Institutions, Interests, and Incentives in American Food and Agriculture Policy
Institutions, Interests, and Incentives in American Food and Agriculture Policy
Abstract and Keywords
American agriculture and agricultural policy are both filled with contradictions. The sector supplies less than 2 percent of GNP, yet farmers and farming communities exert considerable influence on several federal policies and politics—not just on agriculture. Through trade and aid, the United States is also a dominant player in international agriculture, yet the international dimensions of agriculture play almost no role in the formulation of American agricultural policy. This chapter attempts to resolve the key anomalies in U.S. agriculture by presenting a brief summary of the 2008 legislation and its antecedents, comparing U.S. policy approaches and impacts with other developed countries, and examining the political and regional dynamics that produce such inward-looking policy outcomes. Special attention is given to the important role that nutritional assistance has played in policy debates during the past 35 years, and to the fragile farm–consumer coalition that nearly came apart during preparation of the 2013 Farm Bill.
Anyone who has had the good fortune to fly across the United States on a clear summer day cannot help but be impressed by the vastness of American agriculture. From the salad bowls of the California valleys, to the western cattle ranches, to the Wheat Belt of the Great Plains, to the pivot-irrigated circles of corn in Nebraska, to the rainfed corn and soybean systems of the Midwest, to the small dairy farms in New England, agriculture is literally everywhere. And if the airplane has a southerly routing, peanuts, rice, and cotton are also visible. Together these regions underscore the scale of food production activities that contribute to America’s international reach as a global food power; they also demarcate divisions that are important to domestic policies and politics.
The vastness of U.S. agriculture as seen visually from 30,000 feet, however, juxtaposes with its small role on the ground economically. In 2012, agriculture contributed only 1.2 percent of GDP (World Bank 2013). Although the U.S. Department of Agriculture (USDA) asserts that there are 2.2 million farmers, in fact, fewer than 300,000 of them supply 82 percent of the value added in U.S. agriculture (Wilde 2013).1 To complete the circle of contradictions, this small sector of the economy exerts a disproportionately large influence on American politics and policy. To make matters still more confusing, three-quarters of the total expenditures authorized under the current Farm Bill are spent on consumers, not on farmers. Put simply, U.S. agricultural policy is messy.
(p.88) There are reasons why U.S. agricultural policy is in the shape it is, however, and they help to explain why it is extremely difficult to reform. The goals of this chapter are to explain and reconcile some of the contradictions in U.S. agricultural policy, to trace their origins historically and institutionally, to note the similarity and differences between the United States and other developed nations, and to assess the impacts, intended and unintended, of food and agricultural policies on domestic and international food security.
U.S . agriculture plays a massive role in the global food economy despite its meager contribution to domestic GDP and employment. That role, along with its many internal contradictions, makes it particularly interesting to study. The United States is one of the world’s leading producers of food, yet until 2011, when surpassed by China, it was also the world’s largest importer of food and food products. It exports by far the largest amounts of agricultural commodities, provides the largest share of global food aid donations, and in 2013 produced more crop-based biofuels than any other country, including Brazil. By sheer size in international markets, the United States has a strong influence on the level and stability of world food prices, and hence on global food security. Meanwhile, the United States also maintains a very large domestic nutrition safety net, thereby shielding many of its low-income consumers from more serious threats of food insecurity that might arise from its own agricultural policies, the policies of other countries, or sheer economic misfortune.
Herein lies another important juxtaposition: America’s domestic policy agenda versus its foreign policy agenda. U.S. food and agricultural policies are motivated largely by domestic political pressures arising from farm coalitions, agribusiness, and politicians representing farm states. The focus is rarely on foreign policy concerns, despite the fact that global food insecurity arising from U.S. agricultural policies may foster humanitarian crises and political instability in other countries. The political process underpinning this strong domestic orientation in the United States is entrenched in the historical composition of agriculture-related legislative committees (with committee members dominated by farm states), in the representation of the U.S. Senate (with sparsely populated, agriculture-intensive states equally represented), and in the priorities of executive agencies responsive mainly to domestic food and agricultural demands. Success in passing farm legislation has been made possible mainly by the inclusion of consumer interests. However, American agricultural policy still tends to neglect health and environmental outcomes, at home and abroad, as well as the interests and perspectives of the broader U.S. electorate.
This chapter begins with a brief historical description of American food and agricultural policies, and then turns to the political processes that perpetuate a focus on domestic farm interests. We discuss the roles of the legislative and executive branches in agricultural policymaking, and explore the institutional dynamics affecting policy outcomes such as concentrated interests, coalition politics, and processes that hinder the general public from influencing food and (p.89) agricultural policies (typically referred to as “collective action problems”). The chapter ends with an assessment of domestic and international food security implications of U.S. policies, and of the tensions, often overlooked, between domestic and foreign policy agendas.
Federal Farm and Food Policy
The federal government’s involvement with America’s food and agricultural system is as old as the republic itself. Early debates centered on the constitutionality of the federal government intervening on food issues at home and abroad. In 1793, for example, a group of 3,000 French citizens were forced to flee Haiti and arrived destitute on Maryland’s shores. Senator James Madison, in response to a Maryland request for food and other assistance for these refugees, stated that he “could not lay my finger on that article in the Federal Constitution which granted a right to Congress of expending on objects of benevolence....” But benevolence won the vote (reported in Riley 2015).
Many volumes have since been written about U.S. agriculture and agricultural policy (for example, Benedict and Stine 1953; Paarlberg 1964; Cochrane and Ryan 1976; Cochrane 1993; Gardner 2002; Imhoff 2011; Wilde 2013). Our purpose in this chapter is not to duplicate these writings, but rather to provide a brief historical context for understanding how modern U.S. agricultural policy took on its present form, and to show why, many decades after earlier legislation, U.S. farm policy continues to affect food security abroad. The founding period of the late eighteenth century obviously had enormous consequences for the apportionment of legislative power. Three more recent eras—the 1860s, the 1930s, and the period of evolutionary change since World War II—also seem especially worthy of comment.
Three federal actions in the 1860s had lasting consequences for American agriculture. The Civil War, combined with President Abraham Lincoln’s abolition of slavery in 1863, fundamentally changed the nature of society, especially in the South. Altering the organizational structure of agriculture changed land and labor markets, as well as the composition of farm output. Many of the plantations were broken up into much smaller farming units, and labor migration from the Southeast had profound social and economic implications for both the agricultural and non-agricultural sectors of the entire nation.
At about the same time, the passage of the Homestead Act in 1862 was critically important to how much of the midwestern portion of the United States was settled. By providing virtually free land to those who wished to farm it, the Act provided the heartland of U.S. agriculture with its deep and abiding (p.90) egalitarian ethos. The choice of 160 acres as the modal settlement size continues to influence the basic structure of U.S. farm organization. To this day there is dependence on “family farms” that still produce 88 percent of the nation’s farm output—widespread misconceptions about the role of corporate agriculture notwithstanding (USDA Chart Gallery 2013). However, not all land was “homesteaded” in this form. Settlers in the Great Plains, faced with the challenge of cultivating more marginal, drought-prone land, were granted 640 acres apiece in Nebraska (under the Kinkaid Act of 1904) and 320 acres elsewhere in the Plains (under the Enlarged Homestead Act of 1909). In addition, the very large land grants given to railroads west of the Mississippi River, and the settlement arrangements in California during the Mexican period (1821–49), created much larger farm units in those regions (Shannon 1977). The resulting managerial style and size distribution of holdings are major reasons why the structure of Western agriculture is so different from the Corn Belt.
A third component was the passage of the Morrill Act in 1862. This legislation helped to establish a land-grant university for each state.2 A primary focus of these institutions has been on agriculture, and their triple objectives of research, teaching, and extension have produced extraordinary flows of relevant farm and food knowledge and technology.3 These flows were particularly important until World War II, after which the private sector took on increased dominance in producing and distributing agricultural technology.
The 1930s ushered in a period of more active—and prolonged—involvement by the federal government in agricultural markets, and thus represented another major landmark in U.S. farm policy. This period is best known for the Great Depression and widespread droughts that contributed to the Dust Bowl. Farm policy at this time was motivated initially by the buildup of large farm surpluses and declining agricultural prices in the 1920s and 1930s. Real prices received by farmers rose dramatically between 1910 and 1920 as a result of World War I and the Russian Revolution, but then fell precipitously in the 1920s as yield growth and land expansion produced a rising stream of farm surpluses under relatively stable economic and political conditions (Gardner 2002). In an effort to support rural incomes, the government passed the Agricultural Marketing Act in 1929. This act established the Federal Farm Board whose mandate was to stabilize prices largely through supply-side management—for example, paying farmers to idle land or slaughter livestock prematurely to keep markets (p.91) tight and prices high. These institutions set the stage for more pronounced government involvements down the road that remain in play today.
As the Great Depression hit the country in the early 1930s, the demand for crop and livestock products plummeted, creating widespread hardship in rural America that extended from tenant-farming operations (e.g., peanuts, cotton, tobacco) in the post–Civil War South to large livestock operations in the West. The early 1930s also marked the end of an unusually wet period in the Great Plains—a period that had encouraged settlers (with various forms of government support including land allocations) to cultivate the region with unwarranted intensity, believing somehow that “rain followed the plow” (Worster 1979). Having plowed up the native vegetation that historically had held the soil in place, farmers in the Plains experienced massive wind erosion and desiccation of their lands. Persistent droughts over broad areas created dust storms that reached all the way to the East Coast, dramatically reducing yields over 100 million acres and leading to one of the most significant human migration episodes in American history. The fact that the Great Depression and the Dust Bowl occurred simultaneously was probably not a coincidence. The United States had been in an expansionary mode in the 1920s, and the risks of both ecosystem and economic collapses were inadequately assessed (Worster 1979).
Coincidence or not, these events led to a populist movement in the 1930s that backed the interests of farmers throughout the United States and underscored a genuine concern for feeding the country. Agriculture was then a more sizable part of the economy, and President Franklin Roosevelt’s New Deal policies reflected these demographic realities and national sentiments. Congress passed a series of bills on soil conservation, crop insurance, farm price supports, and nutrition assistance following his election in 1932. The Agricultural Adjustment Act was put into legislation during the 1930s,4 giving Congress the authority to stabilize and bolster domestic prices for agricultural products (Gardner 2002). At varying times, policy attempts were made to limit crop and livestock production, to dump surpluses abroad, to restrict imports, and to purchase supplies (for government storage) in efforts to raise prices. Most of the efforts of the 1930s to overhaul farm programs by attempting to fix prices or quantities, or to improve the rural economy more generally, proved unsuccessful. The decade was essentially a dark time for American agriculture, a testing era for various types of agricultural policy instruments, and an active period for setting policy precedents. However, it was World War II, not policy, which (p.92) fundamentally changed the overall economy, the incomes of farmers, and the input structure for American agriculture.
The Post–World War II Era
Agricultural policy innovations since World War II have evolved via a series of legislative actions aimed at increasing the income of farm households, providing safety nets for poor consumers, and investing in infrastructure for rural America. Five-year Farm Bills have become the standard operating procedure for Congress, and simply keeping up with the lengthy, cross-referenced, multi-titled legislation has created full-time jobs for many food policy analysts (see Box 4.1).
Between the 1950s and 1970s, agricultural policy was often the focus of intense partisan fights between the major political parties, especially with respect to presidential appointments to the Secretary of Agriculture position. The conservative appointees typically pressed for fewer restrictions on agricultural production and more market determination of prices, i.e., they wanted “freedom to farm” as espoused by Secretary Ezra Benson (1953–61) (Benson 1960). In sharp contrast, the liberals, such as Secretary Orville Freeman (1961–69), sought stricter controls on output but with much higher price guarantees and direct government payments to farmers (Cochrane and Ryan 1976). In retrospect, neither approach worked very well. Varying attempts to cut production via acreage restrictions failed because of legislative loopholes (intended and otherwise), and because of rapid technological change that increased yields per acre at rates faster than acreages were being curtailed by policy.
The only serious attempt in the United States to impose strict “supply management” for a major crop occurred in 1962–63. The central debate was on limiting wheat production, and on whether wheat farmers would vote (via a special referendum) to impose strict production controls on themselves in return for high guaranteed prices. The approach was very controversial, with those in favor of it arguing that it would be the difference between “$2 [per bushel] wheat and $1 wheat.” The American Farm Bureau was adamantly against the plan, arguing that it was “the tightest, strictest, most complete control ever considered for a major commodity” (Cochrane and Ryan 1976). In the end, the proposed program failed to win enough votes from wheat producers to implement the plan; moreover, the failure of the wheat referendum effectively killed strict supply management as a broader approach to farm policy (Cochrane and Ryan 1976; Siracusa 2004).
The aggregate result of farm policies from 1950–70 was mostly the creation of massive grain surpluses, which were delivered to the government under the loan provisions of the legislation (Box 4.1). By 1962, the U.S. government held wheat stocks totaling 30 million metric tons (mmt), compared to the total global wheat trade that year of 38 mmt (FAOSTAT 2013). These stocks laid (p.93) the basis for very large food aid shipments. U.S. wheat shipments of food aid totaled 90 mmt during the decade of the 1960s. These aid shipments astoundingly amounted to some 20 percent of total global wheat trade for the decade (Riley 2015). A lasting impression of U.S. surpluses was created during this period, which remains widespread but misguided today. By 1980, surpluses had (p.94) largely disappeared, partly because of legislation that lowered loan rates relative to expected market prices (USDA Chart Gallery 2013); partly because of food aid; and partly by the unexpected sales to the U.S.S.R. starting in 1973 when that country radically changed its trade policy. Currently, the United States holds almost no government stocks of grain. When the U.S. government now provides food aid in the form of cereals, for example, it must go into the market to purchase the grain.
The disappearance of government-held farm surpluses, however, did not mean an end to farm programs designed to curtail downward movements in agricultural prices and to improve farm incomes (Box 4.2). The bulk of this financial support goes to farmers who produce a small number of “program commodities”: corn, soybeans, wheat, rice, barley, cotton, oats, peanuts, and sorghum. With the exception of milk production, livestock farmers, who currently produce 44 percent of gross farm receipts, are not major recipients of funding, nor are fruit or vegetable producers. The absence of major support programs for fruits and vegetables may have had negative spillovers on nutrition in the United States, although the evidence is not clear. The fruit and vegetable growers themselves have sometimes contributed to this policy direction by asking for marketing quotas—limits on how much of the commodity can be brought to market—in order to keep prices higher for these largely non-storable products.
(p.95) Payments are largely based on the acres of land (called “base” acres) that have historically been included in farm programs.5 In fact, several of the programs provide farmers with payments even if these base acres are left to lie fallow. Payments under the base-acreage programs are highly concentrated—even more so than the concentration of land ownership. In 2012, for example, the largest 10 percent of farms in terms of sales received 67 percent of the $5 billion spent on this program (EWG 2013). The disconnect between political rhetoric about helping small U.S. farmers and the actual distribution of dollar benefits is remarkable, and is a primary cause for widespread public cynicism about agricultural legislation.
Counter-cyclical programs form a second major form of farmer payments. As their name implies, these payments are triggered when crop prices in the market dip below levels established in the text of the Farm Bill. In the post-2005 period, this form of government payment has been low (except occasionally for peanuts and upland cotton) because world commodity prices have been high. Like direct payments, the counter-cyclical payments are based on historic production, and are highly concentrated in terms of crops, regions, and farm size.
Conservation provisions of American agricultural policy are a third form of payments to farmers. Conservation has had a long history in the United States dating back to the Dust Bowl era of the 1930s, but took on new prominence in the 1985 and 1990 legislation; indeed, the latter was entitled the Food, Agriculture, Conservation and Trade Act. Groups seeking to limit agricultural production—thereby raising prices—joined with environmentalists to establish a Conservation Reserve Program (CRP) for the protection of erodible land. Congress establishes a maximum area for the reserve, and farmers bid for the right to place their land in the CRP. Various criteria, such as slope and soil type, go into the selection of tracts to be included; geography and the conscious inclusion of parcels from numerous states also go into the process. Farmers typically sign ten-or fifteen-year contracts, with average contract prices in 2013 at about $55 per acre per year. In 2012, 27 million acres of U.S. cropland, involving nearly 400,000 farms, were in the CRP (USDA Chart Gallery 2013). However, with the higher commodity prices after a dip in 2005, CRP payments have become less competitive relative to profits from crop production, and a sharp falloff in new or re-contracted acres being placed into the program has taken place.
Figure 4.1 summarizes recent government payments by category. These totals have recently run about $12 billion per year, but as the bar for 2005 also shows, total expenditures are very sensitive to world prices and the compensation given to famers via counter-cyclical payments.
Agriculture has always been a risky business as a consequence of uncertain weather, prices, diseases, and pests. Since 2000, however, new insurance instruments have become more widespread to help combat those risks. They are simultaneously becoming a more important part of the federal budget for agriculture. Much of the insurance legislation traces to 1938; however, legislative amendments in 1994 and 2000, plus the expanded role of the Risk Management Agency, greatly spurred the purchase of “multi-peril” insurance by farmers.6 This program is a public-private partnership, in which the government pays half of the insurance premiums of farmers, and agrees also to underwrite some costs of the private insurance companies. In 2012, for example, the Federal Crop Insurance Program (FCIP) covered 280 million acres and paid out $116 billion in total liabilities (Shields 2012). About 90 percent of U.S. cropland was covered by insurance, typically at a level of 75 percent.7 In addition to yield (p.97) coverage, farmers can also purchase revenue-based insurance, which covers several dimensions of price variability.
The professional literature assessing the innovation and conservation impacts of these insurance programs is still in its infancy. It is likely that new forms of crop insurance will be increasingly important and will likely have powerful incentive effects for farmers, especially within the context of climate variation and change (a topic discussed more thoroughly by Lobell, Naylor, and Field in Chapter 9). Between 2005 and 2012, government budget costs for public-private crop insurance rose sharply, and in 2012, government outlays reached a hefty $14.1 billion (Shields 2012).8
Of all the titles in the Farm Bill, the Supplemental Nutritional Assistance Program (SNAP, also known more generically as “food stamps”) is among the most controversial. The wide scope of nutritional assistance within “Farm” Bills often prompts two questions: How did consumer programs become so large? And, why is this safety-net consumer program located within the USDA’s budget rather than within the Department of Health and Human Services, the home for most other welfare programs? The answers to both questions are complicated.
The origins of the food stamp program trace to the 1930s and the Great Depression. Under the leadership of Agriculture Secretary Henry A. Wallace (1933–40), the program was originally designed to distribute surplus agricultural commodities and simultaneously to assist poor and needy families.9 Food distributions were discontinued during the middle of World War II, and it was not until the early 1960s that they resumed. During the 1960 presidential election campaign, West Virginia became a pivotal state for candidate John F. Kennedy’s success. The poverty he encountered there during extensive campaigning left a deep impression on him, and served as one of the driving forces for his new “War on Poverty.” Food stamps became a part of that war, and Kennedy’s first executive order in 1961 focused on them. Later, and as a part of Kennedy’s legacy following his 1963 assassination, Congress passed the Food Stamp Act of 1964. The SNAP program, like the 1930s food stamp program, ended up within the USDA, even though its purpose was no longer distribution of farm surpluses. The central role of George McGovern and Herbert Humphrey, two prominent midwestern senators with close ties to agriculture and the Senate Agriculture Committee, also contributed to USDA’s control of SNAP. The desirability and political difficulties of changing this arrangement, and other political processes related to food and agriculture, are discussed in a subsequent section of this chapter.
(p.98) The rapid growth of SNAP payments over the past decade has been a surprise to many. We believe that the expansion is related primarily to four factors. First, while the United States is among the world’s richest countries, its personal income distribution is quite unequal, and is becoming more so. For example, in 2011, 17.3 percent of the U.S. population had incomes below 50 percent of the U.S. median income. This measure compares with Norway, Germany, the United Kingdom, and Japan, which have corresponding rates of 7.8 percent, 8.9 percent, 11.3 percent, and 15.7 percent, respectively.10 In short, there are many poor people in the United States who need assistance in fulfilling their basic nutritional needs (Tiehen et al. 2012).
Second, the SNAP program was designed to be counter-cyclical with respect to growth in the U.S. economy. The expectation was always that SNAP costs would go up when unemployment was high and the country was in recession. Between 2007 and 2010, annual U.S. unemployment rates rose from 4.6 percent to 9.6 percent, and remained at 8.1 percent in 2012.11 This rise in unemployment was one reason why SNAP expenditures rose by 77 percent during those five years.
Third, food prices have been rising as a consequence of supply shocks, coupled with growing demand as incomes rise rapidly in middle-income countries and from the greatly expanded use of corn for ethanol production. For the period 2005–2012, the all-food component of the U.S. consumer price index rose by 23 percent.12 Those price increases were then largely translated into additional costs for the SNAP program, which uses retail prices in its benefit calculations.
A fourth explanatory factor traces to the method by which the United States determines its domestic “poverty line,” since that line fundamentally determines the number of SNAP-eligible participants. The USDA plays a dominant role in the line-setting process, since it is charged with calculating “thrifty food budgets.” These budgets are modest, but they cover basic nutritional requirements and provide for moderate diet diversity as well. The cost of these thrifty budgets is one of just two numbers used in determining the U.S. poverty line. The U.S. Census Bureau calculates the latter simply by multiplying the cost of the thrifty food budget by a multiplier of three.13 If food costs were lower, or if the multiplier were (say) two rather than three, fewer people would be defined as being in poverty and thus eligible for food stamps.
(p.99) In 2012, the U.S. thrifty food budget resulted in a poverty line of about $24,000 for a family of four. That year, some 47 million Americans—about 15 percent of the entire nation—received SNAP payments. Support was restricted to those families with net incomes less than the poverty line, with the actual amount of support increasing the further below that line income levels fell.14 If a hypothetical family of four had zero net income, they would have received $8,000 in SNAP payments for the year; if their net income was $12,000, they would have received payments of $4,000. Overall, payments averaged approximately $1,600 per person for the year.15
As a consequence mainly of these four factors, the SNAP portion of the Farm Bill budget totaled $73 billion in 2012. In addition, the budget provided for $19 billion for school lunches; $8 billion in assistance for nursing and pregnant women, infants, and children; and $12 billion in supplemental assistance for new nutrition initiatives.16 The $112 billion consumer package now constitutes the core of USDA’s budget, and not surprisingly, its size and prominence are making the traditional farm constituencies extremely nervous. As discussed subsequently, nutritional costs now seriously threaten the rural-urban political coalition that has been necessary to pass recent Farm Bills.
Adding Up the Bill
Some pundits refer to farm legislation as a feed trough. Our preferred metaphor is a cake, which in 2012 represented a multi-layered pastry valued at a whopping $145 billion. Figure 4.2 shows an extremely large portion consisting of nutrition and consumer services. Farm payments—direct, deficiency, and counter-cyclical—form a much smaller second layer. Conservation activities provide an even smaller third ring. And it is important not to forget the icing. Tucked into the language of the thousand-plus pages of the Farm Bill are significant benefits for numerous smaller groups and special interests.
U.S. Biofuels Policy
Carrying the dessert analogy one step further, there is ice cream on the “farm plate” as well. Government support for crop-based biofuels lies largely in the (p.100) domain of energy legislation but it also falls within the Farm Bill.17 It has been a transformative policy in terms of raising crop prices and land values, altering trade, strengthening rural economies, and rebalancing several important programs within food and agriculture legislation.
The partnership that formed in the early 2000s between the agricultural and energy agencies on biofuels policy was consistent with several developing conditions at the time (Naylor 2014). First, with large crop surpluses and low agricultural prices at the turn of the century, policymakers in both the executive and legislative branches were looking for pathways to support rural communities without the burden of huge crop subsidies. Using more corn to fuel cars in a rapidly growing economy was one method of removing surpluses and boosting prices. At the same time, the Second Gulf War served as a stark reminder that the United States needed to wean itself from foreign crude oil sources, especially those associated with rogue governments. Increased recognition of climate change stemming from greenhouse gas emissions presented yet another rationale for moving away from fossil fuels.
Recent biofuels legislation had been built on a history of tax exemptions for production and tariffs (taxes on imports). But the fundamental policy shift was the introduction of mandates for the use of biofuels in transportation—the Renewable Fuels Standard (RFS)—via the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 (as discussed also by Lobell and colleagues in Chapter 9). The impacts of biofuels legislation on crop prices, trade, and cropped area were impressive (Beckman et al., 2013). From 2004 to 2012, corn acreage increased 28 percent, mainly by the replacement of other (p.101) crops, such as soybeans, barley, oats, and sorghum, and by taking land out of conservation reserves. Corn prices rose from $2.42 per bushel to almost $7 per bushel during this period. At the same time, the amount of corn used for ethanol increased from about 1.2 billion bushels to about 5 billion bushels. Over 40 percent of annual U.S. corn use went to ethanol in 2012–2013, causing the U.S. share of global corn exports to decline significantly.
Biofuels policy interacts in interesting ways with farm subsidies, the crop insurance system, and nutrition assistance programs. Because counter-cyclical and marketing loan programs are linked to market prices, farm program payments decline when market prices increase. At the same time, the cost of administering the crop insurance program rises as the value of the insured crop increases, because insurance product premiums (subsidized heavily by the federal government) are directly connected to crop values. This dynamic helps to explain why the counter-cyclical and marketing loan programs have provided relatively little support to farmers since the establishment of the RFS, while the cost of the crop insurance program to taxpayers has escalated from $2 billion in 2000 to a record $14 bilion in 2012 (Shields 2012).
The combination of crop insurance and biofuels policy operates de facto as a new safety net for farmers. This producer safety net is matched with a hefty consumer safety net, as SNAP and other nutrition assistance programs are also valued according to current food prices. The decline in direct farm subsidies does not offset the rising cost of the RFS and SNAP programs in budgetary terms. Pitting farmers against SNAP recipients (largely an urban constituency) in a period of fiscal tightening left discussions of the 2013 Farm Bill in turmoil.
U.S. Farm Policy as Viewed Internationally
The structure of the U.S. economy has changed dramatically over the past 100 years, with the agricultural sector declining rapidly in relative importance. This same phenomenon has occurred in other developed countries, including those in the EU, as Johan Swinnen describes in Chapter 5. It is thus instructive to see how varying nations have dealt with their relatively diminished agricultural sectors in terms of policy, and what the spillovers from these policies have been for global food security.18 Three questions seem crucial: How much support do farmers receive via domestically oriented policies? How much protection does each country accord its rural sector through international trade policy? And, how is international food aid used as a part of both domestic and international food and farm policy?
When viewed separately, it is easy to conclude that U.S. governmental efforts to assist agriculture have been massive. But viewed in comparative perspective, the support to U.S. farmers appears more modest.
Each year the Organization for Economic Cooperation and Development (OECD)—a grouping of 34 developed countries—calculates various measures of agricultural support for all of its member nations. Using a methodology that is consistent across countries and through time, the OECD provides the most reliable agricultural policy data that are available. The support estimates are broken down by commodity and by various support categories that include product subsidies, input subsidies, and direct payments. These components are summed to provide estimates of total support and the percentage of total farm income that is due to transfers to producers from consumers and the government (OECD 2012). The latter are referred to as producer subsidy equivalents or PSEs.
Box 4.3 summarizes recent comparative data. Interestingly, both the EU and Japan exceeded the total levels of U.S. support to farmers in 2010. In terms of percentage support, only Australia and New Zealand were lower. National differences in support measures notwithstanding, Box 4.3 underscores the widespread global problem of what happens to and for agriculture at upper ends of the development spectrum. The scale of annual global support to agriculture in developed countries reached a gigantic $241 billion in 2010.
Two additional sets of comments are relevant. In terms of the commodity composition of support, the United States is quite diversified. Relative to Japan and Korea, where much of the support goes to rice farmers, U.S. subsidies are more evenly spread across wheat, corn, and milk producers. Second, the estimates shown in Box 4.3 for 2010 are significantly different from those for a decade earlier. Support estimates are made relative to world prices. Since world prices for key commodities have risen, especially since 2005, markets have helped to relieve the cost of the policy “burden” in the United States and other countries. For OECD countries as a whole, the PSE dropped from about 35 percent to 20 percent between 2000 and 2010 (OECD 2012). Even with the lower PSEs, however, it is easy to understand why countries with low levels of support, such as Brazil and Australia, complain bitterly about not having a level playing field for their farmers.
The Magnitude of Trade Barriers
One axiom of food policy analysis is that domestic and trade policies are closely related. If a country attempts to keep the domestic price of a commodity significantly above the world price it will no doubt attract imports of that commodity unless some form of tariff (a tax on imports) or other trade restriction is put (p.103) into place. Those restrictions generally reduce imports and hurt the economies of countries that would otherwise have exported the product. Trade and trade policy thus become integral parts of food and agricultural policy, and are major factors in how food policy activities in one country influence food security in others.
The United States is the world’s largest exporter of agricultural products. In 2012 American agricultural exports exceeded $135 billion.19 Maize, wheat, soybeans, and cotton topped the export listing. That year, agricultural exports comprised almost one-third of total farm earnings. The United States is also a very large importer, with agricultural imports in 2012 totaling slightly more (p.104) than $100 billion. In value terms, tropical fruits, beer, sugar, and beverage crops such as coffee and tea were among the most important imports.
From the perspective of trading partners, the tax on agricultural imports is a key policy variable. International efforts to reduce those tax and other barriers on all goods and services have long been the focus of the World Trade Organization (WTO). These negotiations take place in various multi-year sessions called “rounds.” Because agriculture has been such a politically sensitive sector, it was largely excluded from trade negotiations until the 1994 Uruguay Round and the more recent Doha Round. Global progress has been slow, though there have been some gains, especially in removing import bans and other types of non-tariff barriers. Overall, however, the reduction in trade barriers for agriculture has lagged those in manufacturing. For example, in 2011, the United States imposed average tariffs of 3.5 percent for all goods, but had average tariffs of 4.9 percent for agricultural products.20
Comparatively speaking, the U.S. agricultural tariff of 4.9 percent is quite low. The EU maintains an average 13.9 percent tariff on agricultural imports, and Canada, Japan, Switzerland, and Korea impose average agricultural tariffs of 18 percent, 23.3 percent, 43.5 percent, and 49 percent, respectively. Of the major advanced industrialized countries, the U.S. average rate is higher than only New Zealand and Australia, both of which apply an average tariff of 1.4 percent on agricultural products.
The pattern of American agricultural trade policy during the last few decades is one of broad—but not entirely consistent—commitment to reducing trade restrictions. Though recent American agriculture trade policies have mostly been aligned with the goal of advancing the free movement of agricultural goods into the United States, this record is punctuated by several protective actions such as the sugar and cotton programs.21 Because of these aberrations, the United States is frequently criticized for the negative effects of its domestic farm subsidies on freer agricultural trade.
Food aid is a third policy area where comparative perspectives are helpful. Since the mid-1950s, the United States has been the leading supplier of international food aid, almost always supplying more than half of the global total. During 1965, near the height of U.S. government-held surpluses, global shipments of food aid totaled about 20 mmt, with the United States supplying more than 18 mmt (Wallerstein 1980). By 1988, shipments had dropped to about 14 mmt with the United States supplying 8 mmt.22 And by 2011, the global total had fallen to less than 4 mmt, of which the United States shipped just 2 mmt. Food aid has seemingly gone out of fashion—perhaps in no small part because of U.S. procedures and regulations. The U.S. approach has differed substantially from that of other nations, and seems increasingly at odds with recommendations from the larger development community.
U.S. food aid has been criticized as inefficient, oriented toward domestic political interests over humanitarian needs, and incapable of contributing to sustainable improvements in recipient-country food security. Part of this critique stems from the fact that the U.S. international assistance program was designed originally to provide support to geopolitical allies, develop future markets for domestic agricultural producers, and serve as an outlet for surplus U.S. commodities (Barrett 2005). When President Dwight Eisenhower signed the program into law in 1954, he said the purpose of the legislation was to “lay the basis for a permanent expansion of our exports of agricultural products with lasting benefits to ourselves and peoples of other lands.”23
Part of the decline in U.S. supplies arose from sourcing difficulties. By law, the vast majority of food aid funding must be used to purchase U.S.-grown commodities; moreover, 50 percent of the volume of commodities financed through the program must be shipped on U.S.-flagged vessels, and 25 percent of any “bagged” food aid must be handled by Great Lakes ports (Bageant et al. 2010; Hanrahan 2014). As a result of having to ship bulky commodities from the United States, very significant amounts of funding are used to transport food across the world (Bageant et al. 2010). Most other countries, by contrast, do not require the purchase of domestic commodities shipped on domestically flagged carriers. Instead, they often deliver aid in the form of cash and purchase food from within the destination region if at all possible.
Rising agricultural prices have also taken their toll on food aid shipments. Since the U.S. government no longer has physical stocks of grain, it must go to the market to purchase the cereals and other commodities to be shipped as food aid. The congressional authorization, however, is for a given dollar amount, (p.106) not for a specified tonnage. This arrangement has had a rather cruel effect: the higher the prices for grain—and therefore likely the time of greatest need for food aid—the lower the quantities of food aid that can be provided (Figure 4.3). Because the tonnages have become so low, about 80 percent of food aid funding over the past decade has been provided for emergency relief, even though the legislation indicates that three-fourths of it should be used for longer-run development activities. Finally, a number of humanitarian organizations have strongly criticized the monetization of food aid for project purposes.24 This has caused one major relief agency, CARE, to withdraw from using U.S. food aid. CARE argues that monetization is inefficient, causes commercial displacement that harms traders and local markets, and undermines the development of local markets.25
(p.107) Donor country attitudes toward food aid and to agricultural assistance seem recently to have changed. The food riots that emerged in many countries throughout the world in 2007 and 2008 brought new awareness of the geopolitical risks of food insecurity and resulted in high-level vocal support for agriculture development assistance. At the June 2009 G8 Summit in L’Aquila, Italy, the United States pledged $3.5 billion over three years to a global hunger and food security initiative to address hunger and poverty worldwide. The United States launched an initiative called “Feed the Future” intended to focus the attention of the U.S. government on longer-term investments in international food security. The U.S. initiative is part of a global pledge by the G20 countries and others of more than $22 billion. It remains to be seen whether Congress will provide the significant new food-related resources requested for this initiative, and whether the Feed the Future program can serve as a corrective for the inattention and lack of coordination of foreign agricultural assistance of the past twenty years. We remain skeptical.
Nonetheless, a new bipartisan bill, the Royce-Bass Food Aid Reform Act (H.R. 1947) was presented on Capitol Hill in June 2013, with the intention of improving the efficiency of food aid shipments from the United States and substantially reducing costs. Specifically, the bill sought to eliminate the U.S. procurement and cargo preference requirements and the practice of monetization. It also sought to align non-emergency food aid with the Foreign Assistance Act of 1961. Although it represented a major reconfiguration of historical food aid legislation—from an emphasis on the shipment of U.S. farm commodities to the transfer of cash—it only narrowly failed to pass in the House. In any event, fiscal conservatism seems to forestall any real attention toward food security as a national security concern (a topic discussed by Stephen Stedman in Chapter 13). Whether significant revision of food aid legislation can succeed on Capitol Hill in the near future remains to be seen.
Institutional Dynamics Affecting U.S. Farm Policy
What factors have led the United States to prioritize policies supporting domestic farm incomes and ensuring broad access to nutrition nationally, as opposed to internationally? The United States has far-reaching interests in every region of the world, and food security—or its absence—can affect those interests by altering prospects for development, political security, and political relationships. Why, then, has the United States failed to establish an effective foreign policy agenda or lead an international effort in support of global food security? Even at the national scale, American farm policy is rife with inefficiencies and apparent contradictions in terms of domestic food and nutrition security. What are the political processes at work within the legislative and executive branches (p.108) of government that perpetuate the influence of special interests and make farm policy so difficult to change?
The Power Structure
Food and agriculture policy in the United States is shaped primarily at the federal level. Congress dominates the policy process—it reauthorizes the Farm Bill approximately every five years, it creates national energy policy, and it provides appropriations for farm, food, and international assistance programs. Legislative power is concentrated in the hands of regionally skewed authorizing committees in the House and Senate, whose members represent domestic producer, consumer, industry, and trade interests. Closely connected, the U.S. Department of Agriculture (USDA) is given broad authority by Congress to implement the Farm Bill. As a result, the USDA oversees a wide range of activities including commodity program supports, crop insurance and disaster relief programs, agricultural research and training, nutritional programs, and many other aspects of farm legislation.
The other components of the executive branch that interact with food and agricultural policy, by contrast, are only loosely coordinated, and policymaking responsibility for food security is diffuse. National and strategic issues with foreign policy imperatives are typically coordinated by the White House, in particular the National Security Council and National Economic Council. For most administrations, agriculture has not been treated as a high enough priority to warrant presidential attention given the many other significant demands of the office. Moreover, there is no single high-profile official within the executive branch with responsibility for overseeing food security policy from a national security perspective. The limited attention that policymakers do devote to food and agriculture tends to be focused on domestic concerns, and particularly on regions where agriculture plays a prominent role. As discussed earlier, the Secretary of Agriculture (a political appointee), in coordination with the White House, often plays an important role in motivating agricultural legislation and implementing policies established by the bills passed by Congress (Merrill and Hickman 2001; Winders 2009).
The Legislative Branch
The Congress works predominantly via a well-defined set of committees and subcommittees. These committees help shield the full legislative chambers from having to learn all the intricacies of particular policies. Additionally, they permit senators and representatives who care about policies for a specific sector, such as agriculture, to focus their energies on particular bills (Weingast and Marshall 1988; Krehbeil 1991). For better or worse, this specialization also permits these groups to exercise outsized policy influence unless offsetting (p.109) pressures develop; for example, when there is widespread public opposition or an issue-oriented political movement.
The House and Senate agricultural committees thus hold the dominant position in U.S. farm policy. Members of these committees draft the periodic reauthorization of the Farm Bill—a process that requires many months of public hearings around the country, followed by lengthy amendment processes and deliberations in closed committee settings and in open debates on the floors of the Senate and House. Congress typically delegates considerable power to legislative committees if their jurisdiction (in this case, agriculture and food) elicits particularly intense concern from certain regions of the country (Weingast and Marshall 1988). Hence the House and Senate agricultural committees are largely composed of representatives from regions where program commodities are grown—and where Farm Bill payments are concentrated—including the Corn Belt, Southeastern Coastal Plain, Lower Mississippi, and California. These representatives work in a system responsive to concentrated interests, ranging from the American Farm Bureau Federation to commodity associations to large agribusiness. Because of their focus on farm incomes, they often demonstrate dissimilar political views relative to lawmakers from other parts of the country (Winders 2009). Congressional representatives from large urban areas and domestic nutrition interests are also on the committees, mainly to protect low-income consumer constituents.
Though enormously powerful in matters of food and agriculture, the House and Senate agriculture committees are not the only players on Capitol Hill in this space. The agriculture appropriations subcommittees in the House and Senate allocate discretionary funding among food, agriculture, rural development, and conservation priorities. Environment and energy committees (e.g., the Environment and Public Works Committee and the Natural Resources Committee within the Senate, and the Energy and Commerce Committee within the House) help craft energy legislation, including the Renewable Fuels Standard. Other key congressional committees cover the domains of health (including food safety), public finance, infrastructure, trade, food aid, and other forms of foreign assistance. Primary control of the Farm Bill, however, still rests with the agriculture committees in the House and Senate—a structure that reinforces a tight cycle of policy outcomes begetting political representation begetting entrenched policy outcomes.
A classic illustration of this entrenchment occurred in January 2013. At that time a new Farm Bill was being contemplated, in which the program of direct payments to farmers was presumed likely to come under attack from senators wishing to cut budgets. This prospect led to a mini-revolution within the group of agriculturally oriented senators. Senator Thad Cochran from Mississippi, first elected to the Senate in 1978, invoked his “right” of seniority in the Senate to displace Senator Pat Roberts of Kansas as the ranking (p.110) Republican member of the Senate Committee on Agriculture.26 Despite much flowery rhetoric, the timing and purpose of the displacement seemed obvious. As the ranking member, Cochran would have power to help guide the agricultural legislation, thereby protecting the rural interests of his region. (Cochrane’s power to influence agricultural legislation was enhanced further by his membership on two other powerful senate committees—Appropriations and Rules.) More specifically, he hoped to retain direct payments in the Farm Bill because of their relative importance to southern farmers. Direct payments per acre for the “northern” crops were quite small, and of less concern to Roberts, whereas for the “southern” crops of peanuts and rice, farmers received payments of $46 and $96 per acre (Ifft et al. 2012). Cochran’s new Senate role could thus be seen as a straightforward move designed to help protect Mississippi’s interests.
Lobbyists also play important roles in the legislative process. During the debate on crop insurance, for example, the insurance industry lobbied senators aggressively and outmaneuvered the advocates for reform. One senator ruefully approached a group of legislative staffers and was heard to say, “You had better watch out for angry crop insurance agents when you return home to visit your state!”
In addition to the committee structure, there are procedural elements of the legislative process that make significant reform difficult to achieve. The enactment of legislation under the Constitution requires passage by both chambers of Congress in identical form and the signature of the president. The Senate has complicated this process by developing a norm of operating behavior that requires super-majority approval; for most pieces of legislation to pass, at least 60 (of the 100 total) senators must support the bill in order to prevent the minority from blocking legislation using a technique known as the filibuster (the extension of debate through long-winded monologues that can delay or entirely prevent a vote on an issue on the Senate floor).27 This procedural mechanism is often defended on the rationale that it helps to promote compromise within the Senate, but it also slows the pace of legislation and enables legislative minorities to obstruct the policy process. Moreover, with two senators elected to every state (as opposed to representation in the House, which is proportional to each state’s population), power in the Senate is biased in favor of states with (p.111) relatively smaller populations—states that often reflect greater reliance on agriculture as a total portion of state-level GDP.
These various procedural elements favor rural interests and make it difficult for the Congress to change laws or introduce controversial policies relative to those interests. Even the regulatory process makes it hard to change how existing legislation is implemented. Complicated and far-reaching rules—typical of much agricultural legislation—require review and approval by the Executive Office of the President. Once rules are approved, they are subject to an elaborate process of judicial review that can result in the invalidation of many regulatory changes. As a result, it is often difficult for an agency to execute policy changes involving agricultural supports or energy-related agriculture programs even if there is a change in how the majority of representatives views its policy priorities.
The Executive Branch
The presidential veto assures an executive role in the bargaining process over food and agriculture policy, though not necessarily one prominent enough to create fundamental changes in the regionally oriented nature of legislative action on agricultural issues. The President has the largest bully pulpit in terms of setting the legislative agenda, particularly through the yearly State of the Union address and the annual submission of the Presidential Budget. Often the White House also drafts and submits legislation or legislative ideas for Congress to consider. Legislative drafting relies on technical assistance from agencies such as USDA, which gives the executive branch bureaucracy a further opportunity to shape agricultural policy. For these reasons, executive branch priorities can help determine whether domestic food and agriculture priorities are tempered by international concerns. For example, under the administration of President Barack Obama, officials within the State Department, the U.S. Agency for International Development (USAID), USDA, and other agencies have sought to craft a more nuanced position on global food insecurity.28 Although such interagency coordination is possible and reflects a genuine policy concern over global hunger, most activities related to food and agriculture within the executive branch have historically tended to support the more familiar domestic issues of farm incomes, rural development, and U.S. nutrition assistance.
(p.112) The U.S. Agriculture Secretary is the preeminent cabinet-level decision maker on food and agriculture, and as discussed earlier, has historically set the stage for domestic policy design and implementation within each administration. The Foreign Agricultural Service attempts also to gather data and influence some aspects of international agricultural policy. Nevertheless, the Agriculture Secretary does not participate fully as a so-called “principal” in the National Security Council. As a result, the decisions of the Agriculture Secretary are less subject to pressures and inter-agency scrutiny than are other agencies with shared domestic and international roles, such as Justice, Treasury, and Homeland Security—all members of the National Security Council with oversight from Congressional committees that have strong international interests.29 By contrast, the USDA is not charged with explicit statutory responsibility to manage international food security concerns; the absence of international focus is how Congress designed the agency, and essentially how the executive branch has left it. A similar situation exists with the Department of Energy (DOE); neither DOE’s mandate nor its structure favor concern about the international food security implications of federal efforts to encourage the development of biofuels. By the same token, agencies such as State, Defense, and USAID have reasons to care about international food insecurity—reflected in their institutional structure and their congressional overseers—but have no mechanisms through which to influence core features of domestic agriculture or energy policy that are likely to affect global food supplies and prices.
Collective Action and Coalition Politics
A constellation of non-profit organizations, trade associations, commodity organizations, think tanks, consultants, diplomats, and other lobbyists seek to influence the various elements of the policymaking process through financial and technical support and political persuasion. They represent a broad range of special interests that includes traditional commodity producers, food manufacturers, anti-hunger advocates, environmental protection groups, and energy production companies. In 2011–12 leading up to the latest presidential election, the agribusiness sector contributed more than $90 million to election campaigns.30
(p.113) The establishment of special interests in American agricultural and food policy reflects what Mancur Olson identified as a “collective action” problem: the less a particular policy mobilizes the mass public across different regions of the country, the more it is driven by organized interests competing over policy outcomes within institutions (Olson 1971). The collective action problem is diminished when majorities emerge in support of policy changes that would eliminate or reduce benefits enjoyed by narrow and concentrated interests. Often, majority-supported positions fail to win in the legislative process because the costs of organizing a dispersed majority are very high, and the prospective gain that any individual within the majority can achieve is very low.
Entrenched support for crop insurance and farm subsidy programs—two major components of successive Farm Bills—illustrates this dynamic. While a majority of knowledgeable policymakers may support reforming these programs in order to reduce budget costs or improve income distribution, the gain to any individual reform-oriented lawmaker (or for that matter, any single taxpayer) is likely to be relatively low. On the other hand, the lost benefit to farmers and crop insurance agents resulting from such policy reform is likely to be very high, resulting in vast disparities in efforts to influence the public debate and legislative process.
The force needed to counter-balance concentrated interests—broad public salience capable of mobilizing voters across regions—has existed in the past, but currently there is much less. During the New Deal period, for example, congressional representatives showed enormous interest in using agriculture policy to address the rural population’s exposure to economic risks; the larger public, meanwhile, viewed agriculture policy as a matter of intense national concern. During that era, agriculture was responsible for a much larger share of employment and economic activity. Today, however, with few Americans employed directly in agriculture and less than 2 percent of GDP coming from agriculture, the continuation of New Deal-type farm subsidies resembles a classic collective action problem where the greatest pressures shaping the debate come from organized, concentrated, and entrenched economic actors.
There is another important reason why reform-minded lawmakers may steer clear of challenging entrenched agricultural policies— “logrolling,” or the exchange of political favors.31 Members of Congress often trade votes in order to achieve reciprocal advantage; this practice persists with respect to both the content of particular bills and to the organization of Congress itself. Logrolling especially helps senior members of Congress32 who can leverage their seniority positions by voting in favor of each other’s issues.
(p.114) Arguably, the Farm Bill represents the most prominent example of logrolling and coalition politics in American food and agriculture policy. It exists in its present form largely as a result of the long-standing cooperative arrangement between supporters of domestic nutrition assistance and supporters of domestic farm subsidies in the context of the passage of the Farm Bill. This dynamic has generally entailed an informal understanding whereby members of Congress who support domestic nutrition assistance either vote in favor of, or remain silent on, proposals to subsidize farmers, as long as domestic nutrition assistance programs are also funded adequately. In order to ensure the passage of a bill on either farm subsidies or nutritional assistance, both must be included in the same legislation. The Farm Bill is thus an omnibus piece of legislation requiring the support of both constituencies. What makes this piece of legislation particularly interesting is that the nutritional assistance component provides a safety net for low-income consumers, particularly in times of high or volatile food prices caused in part by agricultural policies like the corn-ethanol program. The convergence of special interests around the omnibus Farm Bill creates a peculiar equilibrium in U.S. food and agricultural policy that is extremely difficult to disrupt.
The coalition between these two very disparate communities around the Farm Bill encourages mutually supportive policy decision making. The process actually works reasonably well under favorable economic conditions, but less well when the growing federal debt and deficit reduction are on the minds of lawmakers, or when political polarization becomes sufficiently widespread to complicate bargains across regions or political parties. The imperative to reduce fiscal deficits—a point of great debate under the Obama administration—limits the amount of money that can be spent through the Farm Bill, placing stress on its “grand coalition.” The tightening of available funds encourages each side to seek the best deal they can get individually, regardless of the outcome for the other. The recent weakening of coalition politics and heightened partisanship pertaining to domestic agriculture and nutritional support was almost certainly the cause of the House of Representatives (failed) proposal in 2013 of a Farm Bill without nutritional assistance.
There are two other features at work that diminish the importance of the farm support and food-stamp coalition. The first of these has to do with the economic demography of the country. The agricultural work force has become much smaller than during the first half of the twentieth century; moreover, a sizable portion of that workforce is composed of recent minority immigrants whose politics and interests are different. In addition, new and different critical issues are entering the debate. Genetically modified organisms (GMOs), climate change, and obesity are all examples of hot-button issues that tend to generate political (p.115) support along non-traditional party and regional lines.33 Perhaps a combination of these forces will be able to alter the status quo on food-related political coalitions, although the outcome from any such shift is far from certain.
Conclusion: Food Security Implications of U.S. Policy
With its vast resources and long history of agricultural investments, the United States plays a dominant role in international markets, and its farm policies directly influence global food supplies and prices. For decades following World War II, when direct and indirect farm supports fueled domestic crop surpluses, the United States contributed to rising food supplies in international markets at relatively low prices for importing nations. Real (inflation-adjusted) prices for corn, wheat, and soy in global markets declined on trend throughout most of the second half of the twentieth century as shown in Figure 4.4. (An exception occurred in the early 1970s when the combination of high energy prices, agricultural supply disruptions, and shifting policies in the Soviet Union caused a major food price spike.) As a result, U.S. farm policies enhanced global food availability and access, and hence food security as defined by short-run affordability. Over the longer-term, however, surplus production in (p.116) the United States, EU, and other industrialized countries created disincentives for agricultural investments in many developing countries. With the vast majority of the world’s poor population concentrated in rural areas of the developing world, lagging agricultural investments translated into low farm incomes and persistent food insecurity in many impoverished regions.
American food aid policy was used in the post-War period to address chronic food shortges in several countries—and more cynically, to increase demand for U.S. farm commodities (Barrett 2005; Riley 2015). However, it also led to a dependence on imports from the United States at below market value, and thus did not solve the longer-run problems of rural poverty and food insecurity. Since the end of the Cold War, U.S. food aid has been aimed increasingly at disaster relief, and only in recent years have political discussions focused on the provision of cash instead of U.S. crop surpluses for food aid. Nonetheless, total food aid shipments remain quite small relative to the chronic shortage of calories and nutrients experienced by over 800 million poor people globally. In essence, food aid addresses short-run famines, not chronic hunger or economic development over the long run.
The direct and indirect effects of U.S. policy on global food prices and food security generally have also taken a significant turn since the establishment of the Renewable Fuel Standard and the escalation of corn-based ethanol production in the mid-2000s (Naylor 2014). Between 2011–2013, over 40 percent of U.S. corn use was devoted to ethanol, more than the share that has gone to livestock feeds. U.S. corn exports fell as a result, particularly relative to other corn producers in the international market, and international prices have remained robust (albeit variable given weather shocks and fluctuations in global feed demand). The impacts on global food security have been mixed: net producers (farmers selling more to the market than they are buying for home consumption) benefitted, while net consumers have suffered from high and unstable prices (Naylor and Falcon 2010). Over the longer term, a high price environment favors agricultural investments that potentially help food security in agrarian economies (Swinnen 2012).
In some ways, the United States has been insulated from the effects of its own policies on food security because of its vast consumer safety net. In other ways—particularly via budget expenditures on SNAP and other nutrition programs—domestic food security is tied directly to U.S. agricultural policy. Despite large expenditures on these programs, one in six American households were classified as having “very low food security” in 2011, and food insecurity increased in most states over the previous decade (Coleman-Jensen 2012, 2013). With the prolonged recession and increasing economic inequality, SNAP payments often fall short of feeding low-income families adequately. And despite major budgetary costs, child nutrition programs fail to cover many children in need, especially outside of school hours. The nutritional quality of these programs is also often inadequate (Pringle 2013).
(p.117) Domestic nutrition problems related to U.S. farm policy extend far beyond school lunch programs. The focus of agricultural policy on “program commodities” (especially corn, soybean, wheat, rice, peanuts) as opposed to vegetables and fruits has limited crop diversity (in terms of area) and has contributed to greater amounts of starch, meat, and high-fructose corn syrup in American diets. The public health impacts of food policy have become increasingly important with more than one-third of the U.S. population classified as obese, and with medical costs associated with obesity nearing $150 billion in 2008 (Centers for Disease Control and Prevention 2008). Moreover, processed foods are consumed worldwide, and American-style diets have become common in a wide range of countries. As noted in Chapter 1, many developing countries now experience more obesity than hunger.
Although many features of American agriculture policy are deeply entrenched, this domain is far from static. Changing demographics will almost certainly affect the priorities of political leaders in the decades to come. The number of commercial farmers in the United States continues to decrease and is much smaller than it was 50 or even 30 years ago. Demographic shifts may also affect the priorities of those who sit on the powerful House and Senate agriculture committees. These changes could potentially reduce the power of the committees relative to the general chambers or congressional leadership, especially when it comes time to consider policies affecting food prices, environmental benefits, and anti-poverty assistance. The likelihood, however, is that these changes will be both slow and marginal.
The institutions that have long held American food and agriculture policy in place are also beginning to respond to developments in still other domains. Fiscal constraints are already beginning to reshape long-standing agricultural subsidies, and budget pressures are increasing the power of those legislative committees that govern budgets and appropriations relative to those with substantive jurisdiction over food and agriculture. Rising interest in confronting the challenge of climate change (as discussed further by Lobell and colleagues in Chapter 9) and reducing the negative health impacts and medical costs of childhood obesity may create new political pressures and constituencies that impact the future direction of food policy. While global hunger remains primarily a humanitarian issue, a changing foreign policy context may raise the profile of broader security challenges posed by countries with greater vulnerability to food price fluctuations within the security establishment of the United States and other developed nations.34 (However, the full inclusion of food security into national security is still unlikely, as discussed by Stedman in Chapter 13.) No doubt institutional (p.118) factors such as the apportionment of the Senate—two senators per state no matter its population—will slow the impact of these changes, and contribute to the continuing entrenchment of some long-standing policies. Still, the structural changes now underway may eventually lead lawmakers and executive branch officials to contemplate modest reforms in executive branch organization, including a revamped National Security Council incorporating USDA, to give food and agriculture their rightful place in discussions of foreign policy issues.
The question for the United States and other advanced industrialized countries is whether any such development will allow the closer alignment of domestic and international concerns that will be needed to improve the prospects for global food security. Most critics of U.S. farm policy focus on specific policy measures that need adjustment. Perhaps they should focus instead on changing the political process that underpins farm policy, which itself has deep roots in U.S. agricultural history.
Coda. On February 7, 2014, President Barack Obama signed the Agricultural Act of 2014. The new legislation made a number of changes, but it was mainly a continuation of earlier approaches described here. In the end, a bipartisan coalition between farm and food stamp supporters continued to hold; 80 percent of projected future expenditures were directed towards nutritional programs; conservation activities were more or less maintained; direct and counter-cyclical payments were abolished, with their risk-reducing objectives covered mainly by expanded use of subsidized crop insurance; and dairy farmers were given a new package of support that protects the margin between the sales price of milk and the cost of feed. Total outlays for the years 2014–18 are projected at $489 billion. For more detail on the 2014 Farm Bill, see http://www.ers.usda.gov/farm-bill-resources.aspx.
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(1) In 1975, the USDA and the Census Bureau defined a farm as a place from which there are sales of agricultural products of more than $1,000. This definition gives rise to a great many part-time farmers. Defining a full-time farmer is arbitrary, though gross sales of greater than $250,000 is one frequently used metric. A sale’s definition also underscores the important difference between “farm income” and “income of farmers,” the latter including income from off-farm employment. These concepts are frequently confused in the literature. For more details, see O’Donoghue and Hoppe (2009).
(2) A second Morrill Act of 1890 created land-grant institutions for minority groups under the then-prevailing doctrine of separate-but-equal.
(3) Numerous other countries have attempted the land-grant model, but interestingly, few have achieved great success with the U.S. model. The extension component, in particular, has often proven to be the weak link.
(4) The Agricultural Adjustment Act of 1933 went through a series of iterations in the 1930s, having been deemed unconstitutional by the Supreme Court in 1936 for levying taxes on processors to support farm incomes. The Agricultural Adjustment Act of 1938 shifted the financing burden onto taxpayers but otherwise kept much of the program content intact. The 1938 Act is considered part of “permanent law” for commodity programs and farm income support (along with the Agricultural Act of 1949, described later). If current legislation under the Farm Bill expires and is not renewed by Congress, the law reverts back specifically to these earlier Acts.
(5) Providing subsidies based on historical acres rather than on current production has a curious but important logic. As part of the international trade negotiations on agriculture, countries have agreed to “decouple” subsidies from current production lest the subsidies induce ever greater production.
(6) The crop insurance provisions are complex and detailed. See Shields (2012) and USDA “Risk Management Policies” http://www.rma.usda.gov/policies/ for various definitions and rules.
(7) For example, a farmer growing corn might have a historical yield record of 4 metric tons (mt) per acre. At 75 percent coverage, the insurance company would indemnify any actual yield of less than 3 mt per acre.
(8) In addition to the crop insurance program, the federal disaster relief program provides ad hoc assistance in the wake of weather disasters like droughts and floods. From 1995 to 2012, the federal disaster relief program alone provided more than $22 billion to farmers and ranchers.
(13) See University of Wisconsin, Institute for Research on Poverty, “How is Poverty Measured in the U.S.,” http://www.irp.wisc.edu/faqs/faq2.htm. The congressional choice of the multiple “three” indicates that Congress believes that Americans, even poor Americans, should spend no more than 33 percent of their household income on food. If Congress felt that 50 percent were an appropriate amount, the multiple would be two, and many fewer people would be below the poverty line. Interestingly, in most poor countries the poverty-line calculation assumes that 80 percent would be spent on food, making the multiple equal to 1.25.
(14) Income eligibility is also defined at 130 percent of the poverty line in terms of gross incomes of families. A series of allowable deductions result in the net-income definition of 100 percent of the poverty line previously used in the text. See USDA, “Supplemental Nutritional Assistance Program Eligibility,” http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm.
(17) The Farm Bill component of U.S. biofuels policy (Title IX) covers a variety of initiatives that include, for example, biorefinery assistance, support for advanced biofuels, rural energy programs, infrastructure development, and biomass-based biofuel R&D. The budget expenditures ($320 million) are small relative to the other tiers of the Farm Bill shown in Figure 4.2 and fall into the “other” category. For a cogent summary of the Energy title of the Farm Bill, see: http://future.aae.wisc.edu/publications/farm_bill/9_Energy_Final.pdf. Accessed July 3, 2013.
(18) See also C. P. Timmer (2009), “A World Without Agriculture,” http://www.aei.org/article/ foreign-and-defense-policy/international-organizations/economic-development/a-world-without- agriculture-outlook. Accessed July 10, 2013.
(20) The averages reported here are the “simple average” summary rates published by WTO (WTO, “World Tariff Profiles,” http://www.wto.org/english/res_e/booksp_e/tariff_profiles12_e.pdf). Readers should be aware that there is a vast literature on how best to measure “average” protection. While it is easy enough to describe precisely the tariff for a single commodity for a given country, countrywide averages depend on weights given different commodities. For example, protection measures depend in part on how specific “commodity bans” on imports are included in the calculations. Similarly, tariff preferences that apply to some, but not all, trading partners complicate computations, as do “tariff-rate” quotas, whereby a certain quantity of a product enters at a low tariff rate, but quantities about the quota face much higher tariffs. Differing assumptions about how best to calculate averages lead to different countrywide measures of tariff protection. In general, however, the various methods lead to relative rankings among countries that are quite similar.
(21) Brazil, for example, brought a challenge through the WTO dispute settlement mechanism against several elements of the U.S. cotton program. Brazil argued that U.S. cotton payments under the Farm Bill seriously distorted international cotton trade. (See Andersen and Taylor 2009.) After many years of appeals and negotiations, the challenge led to a settlement in which the United States provides $147.3 million per year to a newly created fund called the Brazilian Cotton Institute.
(22) See World Food Program, “Food Aid, Quantity Reporting,” http://www.wfp.org/fais/reports/quantities-delivered-two-dimensional-report/chart/year.
(24) If permitted by the agreement with the recipient country, donated food-aid commodities may be sold into local or regional markets and the proceeds used to finance local development projects. This process is called “monetization.”
(25) See Government Accountability Office, “Local and Regional Procurement Can Enhance the Efficiency of U.S. Food Aid, But Many Challenges May Constrain Its Implementation,” http://www.gao.gov/new.items/d09570.pdf.
(26) Roll Call, “Cochran Brings Southern Perspective to Senate Agricultural Committee,” http://www.rollcall.com/news/cochran_brings_southern_perspective_to_senate_agriculture_committee-224199-1.html.
(27) The super-majority requirement in Senate has developed despite the absence of a filibuster requirement in the U.S. Constitution (Carpenter 2010). The practice traces back at least to the classical Roman Senate, where Senator Cato the Younger was a master of the tactic. Because the Roman Senate required that all debates and votes end by dusk, Senator Cato’s long-winded arguments would often prevent a vote from moving forward. The filibuster tactic has increasingly become a tool for political obstructionism within the U.S. Senate too. It has been used more frequently during the administration of Barack Obama than during any other time in U.S. history; for example, from 1917 to 1970, the Senate majority sought to close a vote 58 times, and since the beginning of Obama’s first term through 2012, it sought this “cloture” more than 250 times (Klein 2013, p. 24ff).
(28) The Obama administration introduced its Global Food Security Initiative in September 2009 in response to rising food prices in international markets, food riots in various countries, and persistent food insecurity (see http://www.state.gov/s/globalfoodsecurity/, accessed June 10, 2013). In announcing this initiative, Secretary of State Hillary Clinton observed: “Food security represents the convergence of several issues: droughts and floods caused by climate change, swings in the global economy that affect food prices, and spikes in the price of oil that increase transportation costs. So food security is not only about food, but it is all about security. Chronic hunger threatens individuals, governments, societies, and borders.”
(29) While these agencies are far from immune to domestic political pressures, they are embedded within an organizational context more favorable to foreign policy and national security concerns. That context makes it enormously difficult for Treasury, for instance, to ignore the implications of financial regulatory decisions to foreign policy or security goals involving economic sanctions or the disruption of terrorist finance (see Cuéllar 2003).
(30) The agribusiness sector includes crop, livestock, and meat producers; poultry and egg companies; dairy farmers; timber producers; tobacco companies; and food manufacturers and stores. Two-thirds of the contributions went to the Republican Party and one-third to the Democratic Party. For more details on political contributions in this and other sectors, see the Center for Responsive Politics, http://www.opensecrets.org/industries/. Accessed June 28, 2013.
(31) Logrolling is defined as the informal practice of exchanging favors in politics by reciprocal voting for each other’s proposed legislation and originates from the phrase “you roll my log, and I’ll roll yours.”
(32) Logrolling is most obvious in the Senate where 6-year terms allow legislators to serve for long periods of time and thus develop long-term political relationships.
(33) See Politics Daily, Tom Vilsack’s Farm Country Tour: A Different Kind of Town Hall (August 20, 2009) (describing the purpose of the Secretary’s “rural listening tour” as being “to hear about the problems facing farmers”).
(34) The $3.5 billion pledge by the United States. toward “Feed the Future” is one such positive example. The problem, however, is whether the pledge will be appropriated. And even if spent, the amount is tiny relative to international needs and to the total size of USAID and USDA budgets. (See U.S. Agency for International Development, Feed the Future: Progress Scorecard; June 2013.)