do farm subsidies cause obesity?
TRANSCRIPT
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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
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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
T: (202) 683-2500
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
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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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Dispelling Common Myths About Public Health and the Farm Bill 5
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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6 Do Farm Subsidies Cause Obesity?
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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Dispelling Common Myths About Public Health and the Farm Bill 7
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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8 Do Farm Subsidies Cause Obesity?
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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Dispelling Common Myths About Public Health and the Farm Bill 9
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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10 Do Farm Subsidies Cause Obesity?
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
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Dispelling Common Myths About Public Health and the Farm Bill 11
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
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12 Do Farm Subsidies Cause Obesity?
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
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Dispelling Common Myths About Public Health and the Farm Bill 13
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-
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14 Do Farm Subsidies Cause Obesity?
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
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Dispelling Common Myths About Public Health and the Farm Bill 15
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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
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31 Ibid.
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