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Agriculture and Health Policies in Conflict  How Subsidies Tax our Health

 

Government Support for Unhealthful Foods

Agricultural Subsidy Programs
The U.S. Department of Agriculture (USDA) supports agricultural producers through a variety of programs29 that tend to favor, either directly or indirectly, the production of unhealthful foods. These are the same foods that are implicated in the diseases that have steadily increased over the decades and now impose a significant burden on Americans.

USDA programs tend to favor the production of the unhealthiest foods.

Commodity Crops
Between 1995 and 2009, USDA distributed more than $246 billion ($246,000,000,000) in subsidies.30 The subsidy system, updated approximately every five years, provides financial support primarily to producers of “commodity crops,” which include more than a dozen nonperishable crops. However, five commodity crops—corn, wheat, soybeans, cotton, and rice—receive the vast majority of subsidies.

Corn and soybeans are largely used as animal feed for production of meat, dairy products, and eggs, either domestically or for export. Other commodity crops, including barley, oats, and sorghum, are also used for feed. Notably, waste materials from other crop processing—including cotton production and corn milling for ethanol—also are fed to animals.

fresh fruits adn vegetables as "specialty crops"Specialty Crops
The USDA refers to fresh fruits and vegetables as “specialty crops.” Specialty crops do not receive subsidies. In fact, farmers who participate in commodity subsidy programs are generally prohibited from growing fruits and vegetables on the so-called “base acres” of land for which they receive subsidies. This provision, enacted in 1996, restricts the ability of both small and large commodity farmers from diversifying their crops and including fruits and vegetables as part of their production.

If Americans increased their consumption of fruits and vegetables to levels recommended by federal dietary guidelines, production of these crops would require an additional 13 million acres of land.31

Subsidies for Commodity Crops
The following is a brief description of the major subsidy programs for commodity crops:

  • Direct payments: The current program of direct payments was established by Congress in 1996 as a temporary program intended to wean producers off subsidies. The program has since been made permanent. The direct payments are provided to producers or landowners based on historical usage of the land (i.e., prior commodity crop production), irrespective of current prices or conditions. This means that some individuals may receive direct payments for land they own, even if they are not currently producing commodity crops, and in some cases even if the land is no longer used for farming at all. Direct payments total approximately $5 billion per year. ($5,000,000,000)
  • Counter-cyclical payments: Counter-cyclical payments are intended to compensate producers when the price of commodity crops drops below targets set by Congress. Like direct payments, counter-cyclical payments are tied to historical production, so agricultural producers may receive payments for crops they are no longer growing. The cost of counter-cyclical payments ranges from $1-4 billion annually, depending on price levels.
  • Marketing loans: The marketing loan program guarantees minimum prices for crops. Producers can take out marketing loans, using their crops as collateral, in order to hold the crops and sell them when prices rise. However, if prices fall, the government will accept the crops as repayment for the loan. Producers may also receive a “loan deficiency payment”—essentially a subsidy equivalent to the difference between the market price and a guaranteed price.

Dairy Subsidies
Dairy products are also considered commodities, and milk producers benefit from their own set of federal subsidy programs. Subsidies in various forms to dairy producers totaled $4.8 billion between 1995 and 2009. This included emergency supplemental “market loss” payments of $1 billion to compensate dairy producers for low prices between 1999 and 2001. In 2002, Congress enacted the Milk Income Loss Contract (MILC) program to make these supports permanent, which provides direct payments for dairy producers when the average monthly price of milk falls below a set level.32

dairy producersIn addition, through the Dairy Product Price Support Program, the USDA protects producers from price declines by purchasing surplus products from dairy processors. The federal government also artificially controls the price of milk through milk marketing orders, which set minimum prices that processors who sell milk must pay in specified areas, depending on the intended use of the milk.33

Sugar is also supported indirectly through import quotas and domestic marketing programs, but not direct payments.34

Some aspects of the dairy and sugar support programs, particularly those that take the form of trade barriers, are aimed at establishing a floor for the price of these crops and thus supporting producers who might otherwise be unable to sustain production. These programs affect availability and price by distorting the market for these unhealthful foods.

Direct Support to Livestock Businesses
USDA provides other forms of direct support for producers of agricultural products, including meat and dairy products.

Several programs provide emergency support as well as marketing and price supports to livestock producers, including:

  • the Livestock Compensation Program;
  • the Emergency Livestock Feed Assistance; and
  • the Livestock Emergency Assistance Program.

Together these programs provided at total of $3.5 billion in funding between 1995 and 2009.35

In addition, many producers are eligible to purchase subsidized crop insurance to compensate them for losses due to weather or natural disasters, a program that cost the government more than $7 billion in 2009. Crop insurance is available to livestock producers, as well as producers of other specialty crops, including some fruits and vegetables. USDA determines the availability of subsidized insurance policies for particular crops based on geographic area and risk, and these policies are provided through private insurance companies.36

Livestock producers may also be eligible for financial assistance through USDA programs to counter the environmentally harmful effects of animal agriculture. Livestock producers and others can apply to participate in programs, such as the Environmental Quality Incentives Program (EQIP), which provides funding for environmental interventions such as cleaning up pollution or reducing soil erosion.

Under EQIP, corporate agribusinesses that operate intensive animal-feeding operations are eligible to receive as much as $450,000 in government funding to build manure lagoons to hold animal waste, even though in some cases these storage facilities would be necessary for factory farms to comply with environmental regulations.37 Through this program, the federal government absorbs some of the producers’ cost of doing business.

Federal purchase programs
The federal government, through USDA, provides additional support to livestock and crop producers by purchasing agricultural products for use in the National School Lunch Program, the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), and the Emergency Food Assistance Program (TEFAP). Some of the purchased commodities are also donated to soup kitchens, food banks, and other institutions. According to the USDA, “[t]hese purchases also help to stabilize prices in agricultural commodity markets by balancing supply and demand.”38

Products purchased include meat, poultry, eggs, dairy products (predominantly cheese and dry milk products), and fresh, processed, and frozen vegetables, fruit, legumes, and grains, among other food items. Although the federal government has purchased a significant quantity of fruits, vegetables, and nuts in recent years, purchases remain skewed toward meat and dairy products.

In fiscal year 2009, USDA spent more than $623 million to buy dairy products, with the vast majority (more than $340 million) for cheese as part of the dairy price support programs discussed above.39 In the same year, USDA spent more than $1.4 billion to purchase other agricultural commodities, including at least $793 million for beef, pork, poultry, eggs, and fish, $644 million for fruits and vegetables, $96 million for grains, and $50 million for oils and nuts. USDA also made $319.5 million in “emergency” commodity purchases intended to relieve farm surpluses in 2009, which included large purchases of pork and poultry.40

The federal government also assists industry groups—including meat and dairy producers—in marketing their products through so-called checkoff programs. These programs are administered by USDA, using funds collected from producers for marketing efforts (such as the “Got Milk” campaign). Although these programs likely make significant contributions to consumption choices, they are primarily supported by industry funds and will not be discussed further.



Introduction

The Toll of Chronic Diseases

Dietary Trends and Chronic Disease

Government Support for Unhealthful Foods

Agricultural Policies Versus Health Policies

Evaluating the Impact of Government Policy on Consumption

Conclusion and References

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