The U.S. Farm Bill & the Global Food Crisis

Last week Congress passed a pork laden farm bill that could cost American taxpayers up to $289 billion over five years. At the same time, a global food crisis is deepening. Average prices for wheat, rice, and corn have gone up 41 percent since October 2007. Food riots are rocking cities from Haiti to Egypt to Ethiopia. Tragically, U.S. agricultural policies, designed to placate American agribusiness, are contributing significantly to today's global food crisis.

In the short-term, skyrocketing food prices have been driven by a perfect storm of rising reliance on biofuels; droughts and floods in key food producing regions; the surging price of oil, which raises the costs of petrochemical fertilizers and transportation; and rising demand for meat in China and other newly prosperous areas of the developing world.

According to the International Food Policy Research Institute, 30% of the U.S. maize crop currently goes to ethanol production, and biofuel subsidies range between US$11 billion and US$13 billion a year. By encouraging U.S. farmers to switch land away from food production, U.S. subsidies for ethanol contribute to the biofuel dimension of the food crisis.

In the long-term though, the real damage done by America's agricultural policies has been to undermine agriculture in developing countries. This structural imbalance makes poor countries reliant on food imports and vulnerable to volatile international food markets; limits opportunities for agriculture exports; decreases global food supply; and prevents farmers in poor countries from quickly growing more food in response to rising demand.

Since WWII, U.S. farm policies have promoted the growth of agribusiness by guaranteeing prices to assure profitability as well as paying farmers not to grow in order to prevent a glut of food on the market. Developing country farmers simply cannot compete - domestically or internationally - with cheap subsidized rice, corn, and wheat from the United States. This market distortion undermines both public and private investment in food production in the global south.

When Peru introduced a "shock" import liberalization program in the 1990's to lower tariffs, food imports increased dramatically, particularly of cereals and rice. According to Oxfam International, increased food imports stiffened the market competition faced by smallholder farmers, who cultivate traditional Andean products like quinoa and potatoes. The availability of cheap, imported grain changed eating patterns in favor of wheat and rice, and precipitated a decline in potato consumption.

Cheap food from the U.S. reduces the incentive for developing country governments and the international development community to invest in increasing the productivity of small hold farmers in Africa, because even more productive crops would be competing against subsidized U.S. food exports. The green revolution of the 1960's in Asia - an important underpinning of subsequent economic growth - was spurred by advances in agricultural productivity targeted towards the soil, climate, and crops specific to the region. Farm yields doubled and tripled within a decade. Similar technological investments have not been made in African agriculture. In fact, public agricultural research and development spending actually declined during the 1990s. African farmers lack access to improved seeds and fertilizer, and many small producers grow less than one-fifth as much on the same amount of land as their counterparts in Asia.

The inability to compete with subsidized U.S. crops also reduces the incentive for governments to invest in the rural-to-urban transportation infrastructure urgently needed by farmers. Currently, poor transport infrastructure makes it very costly for rural farmers to export crops or get their goods to domestic urban centers. But even if transport costs were decreased significantly, the reductions might not be sufficient to overcome the subsidy advantage enjoyed by American agribusiness.

Moreover, competition from cheap U.S. food imports have encouraged some rural farmers to focus on subsistence farming or to abandon farming entirely and move to cities. At the same time, U.S. subsidies make it more difficult for food exporters to find buyers on the international market. Competition from U.S. subsidized agribusiness - both domestically and internationally - has shrunk agricultural capacity in developing countries, making it difficult for farmers to quickly grow more food now in response to rising prices.

The demand of a growing urban workforce for affordable food has historically played a key role in pushing governments and farmers to make food cheaper by boosting agricultural yields and reduce production costs. When urban food demand is met by subsidized food imports, there is less pressure for farmers to produce more, or for governments to improve agricultural productivity or transportation infrastructure so rural farmers can get their crops to cities. Being priced out of the international market depresses public and private investments even more. In a vicious circle, underinvestment contracts the agricultural sector, makes small hold farmers less competitive, and increases the price of food grown in developing countries compared to subsidized crops from the United States.

Ironically, artificially cheap global food prices over the past few decades, made possible by U.S. agricultural subsidies, are making the world's poor vulnerable to skyrocketing food prices today.

At the same time, U.S. food "aid" is more a vehicle to dump excess U.S. production than a benefit for hungry populations. Congress requires that food aid be purchased from U.S. growers and shipped overseas. This hurts developing country farmers by undercutting them in their local markets, further reducing domestic production. The policy also prevents the U.S. from contributing to the emergence of food futures markets in the global south. Lack of predictability often makes poor farmers reluctant to invest in improvements that may not turn a profit for several years. Futures contracts, common in the U.S. and Europe but virtually unheard of in rural Africa, Asia, or Latin America, would guarantee farmers' incomes and increase incentives to make investments with short-term costs but long-term gains.

Meeting the growing demand for food in the face of rising energy costs requires increasing the agricultural productivity of small-hold staple food farmers in Africa and the Caribbean; reducing reliance on oil dependent inputs like petrochemical fertilizer; improving the transport infrastructure necessary for developing country farmers to be competitive; and raising the profits realized by small farmers in poor countries, in order to encourage them to produce more. Key is improving agricultural yields using techniques other than oil based petrochemicals. These measures will reduce poor countries' reliance on volatile international oil and food markets and increase global food supply.

A long term solution to the food crisis is very difficult so long as U.S. agricultural policies continue to distort the market. The real tragedy of the global food crisis is that the hunger gripping families from Port-au-Prince, Haiti to Yaounde, Cameroon is not inevitable. The blame rests, at least in part, with us.

Comments

[deanfv]

The Farm bill is disgusting. The country and the people are loaded up with debt, facing a severe recession, housing/autos/retail is a wreck, the Fed is almost out of bullets and we're borrowing more to give money to farmers???? When/where does the spending stop?

I hope that Obama can fix all this stuff.

[noneIn2008]

Typical of everything the US government does. The real purpose is to fatten special interests, but claim some "higher" goal of helping people. Net result, the people are hurt and the special interests in enriched. 90% of what the Federal government touches, it breaks.

[Rule Of Law]

An entire article on Food Politics and not one mention of the World Bank or the International Monetary Fund or NAFTA, all of which have worked hand in glove to destroy the food production in the third world by imposing loan policies on developing countries that require them to plant foods that their own people don't eat, ship it out of the country for sale rather than feed their own people, and destroy their economies with debt and interest on that debt that they demand be paid before any money goes to the people. So you gotta love the headlines--even here--that gloss over the fact that it is still all about following the money.

It's not the Energy Futures Manipulation and Manufactured Shortage Scandal, no, it's the "Oil Crisis."

It isn't the Commodities Exchange Speculation and World Bank Food Supply Destruction Financing Scam, no, it's the "Food Shortage Crisis."

And, it's not the Securitization of Mortgage Debt and Predatory Loan Rip Off, uh uh, it's the "Housing Crisis."

Does anyone see a pattern here?

[Henry]

Take a look at the USDA history of wheat prices in the USA. You'll note that in the year 2008 the price of the hard red spring wheat (flour) and duram (pasta) slope up rather dramatically. Hmmmm this badness of the farm bill is only now becoming extant? The farm bill has been around a long long time. These are some interesting numbers.... it would be even more interesting if you could find the data product juxtaposition to Europe and Japanese prices.

http://www.ers.usda.gov/Data/Wheat/Yearbook/WheatYearbookTable18-Full.htm

[SamThornton]

Great post. This aspect of our trade policies needs to be outed on a regular basis.

One good example of how it's turned around to bite us is the NAFTA-induced destruction of Mexican farming. Best estimate is that so far, NAFTA has put a million and a half Mexican farmers out of business.

That's just the direct cost.

Related impacts include destroying the livelihoods of small businesses and their employees that depended on those now unemployed farmers.

How has this affected us? Try 12-20 million undocumented workers that have fled Mexico's economic wasteland for jobs in this country in an attempt just to survive. The corporations love it, of course, more grist for their assembly lines and sweatshops.

[huffnpuffn]

Agreed, except it's not so much assembly lines and sweatshops these days. It's strawberry picking. It's slaughterhouse work. It's low level service jobs sweeping Walmarts and cleaning hotel rooms.

[Rule Of Law]

It's corporate slavery, no matter what job they are doing.

[Henry]

In the early 1970's trickey Dick Nixon was presdnt and the sneaky Leo Brzhnev surreptitously came into the U.S. market and purchased 25% of the domestic wheat crop. Remember that? The market price for wheat went from $2.50 to $5.25 (if memory serves) and the American Farmer was finally recognized. Pickups traded for cadilaccs and a borrowing to capital intensivity was ignited. Land prices tripled and the future looked tremendous. Then 1979/80 and the Carter/Reagan deregulation or interest rates. Prime at 20%, production booming. Reagan lets Japan export autos to America, but Japan refuses to permit farm exports from America to Japan. 20% of American farmers go out of business in the 80s. Corn was $1.55. Total revenues for farmers would not even service the debt on their land loans. Bankruptcy and consolidation. The point: This all happened when corn prices in Japan and Eurpoe were three times what they were in America... yet our government did not have the balls to enforce "fair" trade.
You might ask yourself, how the Commies could purchase 25% of our domestic wheat crop and the CIA was oblivious? Weren't the republicans at "war" with the commies? And so the history of the great republic ambles on. The farmers are not coddled and they are certainly not "subsidized", they're all trying to survive. This is not true for the Archer Daniels and the Tysons.

[Henry]

In school you study about this abstraction known as the "market". It has this fairy god-mother sort of attribute expecially for republicans amongst us. But you'd do yourself a world of good to look behind the mirrors and get a grip on exactly where it is that this supply function meets the demand function to ascertain where the orgasmic point of consummation occurs. Like big oil (heard of cartel pricing) there is or was the seven sisters including Bunge, Dreyfus, Cargill et al who play significant roll in this thing referred to as "price". Why is it that oil is denominated in the U.S. Dollar?? (any skull-duggery there ya think?) And you say there is a "perfect storm" in the market resulting in record prices. Are you looking at the machinations of the hedge-fund manipulators? Are you properly accounting for the decimation or relative decimation of the dollar? Ltta moving parts here. Lot of devious money market boys involved in a fairy god-mother plot that appears pretty abusive. And you think its the farm bill, the U.S. Farm bill. Wow.

[xrepublican]

Meanwhile we don't calculate the TRUE cost of US food -

We're depleting soil faster, using up scarce water (much of it from aquifers that is NOT being replaced) AND using more oil in the form of diesel for tractors, combines and other equipment - as well as fertilizer. Fly over the US and look down at all the green dots - pivot irrigation for crops that would not grow otherwise using water that is running out.

We're exporting more than food to the rest of the world and the US taxpayer is footing the bill. The REAL irony is that we're bankrupting farmers all over the world in the process and leaving MORE people hungry.

What happens when you can't afford to grow food in the US, when the water is gone and the soil deplpeted - or when you can't afford to ship it all over the world?

[vippy]

I read an article that the polticians have devised a plan for the future, where each country can
only grow one grain. Imagine, what control that will bring and yes, the world will go hungry!
Is that the population control PNAC has suggested?

[Soule23]

You pay more to pipe in water, build subdivisions on the depleted soil and replace the tractors, combines and other equipment with a Hummer in every driveway. That's the American Way, right?

[cylindar]

Yes, and the subsidies will backfire on us and really put us in the same turmoil that we are creating for others. Very stupid move by the agricultural committee and we are all going to pay for it big time.

[vippy]

So why are we voting for these people who make these insane policies?

[rollingdivision]

I am shocked to see a genuinely insightful economic analysis here on huffpo. It is a rare person indeed who understands these issues as completely as Lawson-Remer. She is correct in her analysis when she states "Ironically, artificially cheap global food prices over the past few decades, made possible by U.S. agricultural subsidies, are making the world's poor vulnerable to skyrocketing food prices today.

At the same time, U.S. food "aid" is more a vehicle to dump excess U.S. production than a benefit for hungry populations. Congress requires that food aid be purchased from U.S. growers and shipped overseas. This hurts developing country farmers by undercutting them in their local markets, further reducing domestic production..." There is little good contained the farm bill which just passed congress.

[Henry]

"artificially cheap global food prices over the past few decades, made possible by U.S. agricultural subsidies, "

The above which you state happens to be bullshit. Artificially cheap global food prices. . . made possible by U.S. ag subsidies. Really? Know anything of the CAP (common agricultural policy)? Know anything of trade barriers set by the rich countries? Cuba can produce sugar a darn site cheaper than the highly subsidized, high (not lowly) priced American sugar.

75% of the farm bill happens to be for Food Stamps or school nutrition. This is not keeping the price of tea in China artificially low. The purpose of the farm bill is to keep prices high, not low. Dumping of excess is not the proximity of the farm bill, it may happen, but to argue that this ill consequence is the farm bill is asinine, stupid, and misinformed.

[JScott]

I was reading somewhere and some time ago that the US basically will export food to those areas of the world that can pay for it, and that it's very seldom those parts of the world that are in the most desperate need.

[Soule23]

I don't know if you would consider the food stamp and school lunch programs to be "good," but those are contained within the "farm bill." I doubt that you've read the farm bill in its entirety, not because I doubt your capacity to do so or because I have, but because I saw a copy of it once. In book form. All 300 pages of it.

[CornellRedneck]

Charity begins at home. Let's take care of our own, shall we? Let those who are facing the "Global Food Crises" fix their own problems. We have no obligation, morally or otherwise, to being the global welfare agency.

[Henry]

The economics expression for this is "rationalization". It infers progress and a better standard of living. It is not the american farm program that has anything to do with this.

http://www.globalresearch.ca/index.php?context=va&aid=6522

[Henry]

You have got to be kidding me when you state:

" The blame rests, at least in part, with us."

You'd do yourself a world of good if you found yourself a farm family like some place in Iowa and spent a couple of years with them as a hired hand. Marvel at the production, breath a little fresh air. participate in an honest days work.
Remember Little George's dad with a marine landing in Somalia during his lame duck era? Food for starving Somali's, right. Well...this whole corrupt international aid game needs to be exposed for the breeding ground for corruption that it is. Do us a favor, leave the rural farmers out of it. A goodly part of the farm bill has more to do with food stamps which have nothing to do with production.

[marinade]

"Developing country farmers simply cannot compete - domestically or internationally - with cheap subsidized rice, corn, and wheat from the United States."

This isn't about family farms. It's about agribusiness and creating markets for big corporations. Do you really think the goal of the Farm Bill is to help family farms? Is that why they've been going down the tubes for the last 70 years? The Farm Bill is just another government vehicle to divert tax dollars into the pockets of corporations like ADM and Cargill.

It'll be nice when there's a clear majority in Congress so that the Democrats won't have an excuse to avoid substantial, necessary reform.

[rollingdivision]

Sadly, there is no evidence that increasing the Democratic majorities will in any way address these problems. In fact, the evidence of the last two years points in exactly the opposite direction.

[Soule23]

That's big agribusiness you're talking about. According to what I read these days (none of it informed, mind you), the only family owned farms these days produce organic vegetables in renovated urban wastelands.

I do find many aspects of this post to be troubling, especially the tendencies to label all facets of American agriculture as "wicked agribusiness" and the propagation of the myth that farmers of all stripes and colors live off of generous corporate welfare.

[zaneblue]

I disagree. We need cheap food here in the United States. Already American children are going hungry.

What other countries need is protective farm tariffs, with a commitment to use the income to help their own farmers improve their productivity. In other words, it's our free trade agreements that are causing the problem.

Biofuel subsidies should be restricted to non-food plants like switchgrass grown in areas that can't grow food.

[davefoc]

I am not exactly sure what the point of your post was, but you do understand that US farm subsidies are designed to make food more expensive for Americans, don't you?

Eliminating farm subsidies would reduce the cost of food and it would reduce or eliminate the US practice of undercutting foreign farmers with cheap subsidized American food.