The latest such conference was the G-20 Summit, Nov. 14-15 in Washington, D.C., called to coordinate actions on the financial and consequent economic crises that have spread from the U.S. to much of the world. The joint statement released at the conclusion of the G-20 Summit called for trade ministers to try to finally conclude the Doha Round.

That is not about to happen before the Obama administration takes office. Events of the past five years amply demonstrate that fundamental differences in perspectives about the roles of agriculture in trade can no longer be glossed over.

Leaders of the 20 participating countries released a 16-point statement at the conclusion of the G-20 Summit on Nov. 15. Point 13 reads as follows:

We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports. Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly, as necessary. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome.

Free traders on both sides of the Atlantic have been urging one last push for resolution of remaining Doha Round issues during the remainder of 2008. At this point, that seems to be more wishful thinking. The WTO’s Doha Round, ongoing now for seven years, has had a turbulent history [PDF]. Doha represents the first round of negotiations under the WTO, which was created as part of the 1994 settlement of the Uruguay Round — the last round of trade negotiations under the WTO’s predecessor General Agreement on Tariffs and Trade framework. The Uruguay Round was the first to bring agriculture fully into the multilateral trade-negotiating framework, and the intention was to further “liberalize” agricultural trade in the first round of negotiations under the new WTO structure.

WTO negotiations got off to a rocky start. Surrounded by anti-globalization protests, a 1999 Ministerial Conference in Seattle failed to settle on a negotiating agenda. After finally settling on a negotiating agenda in Doha, Qatar in November 2001, negotiations then fell apart in dramatic fashion in Cancun, Mexico in 2003. A number of "developing" and "emerging" countries aligned themselves with some industrial countries that had already eliminated most of their agricultural subsidies to block trade proposals by the U.S. and the European Union, who previously had been accustomed to calling most of the shots in multilateral trade negotiations. Of particular concern to developing countries were the huge U.S. and E.U. domestic farm subsidies that, together with various U.S. and E.U. import restrictions, put developing country farmers at a competitive disadvantage. Not only was it extremely difficult, if not impossible, for many agricultural products from emerging and developing countries to gain access to U.S. and E.U. markets, but the structures of agricultural subsidies in the U.S. and E.U. were such that they essentially led to "dumping" into developing country markets, thereby undermining incomes and production incentives of farmers in those countries. In Cancun, trade negotiators from India and a number other developing countries finally said "enough," and they demonstrated sufficient negotiating power to block major U.S. and E.U. proposals!

There have been repeated attempts since Cancun to reach an overall agreement, the latest major, failed attempt being this past summer. However, the fact that the U.S. had just completed passage of a new five-year Farm Bill earlier in the summer did not help the credibility of U.S. negotiating positions. The new Farm Bill kept all the existing farm subsidy structures in place, and even added some new ones. At the time of passage, commodity prices were extremely high, and proponents of continuing the subsidy programs argued that they were merely a safety net, and actual subsidy outlays might be quite modest in comparison to years past. However, commodity prices have since fallen, and the U.S. could be facing some major subsidy outlays in the years ahead. E.U. subsidies under its Common Agricultural Policy also remain high, but reforms in the CAP subsidy structure over the last decade give some credence to the argument that E.U. agricultural subsidies are less harmful to farmers in developing countries than are those of the U.S.

Another blow to reaching a Doha Round agreement in 2008 was soaring commodity and world food prices through the first half of the year. After years of U.S. sermonizing to the world to rely on world markets for food supplies, the fallacy of heavy reliance on global markets became abundantly apparent. World food reserves became extremely low, and countries with inadequate internal production capacity faced exorbitant prices in world markets — if they could access supplies at all. A number of countries that normally export a portion of their crop production implemented export restrictions in order to protect their own citizens from food shortages. Food security, something either ignored or downplayed in the push for trade liberalization, suddenly took on great importance.

After seemingly coming very close to an agreement, negotiations fell apart at the end of July without an agreement. The final stumbling block supposedly was U.S. disagreement with India and China over terms of a “special safeguard mechanism” to protect farmers in poor countries from economically damaging import surges.

But it would be delusional to think that Doha negotiations stumbled simply because of disagreements on details. In reality, there is a fundamental impass about how agriculture should be treated in multilateral trade agreements. Led by the U.S. trade negotiators, one view has been that agricultural trade should be completely liberalized. Never mind the fact that the U.S. government does not practice what it preaches in this regard, and shows no intention of doing so!

An alternative view — implicitly held by many developing and some individual European countries and various NGOs — is that the principle of ‘"food sovereignty" should guide agricultural trade negotiations. Under this principle, individual countries need to set their own food and agricultural priorities. For most countries, one of those priorities includes some degree of food self-sufficiency. This certainly does not exclude agricultural trade, by any means. But it does recognize that most countries (or blocks such as the E.U.) want to preserve some internal capacity for production of staple foods, as well as a sensible food reserve system. Many countries also want to protect other agricultural functions, as observed in the European emphasis on “multifunctionality” [PDF], which includes preservation of valued agricultural landscapes.

Those pushing for a resolution to the Doha Round do have a legitimate concern about a worldwide slide into overall protectionism, as we get ever deeper into the current economic recession. But that concern need not override the necessity to step back and totally reassess our economic philosophy about agricultural trade. This will take at least the first couple years of the Obama administration, not just the couple remaining months of the Bush administration.

The Farm Bill provision on environmental services markets directs the USDA to work in cooperation with other federal and state agencies, NGOs, and others to establish technical guidelines for measuring environmental services, as well as a verification process. Environmental service markets could cover such areas as water and air quality and habitat protection, but the initial focus is to be on carbon markets.

Ecological Economics‘ May 1, 2008 issue is devoted entirely to the types of issues that the USDA and its cooperators will need to grapple with in developing a framework for this new Farm Bill provision. This special issue of Ecological Economics on “Payments for Environmental Services in Developed and Developing Countries” is the end result of an international workshop on this subject that was held in Titisee, Germany in June 2005. Case studies of Payments for Environmental Service programs in Europe, North and South America, Africa, Australia, and China were presented and discussed at that workshop. Subsequently, the workshop organizers — Sven Wunder, Stefanie Engel, and Stefano Pagiola — worked with the case study authors to refine and edit the individual case study papers and synthesized the findings for this special journal issue. The result is a volume containing a framework and some lessons with wide applicability; ones that are timely for implementation of the new U.S. Farm Bill. (Jules Pretty and I authored the case study article about agri-environmental payments in the United Kingdom.)

Before summarizing the framework and lessons, we need to define just what we are talking about. In the opening article of this special issue, Engel, Pagiola, and Wunder define PES programs as ones in which there are:

a)    a voluntary transaction where
b)    a well-defined environmental service (or a land use likely to secure that service)
c)    is being ‘bought by’ a (minimum one) service buyer
d)    from a (minimum one) service provider
e)    if and only if the service provider secures service provision (conditionality).

In fact, not all of the case study PES programs fit this definition in all respects. Nevertheless, this definition provides a workable frame of reference.

The case studies included some in which the buyers were the actual users of the service, as well as cases in which others (usually government, but sometimes an NGO or international agency) were the buyers. In the later cases, governments or others, in effect, acted on behalf of the environmental service users. The majority of the cases examined were labeled government-financed, including the U.S.’s Conservation Reserve Program and Environmental Quality Incentives Program and the United Kingdom’s Environmentally Sensitive Areas program and Countryside Stewardship Scheme. Several case programs were categorized as user-financed, however, including watershed protection programs in Bolivia and Ecuador and a forestry program for carbon sequestration in Ecuador.

The last article in this special issue of Ecological Economics contains Wunder, Engel, and Pagiola’s comparative synthesis of the case study findings. The framework they (and the case study authors) used for evaluating the effectiveness and efficiency of PES programs could work well for the USDA, also, in implementing the "environmental services markets" provision of the new Farm Bill. The evaluation framework involves the following series of questions:

1)    Potential service providers must enroll in the program (PES programs, by their very nature, are voluntary).
2)    Providers must comply with the terms of their contract (hence, there must be means to monitor compliance).
3)    Compliance must result in a change in land use compared to what would have happened without the program (the ‘additionality’ problem).
4)    The induced land-use changes must, in fact, generate the desired environmental service(s).

Additional evaluation concerns included the issue of “leakage.” This issue is about the danger that environmental service improvement in one area or region (or even one part of a farm) could be offset by a loss of the same environmental service elsewhere. This is a major concern with forest protection and reforestation projects for carbon capture, for instance. If carbon sequestration services from forestry projects in one country or region of a country simply lead to higher forest product prices and loss of forest elsewhere, the leakage may be sufficiently large as to result in little or no net gain from the PES program.

Here are some lessons from the case studies that U.S. agencies and policy makers need to keep in mind as they move forward with the new Farm Bill provision on environmental services markets.

It is not enough to simply achieve high participation rates. The PES program needs to enroll the right participants — ones that contribute high levels of the desired environmental service per dollar of program cost.

The actual linkages between land use changes that PES programs pay for and desired environmental services are not well established in some programs. This is a particular problem for some types of watershed protection services.

“Leakage” will always be a real concern when the spatial coverage of a PES program is smaller than the potential service area. This is the case with most carbon storage PES programs. Many non-carbon PES programs have targeted a large enough space to reduce the risk of significant leakage.

“Transactions costs” play an important part in PES program design. These are program costs that are not provider payments proper. Among the transactions costs are those of program planning (including building or adapting necessary data bases), initial implementation (including inviting and reviewing applications and negotiating contracts), monitoring, and enforcement. Because government-financed PES programs are often larger than user-financed programs, they tend to have economies of scale that result in lower transactions costs per unit of land area than can be achieved with smaller, user-financed programs. However, user-financed programs sometimes better target service providers. What is most important is total program costs — including both provider payments and transactions costs — per unit of environmental service. Sometimes seemingly high transaction costs may be warranted, in either government or user-financed programs, if the associated targeting leads to greater overall cost efficiency. Better targeting often involves more complex differentiation of provider payment rates, and that can result in high transactions costs.

The case studies in this special issue of Ecological Economics provide many other insights and lessons that space limitations preclude discussing here. In general, we can say that user-financed PES programs work well for some types of environmental services. A good example is the case of a water quality PES program in a dairy farm catchment of France. User-financed programs may be less well suited to some other types of services, such as biodiversity services, where there could be major free-rider problems. User-financed programs also could have severe limitations with respect to carbon sequestration services, except where international agreements or national mandates effectively create a market.

Moreover, we need to avoid getting carried away with the notion that markets are the solution to everything. For some environmental services, policy tools other than PES need to be used, including outright regulation!

To break the farm-block stranglehold on farm and food policy the next time around, we need a need a new vision of agriculture: one that recognizes that farmers produce more than just food, feed, fuel, and fiber. We also count on farmers to take care of vast swaths of critically important land. What we need, in short, is a “multifunctionality” vision of agriculture.

Most reform proposals leading up to Congressional farm bill debate throughout 2007 were based on either a market-oriented global competitiveness vision or a sustainable agriculture vision of American agriculture. These are competing visions, but groups representing both visions were calling for drastic curtailment — or in some cases, virtual elimination — of the commodity subsidy programs. They failed, of course.

The Washington, D.C.-based Sustainable Agriculture Coalition reports farm bill accomplishments in a number of areas, including enhanced funding for conservation, technical and financial assistance for farmers wanting to convert to organic agriculture methods, and increased funding for promotion of farmers markets and local food enterprises.

But the Congressional farm block prevailed in protecting agribusiness and large-farm interests by retaining the commodity subsidy system. The final bill did not even include much in the way of stronger caps on payments to large farmers and landowners. Moreover, Congress added a permanent disaster program that will further encourage crop systems that are ecologically inappropriate to some regions.

In contrast to the U.S., the European Union has succeeded in carrying out some fundamental reforms in its Common Agricultural Policy over the last decade. Reforms include the new, single-farm payment system, accompanied by stronger environmental cross-compliance measures, adopted following the comprehensive midterm review of the CAP in 2003. The E.U. still has a long way to go in enacting needed reforms, but reforms it has made are due in no small part to a new E.U. consensus reached by the late-1990s that policies should be based on a multifunctionality vision of agriculture. Many elements of the U.S. sustainable agriculture vision constitute, essentially, a multifunctionality perspective, but that perspective has yet to be adopted by the broad American body politic and political activists.

The multifunctionality vision is gaining wider acceptance beyond the E.U. The recently released “Executive Summary of the Synthesis Report of the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD)” calls for a multifunctionality approach to hunger, poverty, environmental, and equity problems throughout the world. The IAASTD was a global, intergovernmental initiative launched in 2007, under the co-sponsorship of the FAO, GEF, UNDP, UNEP, UNESCO, the World Bank, and WHO. The process involved 900 participants from 110 countries.

The IAASTD report describes what it means by multifunctionality:

Multifunctionality is used solely to express the inescapable interconnectedness of agriculture’s different roles and functions. The concept of multifunctionality recognizes agriculture as a multi-output activity producing not only commodities (food, feed, fibers, agrofuels, medicinal products and ornamentals), but also non-commodity outputs such as environmental services, landscape amenities and cultural heritages.

The working definition proposed by OECD [Organization for Economic Cooperation and Development], which is used by the IAASTD, associates multifunctionality with particular characteristics of the agricultural production process and its outputs: (i) multiple commodity and non-commodity outputs are jointly produced by agriculture; and (ii) some of the non-commodity outputs may exhibit the characteristics of externalities or public goods, such that markets function poorly or are non-existent.

The Executive Summary of the Synthesis Report states that the challenges for agricultural knowledge, science, and technology (AKST) posed by multifunctional agriculture include:

• How to improve social welfare and personal livelihoods in the rural sector and enhance multiplier effects of agriculture
• How to empower marginalized stakeholders to sustain the diversity of agriculture and food systems, including their cultural dimensions
• How to provide safe water, maintain biodiversity, sustain the natural resource base and minimize the adverse impacts of agricultural activities on people and the environment
• How to maintain and enhance environmental and cultural services while increasing sustainable productivity and diversity of food, fiber, and biofuel production
• How to manage effectively the collaborative generation of knowledge among increasingly heterogeneous contributors and the flow of information among diverse public and private AKST organizational arrangements
• How to link the outputs from marginalized, rain-fed land into local, national, and global markets

As noted in the IAASTD report, basing agricultural policy on the multifunctionality concept has been controversial. U.S. policy makers and economists often have charged that the E.U.’s multifunctionality language is simply protectionism in disguise. But this ignores the fact that many European policy economists have given very careful attention to reconciliation of trade policies and domestic agricultural policies based on multifunctionality (for example, see references in Dobbs and Pretty). Basing agricultural policy on a multifunctionality vision does not imply abandonment of comparative advantage principles or all-out protectionism. It does imply, however, that a narrow comparative advantage, economic competitiveness vision will not completely drive policy. It implies that the full range of agriculture’s multiple functions will be considered in shaping policies.

Unfortunately, though representatives of the U.S. participated in the IAASTD, the U.S. government (along with the governments of Australia and Canada) did not fully approve the Executive Summary of the Synthesis Report. Could that reflect the fact that the global competitiveness vision still implicitly dominates U.S. agricultural and trade policy thinking?

Between now and time for debate on the next U.S. farm bill, we need to develop a multifunctionality policy consensus, like that reflected in E.U. agricultural policies and the IAASTD report. Until the broad public consistently demands more than “commodities” from agriculture, we will continue to have farm bills that make only modest environmental and healthy food improvements, while maintaining status quo policies that prop up industrial agriculture!

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American agriculture is becoming addicted to corn-based ethanol, and the economic and environmental effects of this addiction call for some intervention!

The explosive growth in U.S. ethanol production from corn is having worldwide ramifications. December 6 articles in The Economist (“Cheap no more” and “The end of cheap food“) trace the impacts of ethanol production on prices of other crops and on food. Rising crop prices can benefit farmers not only in the U.S., but also farmers who have marketable surpluses in other countries.

Many consumers, however, are hurt by the rising food prices. This is especially true of urban and landless rural poor in developing countries. According to The Economist‘s food-price index, food prices have risen in real (inflation-adjusted) terms by 75 percent since 2005. International Food Policy Research Institute data cited by The Economist indicates “the expansion of ethanol and other biofuels could reduce caloric intake by another 4-8 percent in Africa and 2-5 percent in Asia by 2020.”

The growth in ethanol production is hardly a market phenomenon. According to The Economist, Federal subsidies for ethanol production already come to over $7 billion a year. Moreover, many previous years of cheap corn that resulted from Federal farm program subsidies helped lay the economic foundation for ethanol plants already built or under construction.

Implications for energy and farm policies?

What are the policy implications of this “food versus fuel” conflict that past and present energy and farm policies have created? As far as the ethanol industry is concerned, its interests trump all other interests, including those of taxpayers and the poor who can least afford higher food prices.

With rising corn prices over the past year squeezing ethanol industry profit margins, plans for some new ethanol plants have been canceled or delayed. Having eagerly rushed to expand production and put in place more plants than can probably operate profitably in the near future, the industry has undertaken an all-out lobbying effort to get the federal government to raise mandates for ethanol blending. The U.S. House of Representatives recently obliged, when it passed a new national energy bill on December 6 that would double the nation’s corn ethanol production by 2015.

Also, it seems quite likely at this point that Congress will pass a new farm bill that continues to be friendly to producers and users of corn. The traditional subsidies for corn and other commodities (especially soybeans, wheat, rice, and cotton) will probably remain in place. The House of Representatives version of the farm bill passed on July 27, and the Senate appears near to passing its version.

Although some of the commodity subsidy payments (the counter-cyclical and marketing loan types) will be very low or nonexistent over the next several years if commodity prices remain high, the so-called “direct payments” would continue under the House-passed farm bill.

Direct payments averaged have averaged approximately $5.2 billion per year under the 2002 farm bill. Real farm policy reform would involve shifting all of this into conservation or rural development programs. The best place for that money would be the Conservation Security Program, which will become part of the new Comprehensive Stewardship Incentives Program if Senate Agriculture Committee Chairman Tom Harkin’s proposal is enacted by the Senate and agreed to by the House.

Without fundamental reforms of the commodity payment system, American agriculture will remain on its chemical-intensive, narrowly focused path. Biodiversity, which already is almost nonexistent in much of the Corn/Soybean Belt, will continue to be lost. Plant biodiversity is fundamental to almost every dimension of agri-environmental quality, including landscape attractiveness, bird life, and soil and water quality.

The expansion of corn acreage to accommodate ethanol production has come in large part at the expense of other crops. U.S. farmland planted to corn in 2007 was up by more than 14 million acres over 2006; land planted to soybeans declined by more than 11 million acres to accommodate much of that increase. This implies an increase in the production practice of corn-following-corn. Although the standard Midwest corn/soybean rotation is pretty weak from a biodiversity standpoint, it at least beats corn-following-corn!

Environmental problems associated with intensive corn production have been amply documented over the years. Recent reports have focused specifically on the environmental implications of expanding corn production for the ethanol industry.

Concerns about soil fertility, and chemical fertilizer and pesticide contamination, are raised in The Rush to Ethanol: Not All Biofuels Are Created Equal (PDF), by Food & Water Watch and Network for New Energy Choices in collaboration with Institute for Energy and the Environment at Vermont Law School. According to this report, abandoning crop rotation to raise corn year after year “will necessitate increased amounts of chemical fertilizers, which will also increase runoff and the deterioration of water quality.”

The National Research Council recently released summaries and the “Prepublication” report (Water Implications of Biofuels Production in the United States) of the findings of its Committee on Water Implications of Biofuels Production in the United States. The NRC committee also raises concerns about water quality due to the potential for fertilizer and pesticide runoff. The committee’s report contains a discussion of possible policy measures to help reduce adverse water quality consequences of ethanol production. Briefly mentioned is the possibility of more stringent conservation “cross-compliance” regulations than those currently in existence for farmers to qualify for commodity price supports and other farm program subsidies.

Time to start controlling the ethanol addiction

On December 11, the Senate rejected the Lugar/Lautenberg amendment to the pending farm bill. That amendment would have phased out most of the commodity program subsidies and transferred the savings to an expanded revenue insurance program and to conservation, biofuels, and nutrition programs. The $5.2 billion in annual direct payments to farmers would have been phased out by 2014.

And then, on Dec. 14, the Senate passed a farm bill that preserves the basic commodity payment structure now in place. Although it is too late for new amendments at this time, I propose that Congress revisit the farm bill at the earliest possible opportunity and amend the conservation cross-compliance provisions to deny direct payments to farmers who plant corn on the same fields in successive years.

Denial of direct payments for farmers who abandon the most minimal of crop rotations — such as the corn/soybean rotation — would not mitigate all of the severe environmental problems we are facing with major expansion of corn-based ethanol production. However, such a denial would be one small signal of major environmental concerns. This new cross-compliance provision would at least place a modest limitation on one of the many subsidies driving the ethanol addiction, with all its associated adverse consequences for the environment and world food prices. It would provide some disincentive to one of the worst agricultural practices resulting from corn-based ethanol production.

—–

Tom Philpott wrote an article in which he challenged some of the key assumptions underlying Farm Bill reform efforts of the past year (“It’s the Agronomy, Stupid“). He contended that gutting commodity subsidies would not solve the U.S.’s long-standing oversupply problems, and that we need the money currently in the “commodity” title to remain available for eventual support of conservation and other measures reformers hold dear.

The following day, a guest post by Britt Lundgren appeared in Gristmill, contending that Philpott missed the real point of the Farm Bill debate. The real point, said Lundgren, is “whether or not the current suite of farm subsidies are actually an effective and productive way to support agriculture in the U.S.”

I find myself largely in agreement with the contents of Lundgren’s post, but I want to address more directly Philpott’s contention that “it’s the agronomy” that matters. I disagree. “It’s the economics” that matters in assessing the consequences of the U.S. farm program’s heavy emphasis on commodity subsidies.

Philpott based his reasoning primarily on a 2003 University of Tennessee report by Daryll Ray, Daniel De La Torre Ugarte, and Kelly Tiller: “Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide” (PDF). There are some extremely valuable insights in the report. I assigned it as a major reading the last several years I taught agricultural policy at South Dakota State University.

Ray, in this report and elsewhere, was one of the first prominent U.S. agricultural economists of recent years to challenge mainstream economic thinking that advocates “free markets” and export trade as the primary solution to oversupply and farm income problems in the U.S. Likewise, he was among the first to call attention to the devastating effect of U.S. commodity subsidies — especially in their post-1996 form — on world prices and, hence, on incomes of farmers in poor countries.

The analyses of Ray and colleagues led them to advocate a very different set of farm policies than are currently in effect or being proposed by most American agricultural economists. In the 2003 report cited by Philpott, they recommended a return to supply controls, emphasis on price support through non-recourse loans, and government sponsored but farmer-owned commodity reserves to support and stabilize crop prices. In the opinion of Ray and colleagues, this set of policies could simultaneously maintain farm incomes at reasonable levels and dramatically reduce government-funded commodity subsidies.

There are both strengths and weaknesses in the analyses and policy recommendations of Ray and colleagues (hereafter, simply referred to as Ray). A major weakness, in my view, is one on which Philpott rested most of his argument. Ray, and by extension Philpott, argued that elimination of commodity subsidies would have little impact on supplies of agricultural commodities. (Philpott, in fact, says farmers would actually increase production in attempts to make up for lost subsidies and maintain farm incomes.) The weakness in this argument is that it represents a “short run” perspective.

In the short run of just a few years, farmers sometimes do behave in the manner described by Ray. It is also true that other forces, particularly the force of technological change, continue to expand agriculture’s production capacity. The noted University of Minnesota agricultural economist Willard Cochrane long ago described this process as a “technological treadmill.”

But if we take a “long run” perspective, it is not just agronomy that matters. Economics matters a lot. Farmers will not continue to invest in capital and yield-increasing technologies if it is not profitable to do so. It is undeniable that decades of subsidies for just a few major crops have increased the extent of commodity specialization and chemical intensification that evolved over the last half of the 20th century. Ray contended that changes in prices and subsidies have little impact on the amount of land that stays in agricultural production. While that is true, Ray and Philpott do not take adequate account of the changes that would occur over the long run in the mix of crops and livestock produced, and in methods of production.

If we were to permanently alter U.S. farm policy by eliminating or drastically reducing the system of commodity subsidies over time, we could eventually see a return to more biologically diverse crop and livestock systems, more ecologically sustainable crop production systems, and livestock systems that are less dependent on feed grains and oilseed crop protein supplements.

It might take a decade for changes to be noticeable, because farmers, quite rationally, will hold on to existing production systems for some time, counting on a reversal of farm policy to the “old” commodity subsidy programs. That’s what happened with the 2002 Farm Bill. After a modest beginning to break from some of the old commodity programs in the 1996 Bill, Congress reversed direction in 2002 by reinforcing remaining commodity subsidies and restoring one of the old ones (in modified form and with a different name) that had been eliminated in 1996. Remembering such reversals, many farmers no doubt will hold on to their existing crop systems until they are convinced that a fundamental change in policy direction is permanent.

Although Ray and colleagues emphasized the tendency for production levels to remain high, their report actually contained examples of agricultural policy reforms in other countries that led to major changes in the mix of crop and livestock produced. Major reductions in farm subsidies in Canada had little effect on total cropland in production, but did lead to significant changes in the mix of crops produced. Wheat production declined and oilseed production expanded. In Australia, the reduction in wool subsidies led to a major decline in sheep inventories. Ray and colleagues stated that “sheep farmers converted significant pasture acreage to crop production.”

My point in citing these examples is not that these particular shifts were necessarily good or bad from a sustainability perspective, but rather, that farmers do respond to new economic incentives brought about by fundamental changes in farm policy. Economics matters!

I don’t want to oversimplify. Restoring more ecologically diverse and sustainable crop and livestock systems will not be easy or quick. It will take more than eliminating commodity subsidies. A much stronger and better-funded set of agri-environmental programs emphasizing agriculture’s “multifunctionality” also is needed (see Thomas Dobbs and Jules Pretty, “Agri-Environmental Stewardship Schemes and Multifunctionality,” Review of Agricultural Economics, Vol 26, No 2, 2004). On this, Tom Philpott and I seem to be in agreement.

I am not confident, however, that we will ever be able to put enough money into agri-environmental programs to fundamentally alter present directions in U.S. agriculture, as long as the current commodity subsidies remain in place. These subsidies offer too much money and risk protection for most farmers in the major “farm states” to shift to more biologically diverse and sustainable crop rotations. Therefore, reform of the commodity subsidy system simply has to be at the heart of Farm Bill reform efforts!