Agriculture and Health Policies in Conflict: How Subsidies Tax our Health: Agricultural Policies Versus Health Policies

The Physicians Committee

Agriculture and Health Policies in Conflict  How Subsidies Tax our Health


Agricultural Policies Versus Health Policies

One way to evaluate how agricultural support programs affect consumption and thus health is to evaluate their impact on price and food availability. However, the relationship between federal subsidies and retail prices of commodity products is complex, in part because other factors, such as the growth of the biofuels industry, which has increased the market price for feed grains like corn and soy.41,42,43 Nonetheless, there is little question that abundant, low-cost commodity inputs distort the market for unsubsidized products and give unhealthful foods—animal products, refined fats, and corn-based sweeteners—a competitive advantage.

Producers who might grow fruits and vegetables have a strong disincentive to do so, even though market prices for these crops may be higher, because government support for commodities compensates for low prices and also ensures against risks of production. In the current market of higher-priced feed grains, producers have an even greater incentive to select corn over broccoli. Moreover, federal support for the dairy and livestock industries has led to overproduction, leading to the placement of excess cheese, cheap meat, and other products in school meal programs. 

Federal Supports Contradict Federal Nutrition Recommendations
Although the Dietary Guidelines for Americans call for reducing intake of saturated fat and cholesterol, federal subsidies favor the production of meat and dairy products that are the principal sources of these hazardous components. Much of the corn and soybeans grown in the United States, which together received more than $96 billion in subsidies over the last 15 years,44 is used for animal feed, as well as to produce processed sugars (particularly high fructose corn syrup) and fats (for example, soybean oil, which is a coproduct of feed production and makes up 69 percent of Americans’ fats and oils intake45), and ethanol.

Corn and soybeans, which together have received $96 billion in subsidies since 1995, are primarily used for animal feed by industrial livestock operations, and also go into processed sugars (like high fructose corn syrup) and fats (like soybean oil).

In January 2011, USDA introduced a new version of the Dietary Guidelines for Americans. These guidelines called for increased intake of fruits, vegetables, and whole grains and a decrease in saturated fats, cholesterol, and solid fats. The top sources of saturated and solid fats in the American diet are dairy products, and the only sources of cholesterol are animal products (meat, dairy products, and eggs). Nonetheless, a review of the more than $246 billion in subsidies provided to U.S. producers between 1996 and 2009 demonstrates that the foods supported by government subsidy programs starkly contrast with those recommended for health.

Approximately 63 percent of domestic food subsidies supported crops grown for feed or livestock directly, about 20 percent supported grains for human consumption (including those processed into refined grains and other food products), and approximately 15 percent went to crops that would become sugar or sweeteners, starch, oil, and alcohol for human consumption.

The Dietary Guidelines for Americans recommend limiting intake of cholesterol and saturated fat. However, the food products that deliver these undesirables receive the vast majority of subsidy dollars (See Figure 3.) Fruits, vegetables, nuts and legumes for human consumption receive only about 2 percent of all subsidies, although these foods, along with whole grains, should constitute the majority of Americans’ daily consumption.

Where the Money Goes: The foods that subsidies support

Figure 3. The vast majority of crop subsidies directly or indirectly support the production of the least healthful foods.
This calculation excludes subsidies supporting crops that are exported as well as nonfood crops like cotton and corn for ethanol.

The long-standing conflict between health policies and agricultural policies was highlighted by the President’s Cancer Panel in its 2006-2007 report:

“Efforts to halt and reverse current obesity trends are unlikely to succeed without the participation and collaboration of governments, non-governmental organizations, industry, educators, and individuals. For example, current agricultural and public health policy is not coordinated—we heavily subsidize the growth of foods (e.g., corn, soy) that in their processed forms (e.g., high fructose corn syrup, hydrogenated corn and soybean oils, grain-fed cattle) are known contributors to obesity and associated chronic diseases, including cancer.” (National Cancer Institute 2006-2007)

The American Medical Association weighed in on the debate in a 2007 resolution calling for efforts “to ensure that federal subsidies encourage the consumption of products low in fat and cholesterol.”46

Subsidies Benefit Agribusinesses Producing Unhealthful Foods
Since the 1970s, U.S. agricultural policies have increasingly encouraged the overproduction of agricultural commodities, including corn and soybeans, by gradually removing supply management policies that restricted how much producers could grow. The resulting glut of commodity crops made it increasingly difficult for producers to profit from the sale of their crops, leading to a greater emphasis on maximizing yield and a growing reliance on government subsidy payments.

At the same time, smaller farms coalesced or were purchased by large farms that could more easily turn a profit from large volume commodity sales. Large corporate grain handlers and processors who purchased the cheap grain profited, and agriculture in the United States became an increasingly industrial, corporate-driven sector.  

The overabundance of cheap feed crops has influenced the nature of food production. Animals raised in concentrated feeding operations on grain and soy feed are significantly cheaper to produce, and large factory farms have proliferated. Although biofuels production competes with livestock production for grains, apparently resulting in prices that are significantly higher than they would otherwise be, subsidies continue to distort the market for feed crops like corn and soy.

Although some subsidy programs are intended to provide a safety net for agricultural producers in cases of low production or poor profitably due to weather, market price variations, and other factors, most producers in the United States do not benefit from subsidies, because planting restrictions and other barriers often prevent small farmers from collecting payments. Between 1995 and 2009, 10 percent of farmers received 74 percent of farm subsidies, and 62 percent of U.S. farmers did not collect any subsidies.47

Reductions in Feed Prices Lower Livestock Operational Costs
Changes in the cost of feed grains are reflected in changes in food prices at the retail level, although the precise impact depends on the proportion of grain input in the final product. The Center for Agricultural and Rural Development of Iowa State University estimated that a 30 percent change in the price of feed grain would change “egg prices by 8.1 percent, poultry prices by 5.1 percent, pork prices by 4.5 percent, beef prices by 4.1 percent, and milk prices by 2.7 percent.”48

Between 1997 and 2005, large livestock producers saved an estimated $3.9 billion annually due to the reduced cost of feed containing subsidy-supported corn and soybeans.

For most livestock production operations, feed represents a significant portion of input costs. Between 1997 and 2005, large livestock producers saved an estimated $3.9 billion annually—nearly $35 billion in total—due to the reduced cost of feed containing subsidy-supported corn and soybeans.49 For broiler chicken and egg production, feed costs constitute about 60 percent of production costs, leading to a 13 percent reduction in operating costs between 1997 and 2005. For the chicken industry, this means a savings of at least $1.25 billion per year. The nation’s largest chicken producer, Tyson Foods, saved $2.6 billion over the nine-year period. Industrial hog producers enjoyed a savings of 15 percent in their operating costs, and beef and dairy cattle producers each saved approximately 5 percent over the same period.50

According to an economic analysis by Elanor Starmer and Timothy Wise of Tufts University, “U.S. policies have made industrial livestock operations appear more cost-efficient than they would if feed were properly valued in the marketplace. They also suggest that taxpayers and farm families have, in effect, been subsidizing factory farms’ feed purchases.”51