Thoughts on the farm bill and the skyrocketing cost of food
Like a magician revealing his secrets, the once-invisible farm and food system is drawing scrutiny from the media, policymakers, and the public as we realize how intertwined our farm and food system is with the energy sector and global markets.
But how did we get here? How did our modern, abundant, and affordable food system run aground? In a sector that is global in reach, absolutely essential (we must eat, after all), and includes the politics of saving family farms and ending hunger, there is no simple, singular answer. A lot of it has to do with economics and politics. Most of it has to do with what goes into making a box of cereal, and why we even have boxed cereal.
North America has long been the breadbasket of the world — so much so that bountiful grain surpluses lead business to find innovative alternative markets for those surpluses.
Quaker Oats and cornflakes were early ways to get Americans to consume more grains in the late 1800s. But people can only eat so much in a day, and storing cereal grains for long periods of time depresses crop prices. Over the last 30 years, once-low-value grain surpluses have found several new uses: livestock feed, sweetener (i.e., high-fructose corn syrup), raw material for plastic, and feedstock for fuel in the form of ethanol.
It is one of the ironies of the agricultural sector that developing new uses for a surplus can generate more demand for a product, but so it is.
As the ethanol market took off, the price for corn rose. Farmers switched to growing more corn, decreasing the acres planted in soy, wheat, and other grains. The resulting scarcity of those grains drove up their prices.
It is true that demand for grains in ethanol production has diverted surpluses to energy use. In one report by an industry group, oil has a greater impact on food prices — by a factor of 2 to 1 — than ethanol. The real catch-22 though is that two primary ingredients of our economy, food and fuel, are linked together.
When oil prices rise, the cost of inputs used in modern agriculture — fertilizer, pesticides, diesel fuel — increase on-farm production costs. In the U.S., farm costs range from 3 percent of the price for a box of cornflakes to 52 percent of the price for a dozen eggs.
Additionally, when oil prices rise, what economists call the “food marketing bill” — the part of the food price that farmers don’t get — increases at every stage of processing, boxing and bottling, and shipping, as each relies upon oil and other energy inputs.
In a market where oil is no longer a cheap input, should we still adopt business models which produce and distribute our food in the energy-inefficient way we do?
And don’t forget that free market proponents have long argued for making agriculture a more market-based sector. The ethanol market has single-handedly reduced government expenditures on farm subsidy programs by a projected $15 billion over the next five years. The market approach is not wrong, but is it the right approach to ensure that no one goes hungry?
Farm subsidies have been singled out as the culprit for many of our farm and food policy woes. Crude as these policy instruments may be to an economist, we still need public policies to address agriculture’s unique problems including droughts, a boom and bust market cycle, soil erosion that depletes the future productive capacity of the land, and a guaranteed supply of food production to feed the hungry. Yet are these policy tools still meeting the needs of the farmers and the demands of the public?
Congress is about to pass a farm bill that is a revision of laws dating back to the late 1930s. For a policy process which rewards incremental and not structural change, it is not a bad bill. Food stamp benefits will now keep pace with inflation. Farmers will have more options to steward the land. Spending on farm subsidies will decrease, saving taxpayer money. But is this the bill we want, the bill we really need to address food and energy adjustments looming on the horizon?
Today’s crises illustrate just how precarious, critical, and invisible our farm and food system is to us. Unanticipated three generations ago was the role oil-based inputs would play in food production and distribution. Unanticipated was the possibility of a new, high-value market for agricultural surpluses, like ethanol.
The problem is the politics of the farm and food system only considers the grains in the cereal box, not how the box got in our cupboard, let alone the other foods in the kitchen. We need a transformative approach to farm and food politics, not only for the U.S., but for the world.
We should not scrap our existing policies, but we should be flexible enough to modify them using lessons we have gleaned from their long history. We need to engage new partners in the 2012 farm bill.
We need to think beyond the cereal box, as a public, as consumers, as farmers, as interest group leaders and policymakers, and revamp our farm and food system so we as Americans and denizens of the world can trust in its stability and integrity.