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Commentary: Subsidies Have Little Influence on Food Prices



The Washington Post
Tuesday, December 05, 2017

Have you heard that junk food is cheaper than fruits and vegetables because of the farm bill? It sure seems reasonable, because the ingredients in the junk — sugar from corn, oil from soy, flour from wheat — benefit from far more subsidy money than broccoli and beets.

This truism was repeated last month by arguably the most influential person in the sustainable-food movement, author Michael Pollan. At a Washington farm bill forum hosted by Rep. Earl Blumenauer, D-Ore., Pollan, whose work I’m a fan of, held up a package of Twinkies (which cost 99 cents) and a bunch of carrots ($2.99). The Twinkies are a complex food with 39 ingredients, and the carrots are “a very simple bunch of roots,” he said. So why do the carrots cost so much more?

“This perverse state of affairs is not the result of the free market,” said Pollan, author of Cooked, The Omnivore’s Dilemma and other influential books. “It has more to do, in fact, with the farm bill.”

The idea that wholesome foods are expensive and junk foods are cheap because of the system of subsidies in the farm bill pervades the conversation about food policy. But that idea has one very big problem. It’s false.

I have pointed this out before, but people keep saying it, so now I’m going to shout: IT’S FALSE.

Yes, junky food ingredients get much more subsidy money than fruits and vegetables. And I’ve argued against a system that has taxpayers subsidizing foods that are worse for us, rather than those that are more nutritious. But here’s the key overlooked fact: Produce is inherently much more expensive to grow than grains, and that difference dwarfs the difference in subsidy levels.

That difference is evident if you slog through data on cost of production. If you don’t want to do that — and I understand if you don’t — I’m here to help. To the ongoing dismay of my family and friends, I have a bottomless appetite for mind-numbing detail.

Consider the per-serving production costs of some vegetables and some staple crops. This is just the money it takes to grow them; no subsidies involved. (Actual production costs vary, of course. I have used data from the Midwest for corn and wheat, and from California for everything else.)

A serving of raw broccoli (1 cup, chopped) costs 14 cents to grow. The same size serving of bell peppers costs 9 cents. A cup of strawberries costs 32 cents; blackberries come in at 74 cents. (I was, alas, unable to find current production costs for carrots, although it was not for lack of trying.) Keep in mind that this is the cost to grow and harvest them. They also have to be shipped and stored (and kept cold all the while), and everyone along the food chain gets a cut. By the time they get to you, they’re more expensive.

Now let’s look at commodity crops. The first ingredient in Twinkies is wheat, and a 1-ounce serving of it (enough to make a slice of bread) costs about half a cent. The fourth ingredient in Twinkies is corn syrup, and corn also rolls in at a half-cent per serving. So do lentils, although they don’t figure in Twinkies. If you go up to a whole cent, you can get an ounce of oats or a half-cup of potatoes. A penny and a half buys you an ounce of rice or peanuts. Because these crops don’t require refrigeration and have low water content (which means they weigh less), storage and shipping are much less expensive.

The U.S. Department of Agriculture calls fruits and vegetables “specialty crops” for a reason: They’re a whole different animal from grains and legumes — a much more expensive animal. Vegetables cost at least 10 times what grains cost to grow (and that’s on a per-serving basis; look at it by calories and the difference is much larger).

Now consider the impact subsidies have. If we take corn, soy and wheat, the three biggest food crops, the 2016 subsidies came to about 10 percent of the value of the crop.

According to supermarket expert Phil Lempert, the actual cost of the food ingredients in Twinkies hovers somewhere south of 15 percent, which means that subsidies account for something like a penny of those 99-cent Twinkies. And the carrots? A 10 percent subsidy of the value of the crop would be about 3 cents a pound.

So, if we redirect our subsidies away from commodities and toward fruits and vegetables, the Twinkies would cost a penny or two more and the carrots a few pennies less, assuming those subsidies get passed on to consumers and not simply absorbed along the food chain.

When I ran that math by Pollan, he warned me: “Don’t lose the forest for the carrots!” Because the bigger issue isn’t the penny or two for the Twinkies, but the long history of subsidies that has encouraged not just the growing but also the improving of commodities. That adds up to huge supplies, which, as any Econ 101 student knows, drive prices down.

And here’s the crucial question: By how much? Pollan and I agree on the mechanism, but disagree on the magnitude.

I think it’s small because I’ve spoken with and read quite a few economists who say so. Daniel Sumner and Julian Alston, economists at the University of California, Davis, have done a lot of work here, and Sumner says subsidies have made corn and soy “slightly cheaper.” Alston estimates that we can attribute 8 to 14 extra calories per day to farm subsidies.

Pollan said he believes the magnitude is large and that a cheap supply of commodities has driven food manufacturers to create calorie-dense, nutrient-challenged processed foods, given that cornmeal and whole-wheat flour aren’t bestsellers. He cites data that show the cost of fresh fruits and vegetables increasing nearly 40 percent from 1985 to 2000 (the beginning of the obesity epidemic), while soda decreased more than 20 percent. That’s a good place to start, but we have to trace those retail prices back to the price of the implicated commodity.

Take that (corn-sweetened) soda. There’s only about a half-cent’s worth of corn in each can (1.6 percent of the retail price). Even if we assume that, had there never been a farm bill, corn would cost twice as much — an impact much higher than I’ve ever heard an economist assert — the cost per can goes up only a half-cent. Would a half-cent have changed anything?

It feels a little grubby to constantly take ideas and boil them down to money; I don’t want to lose the forest for the carrots. But if the argument is about the cost of food, I don’t see how we can avoid it. I’ve checked in with a host of economists and done the math every which way, but I can’t see that subsidies even come close to bridging the price gap between vegetables and commodities. Broccoli just ain’t wheat.

In our correspondence, Pollan indicated that he might be willing to respond more fully when he’s a bit less busy, and I hope he does. Between us, I shudder to think of the man-hours spent trying to get to the bottom of this, and it sure would be nice to resolve it.

It would be more than nice, actually. Pollan is one of the most influential people trying to improve agriculture, so it might even help the effort to revamp the farm bill. As long as advocates make the carrots vs. Twinkies argument, they give defenders of the status quo a reason to dismiss them, possibly muttering something about coastal elites.

I’ve argued for significant change (remember crop-neutral insurance?), all the while worrying about that coastal elites charge. I write for one of those e-word newspapers (let’s not name names), I’m so coastal my shoes are wet, and the nature of journalism is that we write about things we don’t actually do. My oyster farm gives me only a limited window into farming; neither I nor Pollan grows carrots or wheat for a living. We have to earn our place at the policy discussion table by getting these things right.

Tamar Haspel writes about food and science and farms oysters on Cape Cod. On Twitter: @TamarHaspel.