PLANS TO BOOST COMMODITY PRODUCTION A HOUSE OF CARDS
PLANS TO BOOST COMMODITY PRODUCTION A HOUSE OF CARDS
May 12, 2022
The Biden Administration announced proposals in recent weeks designed to boost production of wheat, soybeans, rice, and other major commodity crops to make up for lost global exports due to Russia’s war in Ukraine. In this blog post, the National Sustainable Agriculture Coalition (NSAC) joins a public choir skeptical of the White House’s plans, as well as adjacent whispers circulating on Capitol Hill to permanently boost commodity farm subsidies in the upcoming Farm Bill. These federal incentives would be nothing more than stopgap measures to hide deep-rooted issues which threaten the security and resilience of our food supply chain.
Two weeks ago, the White House announced a $500 million proposal to boost commodity production as one piece of a $33 billion funding request to Congress to address global fallout from Russia’s war in Ukraine. $100 million would be used to provide a $10-per-acre crop insurance premium discount to farmers who plant soybeans following a winter wheat crop in 2023 (a practice known as double-cropping), while $400 million would fund a two-year increase in loan rates to incentivize production of wheat, rice, and edible oilseeds.
President Biden claimed that the measures would “be good for rural America, good for the American consumer, and good for the world.” But agricultural economists cast doubt on whether these measures would even serve to incentivize production at all for commodities that are already fetching heightened market prices.
It seems that members of Congress heard the public skepticism, because this week House Democrats pulled the $500 million proposal from negotiations on the broader aid package.
In its place, the White House announced new executive actions to expand insurance eligibility for farmers who double crop, streamline access to planning and cost sharing assistance programs for precision agriculture, and double funding for domestic fertilizer production. It is unclear what the ultimate cost will be for these initiatives, but the additional funds for domestic fertilizer production alone come with a $500 million price tag. This is in addition to more than $805 million announced by the Biden Administration in April to incentivize greater ethanol production, and thus corn production.
Meanwhile, talks to permanently authorize ad-hoc disaster payments that commodity farmers have received in recent years are quietly gaining steam among DC-based commodity groups.
In 2020, almost 40 percent of net income for farmers came directly from the US government. This was attributable to not just longstanding Farm Bill commodity programs and crop insurance indemnities, but also elevated ad-hoc spending authorized as pandemic relief in the CARES Act, as well as the Market Facilitation Program (i.e., direct payments to offset losses caused by the Trump Administration’s trade war with China).
NSAC believes that a farm safety net backed by the federal government is a prudent and necessary means to help protect American producers from the many risks of agricultural production. However, federal crop insurance, commodity programs, and disaster payments encourage the biggest operations to get bigger at the expense of smaller producers and provide little or no incentive to build resilient systems of production.
US farmers have stepped up to fill a war-induced vacuum in global food production before, but short-term economic booms often devolve into drawn-out busts. Demand for US food exports reached an all-time high in the aftermath of World War I to feed a war-torn Europe, but US farmers experienced a 75 percent fall in commodity prices due to market oversaturation as the continent’s food production capacity was restored. Millions of farms foreclosed.
Further, in the 1970s, farmers received federal incentivizes to fulfill a grain contract with the Soviet Union (USSR) and boost commodity production – to plant “fencerow to fencerow.” But this boom period ended in the worst farm crisis since the 1930s when an export embargo placed on the USSR after the country invaded Afghanistan cut farmers off from the market upon which they had become dependent. This 1980s farm crisis was compounded by an oil embargo, which inflated the costs for farm equipment and fuel.
These historic events are not necessarily harbingers in 2022, but they do serve as a reminder that past concentrated US initiatives to boost commodity exports to war-torn countries have yielded unintended, and profoundly damaging, long-term consequences for our producers at home.
This is not to imply, either, that the United States has no role to play in providing aid to those affected by Russia’s war in Ukraine. However, robust mechanisms to deliver direct and financial foreign aid exist – and further bloating the taxpayer subsidies funneled to wheat, soybean, and corn farmers is not a sustainable or even effective solution. NSAC recommends policymakers learn from our history and consider that this a temporary supply chain vacuum, not a permanent, new export market.
Boost to unsustainable systems
NSAC expects these recent actions and proposals to accomplish little else than serving to boost an unsustainable food supply chain. Domestically, farmers receive just 13 cents on average of every dollar spent on food. Consumers are being forced to make hard choices as prices rise in the grocery store and at the pump. But additional subsidies to boost commodity production are only bandages to deep-rooted issues.
Though costs for inputs, including fertilizers and seed, have spiked in recent months, these prices have been rising for decades. The cost of total farm input expenditures increased almost $80 billion between 2009 and 2019, a classic symptom of an industry that has become too concentrated. Multinational companies – Bayer, Corteva, Limagrain, Chem-China, and BASF – exclude competitors with control of at least 50 percent of the seed and agrochemicals markets by raising the price of inputs for farmers without risking their own market dominance.
NSAC applauds the Administration’s rhetorical commitment to restore competition across the agriculture industry. We also appreciate ongoing requests for information to understand growers’ concerns regarding seeds and agricultural inputs and fertilizers.
Funding proposals on the table, however, contradict these necessary initiatives to address concentration and consolidation. Although bandages are sometimes necessary to mitigate the worst harm – in this case, input costs which are rising more rapidly for farmers – we should not fool ourselves into believing that $500 million to double funding for domestic fertilizer production is anything more than a temporary fix which perpetuates deepening flaws.
Though these federal spending initiatives are designed to boost yields, near-universal reliance on synthetic fertilizers and industrial farming practices in the United States is actively damaging soil microbiome and eroding soils, which lead to long-term declines in soil health. In fact, corn farmers are already losing nearly $3 billion per year in harvest yields due to erosion and poor soil condition. The Food and Agriculture Organization (FAO) estimates that we have 50 years of soil left at current rates of loss.
It is time to take seriously the call to move toward holistic systems that rely on cover cropping, intercropping, and crop-livestock integration to build soil nutrition. Such systems also reduce greenhouse gas emissions and build farm resilience against increasingly severe weather.
Until then, farmers will continue to find themselves trapped in a losing system and reliant on taxpayer subsidies – through commodity payment programs, crop insurance premium subsidies, and ad hoc disaster aid – to remain profitable. Recently announced funding and proposals to permanently authorize heightened ad-hoc disaster payments will only perpetuate this failing system.
What’s the alternative?
Farmers and consumers deserve a fair shake. NSAC believes that taxpayer dollars, if they are to be spent, should be used to uplift resilient production systems and nutritious landscapes. This must include investments in conservation programs and additional incentives for farmers to adopt practices consistent with sustainable, regenerative, agroecological farming.
Heightened soil health will lead to lower input costs and greater natural yields, which will in turn restore farmer agency. These initiatives would also provide clear returns on investment to the average consumer, as opposed to our current system which produces heavily processed foods that contribute to worsening diet-related illness and rising health care costs.
NSAC is working with our members, allies, and champions in Congress to prepare a platform for the 2023 Farm Bill which strengthens the resilience of our food and farm system in these key ways.