Commodities: The Farm Bill
The term "farm bill" is seen by many as a synonym for "U.S. commodity policy." Indeed, the commodity title is an incredibly significant portion of the overall bill, accounting for a large percentage of the money it allocates. However, as much as newspapers, op eds, and politicians talk about commodity policy, very few understand the issue well enough to get on the right side of the debate.
If you haven't already read the page on this site about the history of commodity policy, please do so before continuing to read below. U.S. policy originated with the goal of ensuring a stable food supply and agricultural economy but over the years it's been twisted to provide an indirect subsidy to agribusiness while simultaneously harming farmers, consumers, and developing nations. Therefore, conceptualizing an ideal commodity title for the present requires one first grasp how we successfully implemented it in the past (and how it was co-opted).
The Goals of Commodity Policy
The most basic economics class tells that the optimal price and quantity for any product are found when the supply curve meets the demand curve. Produce too much and you have a surplus (with low prices). Produce too little, and you have a shortage (and high prices). In many industries, it's relatively simple for producers to correctly determine supply, produce the appropriate amount, and make a tidy profit as a result. Agriculture works a little bit differently.
As put by researcher Elanor Starmer, "You can turn off an auto manufacturing plant, but you can't turn off a cornfield." In an unregulated market, commodity growers always have an incentive to produce as much as possible. Simply put, this is because no single producer has the ability to significantly control prices or overall levels of supply, so the more they can sell, the greater their income.
Weather or other natural disasters may impact production in some years, lowering supply and ensuring high prices. Inevitably, other years will see bumper crops and prices below the cost of production - unless the government or some other entity intervenes with sensible commodity policy. Failure to help farmers weather years of low prices will result in increased consolidation as smaller farms fail and larger ones with deeper pockets purchase their land.
How To Translate This Into Policy
Currently, our commodity policy does not match very well with the goal stated above. Farmers who can produce more per acre receive more in subsidies, lowering the price overall. Furthermore, this policy encourages overuse of commercial fertilizer, with devastating environmental results.
To realign incentives with those that benefit our entire society, we can supplant a portion of commodity subsidies with conservation programs. To avoid overproduction, for example, we can provide incentives for farmers to not plant on land that is most critical for wildlife habitats. Or, we can pay farmers for land they keep in production provided they use sustainable techniques to farm it. These programs exist already but they are drastically underfunded and thus not available to enough farmers to replace commodity subsidies in any significant way.
Another reform, aimed directly at commodity subsidies, limits the maximum amount of subsidies a farm may receive (for example, limiting payments to $250,000 as proposed by Senators Chuck Grassley and Byron Dorgan). Small and large farms alike will be eligible for these federal government subsidies, but an amount like $250,000 will be far more meaningful to a small farm than a large one. The subsidy payment might make the difference between staying on the farm or not for a small farm. Note that studies repeatedly show that large-scale, industrialized farms are associated with increases in negative social trends (for example, increased crime or high school drop out rates).
Going even further than that, the government could even consider reinstating policies from the New Deal Era, managing supply and price to ensure farmers are paid fairly and the market is not overrun with cheap commodities. Of course, that runs counter with the goals of Big Ag, making it a politically difficult strategy to pursue.
Currently, politicians use biofuels promotion as a method of raising commodity prices as they simultaneously pat themselves on the back for supporting a form of renewable energy. While support for biofuels raises demand and prices for corn, ethanol is not a good alternative to oil as it requires a lot of energy (currently from oil) to produce it. Ultimately proposing cleaner alternative energies while implementing commodity policy designed to reduce supply while keeping prices above the cost of production are better strategies than backing ethanol.
Last, while commodity policy should not result in prices so high that we experience inflation or such that consumers cannot afford to buy food, it should keep prices high enough to pay farmers fairly for their work. A price to a farmer is like an hourly wage to a worker, so supporting fair prices is tantamount to supporting a fair minimum wage. The percentage of the retail prices of most foods in a grocery store that are paid to farmers (the "farm share") is low, and has been dropping over time. Raising commodity prices to a fair level and simultaneously increasing the farm share slightly need not result in price hikes for consumers.
In sum, Recipe for America hopes to see a Commodity Title that can stabilize natural fluctuations in price and quantity while simultaneously ensuring that farmers receive a fair price for their products.
More information
ABC News: Farm Groups Appeal to Congress for Crop Reserves (article)Ethicurean: The Enemy of My Enemy: Why a Bush veto of the Farm Bill is bad for the food movement (and the world) (blog entry) By Elanor Starmer, May 12, 2008.
Farm Bill Primer (web site) This website will walk you through the farm bill, step-by-step.
Feeding at the Trough: Industrial Livestock Firms Saved $35 billion from Low Feed Prices (PDF) (article) December 2007
Funding Farms Will Help America's Battle with the Bulge (article)
Gourmet Mag: Betting the Farm (article) April 2008.
Grist: Beyond the Farm Bill - Progressive urban food bills could help reshape America's food future (article) December 14, 2007
HR 2419 The Food, Energy, and Conservation Act of 2008 (a.k.a. The 2008 Farm Bill) (news source) Read the full farm bill or brief fact sheets on each title and see who voted for it in the House and Senate.
Living High on the Hog: Factory Farms, Federal Policy, and the Structural Transformation of Swine Production (PDF) (article) December 2007
LTE: Price Supports Needed - Nov 10, 2007 (article)
NYT: A Bull Market Sees the Worst in Speculators (article) June 13, 2008.
NYT: A Global Need for Grain That Farms Can't Fill (article) March 9, 2008.
NYT: House Panel Approves a Farm Bill (article) July 20, 2007.
Philpott: Congress (almost) passes a farm bill; Bush vows to veto (blog entry) May 8, 2008.
Philpott: Farm Bill Agonistes (article) February 27, 2008.
Radio: The 2007 Farm Bill Part 1 (news piece) An episode of the show "Sprouts" on WORT in Madison, WI. Features Joel Greeno, an organic dairy farmer, Jim Goodman, an organic beef farmer and Kellogg Food & Policy Fellow, Mark Kastel from The Cornucopia Institute, and others.
Ron Kind's (D-WI) Healthy Farms, Food and Fuel Act (news piece)
The 2007 Farm Bill: What We Need and Why by George Naylor (article)
The Nation: Farm Bill Showdown (article) August 27, 2007.
The U.S. Has No Remaining Grain Reserves (article) June 6, 2008.
Union of Concerned Scientists: Farm Bill Comments (organization)
