- FOOD POLICY DRAWS FARMERS, CONSUMERS INTO 1995 FARM BILL
- CHEAP RAW MATERIAL POLICY IMPOSES DIRECT COSTS FOR
- THE HIDDEN COSTS OF CHEAP FOOD POLICY
- HIGHER NET FARM INCOME PART OF ANSWER TO FLAWED FOOD
- CONSUMER, FARMERS: NATURAL ALLIES IN FARM BILL DEBATE
FOOD POLICY DRAWS FARMERS, CONSUMERS INTO 1995 FARM BILL
Despite USDA claims that American's food prices are the cheapest in
the industrialized world, many of the nation's rural and urban
consumers are concerned that the price they pay for food is too
Rising direct and indirect costs of food production are costing all of
America's consumers, including family farmers, more and more each
year. Current federal farm policy provisions have forced family
farmers to pay more than their share of America's food price tag
through weekly farm foreclosures and rural economic stagnation.
Likewise, urban and rural consumers have been forking out billions
of dollars in taxes to support seemingly low food prices at the
Farmers and urban consumers are beginning to recognize the high
costs of producing America's food supply. As a result, they are
teaming up in preparation for the 1995 farm bill to ensure that
federal food policy is amended to meet their mutual concerns over
the true costs of the nation's food supply.
CHEAP RAW MATERIAL POLICY IMPOSES DIRECT COSTS FOR FAMILY
America's federal farm policy is often presented to the public as a
"cheap food policy." Current legislation encourages farmers to
produce high yields through intensive mechanization, chemical
inputs and hybridization, which has forced farmgate prices down and
allowed the USDA to boast that America's food supply is the cheapest
in the industrialized world.
Most consumers, however, don't realize that farmers are the ones
bearing the direct costs of this cheap food policy. While retail food
prices have jumped more than 110 percent since 1950, farmers
today earn only half of what they were paid for their crops 45 years
ago. Only 22 cents of every food dollar spent by consumers at the
grocery store is paid to farmers, compared to 37 cents in 1980. The
balance goes to processors, transporters, wholesalers and retailers
who are the benefactors of what could be more accurately be called
America's "cheap raw materials policy." This policy has forced more
than half of the 5 million farms in existence immediately after World
War II out of production.
THE HIDDEN COSTS OF CHEAP FOOD POLICY
America's cheap raw materials policy has also resulted in a number
of indirect economic, social and environmental costs for farm, rural
and urban consumers alike. The following indirect costs of America's
food supply are currently not reflected in farmgate prices or grocery
store price tags:
Tax Spending. In 1993, consumers doled out over $16 billion in
taxes to fund USDA commodity initiatives, like the Export
Enhancement Program and the deficiency payment program which
enable lower market prices. Although U.S. consumers are told their
food prices are the cheapest in the industrialized world, once tax
costs are added in their food bills jump significantly. "Food is cheap
only at the farmgate," noted Tom Asbridge, executive director of
American Agricultural Movement, earlier this year. "Real food costs
must include the cost to the taxpayers to maintain this 'cheap-food'
Environmental Costs. Long-term environmental costs resulting from
high-input, conventional farming practices are a high price to pay for
inexpensive food at the market. Soil compaction, soil erosion, water
pollution, and the loss of wetlands are just a few of the hidden
environmental costs ignored in market price valuations of food cost.
The effects of the environmental damage caused by high-intensity,
high-input farm production are foregone production opportunities,
loss of biological diversity and a permanent depletion of natural
resources -- all are elements critical to long-term sustainability of
the nation's food supply.
Social Costs. Social costs, such as the loss of rural economies and
communities, must also be factored in to America's food price tag.
Rural communities are sources of economic and cultural diversity
that provide opportunities for successive generations. Throughout
the 1980's almost half a million more people moved out of rural
areas than moved in. The loss of these communities affects both
rural and urban populations through increasing unemployment and
falling retail sales.
A number of academic institutions, researchers and grassroots
organizations have attempted to internalize these and other hidden
costs associated with the current agricultural production system. All
estimates suggest that the raw material and retail prices of America's
food are grossly undervalued.
HIGHER NET FARM INCOME PART OF ANSWER TO FLAWED FOOD
Internalizing these hidden costs by continuing to charge consumers
more for their food and by paying farmers less for their work will
not solve America's food policy problems. Consumers, whether they
be family farmers living in a small rural town or urban dwellers in a
large city, should not be forced to pay for these hidden costs.
Already 26 million American's rely on food stamps to put food on
their families' tables.
Instead, farm policies must be shaped which allow farmers to earn a
living from their land and consumers to afford food for their families.
This can be accomplished in the following ways:
Implementation of higher federal loan rates in the short run will
enable farmers to begin covering their costs of production and
eliminate the need for federal income support payments. Raising
loan rates, which establish a floor for commodity market prices,
could save consumers up to five billion dollars in taxes through the
elimination of deficiency payment spending alone.
Enhancing farmers immediate financial condition through higher loan
rates will also enable them to make the initial transition from
conventional, high-input farming to low input, environmentally-
friendly production. Many farmers wishing to make this transition
to sustainable production must overcome a number of financial
obstacles, which they are unable to do while being paid a cheap raw
price for their raw products.
In the long run, farmers need increased opportunities to begin their
own direct marketing and value added ventures. By direct
marketing and processing their own crops to consumers, farmers will
bypass the industry middlemen that currently absorb 78 percent of
the retail food dollar.
Putting more money in the pockets of farmers will also trigger
revitalization of rural America's economy through the increased farm
input, household and tax spending. Farmers participating in
cooperative value-added ventures will increase individual and
business spending throughout rural communities and boost the rural
tax base. Individual and state spending creates employment
opportunities for rural business and reduces the outmigration of
labor to urban areas where unemployment is already a chronic
These policy changes are needed in next year's farm bill to reverse
the nation's cheap raw materials policy and ensure ample food
supplies at stable prices for America's consumers.
CONSUMER, FARMERS: NATURAL ALLIES IN FARM BILL DEBATE
FARM AID believes consumers and farmers are natural allies in the
struggle to reform the nation's flawed farm policy. Both groups have
an inherent interest in ensuring that family farmers are able to earn
their living from the land, in an environmentally friendly way,
rather than from a taxpayer-funded government paycheck.
On behalf of the thousands of American's who support these goals,
FARM AID is committed to working with consumer, environmental
and farmer groups to create a balanced food policy at an
economically, environmentally and socially affordable price.
Sources: Don Reimund, David Harrington, "Trends in Numbers, Sizes
and Ownership of Farms," ERS, May, 1993; "An Agriculture That
Makes Sense: Profitability of Four Sustainable Farms in Minnesota,"
LSP, 1994; Howard Elitzak, "Food Marketing Costs Rose Little in
1992," FOOD REVIEW, September-December, 1993; "Campaign for
Sustainable Agriculture Policy Options," CAMPAIGN FOR
SUSTAINABLE AGRICULTURE, 1994; "Cheap Food Policy??? Cheap
Raw Materials Policy!!!" AGRIBUSINESS EXAMINER, September-
October, 1994; "The Facts About Food Spending," FOOD INSTITUTE
REPORT, October 18, 1994; "U.S. Agricultural Policy Guide," WORLD
We welcome comments and suggestions: contact Harry Smith at
FARM AID, (617) 354-2922. We encourage the reproduction of
FARM AID NEWS. Produced by The Institute for Agriculture and
Trade Policy (IATP) for FARM AID. Editors: Gigi DiGiacomo and
Harry Smith. For information on other agriculture bulletins, contact
IATP: (612) 379-5980.