Thursday, March 20, 2008

And they don't cause obesity...

For many of you long-time readers, prepare to be dazzled by an atypical even-handedness on the topic of farm subsidies. First my post on subsidies and terrorism, and now this. While I never really bought into to DCP's-cause-fat-kids argument, neither did I defend our farm program from this charge.

The basic thrust of such assertions was that by subsidizing corn, HFCS was made cheaper and hence we all drank too much pop, and got fat. Over time, the anti-HFCS theory became a movement.

But as corn growers now loudly point out, the price of corn doesn't make food (much) more expensive, which in reverse means it can't really make food much cheaper either. Recently economists at UCD agreed, but with interesting collateral damage.
Compared with other factors, the policy-induced differences in relative prices among various farm commodities have played only a tiny role in determining excess food consumption and obesity in the United States. U.S. farm subsidies have many critics. A variety of arguments and evidence can be presented to show that the programs are ineffective, wasteful, or unfair. Eliminating farm subsidy programs could solve some of these problems, but would not even make a dent in America’s obesity problem.
Well, I think that sets the record straight. But as you might suspect, the researchers did find some tiny problems with our farm program (other than being "ineffective, wasteful, and unfair", of course).
The policy economics of the sweetener market raises some issues that merit some explicit discussion. Farm subsidies are responsible for the growth in the use of corn to produce high fructose corn syrup (HFCS) as a caloric sweetener, but not in the way it is often suggested. The culprit here is not corn subsidies; rather, it is sugar policy that has restricted imports, driven up the U.S. price of sugar, and encouraged the replacement of sugar with alternative caloric sweeteners.

Combining the sugar policy with the
corn policy, the net effect of farm subsidies has been to increase the price of caloric sweeteners generally, and to discourage total consumption while causing a shift within the category between sugar and HFCS. In this context, eliminating the subsidy policies would result in cheaper caloric sweeteners, and if anything more rather than less total consumption of sweeteners, with a switch in the mix back toward sugar.
The bottom line is a solid academic reaffirmation of our farm policy as having little effect on food prices, just which food we choose. In effect, you could say we need even higher sugar prices to make HFCS more expensive, and junk food less available.


Meanwhile what we do know is farm subsidies create discomfort among the recipients when the payments are revealed. The EWG introduced this transparency to the US years ago, and it has proven more effective than imagined at mobilizing formerly indifferent taxpayers (and especially media) into subsidy opposition.

Transparency is now easier than ever, whether by computer-crunched databases or cell-phone cameras. Our buddies in the EU are about to find out what happens when the payout list is an annual headache.
European Union governments will soon have to reveal to the outside world exactly how much they hand out in subsidies to their farmers from the EU's huge agricultural support policy, putting an end to years of secrecy.
By the end of April 2009, EU countries must publish an annual list of beneficiaries that get cash under the Common Agricultural Policy (CAP) and how much each one has received. At present, there are no rules to force EU governments to do this.
A vast support programme worth some 44 billion euros ($69.57 billion) a year, the CAP eats up close to half the entire EU annual budget.
The subsidy-heavy system is fiendishly complicated and has spawned dozens of studies that attempt to peer into its darkest corners.
EU countries will have to publish the full name, municipality and, if possible, postal code of all recipients on nationally-managed websites with a search tool to enable the public to see how much money each person or company received.
Cash amounts would be broken down in direct payments to farmers and other support measures, the European Commission said in a statement. The Commission, the EU executive, will also run its own website with internet links to each national site. "This is taxpayers' money, so it is very important that people know where it is being spent," EU Agriculture Commissioner Mariann Fischer Boel said. [More]
Your farm, like mine, may be miles from the nearest McDonalds, but trust me, it's on some radar somewhere. We need to get used to doing business in the noonday sun with everybody watching. It's not fun, but it's a definite trend.


Ol James said...

I do not have a problem with the Farm Subsidies at all. If the Consumer Bean Counters want to raise a ruckus. Let them take a look at Airlines, Real Estate Market, Wall Street, Banks, OOh the list just goes on.
If I were a betting man I would say the Airlines have gotten more than Farmers.
here's a little video ya might like:
it's sorta self explanatory, funny!!

Anonymous said...

John, this only problem I have with EWG and the transparency issue is that farmers are being singled out by this group and others who espouse their information.

Why do they not list the individual oil companies who receive government support, or other types of businesses who take these "subsidies"? Any type of industry who would be revealed as receiving this type of support would have the same detractors.

People need to remember that support of farmers is a matter of national security. We are already dependant on a foriegn supply of oil......

Just imagine: Where would we be if we suddenly found that a major part of our food supply was coming from other nations? You think $4.00 diesel/gas is bad, maybe consider a $4.00 loaf of bread.

John Phipps said...


I have heard this argument often in defense of subsidies. Actually those numbers are available, and usually can be parsed from financial statements of the companies.

Farm subsidies, like welfare payments and student aid are paid directly to individuals. Since our payments are not made based on a economic need, they are open to FOIA scrutiny, just like Chicago city garbage contracts (snicker). One reason farm payments are tracked therefore is simply they can be tracked to names, not organizations.

One thing decoupling did was to end any pretense of them not being an entitlement - something we get simply for having a pulse.

As far as food security I will post more on that soon, but some quick facts: two years ago we came very close to being a net ag importer. In other words, it could have been said the world feeds us, for once. I was waiting to see how farmers would spin that one.

Secondly, in some categories like fresh fruit I think we depend on other nations (mostly Latin America) for most of our food. We depend on Argentina and Australia for lean beef. And olive oil (without which you can't cook a hot dog nowadays) is the vast majority.

I am uncomfortable with wrapping the flag around farm policy as a last defense. If we assure Japan or Taiwan depending on us for feed grains and wheat is not a security issue, why is letting Mexican farmers grow what they can grow best and send it to us (keeping them at home, I might point out) such a bad thing?

Thanks for reading.

Anonymous said...

Hey Mr John, perhaps if there was a way for Farmers to have a line of red-tape. Just like a lot of the Non-Profit organizations do. You know the kind, when you investigate the money trail it will take a 20-Mule team of lawyers a few years to break the ice. By that time they will either forget what they were looking for or just lose interest. papaw used to say.." It's easier to hit a still target than a moving one."

Anonymous said...

I posted the EWG comment earlier. I appreciate your response. It is interesting that the crops you list as the US having to "depend on other nations (mostly Latin America) for most of our food" are commodities that are mostly least directly.

Whether it is food, oil, hubcaps, or ball point pens, the product will be made in the U.S. as long it is more profitable to make it here than other places. Subsidies help keep that happening.

I respectfully disagree with your underlying feeling that food production is not a national security issue. If for some reason we get in a fit with China and the national supply of sneakers is shut off, I am sure we can make due until we start producing them here....even if I have to go barefoot for 6 months. I am not as sure about that statement when feeding my family comes into play.

Funny how disruption of supply of such a little percentage of oil from rogue nations can throw our economy into such a tizzy. I can see the same thing happening with agriculture. It is my belief that economic terrorism will damage this country more irreparably than physical acts of terrorism.

John Phipps said...


Since we only subsidize 8 out of over 200 crops in the US, the linkage between importing and no subsidies is pretty weak. Also, one crop isn't even food - cotton. For the most part, we subsidize feed rather than food.

I would offer a better food security program would resemble a better national security program - make more staunch allies to trade reliably with. Farmers need to grow what they grow best (natural/competitive advantage) and we'll all be in a better position to feed the world together.

I agree we seem to overreact to physical terrorism, but frankly think we are overreacting to terrorism in general. The best response is to take reasonable precautions, and get on with business, IMHO.

Thanks for commenting.