The Current Debate Concerning Obesity and Crop Subsidies: Why Farmers Should be Concerned

By: Rebekah McKinney, Staff Member

It has become almost impossible to watch the morning news or catch up on current events without being confronted with America's losing battle against obesity. Current efforts to battle the epidemic were announced by First Lady Michelle Obama, Secretary of Health and Human Services Kathleen Sebelius, and U.S. Surgeon General Regina Benjamin in 2010 in the "Healthy Fit America" plan.[1] While this plan promotes grassroots efforts to improve availability of supermarkets, recreational facilities, and limiting unhealthy food advertisements, some believe altering the current crop subsidies would address the root of the problem.[2]

Progressive organization

Think Progress

 discussed the findings of the California Public Interest Research Group (CALIPRIG) which reported that current crop subsidies contribute to driving down the prices of ingredients used in "junk food."[3] The organization opined that this was "particularly alarming" in light of the growing prevalence of obesity and such subsidies especially affect the poor due to the relatively inexpensive cost of unhealthy food.[4]

However, others claim farm subsidies have negligible effects on food prices and, consequently, America dietary choices. In an article examining the contribution of farm subsidies to the American obesity rate, Dr. Julian M. Alston, Professor of Agricultural and Natural Resource Economics at the University of California at Davis and previous Chief Economist in the Department of Agriculture and Rural Affairs in Australia, identified three elements which must be true for subsidies to have an impact on American dietary choices: farm subsidies must have resulted in cheap and abundant commodities used in junk food, the abundance of farm commodities must result in cost savings for the food industry which are passed on to the consumer, and food consumption must have changed significantly in response to the price differential.[5] Dr. Alston illustrates that a simplistic view of the American crop subsidy program may lead to overly simplistic conclusions concerning the relationship between subsidies and obesity. For example, the effects of price-depressing subsidies are often contained or reversed by policies such as restricted acreage and production.[6] He concluded that altering current subsidy programs would have only a modest effect on the cost of production and prices and the overall effect on food prices would be small due to the declining and already small influence of farm commodity prices on food.[7]

With the failure of the House of Representatives to pass a comprehensive farm bill in 2012, coupled with the increasing prevalence of obesity in America, farmers should pay special attention not only to future farm bill discussions but also to the current obesity discourse. American Farmland Trust President Jon Scholl described this failure as leaving "U.S. farmers less secure" and placing important programs in "limbo."[8] This failure coupled with the recent spotlight on how subsidies may contribute to the obesity crisis will surely be of great importance to farmers in the months to come.

________________________

[1] Press Release, Department of Health and Human Services, HHS Secretary, and Surgeon General Join First Lady to Announce Plans to Combat Overweight and Obesity and Support Healthy Lifestyles (Jan. 28, 2008), http://www.HHS.gov/News/Press/2010pres/01/20100128c.html.

[2]

Id.

[3] Zach Beauchamp,

Farm Bill Contributing to America's Obesity Crisis

, 

Think Progress

 (July 26, 2012), http://ThinkProgress.org/Health/2012/07/26/589041/Crop-Subsidies-Obesity/;

see

 California Public Interest Research Group,

Applies to Twinkies

, 

CALIPIRG

(Sept. 21, 2011), http://www.CALIPIRG.org/Reports/Cap/Apples-Twinkies.

[4]

Id.

[5] Julian M. Alston,

Farm Subsidies and Obesity in the United States: National Evidence and International Comparisons

,

33 Food Policy 470, 472

 (2008).

See

 University of California at Davis,

Julian Alston: Biographical Sketch

, 

Agricultural and Resource Economics

 (last visited Jan.30, 2013), http://AgEcon.UCDavis.edu/People/Faculty/Julian-Alston/Biographical-Sketch/.

[6]

Id.

 at 472.

[7]

Id.

 at 473.

[8] Press Release, American Farmland Trust, Press American Farmland Trust Calls Extension of Old Farm Bill a Missed Opportunity (Dec. 31, 2012), http://www.FarmLand.org/News/PressReleases/2012/FarmBillMissedOppl.asp.

Crop insurance: The agricultural equivalent of the mortgage crisis?

By: Jocelyn Arlinghaus, Staff Member

Every five years, Congress promises to improve the agriculture industry in the United States through a new farm bill. The bill addresses competing challenges facing the agriculture industry, including devastating losses to American farmers as a result of crop failures and increasing government subsidies in order to keep these farmers in business, costing taxpayers millions of dollars in the process.

[1]

The Senate is currently considering the Agriculture Reform, Food, and Jobs Act of 2012, which proposes a series of resolutions to these ongoing problems.

[2]

Through the act, Congress seeks to expand the crop insurance system by creating a $3 billion per year subsidy that would cover any farm losses before crop insurance policies kick in, effectively “bailing out” both farmers and insurance companies. This will replace the existing direct payment system which paid out over $5 billion a year as part of a direct subsidy to farmers regardless of whether they actually planted crops.

[3]

While the possibility of cutting $23 billion in spending over the next ten years is enticing, critics argue that this system only creates new problems for the agricultural economy and will have a negative impact on the environment.

[4]

Congress introduced federal crop insurance in the 1930s in an attempt to recover the agriculture industry after the Dust Bowl devastated Midwestern prairielands.

[5]

The government provided small subsidies that covered farmers’ losses due to circumstances beyond their control such as bad weather or pests.

[6]

Through this program, farmers can purchase insurance coverage against poor yields and the decline in crop prices.

[7]

The government now spends roughly $7 billion a year to cover two-thirds of farmers’ insurance premiums.

[8]

Congress now proposes an increase in the program to $9 billion a year in coverage and suggests a “shallow loss” provision that will cover losses to a minimum of 10%, effectively subsidizing farmers’ insurance deductibles.

[9]

While government subsidies appear to be a necessity for farmers whose profits hinge upon the weather and a volatile market,

[10]

this proposal has sparked recent controversy among industry experts. Critics argue that the new crop insurance program will be just as costly to taxpayers as the direct payment program because the government will be effectively subsidizing the private insurance companies that provide coverage to farmers.

[11]

Further, critics suggest that the program will create serious environmental risks. Because the guarantee of a large insurance subsidy reduces the risk of profit-loss, farmers are encouraged to plant “fence to fence” and expand onto land that is unsuitable for farming in order to make more money.

[12]

Enticing farmers to plant on unsuitable land where failure is almost certain will cost the government and taxpayers millions when these crops fail to produce.

[13]

Millions of acres in the Midwest that were once used for hunting purposes and home to many species of wildlife will be turned into corn, soybean, and wheat fields.

[14]

The bill does not include the conservation measures that were in place under the direct payment program, so farmers are free to take extreme risks knowing that if they are not successful the government will compensate them for their losses.

[15]

It is a win-win situation for farmers at the expense of taxpayers and the environment. Indeed, it is difficult to conceptualize why a big business American farmer is granted a “subsidy” during hard times while similar aid would be labeled as a “bailout” in a different industry. Additionally, some farmers have complained that while this program will help corn producers who are more affected by natural disasters, it will do little to help rice and peanut farmers that do not encounter “shallow losses.”

[16]

Because the negative impact of increasing crop insurance subsidies cannot be ignored, Congress should consider a less extreme version of the program in which a base level of coverage will be offered to farmers free of cost, with the option to purchase additional coverage out of their own pocket.

[17]

This places more responsibility on farmers and less of a burden on the government to provide a bailout for poor business decisions. Without such large subsidies, farmers are still have other remedies. They can choose to purchase less insurance or farm more conservatively by planting later in the spring when the weather is less volatile.

[18]

Allowing an increase to crop insurance subsidies would be a tragedy for government spending, taxpayers, and American prairielands.

[1]

See

Ron Nixon,

Crop Insurance Proposal Could Cost U.S. Billion

,

The New York Times

(June 6, 2012) http://www.nytimes.com/2012/06/07/us/politics/bill-to-expand-crop-insurance-poses-risks.html?ref=farmbillus

[2]

Agriculture Reform, Food, and Jobs Act of 2012, S. 3240, 112

th

Cong. (2012).

[3]

Nixon,

supra

note 1.

[4]

Id.

[5]

Stett Holbrook,

Crop insurance a boon to farmers--and insurers, too

,

The Bottom Line on

MSNBC

http://bottomline.msnbc.msn.com/_news/2012/06/18/12240997-crop-insurance-a-boon-to-farmers-and-insurers-too?lite

(last visited June 19, 2012).

[6]

Id.

[7]

Nixon,

supra

note 1.

[8]

Id.

[9]

Holbrook,

supra

note 5.

[10]

Nixon,

supra

note 1.

[11]

Holbrook,

supra

note 5.

[12]

Nixon,

supra

note 1.

[13]

Id.

[14]

Id.

[15]

See

Holbrook,

supra

note 5.

[16]

Melissa Miller,

Proposed farm bill would end direct payments

,

Southeast Missourian

, (June 15, 2012)

http://www.semissourian.com/story/1860520.html

[17]

Holbrook,

supra

note 5.

[18]

Id

.