Farm Bill Fallacies

In a recent Mother Jones article,  I found some pretty common misconceptions related to agricultural policy.  The concluding paragraph sums up much of the article:

“At a time when the public is increasingly demanding a more sustainable and healthy food production system, Congress is in the process of enshrining agribusiness as usual—pinching the pennies that go to sustainable food programs while propping up destructive agriculture tailored to the profit needs of agrichemical companies like Monsanto.”

In this article, the concept of “Big Ag” is referenced at least 4 times.  When I hear the term ‘big ag’ I have to read on to see if they are confusing 'big ag', 'factory farming' or 'industrial agriculture' with the complex network of modern family farms, biotechnology companies, food processors, and retailers that cooperate to bring healthy and sustainable food to your table. It seems to be the case in this instance.

One of the major concerns with the farm bill, as presented in the article, is that budget cuts will lead to decreased funding for ‘progressive’  food and ag programs while continuing to promote more ‘regressive’ ‘Big-Ag’ friendly areas of agriculture:

“All of that, of course, is manna to the companies that supply inputs to industrial-scale farmers: seed and pesticide companies like Monsanto and Syngenta; and to the companies that buy corn and soy and transform them into a range of low-quality, profitable foods.”

 So lets look at the inherent claims made here and above. 

Are we pinching pennies from sustainable food programs and propping up ‘destructive’  agriculture tailored to the needs of agrichemical companies and industrial-scale producers? 

You might claim that if there are cuts to funding for marketing foods to farmers markets or financing transitions to organic farming, that we are defunding sustainability in the farm bill. However, many of the green technologies (herbicide and pest resistant GMO crops, pharmaceuticals) used by modern farmers dwarf the impact of other consumer green technologies like hybrid cars.  These technologies certainly profit companies like Monsanto, but shouldn’t we expect companies to profit to the extent that they improve the lives of others? It should also be emphasized that these technologies are largely scale neutral, and aren’t used exclusively by the largest or ‘industrial-scale farms.’ In fact, globally, the single largest growing demographic of GMO adopters are small land holders in developing countries.  

When you actually follow the money, it may appear that it all goes to ‘Big Ag’ in terms of large producers that then in turn buy inputs from companies like Monsanto. In reality, subsidies make up a very small percent of the budget of the largest farms and likely don’t impact input or cropping decisions.  They actually make the largest difference in terms of budget to the smaller producers.  
Among those most lagging in green technology adoption are organic producers, which have zero tolerance for GMOs, (although fully embracing more volatile methods utilizing nuclear radiation to breed better plants). So, its not entirely clear cut that taking funds from local and organic programs would have a net negative impact on the environment, or that it promotes ‘destructive’ agriculture. 

Do subsidies largely favor the consumption of low quality foods as opposed to healthy fruits and vegetables? Are we propping up the companies that process corn and soy? 

Some people have the impression that healthy supplements in our diets, like fruits and vegetables, are more expensive than processed foods containing staples like corn and soybeans because corn and soybeans are subsidized more heavily than fruits and vegetables. This couldn't be further from the truth. The agronomics, labor, risk, economies of scale, and capital costs associated with fruit and vegetable production make those crops much more expensive than commodities, and have a much larger role on their prices than subsidies.  Eliminating commodity programs would have an insignificant impact at the retail level on staple food prices relative to fruits and vegetables. 

In fact, most of the research indicates that completely eliminating corn subsidies would reduce corn based food consumption by less than ½ of 1% .

Never mind  the fact that soy is one of the healthiest food products that you can eat, and a large amount of corn ultimately goes to producing healthy, sustainable, and nutritious meat products like lean beef!

The overall impact of completely eliminating U.S. commodity protection and subsidies at the commodity level in terms of total acres produced and commodity prices would also be minimal, as reported by researchers at UC Davis:

Eliminating or restructuring the farm bill is not an issue of sustainability or healthy food production. At best it is a size and scope of government debate.  Regardless, if we completely eliminate commodity related programs and subsidies, corn is still king and Monsanto will still continue to sell Roundup and GMO soy as long as the 98% of all U.S. farms that are family farms embrace the benefits of modern sustainable agriculture. At a time when the public is increasingly demanding a more sustainable and healthy food production system, ‘Big Ag’ is delivering.

REFERENCES: 

See also links tagged subsidies. 

Farm Subsidies and Obesity in the United States

Julian M. Alston, Daniel A. Sumner, and Stephen A. Vosti

Agricultural Resource Economics Update

V. 11 no. Nov/Dec 007

U.C. Davis

Is the Pink Slime Issue Just A Matter of Consumer Preferences?

Previously I made a post entitled ‘Pink Slime: What is Seen and Unseen.’ Having made its way through some social media channels, it has received some interesting comments. A couple common arguments that seem to stand out, not only in my posts, but also in other articles could be generalized as follows:

"This is how the free market works. Supply chains will adjust. This isn't a unique situation that requires any further analysis. It doesn't stand out among the millions of other choices consumers make on a regular basis between numerous other products."

"Why even mention it. So what if consumers are uninformed. Education and evidence are really irrelevant to this issue (or any issue for that matter) because people are irrational. "

These comments really help to clarify the real issue here. The supply chain is really at the heart of the issue for many of those slamming pink slime. Its not pink slime in and of itself that is their only problem. They don't like modern food supply chains (think ADM, Monsanto, Wal-Mart), and if they get their way, our food supply chains would more closely resemble the balkanized gasoline market, with all of the restrictions and the required bottlenecking boutique of gasoline blends etc. and of course the high prices.

If I thought this were simply about food preferences, food choices, and consumers making decisions based on those preferences, and the markets  responding, then of course this would all be a moot discussion. Those that simply choose to avoid finely textured lean beef, are not necessarily the problem. The goal of the purveyors of the pink slime propaganda isn't simply to persuade consumers to choose alternative products, but to build the sentiment that will support coercive government intervention in the market place. (as has happened in other states with laws regarding 'child labor', ‘dust’ regulation, 'CDL  requirements for operating farm machinery', 'battery cages' in egg  production, 'gestation crates' in pork production, fat taxes, sugar taxes, salt  taxes, hormones, antibiotics, biotechnology...pick your technology,  ingredient, and regulation).

From fiction to reality, biotechnology, 'pink slime', pharmaceuticals, modern  food supply chains and processing, (name your villain) are all contemporary  analogs to 'Rearden Metal' from the book Atlas Shrugged. When Dagney had to go out on her own and  start the 'John Galt Line' it was in fact largely in part a response to the loss in demand as a result of the dynamics of public opinion regarding Rearden Metal, penalized for being virtue. Given the negative public perception and the heavy burden of the regulatory environment for the railroads, Taggert Transcontinental stock was plummeting.

Recognizing this dynamic between public opinion, market forces, and the regulatory apparatus and making it known is essential to the  perpetuation of a free society. As Don Boudreaux of George Mason  University states so well:

"What matters mostly – overwhelmingly – is the climate of opinion. And so affecting the climate of opinion for the better seems to me to be, by far, the only long-term means of ensuring the stability of a free society."

But, can we really affect public opinion for the better? Are people obstinate and irrational in their views?  Is evidence irrelevant?

 "Reason, my dear fellow is the most naive of all superstitions...logic is a primitive vulgarity" -Dr. Pritchett, Atlas Shrugged.

 Is evidence always and everywhere irrelevant, or is it just minimized by propaganda and undervalued in general?  Does the assumption of perfectly rational behavior have to hold to make these arguments, or to approach these issues utilizing the analytical way of thinking that economics teaches?  Should we just assume that all behavior is mindless and throw in the towel?  That would certainly relieve many of us a lot of stress and of course, that's what the interventionists like Dr. Pritchett in Atlas Shrugged wanted people to think. They desire a public that has grown disdainful of facts and evidence, looking to intellectuals and politicians to make things right.

But, as Steve Horowitz points out in his textbook 'Lessons for the Young Economist':

“When we look at the world and try to make some sense of it, one of the most basic and crucial distinctions we all make—usually without even realizing it—is the difference between purposeful action versus mindless behavior...The lessons in this book apply to purposeful actions performed by

conscious people who have goals in mind.”

As Dr. Horowitz goes on to explain, even if people often 'miscalculate' or aren't "perfectly rational people" the logic of economic thinking holds. As Economist Peter Boettke states:

"The great free market economic thinkers from Adam Smith to F. A. Hayek never argued that individuals were hyper-rational actors possessed with full and complete information, operating in perfectly competitive markets.... Efficient markets are an outcome of a process of discovery, learning, and adjustment, not an assumption going into the analysis."

And in fact, blogs, even 'micro bloggers' with just a few thousand imprints or less, all have a role to play in adding to this pool of knowledge. Even if they are preaching to the choir (i.e. read mostly by like minded individuals) they provide an arsenal of ideas that help everyone to better structure their thoughts, and share them with others, and occasionally someone that may actually change their mind.  Not everyone is a general like Bodreaux and Roberts at Cafe Hayek,  but given this war of ideas and the role they play in a free society, every soldier counts. Post by post, line by line. While its origins are disputed, the quote often attributed to Thomas Jefferson is no less true:

"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt."

PINK SLIME: WHAT IS SEEN AND WHAT IS UNSEEN

"But you don't want to have public opinion against you. Public opinion, you know, it can mean a lot."
"...I saw the whole industrial establishment of the world...all of it was run, not by bankers and boards of directors...all of it was run by any unshaved humanitarian in any basement beer joint, by any face pudgy with malice, who preached that virtue must be penalized for being virtue." - Atlas Shrugged.
"Cargill cuts 'pink slime' output, sees hamburger price rise' (Reuters)

http://www.reuters.com/article/2012/03/28/us-food-slime-idUSBRE82R1LP20120328
 
Consumers say they want healthy sustainable food. They want it to be safe. They want it to be affordable. The market delivered with finely textured lean beef. Now in a classic illustration of group think, lead by celebrities, anti-farm activists, and advocates of big government, these same producers are being punished for catering to the expressed desires of their harshest critics. Some extremists are even peddling petitions and calling for government bans and regulations to 'label' or remove this product from stores and schools. Companies are shutting down operations and laying people off. Beef prices are taking a hit.

This summer, many of these same people will go to their Farmer's Market and feel good about themselves for doing their part to support local farmers, their community, and perhaps even bettering the environment. Certainly a laudable gesture. Others will just go to the nearest big box retailer and feel more comfortable that this product may have been taken off of the shelf or out of their school.  That is what is seen.

What remains unseen is the negative impact that this self-righteous orthorexic food fetish condeming so called pink slime will have on the rest of us. Particularly what is unseen is the loss of value that thousands of family farmers and local producers will have to absorb, while continiung to strive to feed the rest of us in a manner that modern agriculture makes efficient and sustainable.

Is Corn a Greater Threat Than Al-Queda? Ask Joe Biden.

Last Friday a caller into the Rush Limbaugh show makes the following statements:

"I am a student a Murray State University as a biology major, and I was in biochemistry this morning, and there was an emphasis on discussing the regulation by the government of sugar, and particularly fructose. So he had us read an article, and I'll read you a quote from the article.  It said, "If international bodies are truly concerned about public health, they must consider limiting fructose ... to individuals and to society as a whole." They had five suggestions how to do this.  They said we need to reduce the hours retailers are open, control the location of retail markets, tighten the licensing requirements on vending machines in schools and workplaces, designate an age limit on who can buy the fructose (they suggest age of 17), and then their last suggestion is the doubling of the price through taxation.  And, you know, I just sat there in class thinking: "My goodness, you know, how brainwashed do people have to get to push this?"


This is a prime example of the phenomena that I have dubbed 'ose' gate.(http://ageconomist.blogspot.com/2010/09/osegate.html) This has almost reached the levels of a consipiracy theory that modern family corn farmers are producing unhealthy, toxic food additives, and in the process, destroying the planet.  I would agree with the student, it appears that they were potentially on the receiving end of brainwashing and propaganda, probably in the name of infusing sustainability into the curriculum by a professor coming down with a case of Dunning Kreuger. It could be, perhaps, that the professor thought what they were doing was an innocent and innovative attempt to get students interested in biochemistry by presenting an application of what's going on in the classroom. However, I would think that they could have provided additional references or students to weigh in comparison to such extreme policy proposals presented in the article.

What's even more shocking are these words from vice president Joe Biden: 

 I think its just a symptom of general ignorance about where food comes from and how it is produced. The locavore movement and writers like Michael Pollan both seem to be bringing food to the forefront of people's minds. But reading his books or buying from the local farmers market isn't getting the job done. In fact, these venues could at times also be dens of ignorance and misconception as much as a place to educate consumers. Its important that producers of all types and scale as well as all other industry affiliates do their part to clearly communicate what's going on in the industry from gate to plate.

References:

The Rush Limbaugh Show. Friday March 2, 2012.

Sun SZ, Flickinger BD, Williamson-Hughes PS, Empie MW. 2010. Lack of association between dietary fructose and hyperuricemia risk in adults. Nutr Metab (Lond). 2010 Mar 1; 7:16. Free access to full article.

White JS. 2009. Misconceptions about High-Fructose Corn Syrup: Is It Uniquely Responsible for Obesity, Reactive Dicarbonyl Compounds, and Advanced Glycation Endproducts? J Nutr 139(6): 1219S-1227S. Free access to full article.

Fulgoni V. 2008. High-fructose corn syrup: everything you wanted to know, but were afraid to ask. Am J Clin Nutr 88(6):1715S. Free access to full article.

White JS. 2008. Straight talk about high-fructose corn syrup: what it is and what it ain't. Am J Clin Nutr 88(6):1716S-1721S. Free access to full article.

Melanson KJ, Angelopoulos TJ, Nguyen V, Zukley L, Lowndes J, Rippe JM. 2008. High-fructose corn syrup, energy intake, and appetite regulation. Am J Clin Nutr88(6):1738S-1744S. Free access to full article.

Soenen S and Westerterp-Plantenga MS. 2007. No differences in satiety or energy intake after high-fructose corn syrup, sucrose, or milk preloads. Am J Clin Nutr86(6):1586-1594. Free access to full article.

Akhavan T. and Anderson GH. 2007. Effects of glucose-to-fructose ratios in solutions on subjective satiety, food intake, and satiety hormones in young men. Am J Clin Nut 86(5) 1354-1363. Free access to full article.

Forshee RA, Storey ML, Allison DB, Glinsmann WH, Hein GL, Lineback DR, Miller SA, Nicklas TA, Weaver GA, White JS. 2007. A Critical Examination of the Evidence Relating High Fructose Corn Syrup and Weight Gain. Critical Reviews in Food Science and Nutrition. 47(6):561-582. Free access to full article.

Sun SZ, Empie MW. 2007. Lack of findings for the association between obesity risk and usual sugar-sweetened beverage consumption in adults - A primary analysis of databases of CSFII-1989-1991, CSFII-1994-1998, NHANES III, and combined

NHANES 1999-2002. Food Chem Toxicol 45(8):1523-1536. Free access to full article.

Monsivais P, Perrigue MM, Drewnowski A. 2007. Sugars and satiety: does the type of sweetener make a difference? Am J Clin Nutr 86(1):116-123. Free access to full article.

Lowndes J, et al. June 2007. The Effect of High-Fructose Corn Syrup on Uric Acid Levels in Normal Weight Women. Presented at the June 2007 meeting of The Endocrine Society. Program Abstract #P2-45. Abstract available.

Zukley L, et al. June 2007. The Effect of High Fructose Corn Syrup on Post-Prandial Lipemia in Normal Weight Females. Presented at the June 2007 meeting of The Endocrine Society. Program Abstract #P2-46. Abstract available.

Public Choice Theory for Agvocates

For aggies, agvocates, and otherwise 'agnerds' that are particularly interested in ag policy, if you are not familiar with public choice theory, I think you might find it as interesting as I have. For all of the regulatory issues facing the ag industry, (dust regulation, GIPSA, child labor laws, biotech and GMO issues, taxes, etc.) public choice offers a powerful analytical framework for policy analysis.

 The moral of the public choice story is that democracy and governments are not perfect. When we have issues with market outcomes and we are thinking about new regulations or government spending to correct those problems, public choice analysis offers a guide. Public choice analysis implies that we have to question which system will provide the best information and incentives to act on that information to achieve the results that we want. The democratic process itself offers no guarantee that the decision will be the best solution to our problems.

Below is a list of topics related to public choice with simple short descriptions as well as links to more detailed discussions. Following that, I've provided some links to some applications of the theory and tools, including many related to issues important to the agriculture industry.  For another good primer, I also recommend the article 'The Public Choice Revolution', Regulation Fall 2004. ( link ).

Concepts related to public choice theory include the following:

RENT SEEKING -  the act of seeking special privileges or protections form the government.

TYPE TWO ERROR BIAS - overcautious behavior, ex: FDA drug approval, response to Hurricane Katrina

VOTING PARADOXES- randomness of election outcomes

MEDIAN VOTER THEOREM- leads to exploitation of minority by majority

TRAGEDY OF THE COMMONS – lack of property rights and pollution

COASE THEOREM – symmetry of environmental pollution, internalizing effect of property rights and markets

TRAGEDY OF THE ANTICOMMONS – underutilized resources due to excessive checks on power, bureaucracy. Ex: response to hurricane Katrina

KNOWLEDGE PROBLEM- government relies on a ‘shrunken’ pool of knowledge vs. markets

My applications of public choice theory:

Biotech Alfalfa: Who may harm whom? An Application of the Coase Theorem

The Constitution, Democracy, and Public Choice

Biotech and Rent Seeking

Rent Seeking and Biotechnology

Homeland Security, The Knowledge Problem, and Rent Seeking

Cap and Trade: Can we really price carbon?

More on biotech and rent seeking...NYT


Rent Seeking, Economic Growth, Corporate Power, and Inequality

Politics and Science

Government and Capitalism - the knowledge problem

The Right and the Left from a public choice perspective

When should personal decisions become government decisions?

Regulating Commerce

For newer or additional posts related to these issues, follow my public choice tags on this blog here or my companion economics principles and applications blog here.

Occupy Cargill. What?

From:

http://understory.ran.org/2012/01/21/breaking-%E2%80%9Coccupy-cargill%E2%80%9D-activists-stage-citizen%E2%80%99s-arrest-on-cargill-inc/

"Multiple speakers at the rally railed against Cargill's corporate personhood and its extensive lobbying of governments for free trade policies that benefit its profits at the expense of people and planet."

We know that modern supply chains made possible by companies like Cargill actually help reduce our carbon footprint and in many cases outperform more energy intense 'local' supply chains. ( http://economicsprinciplesandapplications.blogspot.com/2011/05/food-miles-kowalskis-and-that-steak-on.html ) . One thing that Cargill excels at is making markets, matching U.S. agricultural products to overseas markets. This is incredibly valuable considering the importance of international trade to the 98% of all U.S. farms that are family farms. According to the USDA:

• U.S. agriculture looks overseas to expand sales and boost incomes. Exports also generate additional economic activity that ripples through the domestic economy.
   
• Expanding existing market access and opening new markets under future trade agreements will significantly boost U.S. agricultural export sales. 
   
• The President's FY2011 budget provides increased discretionary spending of $54 million to enhance USDA's export promotion activities. 
   
• Compared to the overall economy, U.S. agriculture is twice as reliant on overseas markets.
   
• USDA estimates that anywhere from 26 to 30 percent of farm cash receipts in any one year comes from exports. 
   
• Every dollar of exports creates another $1.40 in supporting activities to process, package, finance and ship agricultural products.
   
• U.S. agricultural exports, which in FY 2009 reached $96.6 billion, generated an additional$135 billion in supporting business activity in transportation, distribution, food processing and manufacturing. 
   
• These exports support approximately 1 million U.S. jobs both on and off the farm. 
   
• Some agricultural commodities benefit dramatically from sales in overseas markets.  For example:
  
  1.  64 percent of our almond crop is shipped overseas. 
  2.  74 percent of cotton is exported.  
  3.  49 percent of U.S. rice goes to international markets.   
  4.  50 percent of U.S. wheat   goes into the export market. 
  5.  34 percent of our soybeans are exported.
   
• 96 percent of the world's consumers live outside the United States. 
   
• U.S. agricultural export growth is led by the NAFTA countries of Canada and Mexico andnon-Japan Asia.    

(source: http://www.fas.usda.gov/info/factsheets/tradevalue.asp )

Cargill's efforts to promote free trade should be applauded, as it opens up markets for the many commodities produced sustainably by U.S. family farmers employing the latest technologies. Of course this leads to profits, but contrary to the claims made in the article, true profits exist only at the BENEFIT of all people involved, and never at their expense (other wise trades would not take place and no profits would be realized). The economic definition of profit is the net contribution a firm makes to society. 

Of course, if firms are accumulating cash at the EXPENSE of others, they are not making true profits, but are either committing fraud or theft or extracting rents through subsidies, special priviledges, or regulatory protections (like restrictions on trade). This behavior can be described in terms of game theory as a Nash Equilibrium, particularly a prisoner's dilemma. When government is permitted to engage in excessive regulation and is granted the power to use the regulatory apparatus to benefit special interests, it pays for (more like forces) everyone to play the game. 

This is the sort of corporate abuse of power that the occupy people should be focused on. The lamenting over Citizens United would be a moot point if the occupiers would actually address the problem of excessive corporate power and abuse at its core- the out of control progessive policy agenda and regulatory apparatus of the federal government. I've yet to get the idea from any in the movement that this is their focus. A corporation is NOT a person. However, taxes and regulations on corporations are taxes and regulations on PEOPLE. Lots of PEOPLE, not just CEO's and shareholders, but the millions of consumers, workers, farmers, and small business owners that depend on the mutually beneficial exchanges for their livelihood and day to day life made possible by companies like Cargill. PEOPLE are most empowered, not by government or progressive policies, but by the ability to engage in socially cooperative exchanges and forming socially cooperative relationships. They have a right to organize and use speach to advance their views and causes through whatever corporate or non corporate vehicle they feel is most effective. However, there is nothing noble about PEOPLE using speach to advance an agenda to restrict the free trade and the social cooperation of others, through any vehicle corporate or noncorporate.  As stated in the article, these occupiers actually seem to be (through their castigation of Cargill's pro trade efforts) supporting policies that enrich and empower corporate interests at the expense of family farmers and the 99% of PEOPLE they claim or think they are advocating for. 

Occupy Wall Street: Farmers March

At the following link, you will find an article and youtube video covering a farmer's march
as part of the Occupy Wall Street movement.
http://www.care2.com/causes/occupy-wall-street-farmers-march-celebrates-community-power.html
I'm not sure that 'corporate America' is the demise of the family farmer, given that today some 96% or more farms are actually family farms, practicing modern, sustainable agricultire (see: http://youtu.be/D4ZL7w9q9Jc )
In just this past year we've seen everything from trumped up lawsuits attacking biotech alfalfa, attempts by congress to tell farmers how to market their livestock, threats of requiring CDL liscenses, threats of dust regulation, and now threats of using child labor laws to prevent young people from getting valuable training in agriculture that could encourage their own entreprenuerial ventures in ag, or lead to high paying jobs in science and technology (as many find their way to the lab via the hayfield or corn crop). Regulatory threats and regulatory uncertainty certainly tax the American farmer (and future farmers and agriculturalsts) as much if not more than any other alleged source.
I've written before about how economies of scale in compliance have lead to increased market concentration in agriculture ( http://works.bepress.com/matt_bogard/13/ ) and I urge the OWS people to be careful that they not find themselves tools for more progressive policies that may threaten modern agriculture's ability to sustainably feed the world.

USDA Research: Food Miles & Local Beef

Comparing the Structure, Size, and Performance of Local and Mainstream Food
Supply Chains

USDA Economic
Research
Report
Number 99
June 2010

"Transportation fuel use is more closely related to supply chain structure and size than to the distance food products travel. Products in local supply chains travel fewer miles from farms to consumers, but fuel use per unit of product in local chains can be greater than in the corresponding mainstream chains. In these cases, greater fuel efficiency per unit of product is achieved with larger loads and
logistical efficiencies that outweigh longer distances."

This research compared 3 beef supply chains, one that markets local sourced beef via farmer's markets and community supported agriculture (CSA), one that is intermediately sourced to restaurants, supermarkets, and food cooperatives, and one that has a traditional supply chain that utilizes beef finished in the feedlot, slaughtered, processed, shipped, and sourced to restaurants. In terms of food miles, the local supply chain averaged 75 miles, intermediate 300, and mainstream 1645. However due to efficency and economies of scale,  it turns out that the most fossil fuel and energy intensive supply chain is local, averaging 2.18 gallons of fuel per cwt, vs. 1.92 for the mainstream feedlot finished supply chain.  In terms of carbon footprint, we should note that both the intermediate and local supply chains utilize grass fed beef, which would add even more to their environmental foot print in terms of global warming potential.