Mt. Vernon Register-News

February 19, 2014

Taxpayers underwriting system that hurts health


The Register-News

---- — Read the farm bill, and a big problem jumps right out at you: Taxpayers heavily subsidize corn and soy, two crops that facilitate the meat and processed food we’re supposed to eat less of, and do almost nothing for the fruits and vegetables we’re supposed to eat more of. If there’s any obligation to spend the public’s money in a way that’s consistent with that same public’s health, shouldn’t it be the other way around?

The problem dates back to the bill’s inception in the 1930s, when farms raised livestock and grew a mix of crops, including staple crops (corn, wheat, oats, barley) and what the bill calls “specialty crops” but what the rest of us know as fruits and vegetables.

From the 1930s to 1980, subsidies alone weren’t substantial enough to significantly change the mix of crops on farms, according to Vincent Smith, professor of economics at Montana State University and a visiting scholar at the American Enterprise Institute. “In 1980, we introduced crop insurance subsidies of substance that began to change the ways in which farmers manage risk, and to discourage diversification,” he says. And then we increased them until they became very substantial, and farmers, at least to some extent, farmed to the bill the way teachers teach to a test.

What’s important about how we subsidize farms isn’t necessarily the overall dollar amount — it comes to 5 percent to 10 percent of the market price of most of the subsidized crops — it’s that it takes some of the risk out of farming grains and oil seeds, but not fruits and vegetables.

Farming is inherently risky. Weather, insects and disease, over which you have limited control or none at all, can wipe you out. One of the ways farmers manage risk is to plant variety. Okay, powdery mildew got your strawberries, but the broccoli’s going gangbusters. For farmers, crops that are given guaranteed protection from both losses and price drops are lower-risk propositions.

Farmers, like the rest of us, have bills to pay and children to feed. (Full disclosure: My husband and I farm oysters and have benefited from the farm bill’s conservation program.) A guaranteed source of income is attractive. That’s one of the reasons that, of the 300-million-plus acres planted with food (other than grass, hay and forage for animals) in this country, half are corn and soy. Another 50 million are wheat. Only 14 million are devoted to fruits and vegetables, from peas (1.2 million acres) to mangosteens (1 acre, which I’d dearly love to visit).

The 2014 iteration of the farm bill, signed into law this month, changes the way farmers are subsidized, and if you’ve read one thing about it, it’s probably been that direct payments — annual checks based on production history — have been discontinued. But calling the two programs that replace them “crop insurance” isn’t quite accurate, says Smith, because there are no premiums and no policies.

Farmers choose between Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) and receive payments when price (for PLC) or revenue (for ARC) drops below a benchmark.

The Congressional Budget Office estimates that PLC and ARC will cost about two-thirds of what direct payments cost, but the accuracy of that estimate depends on assumptions about the future price of commodities, something any commodity trader will tell you is notoriously hard to predict. Any analyst who could do it accurately would make his fortune in commodity futures, quit his analyst job and buy a lovely home somewhere sunny, where they grow less corn and more mangosteens.

PLC and ARC, together with a few other commodity programs, are slated to cost $44.4 billion over 10 years. Traditional crop insurance will continue, with government paying 65 percent of the premiums, and that’s another $89.8 billion, for a total of $134 billion for commodities over a decade.

And how does the bill help specialty crop growers? Robert Guenther, senior vice president of the United Fresh Produce Association, counts the ways. There’s help with research, provisions to include produce in the Supplemental Nutrition Assistance Program (SNAP) and school lunches, export enhancements, grants and a few other things. Total expenditure: $4 billion over 10 years. There is almost no insurance, and there are no subsidies, but many fruit and vegetable growers wouldn’t have it any other way.

“We’ve taken a different approach from the commodity growers,” says Guenther. He explains that specialty crop farming, because of its variety, doesn’t lend itself to the same kind of regulation. And he says many farmers prefer the flexibility that comes with independence to the conformity required by regulation, even if the regulation comes with cash. Asking the Agriculture Department to compare Washington apples with Florida oranges, and regulate appropriately, would be asking a lot. (There are also contractual agreements, outside the scope of the farm bill, that reduce risk for many specialty growers.)

It’s worth noting that, although producing more vegetables at lower prices looks good from a public health perspective, it’s not in the interest of the farmers already growing vegetables. Specialty growers supported the rules that, until now, prevented commodity growers from devoting some acreage to fruits and vegetables; this year’s farm bill allows commodity farmers to use up to 15 percent of their acreage for specialty crops without losing benefits. Because growing interest in local produce gives them a market, some will undoubtedly do that, and one study, published last year in Applied Economic Perspectives and Policy, concluded that “the removal of the planting restriction may have a non-trivial impact on U.S. fruit and vegetable production.”

I asked Guenther what he thought about the competition. “As long as these growers are willing to play by the same rules that current producers play by, they’re welcome to join the club,” he replied.

The extent to which the farm bill has shaped agriculture is hard to quantify, and the degree to which changing it can reshape it is hard to predict. According to Patrick Westhoff, director of the Food and Agriculture Policy Research Institute, “If you subsidize something, you get more of it.” Neither Westhoff nor Vincent Smith, however, is convinced that if you stop subsidizing it, you get much less. But a 1 percent decrease in the 160 million acres of corn and soy translates to an 11 percent increase in the 14 million acres of fruits and vegetables. (Whether that would translate to increased consumption is, of course, another question.)

There might be a way to promote production of fruits and vegetables while also protecting the interests of the farmers already growing those crops. Although specialty growers haven’t pushed for commodity-like plans, Guenther says they would like to see more focus on insurance. Smith points out that most of the risk to specialty crop growers comes from weather, and many private weather insurance products are available now that can cover a wide variety of crops. Many farmers don’t buy them because they’re not subsidized. If we were to change that, says Smith, “it would probably increase production, and there would be some price effect.” How much? “Anybody’s guess.”

Changes to the farm bill can have consequences both here and abroad, and we have to proceed cautiously. We can’t pull the rug out from under farmers whose choices have been influenced by the bill, and we have to consider the price and supply of the grains and oilseeds that feed the developing world. But we also need to move away from a system that requires taxpayers to spend billions underwriting a system detrimental to public health.