The United States is a major player in global agricultural markets. American farmers account for around 25 percent of world exports of wheat and corn, and are also among the largest producers and exporters of beef, pork, and poultry. This success is partly the result of those farmers having access to abundant land, deep financial markets, and modern technologies. But as I explore in my new book, Global Agriculture and the American Farmer: Opportunities for U.S. Leadership, it is also the result of government policies that distort markets and undermine the provision of global public goods. The poor in developing countries are particularly vulnerable to the negative spillovers of these policies.
Congress has already begun deliberations on next year’s farm bill, which provides an array of subsidies that form the core of US agricultural policy. In recent years, premium subsidies to encourage farmers to buy crop insurance has been one of the most costly. Producers of sugar, peanuts, and some other crops also receive protection from import competition. Both kinds of policies support higher domestic prices, but they suppress prices for farmers elsewhere. And many developing country governments cannot afford their own subsidies to offset the effects on their farmers. More disturbingly, the aid that the United States provides to help the hungry in overseas crises is far more costly and slower to arrive than it should be, thanks to the farm bill. This is due to obsolete provisions originating in a 1950s farm bill that require food aid to be purchased in the United States, and transported on US-flagged ships.
Other policies that are not always as visible as the farm bill support farm incomes by bolstering demand for their crops, or reducing their production costs. Two that I focus on in the book are the mandate to blend biofuels—made mainly from corn and soybeans—in gasoline and diesel, and the failure to effectively regulate the widespread use of antibiotics in livestock. The biofuels mandate contributed to the 2007-08 food price spikes and is more likely to contribute to climate change than mitigate it as intended. In the latter case, livestock producers have been using antibiotics to promote growth and prevent, rather than treat, disease and these practices are contributing to the global spread of antibiotic resistant superbugs.
In the book, I analyze these policies in detail with particular attention to the deleterious effects for the poor and vulnerable in developing countries. While an overhaul of US agricultural policy to make it less trade-distorting and more focused on providing public goods—such as research and development, environmental amenities, and infrastructure—is desirable, it does not seem likely in the short run. Thus, in the book I recommend more limited steps that still provide important benefits for American taxpayers and consumers, as well as developing countries.
In next year’s farm bill, I recommend that Congress:
- Reduce the amount of the subsidy that farmers receive for buying crop insurance (now more than 60 percent of the value of the average premium).
- Reform the complicated and increasingly expensive program protecting domestic sugar producers and remove the tight restrictions on imports.
- Remove the requirements to purchase food aid in the United States and transport it long distances on US-flagged ships.
In addition, I recommend that Congress eliminate the mandate to blend biofuels in gasoline and diesel, or at least make the mandate more flexible and reduce the amount of biofuel that is derived from food crops. Finally, the executive branch should negotiate global targets to reduce the use of antibiotics in livestock and ensure that veterinarians who oversee such use do not have financial incentives to prescribe antibiotics. In a policy brief accompanying the launch of the book, I focus on food aid reform and more modest steps that Congress could take in the farm bill to lessen the distortions associated with the biofuels mandate and antibiotic use in livestock.
Farmers face numerous risks that markets alone cannot address, so there is a role for government assistance. But the US government supports the agriculture sector at levels far beyond what is socially optimal, or what other sectors receive. Unbeknownst to many, these subsidies go disproportionately to larger, richer farmers and only a few crops receive the bulk of the support—mainly grains, oilseeds, sugar, and dairy, rather than fruits and vegetables. This is not a set of policies that serves most Americans well, much less poor and vulnerable people around the world.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.