Let’s pick up where we let off in Part I, by taking another look at the graph of commodity agriculture. The story of agriculture in our country can be told (admittedly, in an oversimplified manner) by the fascinating interplay of bank debt, crop prices, and USDA policy.
Increasing debt and low farm income means that farming has become an increasingly high risk, low reward proposition for commodity farmers. In 1920, farm income was not high, but neither was the cost of farming. So, if a farmer had a bad year, it was a hardship but they were not forced off the land. Compare that to 2018, where the cost of production is extremely high (brown line), but income is still low (red line). How does the farmer afford the costs of the inputs? Debt, in the form of bank loans. If a farmer has a bad year in 2018, not only do they have low income, but they have a massive bank debt to service, which requires cash flow. That means they are either working a second job to subsidize their farm, or they are getting foreclosed on by the bank and bought up by other farmers (or Bill Gates). The loss of farms and farmers to bank debt is a long and painful story in this country that continues to this day.
Critics of industrial agriculture often describe it as extractive, primarily because is takes more from the soil and water than it puts back. But this term also applies in an economic sense. When you combine low farm income, high input costs, and the interest on huge amounts of farm debt, we actually see the net effect is that money is pulled out of communities. Instead of agriculture being an economic stimulus for local economies, it has become an economic drain. For every $1 million dollars that comes in to a community from the sale of farm products and government subsidies, $1.3 million dollars leaves that community via input costs and payments on bank debt. This has an erosive effect on rural communities, where there are no longer enough farmers to support the local economy. And if you don’t believe that, hop in your car and take a summer vacation through rural America. It’s not hard to imagine why a farmer making $296 a year would be willing to sell farm land to developers given the current state of affairs. And it’s important to point out that this extractive nature of industry is not unique to farming. Any time a corporation comes into a local economy, it extracts money from that community. Yes, it provides a good or service, but the money consumers spend on that product or service heads back to corporate headquarters and the stockholders located out of state, rather than staying in the community to recirculate and foster local economic vibrancy. That’s why supporting local businesses has such a positive impact on community vibrancy as opposed to shopping at corporate franchises or online. But I digress.
The second unfortunate challenge that has plagued farmers for the last century is crop pricing, and how US policy seems to have broken the law of supply and demand. That law basically states that low crop prices will lead to less production, which creates a shortage of supply that increases demand and drives crop prices back up. And conversely, high crop prices will lead to higher production (to capture all that profit), which creates a surplus of supply and drives the price back down. The interplay of supply and demand theoretically is supposed to regulate the price at some middle ground. For farmers, due to bank debt and USDA policy, this is not the case. It’s true that in times of high crop sales prices, farmers have the uncanny ability to overproduce to try to capture that price, thereby producing massive surpluses that drive down sales prices before they can cash out, often below the cost of production. But then when prices are low, farmers can’t cut back on production because they need cash to service their debt. Because the profit margin is so low on each unit of production, the only way to generate cash flow is to increase the production of units. This often requires buying more land, more inputs, and bigger equipment, which only adds to their debt load. So prices are low, and farmers take on more debt, and increase production, which further drives down prices and keeps them in a depressed state (the prices, i mean, although probably also the farmers). This is called being stuck on the “treadmill”, which is where many commodity farmers find themselves today
Which leads us nicely to USDA policy. One would think that if the USDA were “pro-farmer”, as many people think of it, then the policies of this federal agency would help regulate this market to protect farmers. And at one time it did. Back in 1938, when FDR was in office, the government realized that farmers were being hurt by volatile prices, as well as volatile weather (remember the dust bowl, which was caused by drought and over-tillage of farmland was 1930). To help moderate the impacts that surpluses and shortages played on price volatility, FDR and Secretary Marshall of the USDA implemented a program called the Ever Normal Granary. This program buffered prices by allowing the USDA to step in during times of surplus to buy up the excess supply and hold it in government storage facilities. Then, when the next production shortage hit, the government would release these surpluses back into the market. By decreasing the ups and downs of crop supply on the market, the prices would hold steady and allow farms to have a more predictable economic future. And I would argue this era was the heyday of farming in America, where a family farm could earn a reasonable income and a spouse was not required to work a second job in town to subsidize the farm.
However, this time period also leads into World War II. This war led to increased mechanical and chemical technologies that created the Military Industrial Complex, and when the war ended, this technology was converted to agriculture, kicking off the Industrial Agriculture Complex. For example, did you know that artificial nitrogen fertilizer was invented as a result of the Haber-Bosch process that created nitrogen for making bombs during the war? Or that many of the synthetic insecticides and herbicides used in agriculture today came from chemical weapons research developed during war time?
In post-WWII America, we find many people have left rural areas to fight in the war, or to work in urban factories supporting the war effort, and so we have less people in farm communities. Yet the baby boom generation is kicking into gear, and so the global human population begins to increase rapidly, and many parts of the world are still rebuilding from the destruction of war. The end result is that our agriculture system begins to take on a very industrial approach to maximizing yield to “feed the world”. And as more equipment, and fertilizer, and chemicals get used, we see the rise of the Agribusiness industry, as well as the advent of “processed food” to the American kitchen. As these industries gain in size and power, they begin to use their clout to dictate farm policy with the USDA.
And what the growing food processing industry realizes is that the Ever Normal Granary program that protects farmers also prevents industry from getting discount prices on raw materials. What would be a much better capitalist business model for food processors would be to squeeze every penny out of the supply chain to maximize their own profit (sound familiar?). Throw in the fact that we are engaged in the Cold War at that time, and the US government sees farm exports as a tool for foreign influence, and suddenly the USDA reverses course, gets rid of the Ever Normal Granary, and unleashes farmers to maximize production. The infamous Secretary of the USDA during the 1970’s, Earl Butz, was famous for telling farmers to “get big, or get out” and to tear out all farm windbreaks and plant “fencerow to fencerow”. In fact, during the 1972 Russian grain shortage, Butz urged farmers to take out massive debt to increase production with the promise of perpetual foreign export markets. Those perpetual markets lasted exactly 2 years, before foreign wheat production recovered, tanking prices, and leading to massive farm debt and foreclosure. And, in one of the more shameful chapters of USDA history (and there are many), the USDA chooses not to forgive these debts or bail out the farmers. You all might remember this period in the 1970’s and 80’s as the era of Farm Aid concerts. The USDA has a proven penchant for failing farmers while taking care of Agribusiness industry, the most recent example being the loss of integrity in the USDA Organic label which I’ll talk about in Part III. I would suggest that an agency responsible for farm policy that oversees a reduction in farms from 6.5 million to 2 million over a century is not working on behalf of farmers.
So why focus on maximum yield as a national policy? While this strategy to permanently deflate farm gate prices is harmful to farmers, it massively benefits Agribusiness. Growing more food requires more fertilizer, more machinery, and more chemicals…the prices of all of these continue to increase each year, as do the profits of the corporations selling them. It also means the food processing industry can now buy their inputs at discounted prices that are less than the cost of production. Rather than the industry paying a fair price, the price is intentionally deflated, and the USDA steps in with taxpayer funded subsidies to cover the difference. Which means, we, as consumers, are subsidizing the production of processed food in this country. The sticker price of processed food at the grocery store does not factor in the money that you already paid for that food through farm subsidies coming from your taxes, nor does it factor in the negative health effects eating processed food creates. And I can’t state that point strongly enough. When we talk about cheap food, we are not doing the full accounting.
My point to this discussion is to lay out my justification for calling the Industrial Agriculture Complex a lose/lose/lose/win scenario. I think I have shown how this system has been hard on farmers. And we know that tillage, synthetic fertilizers, and toxic herbicides and pesticides are degrading our soils and water supplies. And we know that the quality and nutrition of our food, and the unhealthy oils and additives are degrading our human health as is evident in our national health statistics. So farmers, the environment, and the end consumer are all losing. But we see the profits of the industry continue to rise, as it extracts the wealth and health out of the first three groups, and captures it as profit. This is the age old story of capital winning, and labor and the environment losing. And while it gets repeated over and over again (it is named Capital-ism, after all), we are well past the point as a society where we need to revisit the excesses of this economic model.
One could argue that the goal of a country’s food system (or health care system, for that matter) should not be profit maximization. That perhaps goals such as human health and nutrition, or landscape health, or hunger prevention would be more appropriate. Because when we focus on profit, we squeeze the supply chain to extract all possible value, lower quality, and maximize external costs. For the industrial food system, this means soil degradation, water over-extraction and pollution, lower nutrition food, declining human health, loss of farmers, and decline of rural communities, just to name a few. Which is why I called it a “degenerative” system in Part I. It is estimated that industrial agriculture has no more than 60 harvests left before the soil in this country is unable to support crop production using industrial practices. And given that the focus on yield, rather than on health and nutrition, is destroying American’s health, we need to make change sooner than that. And for a great book on the challenges faced by farmers in trying to make that change, I recommend Beth Hoffman’s “Bet the Farm”.
Which leads us to the point as individuals, and as a country, where we need to make a choice. Do we double down on industrial agriculture and continue to OOOHHH and AAAHH the next piece of high tech machinery, genetically modified seed, or new chemical herbicide, or do we do a course correction and seek a more regenerative future that is focused on health and nutrition? Do we continue to rely on an interventionist approach to health care based on pharmaceutical and gene editing, or do we address the underlying issues that are creating our health problems and take steps to regenerate our health? These are huge decisions that we face, and most of the money and power in this country wants to stay the course. But what do “We, the People” want? Stay tuned for Part III.