The Inconvenient Truth About Cheap Food and Obesity: It's Not Farm Subsidies
Pop quiz: What mistaken belief about food is endorsed by both the libertarian right and the foodie left?
Answer: That farm subsidies make unhealthy foods artificially cheap.
This myth gained currency thanks to Michael Pollan’s runaway 2006 bestseller, The Omnivore’s Dilemma, which blamed America’s bad eating habits on corn and soy, made cheap and ubiquitous by farm subsidies. More recently, the Cato Institute, and even George Will, have made the same claim.
Any complaint that food prices are too low might seem bizarre today, since world grain prices hit their highest levels in 30 years in 2008 and are now back up again. Yet this did not stop columnist Mark Bittman from reminding his New York Times readers that the price we pay for corn, soy, chicken, pork, beef, and high-fructose corn syrup is “unjustifiably low” because of farm subsidies.
Nothing could be farther from the truth. Our federal farm programs are designed to supplement the income of farmers, not subsidize the production of food. Most federal farm support programs either give cash to farmers whether they grow more crops or not, or boost farm income by raising crop prices through import restrictions, market controls, or temporary land set-asides, all of which make food artificially expensive, not artificially cheap.
For example, the federal sugar program uses a “tariff rate quota” to restrict the entry of less expensive foreign sugar into the United States market, which drives up the consumer price of all sweeteners, including high-fructose corn syrup. If our sugar program were eliminated, the price for most sweeteners would fall by 15 percent. We also place tariff rate quotas on imports of less expensive beef from South America. Our dairy program, in addition to import tariffs, employs “marketing orders” to prevent low-cost Midwest milk from gaining market share in high-cost regions such as the Northeast, making dairy products artificially expensive, not artificially cheap. Our Conservation Reserve Program takes farmland out of production in Kansas, driving up the price of wheat.
As for the corn program, it does provide “loan deficiency payments” that encourage a small quantity of extra production when market prices are low (which they are not at present). How much extra production? In an average year, American farmers produce about 4 percent more corn due to these incentive payments, lowering the price of corn slightly. This small effect is more than offset, however, by the federal ethanol program, which now uses mandates, tax credits, and trade restrictions to shift nearly one third of all the corn we produce into “biofuel” use, to power automobiles. This ethanol program not only makes corn for food and feed much more expensive; it also diverts land away from soybean production, driving up the price of soy.
So federal farm subsidy programs are not the cause of our obesity crisis. There is no denying that obesity-inducing foods are now cheap relative to consumer income in the United States, but this is not due to farm subsidies.
The cause is higher personal income plus productivity growth in our food and farm industries. On the farm, new precision technologies such as GPS systems, satellite-controlled variable rate chemical applications, efficient drip irrigation, and improved crop genetics are continuously reducing production costs, and lowering consumer prices. Nor is it just the crops grown by subsidized farmers that have become cheap. One USDA study in 2008 found that over the previous 25 years the price of un-subsidized fruits and vegetables—controlling for season and quality—had fallen at almost exactly the same rate as the price of chocolate chip cookies, cola, ice cream, and potato chips. So that other popular claim—Americans are obese because unsubsidized healthy foods have become more expensive—is also bogus.
Studies that purport to show the retail price of fruits and vegetables actually rising in America over the long term make several different mistakes. One is to ignore the greater price volatility of fresh produce items, compared to snack or junk foods, and to compare across only a brief one or two-year interval (for example, “The Rising Cost of Low-Energy-Density Foods”). The other error is to ignore improvements over time in both quality and seasonal availability. The price of fresh peeled carrots today should not be compared to the price of unpeeled carrots 25 years ago, nor should the price of out-of-season blueberries today, flown in from Latin America, be compared to in-season blueberries 25 years ago. In fact, arguing that healthy fruits and vegetables are harder to get today is a stretch by any measure. The average American supermarket today carries roughly 400 different produce items, many year-round, compared to just 150 items in the 1970s, many only in season.
What motivates so many smart people to ignore this evidence and blame America’s over-eating on farm subsidies? For Cato, George Will, and the libertarian right, the careless thinking springs from an understandable urge to use any argument available against wasteful farm subsidies. On the anti-corporate left, Pollan and others (e.g., the film Food, Inc.) want to blame our nation’s obesity crisis on an imagined “cheap food” deal between food industries and their friends in Congress. When it comes to crop prices, however, farmers have more clout with Congress than food companies, so the farm bill and the ethanol program tend to increase rather than decrease food prices. This actually hurts food companies, an inconvenient truth the critics intentionally ignore.
Illustration by Sarah Sara Saedi.
Chart comparing the dollars per pound cost of Red Delicious apples and chocolate chip cookies using data from the Bureau of Labor Statistics’ (BLS) average food price data between 1980-2006, via Fred Kuchler and Hayden Stewart's Economic Research Report No. (ERR-55) "Price Trends Are Similar for Fruits, Vegetables, and Snack Foods," March 2008.