In the US and in many other countries, government incentives and trade programs have significantly impacted the structure of the commodity crop industry. Incentive programs use government subsidies to maintain prices during difficult times and promote the export of food. While the original intent of these programs was to create long-term stability for farmers, in fact, over the last 70 years, farmers and farm families in the US have continued to exit the profession. Consequently, rural communities have declined in population and economic condition, and the farm landscape has been one of continuing consolidation of acreage into large-scale corporate farms and the creation of economy-of-scale supply chains.
Together, the 2007 Energy Bill and the 2008 Farm Bill increased the subsidy program, which enables payouts of close to US$1 trillion to US farmers. The 2018 farm bill expanded some farm benefits but was criticized for expanding subsidies to absentee farmers and their extended families, favoring wealthier farmers and land- owners. The bill left overall subsidy levels roughly unchanged. Corn, soybeans, wheat, rice and cotton account for 70% of the subsidies received by American farmers. Corn is by far the most subsidized crop. In 2019, many farmers hit by record-setting floods and new export tariffs driven by a trade war got additional subsidies in the form of direct payments for lost revenue. The payments were not part of the farm bill and did not go through Congress. As in previous years, a small percentage of farmers receive most of the subsidies paid out.
Global Impact of US Policy
The policies of the US government can strongly impact global food prices. One example is wheat. Recent policies have essentially dictated a reduction of wheat in favor of other grains. For example, funding for biofuels such as ethanol has incentivized the production of corn, an essential ingredient in ethanol production. Consequently, US farmland is being diverted from wheat to corn. Since wheat is a staple crop worldwide and the US is the world’s top wheat exporter, increases in US wheat prices drive worldwide prices higher. Likewise, during the global recession in 2008, the US government crafted stimulus packages that, compared to other currencies, greatly increased the speed of inflation, weakening the dollar’s value. That had global implications. On the commodity market, for instance, the stimulus packages created a long-term condition in which it was harder to purchase commodities domestically. Thus, more crops were shipped overseas.
Agricultural policy can also take the form of trade agreements, which both positively and negatively impact the world. The North American Free Trade Agreement (NAFTA) was one such example. NAFTA was a large, regional cooperative trade policy between the US, Canada and Mexico, adopted in 1994. In 2019, NAFTA was replaced by US-Mexico-Canada Agreement (USMCA). It mostly affects automobile trade, leaving agricultural trade largely the same.
NAFTA eliminated quotas on imported grains, particularly corn, going into Mexico. With US corn subsidy programs in place, US corn was essentially “dumped” into Mexico. Dumping was encouraged by favorable loan rates made available to Mexican corn buyers through US export agencies, which ranged as low as 3%, compared to Mexican lenders, which ran closer to 25%-30%. Soon after NAFTA came into effect, US corn exports to Mexico soared from 1 to 9 MMT. Those policies contributed to greater inequalities for US and Mexican small and family farmers because large, corporate farms were better positioned to take advantage of the loans.
Social & Environmental Issues
Today, the most critical social issues related to commodity crop production are price increases and food shortages, which particularly impact developing countries and poorer populations. The environmental impact of commodity crop production is also increasing, largely due to population growth and increasing global consumption of animal products. These issues, and others, are discussed below.
Price Increases/Food Shortages
A primary concern with any increase in commodity food prices is the impact this has on lower-income, food-deficient countries. Families in such countries depend on staples such as corn, wheat, rice and vegetable oil for much of their nutrition, and a sizable percentage of their income goes to pay for these necessities. A rise in food prices disproportionately impacts poor countries. This trend tends to hold true for poor families in wealthy countries, as well.
One example of this is the recent increase in the cost of wheat. With the US incentivizing corn production over wheat production, the demand for wheat has skyrocketed, and the increasing price has put wheat out of range for citizens in other countries who depend on it for daily nutrition. Weather problems have also created shortages. Wheat is highly susceptible to drought and floods, and with climate change, many growers are now witnessing either too much or too little rain.
Volatile market and climate conditions are combining to impact crop supply chains. Two more years of heavier-than-normal rains flooded farms in the American Midwest in 2018 and 2019, damaging and destroying corn and soybean crops. While this might have been a boon to those farmers who were able to harvest, the African swine flu killed millions of hogs in China during the same period. Even the crops that did make it to market found lower demand and higher tariffs.
An additional issue, impacting developed nations more than others, is the decline in consumption of whole grains—grains in which the bran, germ and endosperm remain in the final product. Nutritionists and health advocates agree that consuming whole grains is far superior to consuming refined grains, in which the grain has been milled to remove most of the bran and some of the germ. However, consumption patterns for whole grains are very low, particularly in the US, and certain ethnic groups and low-income people consume fewer whole grains than the population as a whole. These disparities can be attributed to issues with food access, traditional diets and food costs, among others.