The productivity of U.S. corn farmers should inspire awe.
According to the U.S. Grains Council, the U.S. produces about 44 percent of the globe’s corn crop — that’s more than China, the European Union, Brazil, Argentina, and Mexico combined. Iowa alone, which produces a sixth of U.S. corn, produces about as much as the European Union.
Corn underpins our industrial food system, showing up in a dizzying array of processed foods and serving as the main feed for poultry, dairy, meat, and egg production. Even given all of those uses, there was still enough corn in 2006 to devote a fifth of the harvest to exports, and nearly as much to ethanol.
To create that breathtaking bounty, however, corn makes extraordinary demands on U.S. farm resources. It covers fully a fifth of U.S. cropland, far more than any other crop. It draws more subsidies than any other crop, too. According to the Environmental Working Group, the U.S. government paid corn farmers $51.2 billion between 1995 and 2005 — more than the outlays for the next two most-subsidized crops combined (cotton and wheat) and nearly three times more than the amount spent on the Conservation Reserve Program over the same period.
Moreover, according to the USDA (see table 2), growing all that corn entails far heavier applications of nitrogen and phosphorus — both major water polluters — than any other crop.
To try to get a handle on this prodigious but ravenous crop, I did something last week I’ve never done before — I got on the phone with a spokesperson for major corn interests. I talked with Jon Doggett, vice president of public policy for the National Corn Growers Association, which represents 32,000 corn growers and receives support from a roster of agribusinesses including Archer Daniels Midland, Monsanto, and John Deere. For the interview, Doggett brought in Ralph Grossi of American Farmland Trust — a surprising turn of events, since the two groups are commonly associated with opposite sides of many farm issues.
I don’t think of the American Farmland Trust and the National Corn Growers Association as organizations that necessarily work together. Are you guys pretty closely aligned?
Grossi: We agree on a lot of issues. We haven’t historically worked very closely together, but we both agree that in the rapidly changing world of agriculture, a functioning safety net that works well for agriculture but that’s not overly costly is a goal we should all be striving toward. I think both organizations are very concerned about the health of the landscape. And so we’ve actually found a lot in common as we’ve worked together on this farm bill.
Doggett: Ralph and I have known one another for quite a while, and have stayed in touch. And as we in the Corn Growers have been putting together a concept called “revenue counter-cyclical payment,” American Farmland Trust has been talking about something very similar. So it was interesting when Ralph called me one day and he said, “You know, we’re going to do this release, you’re going to find it very similar to something you’re working on.” And it was. And it was interesting that we came from two different points and found a place in the middle that we agreed on a number of issues.
Grossi: Just for clarification: when we talk about revenue insurance or revenue counter-cyclical payments, we’re talking about a mechanism to replace the current farm subsidies to give farmers a better safety net.
One of the charges against the current system is that it promotes overproduction. Would this revenue scheme you guys are talking about address that charge?
Grossi: Certainly a revenue-based mechanism moves toward a market-based [system], that farmers will make planning decisions based on what the markets are telling them, not what the government’s telling them. The problem in the past is that the price-support mechanism was set by members of Congress who would set that price once every five or six years. And there simply isn’t any way to do that in a way that can anticipate the changes that are going to happen in the market over the next few years. So what happens is some of those prices are set too high, and some are set too low. Those that are set high then encourage farmers to move into those crops and end up in surpluses, and sometimes end up encouraging production on marginal lands, which is one of the reasons we were very concerned about the current structure.
When I was in Iowa this past summer, I talked to a farmer who runs a thousand acres of corn and soy, and he told me something interesting. I asked him about corn at $4, and what that meant for him. And he said, essentially, “not much.” Since the corn price went up, his rent has crept, fertilizer prices are higher … He figures when it all balances out, his profit margin will be pretty slim, like always.
Doggett: Certainly our growers are telling us that they are seeing their costs go up, particularly their land cost. A farmer who owns all of the land that he’s farming is in a much different situation than if 25 percent of the ground he farms is his own and the other 75 percent is rented. Those landlords — and most of them are retired farmers — they understand what the price of corn is and they’re not shy about making sure that they participate in $4 corn. And that’s one of the reasons you see the rural economies on an uptick, because everybody benefits from $4 corn.
The ethanol boom is what caused corn prices to spike — and ethanol has entered a glut phase. Will the government just keep raising the renewable-fuel standard [which requires a certain percentage of biofuels in the national fuel stream]?
Doggett: Certainly no one anticipated that ethanol production would take off like it did after the passage of the 2005 energy bill. And obviously the high price for gasoline factored into that, and the renewable-fuel standard as passed into law in the energy bill factored in to that. There were a number of things that caused ethanol production to come up as quickly as it did. We are at a bit of a plateau in demand.
But I think that the long-term scenario for renewable fuels is excellent because we’re not making any more oil, and the places we’re getting the oil aren’t very good places for us to go and get it. This market is going to have some ups and downs for the short term, but long-term I think that we’re going to see some excellent opportunities.
Grossi: Certainly there’s mounting evidence that at least a portion of the problem of the dead zone can be attributed to agricultural activity in the Mississippi River watershed, because of the nutrients used in agriculture. I believe the latest numbers I saw, it was something like 60 or 65 percent of the problem was attributable to agriculture.
There are a lot of people working to try to solve that, to minimize it, and it’s happening in a number of different ways. One, of course, is technology — new technologies that will allow plants to use nutrients more efficiently, let farmers apply less nitrogen and less phosphorus, for example — those are coming online as we learn more and more about plants. There’s a lot of work going on in some subwatersheds that have been identified as the most problematic watersheds for runoff. American Farmland Trust is working with groups of farmers on best management practices, on new techniques, trying to get your arms around the issue.
But certainly these kinds of challenges require a public investment, because the benefit to having a viable fishery in the Gulf of Mexico does not flow back to the farmer in Minnesota — it flows to society at large. We have to find ways to help those farmers to improve those practices.
Doggett: We are making strides in reducing our environmental footprint all the time. The widespread acceptance of conservation tillage or minimum till or no-till has significantly reduced the amount of erosion that we’ve seen on cropland — in some areas by 80 percent or more. We’re seeing similar gains they made as far as runoff. Particularly no-till, you’re seeing less runoff. But when I talk to growers and they’re paying $500 or more for a ton of anhydrous ammonia [fertilizer], they are not going to waste that and they are going to have to be more efficient — not only to afford the anhydrous, but just to be competitive with other growers in other parts of the world who don’t maybe have some of the same restrictions.
It’s an ongoing process to reduce that runoff. One of the things our growers clamor for is some cost-share money from the federal government to put in some of those things that are important: filter strips, buffer strips, continuous signup for [the Conservation Reserve Program] in some of those places where we have a federal partner working with us.
Under current conditions, don’t farmers have an incentive to essentially over-apply nitrogen in order to achieve maximum yield?
Doggett: I have not heard a grower say that he over-applies nitrogen to maximize yield. You apply nitrogen to the extent that the plant will take it up. If you over-apply nitrogen, you’re wasting your money, and the goal is to have the most efficient use of the nitrogen, not to maximize the yield. But when you properly apply nitrogen, which we think by far and away almost all of our growers do, they get the most efficient yield. But anybody that’s over-applying nitrogen is crazy.
Grossi: There certainly may be cases where farmers are putting a little extra [fertilizer] on as sort of an insurance policy to make sure they have enough. The rapidly increasing cost of those inputs, as we approach $100 oil, is going to make that just economically impractical.
But if ag runoff is causing the Gulf dead zone, then there’s got to be a widespread problem that’s not just a few bad apples, right? There’s some kind of systemic problem going on.
Doggett: You also have to remember that a lot of that has been a problem for a while and it will take time to resolve; that nitrogen load in the Gulf is not a direct reaction to nitrogen that was applied in the last six months. It’s residual in many cases, it’s multiyear in accumulation.
How do you guys respond to charges of people like Michael Pollan that corn has been grossly overproduced for 20 or so years, and a lot of the uses we’ve found for it — like ethanol and high-fructose corn syrup — are government-created boondoggles?
Doggett: Are we guilty of finding new uses for our commodity? Absolutely. Those products are in the marketplace and have wide acceptance by the American people, and people are using them gladly.
Grossi: I think this is a good example of the domino effect of public policies. You have to question whether or not high-fructose corn syrup, for example, ever would have come into the prominence it has today if we had had sensible sugar policy in this country. We have artificially kept the price of sugar in this country well above, sometimes more than double, the world sugar price, which made it possible to develop alternatives to sugar as sweeteners. And so high-fructose corn syrup was developed in that atmosphere. If domestic sugar prices had stayed at world price levels for the last two decades, I would venture to guess that the high-fructose corn syrup market would not have developed as it has today.
Well, there are critics who agree with that and they don’t see it as a coincidence. As Richard Manning showed in Against the Grain, Archer Daniels Midland lobbied very heavily to get the sugar quota put in place in 1982, and when it came into place, the price of sugar doubled, and suddenly, high-fructose corn syrup was very marketable.
Grossi: I don’t know enough about that whole political process, but I seriously doubt that Archer Daniels Midland was the reason we have sugar quotas as we have them. In fact, I think there’s a pretty significant sugar cartel that developed in this country. You’d have to talk to the ADM folks about that, I have no idea.
ADM was demonstrably part of the lobbying effort for the sugar quota in the early ’80s. [See also a 1995 paper by the Cato Institute called “Archer Daniels Midland: A Case Study in Corporate Welfare.”]
Grossi: They may very well have been — I don’t know. I have no knowledge of that.
Doggett: Yes, there was a sweetener coalition that existed for a long time, but that entity worked on issues common to the sweetener industry. I didn’t see any collusion, and I’ve not ever heard of any collusion between those two industries to do what the conspiracy theorists say. But I wasn’t around here in ’82.