Cheap Food Policy: Fact or Rhetoric? - By Mississippi State University - James C. Miller and Keith H. Coble, Department of Agricultural Economics, Mississippi State University - This paper econometrically evaluates the impact of direct government payments to farmers from 1960-1999 on the proportion of disposable income consumers spend on food.

Abstract

The term “cheap food policy” has frequently been used as a descriptor for U.S. commodity programs by those who contend these payments to farmers ultimately result in lower food costs for consumers. More recently, farm policy has been criticized for contributing to the obesity problem in the U.S. by making large quantities of fattening foods widely available and relatively inexpensive. This paper econometrically evaluates the impact of direct government payments to farmers from 1960-1999 on the proportion of disposable income consumers spend on food. The model finds the payments do not significantly affect the affordability of food.

Introduction

Americans spent just over ten percent of their disposable income on food in 2003. This amount equals the lowest level recorded since 1929, and is well below the peak level of 25.2 percent experienced in 1933. The percentage of disposable income Americans dedicate to food purchases has consistently fallen since 1947, and has hovered near ten percent since 1997. The downward trend over time can be observed in Figure 1 in the full PDF.

This article focuses on a long-asserted source of the declining proportion of consumer income devoted to food, U.S. agricultural commodity policy. For many decades, U.S. farm policy has been described as a "cheap food" policy-in the broadest sense meaning the results of actions taken by the federal government to affect agriculture include lower retail food prices for consumers. In their textbook Agricultural and Food Policy, a cheap food policy is described by Knutson, Penn, and Flinchbaugh (1998) as one that "involves the government overtly pursuing policies that hold down the price of food below the competitive equilibrium price."

Cheap food policy remains in the milieu of the debate about federal farm program payments. For example, a recent farm publication editorial stated, “They [farm payments] really are a food subsidy assistance in disguise . . . and every person in this county [sic] who buys food and eats three squares a day are the beneficiaries of it-U.S. citizens pay far less for food than anyone on the planet” (Brandon, 2004).

Cheap food policy has also made its way into the recent debate surrounding the nation’s emerging obesity problem. According to the National Center for Health Statistics (2004), the proportion of obese adults in the U.S. increased from 14.6 percent in 1971 to 31.1 percent in 2002. Many articles in the popular press over the last 18-24 months have been highly critical of what their authors contend are the deleterious effects of U.S. agricultural policy concerning obesity. In 2003 Pollan asserted, “Absurdly, while one hand of the government is campaigning against the epidemic of obesity, the other is subsidizing it, by writing farmers a check for every bushel of corn they can grow.” James Tillotson (2003), Professor of Food Policy and International Business at Tufts University, perhaps best encapsulates the arguments for the commodity policy-obesity link:

Yes, public-supported long-active strongly politically backed agricultural policies have played a pivotal role in shaping our low-cost commodity supply. Combined with our highly efficient food-processing industry, this helps to lower the costs of our consumer food. These conditions have, unintentionally and unexpectedly, created one of the environmental preconditions that have allowed many of us to become fat-cheap food.

The idea of such a relationship is gaining acceptance, as four first-year medical students recently concluded in the Stanford Daily (2004) that, “Specifically, the United States should advocate for a gradual phase-out of the existing farm subsidies and shifting to an open market... as a potential solution for the increasing obesity epidemic.”

The reports continues with...

• Literature Review
• Conceptual Framework
• Data and Methods
• Model and Results
• Implications and Conclusions

To continue reading this report, please click here (24 page PDF)

Source: Mississippi State University, Department of Ag Economics - July 2005