Cheap (27 page)

The U.S. Department of Agriculture handed out $177.6 billion in farm subsidies between 1995 and 2006, with three-quarters of the largesse concentrated in the hands of only 10 percent of the recipients. The top beneficiary was Riceland Foods of Stuttgart, Arkansas, the largest rice miller and marketer in the world. You have probably eaten Riceland rice in a cafeteria at work or school, or maybe in a restaurant. There is a good chance the “private label” rice at your local supermarket came from there, too. Riceland is responsible for one-third of the entire United States crop, and the cooperative exports rice to Europe, Saudi Arabia, Mexico, and Cuba. Still, Riceland relies on a good deal of taxpayer support. From 1995 to 2006, Riceland received an astronomical $554,343,039 in government handouts. Thanks to this, Riceland can set the bar for low price: In 2005 the world market price for rice was 20 to 34 percent less than what it cost the average U.S. farmer to grow.

Larry Matlock is a fifth-generation farmer in Kansas and president of the American Agriculture Movement, a national lobby representing the interests of small farmers. Matlock is not a fan of government subsidies, which he said “suck the lifeblood out of every family farmer in the world.” While there is little evidence of actual blood-loss, most independent American family farmers gave up long ago. Some can and do compete by offering “boutique” products, such as organically grown crops and meat, or by diversifying. American and European farmers can also go into the business of value-added products such as specialty cheeses and smoked meats. But in the developing world, local producers rarely have these options. And it is in the developing world that America’s penchant for cheap food has the most devastating impact.

Michael Morris is lead agricultural economist at the World Bank, currently stationed in Madagascar, a large island state where people eat rice two or three times a day, much of it imported. Morris assured me that the price of food in American supermarkets does not reflect the true cost of production of rice, wheat, corn, or the livestock that fatten on it. “The low prices are there partly because of first-world efficiencies, but mostly thanks to subsidies,” he said. “And subsidies have a depressing effect on producers in developing countries. They sharply reduce incentives.” That is, when developing countries are pushed to import Western-subsidized food, they are likely to lose the knack of growing their own.

Haiti, the poorest nation in the Western Hemisphere, offers a telling illustration. In 1995, Haiti reduced tariffs on rice imports from 35 to just 3 percent in response to pressure from the International Monetary Fund (IMF) and the United States. Rice imports grew by 150 percent, and Haitian rice farmers could not compete. Some tried cultivating other crops but eventually abandoned their land and moved to the city in a desperate search for work. Henri Bazin, head of the Haitian Economists Association and a former IMF employee, told one reporter, “Cheap imports and the government’s failure to support peasant farmers are driving them off the land and into the cities to burgeoning slums.”

Haiti once exported rice. Today, three-quarters of the rice on Haitian dinner plates comes from the United States. When farms are neglected, native farming traditions and practices are lost. This, in turn, increases local demand for imported food. Paying for those imports requires cash, and acquiring that cash usually means getting a job providing the First World with something it wants—either raw materials, such as timber, minerals, or coffee, or cheap mass-manufactured goods. Farmers leave their land to find work in mines or factories, further reducing local food production. Without land or with only marginal plots, those who cannot find jobs join the poorest of the poor. Some of them flee—often to the United States. This helps explain why U.S. immigration reached an all-time high of over 37 million in 2007.

The rap against “agribusiness” is not new. Antiglobalists protest the destruction of agrarian economies and the “de-peasantization” of the developing world. Journalists, too, tend to take this view, contending that globalization has destroyed a vibrant and vital way of life. Although well meaning, these claims are simplistic and reflect their adherents’ ideology more accurately than the experience of the rural poor. The story of cheap food is far more complicated than advocates on either side make it out to be.

History has rarely been kind to peasants, for whom farming is not necessarily a source of satisfaction or, for that matter, a decent living. Small subsistence farmers comprise 75 percent of the world’s poor, and few can rely on their farms as an exclusive source of income. Even under the best of circumstances, subsistence farming is not a job for the future, because the land simply will not sustain it.

Let’s say a farmer makes a decent living growing sorghum on a ten-acre plot. The farmer grows old and bequeaths his farm to his three sons. In a healthy expanding economy, two sons might leave the farm to work in another trade, while one son stays back to run the farm. But in many poor countries the economy is not growing, and all three sons must rely on that plot to make their living. The same ten acres must now support three families. When these men grow old, they bequeath the land to their sons. Eventually, and probably soon, there is no longer enough land to support the string of generations.

For the vast majority of the rural poor, farming is just one component of a highly diversified working life. The myth of the “noble peasant,” though increasingly popular, is no more real today than it was in medieval times. Scratching a living out of an unforgiving earth is a dicey business for most people in the developing world and offers a lifestyle that many are eager to escape. University of London development scholar Henry Bernstein points out that the vast majority of rural farm workers make their living by finding work where they can, both on and off the farm, and had done so long before globalization brought multinational interests into play.

Still, the demands of today’s global marketplace—and the influence of multinational corporations—have made it even more difficult for Third World farmers to maintain what little power they once exerted over their own lives or to plan for the future. When food prices soared in the early 2000s, few small farmers were prepared to take advantage of it. Many were just as shocked as the rest of us.

Blame for the price hike landed on a number of culprits: price spikes in the fossil fuels needed for farm machinery, transportation- and petroleum-based fertilizer; the ill-considered biofuels fad that rocketed demand for corn and soybeans and, indirectly, other grains; storms, droughts, and political unrest in Australia, Russia, and other food-exporting nations; a sustained decline in the dollar leading to a spurt in commodity speculation as a hedge; and growing prosperity in the developing world that contributed to demand for high-value foods such as meat and dairy products. Each of these played a significant role, but it would be natural to assume that the final variable—growing affluence in developing nations—would compensate for rising food prices. After all, higher prices should lift the incomes of farmers, and a wealthier citizenry should be better able to pay the bill. Unfortunately, things have not played out that way.

Once again, rice, a staple for more than half the world’s population, makes a good example. Prior to the most recent “global food crises,” India for nearly two decades had been a reliable exporter of rice—and often the world’s largest, after Thailand. Given that impressive track record one would think India would be self-sufficient in rice and be in a strong position to keep rice prices within reasonable limits for its own people. Underlying circumstances make that outcome seem even more likely. In 2008, India produced 94 million metric tons of rice, an increase of more than 2 million metric tons over the year before and more than 20 million metric tons more than 2003’s crop. As for the poor, India’s government-run free rice distribution unit purchased 25 million metric tons from both domestic growers and importers, a substantial increase from the 20.6 million metric tons it bought the year previous. Making things look even better was that global rice production had reached an all-time high. Indeed, grain harvests in general were stupendous, up 5 percent from the previous year. Bluntly put: There was no shortage of rice in India and no shortage of food in the world during the “food crises” of 2008. Yet millions of Indians—as well as Africans and Asians—suddenly found themselves stranded on the edge of starvation.

What had changed was not rice but the rice trade. Historically, the Indian government had kept a firm grip on rice stores and maintained a policy of food self-sufficiency that discouraged exports. In the 1990s that policy was softened, and Indian rice was made available on the world market. Indian farmers and traders auctioned their wares to the highest bidder, with the result that rice which had once sold domestically or was stockpiled by the government was sold abroad. Over time this practice increased price instability. When world rice prices started to climb in 2006 and India started to pull back on exports in 2007 and ban them entirely in 2008, panic ensued. Those who could afford to hoarded rice, which led to scarcity, and in April 2008 prices leaped from $750 to $1,100 a ton. Suddenly, rice was unaffordable.

And, of course, it was not only rice. April of that year was an altogether terrifying month for a hungry world. The price of meat, milk, wheat, and corn skyrocketed. Most other things did, too. Yet the prices were not the highest they had ever been—far from it. Despite stratospheric increases, the price of staples was only about half of what it had been in 1973-74 and no higher than average prices throughout the 1960s. These facts were of little comfort to the hundreds of millions of poor in the developing world or to budget-strapped consumers in the West. But they were inescapable—and key. The spike in food prices in 2008 was a result, at least in part, of the unsustainably low prices that preceded them.

 

 

 

ON ITS FACE, cheap food is a godsend, especially for urbanites and the rural landless. But frequently this benefit is short-lived. Over the long term, overreliance on cheap food contributes to food dependency, complacency, and—when prices rise as they have in recent years—social unrest and devastation. “All things being equal, if agricultural prices were higher, incentives in the developing countries would have been greater, and there would have been more food production in the developing world,” Michael Morris said.

Prior to 2001, cereal prices were on a stuttering decline for nearly a century and on a steady decline since the early 1980s. Stanford economist Peter Timmer, an expert on global agricultural markets, explained what happened when prices dropped too far. “They sent investment signals to governments, donors and research institutions, encouraging them to walk away from the agricultural sector as a crucial source of productivity growth and poverty reduction.” Low prices provoked government policies directed not at increasing food production and supporting farmers, but reducing surpluses. Food was so cheap and so plentiful that there seemed little reason to store much of it or find better ways to grow or harvest it. Stockpiles dwindled as nations relied on a just-in-time approach to getting food to markets. Governments operated as though food, like T-shirts or DVD players, would always be available at a low price.

“Reduced investments in agriculture and rural infrastructure throughout the 1980s and 1990s resulted in falling productivity growth,” Timmer said. “Eventually, growth in food production fell behind growth in food consumption, scarcity reemerged, and market prices spiraled higher. The world food crisis in late 2007 and early 2008 had its roots directly in this earlier neglect of agricultural investments.”

Agricultural investments are not always well placed or even well meant. Titans of industrial agriculture—including U.S.-based multinationals such as Monsanto, Archer Daniels Midland, and Cargill—have long pushed for increased production through the introduction of “inputs”—designer seeds, chemical fertilizers, and herbicides—that small farmers can ill afford. Increased efficiencies achieved by these improvements brought great benefit to the world’s hungry but also demanded consolidation of small farms into mega-farms, forcing marginal producers—small farmers in particular—onto smaller plots and then, when they could last no longer, off their land. “The consolidation of food production has led to economies of scale and lower production costs, which have contributed to the long-term secular decline in real food prices,” Morris explained. “But consolidation has meant that when the large agribusiness interests decide to change course abruptly and, say, invest in biofuels, that can lead to severe disruptions in food markets in the short run.”

The United States is the world’s largest exporter of food and as such dominates world food policy. But in recent years we have become increasingly dependent on imports in a frantic effort to keep food prices low. Left to their own devices, global food markets pretty much follow the same “race to the bottom” model followed by other unfettered markets. Subsidies and economies of scale have made grain and everything it is made of—including the animals that eat it—increasingly cheap.

In hard times all but the poorest Americans tend not to cut back on food consumption but, rather, gravitate toward getting what we perceive to be “more for less.” Responding to rising food prices and a sinking economy in the early months of 2009, Americans cut back on fresh fruits and vegetables but increased their consumption of fast food. The
New York Times
reported: “During a year when the stock market lost a third of its value—its worst performance since the Great Depression—shares of McDonald’s gained nearly 6 percent, making the company one of only two in the Dow Jones Industrial Average whose share price rose in 2008. (The other was Wal-Mart.)” The popular Denny’s Restaurant chain touted its Extreme Grand Slam Breakfast, consisting of three strips of bacon, three sausage links, two eggs, hash browns and three pancakes. The meal contains 1,270 calories and 77 grams of fat, and aside from the potatoes, every component is either grain-based or grain-fed. There are no tomatoes with those eggs or fruit salad or even orange juice. Humans are programmed to seek the greatest volume of food at the least energy expenditure, which in biological terms amounts to a “cost.” So in times of economic stress, loading up on large amounts of low-cost foods makes sense. But in a world of industrial food, this seemingly simple strategy is neither simple nor, over the long term, safe.