have not actually been armers, but the ood industry

The proposal to eliminate the New Deal policies and

to get the government out o managing commodity

supply and price was rst promoted in the 1960s by

ree-market think tanks such as the Committee or

Economic Development, which at the time was made

up o the chairs o large US companies, including

meat processors and grain traders36 These interests

did not benet rom policies that restricted the supply

o commodities and required them to pay prices high

enough or armers to be able to make a decent living

Overproduction was much more benecial to their

interests

For example, in the 1970s, the grain processor and

trader ADM hoped to boost Soviet grain purchasesrom the United States (ADM controlled a vast stor-

age, transportation and cargo network or grain

exports) The company lobbied or the United States

to subsidize Soviet grain purchases through what

are called export subsidies37 But in order or ADM to

export more grain, US producers would need to grow

more Thus, around this time, ederal land set-aside

and conservation policies were relaxed to acilitate

greater production or export markets, and

President Nixons Secretary o Agriculture

implored armers to expand their production

by plant[ing] encerow to encerow38 This

decision had a clear benet to ADM

In 1994, a report unded by the National

Grain and Feed Foundation titledLarge-

Scale Land Idling Has Retarded Growth

o U.S. Agriculture again urged an end to

programs that had kept production in check

by encouraging armers to idle some o their

cropland39 This report played a key role in

debates over the 1996 Farm Bill, during

which Congress dismantled the last o the

1930s-era supply management policies In

their book, The Making o the 1996 Farm Bill, Purdue

University economist Otto Doering and ormer USDA

economist Lyle Schertz explain the interests behindthe study:

The idea that arm programs had gone too ar in

withholding cropland rom production was given a

substantial boost with the preparation and astute

promotion o a study sponsored by the National

Grain and Feed Association through their ounda-

tion. The study, released in May 1994, concluded

that American armers and the U.S. economy

stand to reap substantial benefts rom expanding

crop area and production.Over 185 companies,

most o whose profts are geared substan-

tially to volume o commodities handled or

processed, were involved in supporting the

study.40[Emphasis added]

Today, the trend o agribusiness lobbying continues

A review o statements by representatives rom the

livestock sector during the 2002 Farm Bill debate

suggests that the meat industry recognizes the im-

portance o low-cost eed to its economic viability andsupports policies that keep the production o corn

and soybeans high and prices low In a hearing beore

the House Agriculture Committee in 2001, repre-

sentatives o Perdue Farms and other meatpacking

interests laid out their positions on the content o the

upcoming Farm Bill The representatives advocated

or the continuation o the emergency payment pro-

grams to armers that had begun a ew years earlier


13/19


the payment system that had replaced the sup-

ply- and price-control policies o earlier decades41 The

pork industry representative suggested that, i politi-

cally necessary, Congress should authorize additional

subsidies or arm households to keep them solvent

despite low prices42 Representatives criticized gov-

ernment programs that could raise the price o eed

grains, including mandatory set-asides, production

controls or a armer-owned grain reserve43

FINDING: Removing subsidies

before commodity supply and prices

have been managed will not stop

overproducon of corn and other

commodies, but could harm small

and midsized family farmers.When the government stopped managing commodity

supplies, overproduction and low prices became the

norm Current ederal arm programs do nothing to

stop this treadmill Farmers have been urther hurt

by an increase in the cost o their inputs seed, ertil-

izer and uel44 It is beyond the scope o this white

paper to examine the relationship between rising in-

put costs and the growing market control exercised by

concentrated seed, ertilizer and pesticide companies

like Monsanto, but it is clear that as the prices arm-

ers pay or inputs have risen, arm prots have allen

and made armers even more reliant on subsidies to

stay afoat Even in recent years, when commodity

prices have been high, net prots or amily armers

have been low because o the cost o their inputs

Media headlines suggest that only large, wealthy

arms receive subsidies, and that they are living high

on the hog The reality is much more nuanced Data

rom the USDAs Economic Research Service shows

that 82 percent o ull-time small to midsized amily

armers receive subsidies45 In 2009, ater accounting

or land, labor, equipment and input costs, the aver-

age amily armer in this category netted only $19,274rom ull-time arming Government payments made

up nearly hal o that amount Earnings rom o-arm

jobs made up the rest o the households income46

Critics o arm subsidies oten cite the statistic that

the average arm household makes 114 percent o

0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

SOURCE: USDA Economic Research Service, Farm Income and Balance Sheet Indicators, 1929-2009,

and Number of Farms, Land in Farms, and Value of Farm Real Estate, 1850-2010, accessed October, 2011

Average Real Farm Income, 1929 - 2010Constant 2005 Dollars per Farm

Gross Farm Income

Net Farm Income


14/19


the average US household income47 For small and

midsized amily arms, however, average household

income (including o-arm jobs) was 19 percent below

the US average in 200948 An even more appropri-

ate comparison is not to household incomes but to

small-business income Farms are more like small

businesses than typical wage earners they may

own hundreds o thousands o dollars worth o land

and equipment except they earn less money For

example, in 2007, the median income o midsized

amily arms was $61,300 below the $69,800 median

income o small-business owners with one store49

It is absolutely true that the largest arms receive the

largest share o arm subsidies and that these arms

are making a decent living rom arming It is also

true that some politicians and urban residents who

own armland are proting unairly rom subsidies

These critiques, however, should not overshadow theact that small and midsized amily arms are not do-

ing well nancially; that a signicant majority o am-

ily armers receive benets rom arm subsidies; and

that they rely on these payments to keep their arms

afoat For them, subsidies are a critical saety net

These arms are important allies or the public health

and health care communities in supporting policy

changes that will lead to improved health outcomes

rom the ood system Small and midsized operations

have the greatest potential to diversiy their produc-

tion and drive a healthier system These arms are

also in a position with support to supply local

or regional markets, because they are large enough

to deliver a good volume o product while still being

small enough to shit into dierent products depend-

ing on demand

To build a healthy ood system, we must ensure that

these armers can make a living rom arming; help

build new markets or them to sell to; support them

as they take risks to diversiy into other products; and

rebuild the inrastructure to connect them to consum-

ers These steps are necessary whether armers are

growing commodities and livestock we will always

have a need or corn, soybeans and wheat or are

diversiying their operations urther into ruits and

vegetables, ber or on-arm energy generation such aswind

Conclusion

It appears rom the analysis above that the main

beneciaries o the shit away rom ederal policies

such as supply management which kept commodity

prices stable and production under control are not

consumers or armers, but the

ood industry These interestswere the main advocates behind

the elimination o these policies

and in avor o deregulation o the

arm system It also appears that

simply removing subsidies the

payments that Congress put in

place as a Band-aid solution ater

prices plummeted and armers

began going out o business

will not bring about the changesneeded to build a healthy ood

system That is because, according

to the literature, subsidies do not

themselves impact the supply or

price o junk ood

Building and supporting healthy

ood systems will require the


15/19


public health and health care communities to

understand the relationship or lack thereo

between subsidies and retail ood costs, but also to

understand the role that subsidies currently play

as a saety net or small and midsized amily arms

Focusing on the subsidy program as the root o the

problem takes ocus away rom more comprehensive

policy solutions that will help ensure a US ood

system that supports rural and urban communities

and promotes health outcomes

Given the role that deregulation played in driving

production up and prices down, the community would

do well to ocus on reinstituting these common sense

supply and price management policies, as well as on

promoting new programs to increase access to and

aordability o healthy ood The literature suggests

that advocating or subsidy removal as a means to

address obesity will be unsuccessul because subsidies

do not aect the price or production o commodities

that go into making unhealthy ood

Policy Soluons

Signicant reorms to US commodity policies are

clearly needed At the same time, as we build or these

longer-term reorms, much can be done to support

healthy ood access and the arm sector by build-

ing alternatives to the current system dominated

by industrial ood processors The public health and

health care communities can play a signicant role

in pursuing these types o proactive policy reorms

immediately They will expand the supply o and de-

mand or healthy ood and help rebuild smaller-scale

inrastructure, such as processing and distribution

acilities, to connect growers and arms to consumers

Such reorms also support the community through

job creation and economic development in ood and

agriculture

Rather than depicting subsidies as the main driver

o the ailings within the ood system and spending

critical resources campaigning or their removal, we

propose that the public health and health care com-

munities pursue policy reorms such as the ollowing:

1. Engaging in the long-term campaign to re-

form commodity policies. Healthy commodity

policy will require a return to the common-sense

programs in place until the deregulatory era o

1985 to 1996, policies that ensured that proces-

sors and meat companies would pay armers airly

or their products, that bolstered ood security

through a grain reserve, and that kept overpro-

duction in check through land set-asides and

other mechanisms By advocating in avor o these

policies, the public health and health care commu-


16/19


nities can help build an economically

stable amily arming sector, bring in-

creased income to rural communities,

improve environmental outcomes and

put amily arms on a more secure

nancial ooting rom which to supply

healthy local and regional ood sys-

tems These policies also reduce the

benets that accrue to the ood pro-

cessing, marketing and retail sectors

2. Increasing demand for and access

to healthy foods.As a rst priority,

it is essential to strengthen USDA

ood assistance programs that ght

hunger and improve nutrition This

would include protecting eligibility,

benet levels, and program integrity

o SNAP and the Women, Inants,and Children Supplemental Nutrition

Program to ensure that low-income Americans

have the resources necessary to aord healthy,

nutritious oods and prevent hunger Additional

policy solutions can also include: SNAP incentives

to promote purchasing o healthy oods such as

ruits and vegetables and whole grains; expand-

ing Electronic Benet Transer (EBT) availability

at armers markets and other community venues;

government procurement changes; ully undingthe national Healthy Food Financing Initiative

to encourage the development o new markets

that sell healthy oods in underserved low-income

communities; and expanding the national Fresh

Fruit and Vegetable Program in schools Existing

nutrition education programs, such as SNAP-Ed,

must be protected and strengthened to provide

comprehensive interventions that promote health

outcomes in underserved communities

3. Expanding the supply of healthy foods. Thiscan be done by helping armers diversiy their

production and supply local and regional markets

with healthy ood, rather than shipping everything

they grow to large commodity processors Solu-

tions include research, training and extension pro-

grams to help armers diversiy their production

and/or market to new outlets, as well as nancial

inrastructure to provide a saety net while they

develop these arm and marketing systems (eg,

loan and credit programs, access to loan restruc-

turing services, and policy changes so that these

supports are distributed equitably, not just to the

largest operations)

4. Building links between farmers and consum-

ers to deliver healthy foods. This will require

maintaining and enhancing unding in the Farm

Bill or programs that develop new and broader

ood system inrastructure that ensures a supply

o healthy oods that meets national demand and

need, while also supporting new local and regional

markets This would include smaller-scale pro-

cessing, cold storage, distribution and retailing

mechanisms that can bring ood rom armers to

urban and rural consumers Small-business grant

and loan programs, business development training

and other incentives to acilitate inrastructure de-

velopment are critical i we hope to truly connect

armers and consumers and create jobs in ood

and agriculture


17/19


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This paper was commissioned by the Robert Wood Johnson Foundaon through its Healthy Eang

Research program and was wrien by Food & Water Watch and the Public Health Instute. The

opinions expressed in this white paper are those of the authors alone and not of Healthy Eang

Research or the Robert Wood Johnson Foundaon.

Food & Water Watchis a naonal nonprot consumer

advocacy organizaon working to ensure that the food,water and sh we consume is safe, accessible and sustainably

produced. So we can all enjoy and trust in what we eat and drink,

Food & Water Watch helps people take charge of where their

food comes from, keep clean, aordable, public tap water owing freely to our homes, protect the

environmental quality of oceans, hold government accountable, and educate about the importance

of keeping the global commons our shared resources under public control.

The Public Health Instute, an independent nonprotorganizaon based in Oakland, California, is dedicated to

promong health, well-being and quality of life for peoplethroughout California, across the naon and around the world.

PHIs primary methods for achieving these goals include: sharing

evidence developed through program intervenons, quality

research and evaluaon; conducng public policy analysis and advocacy; providing training and

technical assistance; and promong successful prevenon strategies to policymakers, communies

and individuals.


18/19


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15 Ibid.

16 Ibid. at 3.

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18 Ray et al. (2003) at 5.

19 Starmer et al. (2006) at 7.

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22 Starmer and Wise (2007) at 1.

23 Starmer et al. (2006) at 6.

24 Retail Realies: Corn Prices Do Not Drive Grocery Inaon. Food &

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25 Ibid. at 6.

26 U.S. Department of Agriculture, Agriculture Fact Book 1996, 1996

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28 U.S. Department of Agriculture (1996) at 11; U.S. Department of

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29 Schaer et al. (2007) at 18.

30 Harvie and Wise (2009) at 3.

31 Ibid.

32 Alston et al. (2010) at 3.

33 Beghin, John and Helen Jensen. Farm Policies and Added Sugars in

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34 Alston et al. (2010) at 3; See also Alston et al. (2006).

35 Beghin and Jensen (2008) at 16.

36 Commiee for Economic Development. An Adapve Program for

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40 Schertz, Lyle and Oo Doering. The Making of the 1996 Farm Act.

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41 Congressional Press Release. Livestock Industry Presents Farm

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47 Ibid.

48 Ibid.

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Do Farm Subsidies Cause Obesity?