Fixing the Farm Bill

Reflections on Farm Action’s 2023 Food Not Feed Summit where Dr. Grantham gave this talk in February 2023.

A diverse coalition of 150+ organizations including Summit organizer, Farm Action, say Farm Bill policy makes America’s farmers grow too much feed and not enough healthy food. There is an opportunity to change the 2023 Farm Bill to transform land use, diets, and health in America.

In reflecting on the event, we’ve grappled with several questions:

Why do we even have a Farm Bill?
What has the Farm Bill done?
Is that what we still need it to do?
Who does it benefit and how much?
Is that in the best interest of the average taxpaying American?

We won’t answer all of these questions in this blog post, but intend to begin unpacking them in this and upcoming posts.

Our rich history of policies and shifting political power dynamics have shaped agriculture and our American landscape for centuries. Today, we have approximately 900 million acres of agricultural land in the United States – roughly 3 acres for every person in the country, about the same amount of farmland we had in 1933 when Congress passed the first Farm Bill. That policy is also still the dominant driver of who farms this land and how.

The Farm Bill might better be described as the farmland bill. Its primary impact has been to stabilize the amount of land in agriculture in the United States at around a billion acres for almost a century.
Source: USDA Economic Research Service

What has the Farm Bill done?

Encouraged an ag landscape dominated by feed

Increasingly, much of our food, particularly nutritious foods like produce and seafood, isn’t coming from these 900 million acres at all – it’s imported. In fact, only roughly 6% of that total farmland acreage is used to grow food for human consumption, while 440 million acres are allocated for pastureland or range. This tiny shrinking sliver of land is dedicated to wheat and specialty crops, many of which, like nuts, are exported (more than 70% of almonds grown in water-challenged California are exported, for example).

What drives farmers to choose these crops over others? The answer lies in the economic incentives offered to farmers, which are increasingly driven by federal policy. As an agroecologist and biogeochemist by training and a consultant by practice, I work across the food system to bring data and science to decision-makers to enable a more resilient, climate-aligned food system for all of us.

Supported an (im)balanced diet

On the eater side, the American plate is crowded with animal products and highly processed foods and lacks healthful quantities of legumes, whole grains, nuts, produce, and seeds. This imbalance is driving skyrocketing rates of diet-related chronic diseases, exacting a terrible toll in terms of morbidity, mortality, and dollars. Recent estimates of food-related human health costs in the United States of $1.1T – as much as Americans spend on food in total.

This is what the farm bill currently protects and promotes.
Source: BioEnergy Consult

On the farm side, far too much of our agricultural land is devoted to livestock feed, with numerous negative ramifications that go far beyond our dinner tables. Because of this livestock-heavy agri-food system, our water is impacted, our shared global climate disrupted, and numerous species and ecosystems endangered. That same study estimated these costs total about $900B annually in the U.S. alone.

The root of this issue, surplus land in agriculture, can be traced back to the Homestead Act of 1862, which stipulated land clearance and conversion to “farmland” as a condition of retaining claims. This policy was critical to the country’s westward expansion and retention and subsequent Farm Bills maintained the extensive ag landscape we still see today. If policy got us into this mess, policy can get us out, but we first need to appreciate how it incentivizes farmer decision-making.

Who does the Farm Bill benefit and how much?

The Farm Bill incentivizes farmers to grow feed

One of the key incentives for farmers is income. Farmers need to make a living, and the income they earn from their crops determines what they plant. Commodity prices, government payments, legacies of tax policies, current land tax policies, interest rates, and other production costs all influence a farm’s income.

In the United States, crop insurance and commodity programs heavily subsidize the production of certain crops over others. For instance, the 2018 Farm Bill allocated 80% of its funding to commodity crop subsidies, with just 5% going to fruit and vegetable production.

This means that farmers who produce corn, soybeans, wheat, and other commodity crops receive significant subsidies and support from the government, while those who produce fruits and vegetables receive little support. In fact, corn and soy farms enjoyed some of the best income stability and increases in recent years.

This income-based incentive upholds the current ag landscape, where a vast majority of our agricultural land is devoted to livestock feed and commodity crops. But what would the American farm economy look like if policy encouraged farmers to produce more fruits and vegetables, legumes, whole grains, nuts, and seeds by enabling more Americans to afford to eat those foods?

Benefits go to a group with higher incomes and wealth than average americans

The Farm Bill, which has historically been an overwhelmingly supply side intervention, in terms of ag policy, has become less effective as farmers’ household economic status has diverged from the average American’s. To explore what might be more effective, it is critical to take a clear-eyed look at trends in income inequality and household, both in America at large and within agriculture.

Farmers and their households have been doing increasingly well, in terms of their overall household incomes, their farm incomes, and their wealth. Every year since 1998, median farm household income has exceeded the US median. A December 2022 USDA-ERS publication reported, “median farm operator household income exceeded median U.S. household income by 30.3%.” Since 2009, farm income has become a fairly steadily increasing component of farm household income, averaging 21% in the last decade. Increases in commodity prices are the biggest contributors to this spike. Soybean and corn prices in particular have achieved exceptional highs in 2022.

Direct government payments are also responsible for exceptional farm incomes, ballooning from about 10 billion annually to more than $45 billion in 2020 when direct government payouts accounted for nearly 40% of farm income, tens of thousands of dollars per farm household on average. Median farm household wealth increases have been similarly exceptional and currently sit at more than $2M per household, compared to just ~$100k as the median household wealth in the US, the same level as in 1995. Commercial farm operator households, who receive the bulk of Farm Bill payments, have even higher median wealth - more than $3M.

In contrast, wealth and incomes of Americans, particularly of middle and lower income Americans have not been growing as quickly or attaining anywhere near the levels achieved by the 97.6% of farmers who have wealth levels higher than the U.S. median. This has left 10-15% of Americans (30-50 million people) struggling with food insecurity for the last 30 years. The Nutrition title of the Farm Bill, which now accounts for more than 75% of Farm Bill spending, provides some food relief to low income Americans, but has not meaningfully or consistently changed food insecurity rates in the last few decades.

Does the crop even matter?

Unfortunately, land value trends minimize the economic importance of cropping decisions. Couple that with public policies that tax farmland at extremely low rates, which is attractive to investors, and it will be difficult to repurpose farmland for food crops or other uses (such as reforestation for carbon storage to meet our climate needs) in the future.

It’s important to remember that decisions about America’s millions of farmland acres are being made by people holding the land for the appreciation value.

The cost of production is the final piece of the income puzzle. Simply, it’s not about the gross income. It’s about the net. Labor costs are a huge barrier to expansion into healthy food production. Specialty crop farmersspend 40% of total cash expenses on labor costs compared to just 3-4% on corn and soybean farms. Additionally, other factors like unfriendly immigration policies are driving production out of the United States.

Higher production costs and poorer price risk management protection push farmers away from specialty crops and towards corn, soy, and cotton. Changes to immigration policy and risk management programs are necessary to encourage increased domestic food production.

Dr. Grantham delivers her talk at Farm Action’s 2023 Food Not Feed Summit in February.

The opportunity space – ensuring adequate food for all Americans

America’s farmers have responded rationally to the policies that currently are set in place, which encourage calorie productivity at all costs. As a result, land allocation is tremendously skewed toward livestock feed and away from the food we need to escape the scourge of diet-related disease.

Often, we hear people speak about America’s farming industry through a scarcity lens. In reality, we have more than enough space to shift the farming economy toward growing healthy produce, but we cannot expect farmers to make the change with the current incentive structure, which disadvantages farmers economically for growing specialty crops for human food.

The wealthiest American households spend nearly 3 times as much as the poorest American households spend on food. $5,000 Per year per household is not enough to effectively create a demand-side signal for more healthy food. Boosting the food purchasing power of the poorest Americans is critical to creating demand necessary to shift US ag land use to the benefit of human and environmental health.
Source: USDA Economic Research Service

Where we do have scarcity is on the demand end of the system. American consumers, particularly the 66 million poorest Americans do not have sufficient incomes to adequately signal their demand for healthy foods. Even though they’re spending more than 30% of their incomes on food, they’re only able to spend about a third as much as the wealthiest quintile of Americans spends (see figure below). Closing this gap through policies that empower the poorest Americans to eat well could go a long way toward strengthening the demand signal for farmers to grow a more diverse array of healthy foods.