scotland
//
you're reading...

Economics

Feast, famine, and obesity – cheap corn

0 Flares Filament.io 0 Flares ×

Paradoxically, in the past 100 years, the increased production of food has also increased the levels of food insecurity in the world. Wouldn’t it make sense that if there is more food, there are less people who are hungry? Unfortunately, the world is not so simple. Where the food is produced is as important as how much food is produced.[i] And for sheer irony, this post could also be titled, “Why is obesity an epidemic in the US?” or even “Why are the poorest people in the US also the fattest?”

So historically, the US and Canada have had very advantageous terrain for the production of wheat and corn. From the 1800′s, wheat and corn was being exported to England. Today, the US produces anywhere from 1/3 to 1/2 of the world’s corn, some of which is now being harvested for ethanol. One would hope that the world’s population distribution would match the world’s food production, but this is certainly not the case for corn nor wheat.[ii] .

One of the reasons for this skewed distribution is the massive farm subsidies for corn in the United States. Naturally, with the excess production of corn, it becomes unnaturally cheap, and therefore must be either eaten, or used in other ways, or exported. Much has been said about the corn being transformed into other food products such as HFC (high-fructose corn syrup) which has made it’s way as a sweetener into soft drinks, cereals, and most of the packaged food available today[iii]. Given this massive change in diet, it’s not a surprise that obesity is common in the United States. The usage of corn has also adapted from the production of ethanol to the feeding of livestock. Food Inc. is a documentary that covers the industrial production of food, the difficulty of buying non-corn food for those that are poor, and the effects of feeding cows corn instead of grass. Perhaps another post is required for the evolution of beef production and the consequences of feeding cows corn.[iv] Anyway, the last method by which the corn stockpile is reduced is exportation, but it is certainly not as well-publicized as the first two points.

So before examining the effects of exportation, it is instructive to understand why there’s a surplus and the current industrial agriculture phenomenon. Going back to the Great Depression, the Agricultural Adjustment Act was enacted to help farmers survive the downturn and the extended drought. Like every policy, there’s the good, the bad, the short-term, the long-term, and the unintended consequences. There were seven crops that the government monitored and attempted to control the price. Farming is one of the the most difficult professions in term of supply and demand. If too much food is produced, the prices are too low and the farmers have problems. If too little food is produced, the prices are high, but the world has problems. In any case, the unintended consequence was that by providing cheap loans, the government actually drove more farmers off the land. How was this? Before the policy, landowners had to hire several farmers who used horses and plows to till the land, but afterwards, they could buy tractors and consolidate more land. This reduced the man-hours per acre tremendously and allowed the cultivation of more land. Naturally, during WWII, this additional productivity was also required and the tractor became a necessary fact of life. As the productivity increased, less people worked on the farms and the farmers that did continue needed to buy more land to justify the usage of the tractors.[v]

This trend continued from 40′s well into the 70′s with the number of farms decreasing from approximately 6.5 million to 3 million.[vi]. The increased specialization and growing agricultural surplus moved more farmers off the land and caused a stockpile of food that could not be dealt with without exportation.

Enter Public Law 480 passed in 1954, commonly known as Food for Peace (PL 480), which created a funding avenue by which U.S. food could be exported. With the law allowing lower than normal interest rates to the borrowing nations, this allowed new markets to be opened up, even without the event of a food shortage. The corn or wheat would be shipped overseas, the loan money went straight to the farmers in the US, and the foreign nation faced a nominal interest rate.

In the short term, this helped many countries face their food deficits, but at the long term cost of not building their own agriculture base. After several decades, governments, for instance in Zimbabwe, now need to import food in the short-term as the cost of agricultural development is too long-term for a government only elected for several years. A story that was related to me was that in some regions, there is no longer any local seed, as the farmers focused strictly on producing cash crops as it was not worthwhile to grow their own grain. With the advent of patents, GMO food, and international treaties, this situation will probably not end well for subsistence farmers.

However, the excess production of the 1950′s does not quite bring us to the state that we are today. The next event to look at is known as the “Great Grain Robbery” by Russia in the 1972. At that time, Russia had a 5 year plan that incorporated producing more meat and required feeding the livestock grain. Unfortunately, they had a drought, and to cover the shortfall, bought 30 million tons of subsidized American wheat which caused the price of grain to increase in the US! The response to the grain robbery was the even more subsidies or better known as Agriculture and Consumer Protection Act of 1973 to ensure that the US would never have a grain shortage again. Rather than attempting to manage the crop, the government now paid a fix price for corn, which meant that farmers could always produce corn with a guaranteed buyer. As a side effect, this changed the economic life cycle of the farmer to solely focus on corn production.[vii]

This brings us to the present day. A more recent example of the exportation destroying the agricultural base of a country has taken place in Mexico with the advent of NAFTA[viii]. Ironically, the illegal immigrant problem is related, as jobless Mexican farmers went across the border to look for work. Also, with corn subsidies distorting the agricultural production, now ethanol is being produced, an inefficient biofuel that threatens to raise food prices worldwide and coupled with the food dependence of countries could cause mass starvation.

So the corn subsidies have multiple effects. Large agribusiness is supported at the expense of small farmers[ix]., the production of ethanol from corn is inefficient from an energy standpoint and actually hinders potentially better biofuel development, the exportation of food destroys basic crop production in foreign countries by flooding markets, there is economical dependence of agribusiness on these subsidies, and the cheap corn has made it’s way into the food system in an unnatural way which may cause massive health issues. Furthermore, with any increase in fuel prices, either the subsidies will have to increase or food prices will have to rise. For most people on earth having to spend more than 50% of their income on food, this could be disastrous. All in all, this is an untenable situation, as there is no long-term plan to create a rational agricultural structure.

tl;dr – corn subsidies have unintended effects – people in the US get fat, people in other countries may starve

0 Flares Twitter 0 Facebook 0 Filament.io 0 Flares ×
  1. Economically, the poor need money to get food or they need to produce their own. In pure market terms, it’s not that there isn’t enough food, it’s that the poor don’t have enough money or are unproductive. []
  2. http://www.geohive.com/charts/ag_wheat.aspx []
  3. Michael Pollan among others have written extensively on this []
  4. Feeding cows corn instead of grass raises the acidity of their stomachs. Since it’s not their natural diet, the cows get sick, and then require antibiotics to remain healthy. Theoretically, the human stomach has evolved to be highly acidic to kill any bacteria or virus that has been reared in a non-acidic environment. Unfortunately, now there are super-bugs being incubated in cows stomachs that human stomach can’t kill. Furthermore, these super-bugs are antibiotic resistant. So as a consequence of this, instead of not feeding cows corn, there is now a method to irradiate the meat. []
  5. Note that in traditional economies, the farmers just work till the work is done, which is a completely different situation with the decrease in productivity of the land []
  6. US Department of Commerce & USDA []
  7. To make more money they produce corn, to produce more corn they need to buy more land and larger tractors, but the only way to pay for the land and tractors is to produce more corn. []
  8. http://www.iatp.org/files/Mexican_Corn,_NAFTA_and_Hunger-.htm []
  9. Perhaps it’s not exactly at the expense of small farmers, but large agribusiness can derive much more benefit from the subsidies because they have larger equipment, land, specialization, etc. This naturally causes small farmers to suffer as their land is bought out or they are driven out of business. []
Share
  • TJ

    I love corn.

0 Flares Twitter 0 Facebook 0 Filament.io 0 Flares ×