Structural Adjustment in Agriculture The United States – A case study.

Structural Adjustment in Agriculture

The United States – A case study

History of Commodity Policy

History of Commodity Policy

1933 – Agricultural Adjustment Act• supply management• payment to farmers to increase the price

they received for crop and livestock• Reverse deflation by increasing farm

income and the circulation of money

1933 - Commodity Credit Corporation• Stockpiled commodities in order to

support and stabilize prices• Made non-recourse loans to farmers for

their harvested and pledged crop• These loans constituted a price floor as

farmers could use the pledged crop to repay the loan or find a buyers paying a higher price

1933 – Agricultural Adjustment Act• supply management• payment to farmers to increase the price

they received for crop and livestock• Reverse deflation by increasing farm

income and the circulation of money

1933 - Commodity Credit Corporation• Stockpiled commodities in order to

support and stabilize prices• Made non-recourse loans to farmers for

their harvested and pledged crop• These loans constituted a price floor as

farmers could use the pledged crop to repay the loan or find a buyers paying a higher price

1954 - The Agricultural Trade Development and Assistance Act – Food for peace:• Grain export to Europe soared from 48-

503 million bushels from 1944 to 48• Became an obstacle to domestic

production and self-sufficiency, therefore opposition• Food for Peace secured a market for US

surplus grain as Aid and generated great profit for grain sellers, transporters and handlers

1954 - The Agricultural Trade Development and Assistance Act – Food for peace:• Grain export to Europe soared from 48-

503 million bushels from 1944 to 48• Became an obstacle to domestic

production and self-sufficiency, therefore opposition• Food for Peace secured a market for US

surplus grain as Aid and generated great profit for grain sellers, transporters and handlers

1973 - The agricultural and consumer protection act (abandoned 1996):• deficiency payment to guarantee

“target price”• 1975-1995 target prices was usually

well above market price• Intended to benefit US farmers but

often main beneficiaries were agribusiness

1973 - The agricultural and consumer protection act (abandoned 1996):• deficiency payment to guarantee

“target price”• 1975-1995 target prices was usually

well above market price• Intended to benefit US farmers but

often main beneficiaries were agribusiness

1985 - The Export Enhancement Program:

• export at discounted prices to eligible countries- USDA paid the difference (1987-88: 70% of wheat export)

• Four major agro-businesses netted 60% of the subsidies US$1.38 bil.

• At the same time blamed Canadian Wheat Board and the Common Ag. Policy of EU

• Consumers in eligible countries did not receive lower prices

• Incentives favored large monoculture farms

• Small family farmers were marginalized

1985 - The Export Enhancement Program:

• export at discounted prices to eligible countries- USDA paid the difference (1987-88: 70% of wheat export)

• Four major agro-businesses netted 60% of the subsidies US$1.38 bil.

• At the same time blamed Canadian Wheat Board and the Common Ag. Policy of EU

• Consumers in eligible countries did not receive lower prices

• Incentives favored large monoculture farms

• Small family farmers were marginalized

U.S. Has Experienced:U.S. Has Experienced:• Reduced trade surplus in agriculture• Reduced number of family farms• Racial discrimination against farmers of

color (African-Americans down from 14% to 1% of all farmers)

• Increased level of subsidy to large agricultural concerns

• Increased level of fertilizer and pesticide use

• Decreased crop and biological diversity • Falling levels of rural social welfare• Increased indicators of malnutrition

• Reduced trade surplus in agriculture• Reduced number of family farms• Racial discrimination against farmers of

color (African-Americans down from 14% to 1% of all farmers)

• Increased level of subsidy to large agricultural concerns

• Increased level of fertilizer and pesticide use

• Decreased crop and biological diversity • Falling levels of rural social welfare• Increased indicators of malnutrition

• The 1985 Export Enhancement program came at a time when US export was very low and seems to have stabilized and maybe even increased export

• The 1985 Export Enhancement program came at a time when US export was very low and seems to have stabilized and maybe even increased export

Diminishing Agricultural Trade Surplus

Diminishing Agricultural Trade Surplus

Farms, farm size and farmed area Farms, farm size and farmed area

• Page 16 fig7• Page 16 fig7

In 1940 there were 6,096,799 farms with an average size of 174 acres, By 1997, the number of farms had decreased to 1,911,859, while the average size grew to 487 acres.

Distribution of Farms by SizeDistribution of Farms by Size

• In 1900: 17% produced half of the nations output• In 1997 this figure was down to 2%• Subsidies not paid according to need but to past

yields and growing the crops set by the government • Despite the fact that the argument for the program

was to provide income maintenance for poor farmers

• In 1900: 17% produced half of the nations output• In 1997 this figure was down to 2%• Subsidies not paid according to need but to past

yields and growing the crops set by the government • Despite the fact that the argument for the program

was to provide income maintenance for poor farmers

Net U.S. Farm Income Net U.S. Farm Income

• 2001 net farm income 35.9% lower than 1989

• 2001 net farm income 35.9% lower than 1989

Average Prices Received and Paid by Farmers

Average Prices Received and Paid by Farmers

• Page 21 fig 10• Page 21 fig 10

2002: farmers received 2% less than in 1990/92, while they paid 18% more for farm inputs

Net Farm and Off-farm Incomes, 1999

Net Farm and Off-farm Incomes, 1999

• Page 23• Page 23

Source: Georgia Agricultural Facts

Higher Investment = More Risk

Higher Investment = More Risk

• Getting larger to compete. • With low commodity prices farmers try

to produce more. That is to:• Buy more land or rent more land• Invest more in machinery• Increase debt• Higher input in fertilizer and chemicals

• Exposed to increase risk of financial failure due to fluctuating commodity prices, droughts, crop failure etc

• Getting larger to compete. • With low commodity prices farmers try

to produce more. That is to:• Buy more land or rent more land• Invest more in machinery• Increase debt• Higher input in fertilizer and chemicals

• Exposed to increase risk of financial failure due to fluctuating commodity prices, droughts, crop failure etc

Direct Government Payments to Farmers

Direct Government Payments to Farmers

• The US Government preaches ‘free market’ but in reality subsidizes heavily

• The US Government preaches ‘free market’ but in reality subsidizes heavily

USDA – Subsidy Payments

USDA – Subsidy Payments

• Meant to support farm operators, but

• if the operator is not the owner must split the subsidy with the owner

• As much as 60% subsidized land is rented

• Large parts of the subsidies leave the farms

• 1996-2001 residents in major cities rec. 3.5 bil.

• 10,491 Houston residents received $330 mil

• Only if grow certain crops

• Subsidies = higher land prices = small farmers less able to buy

• Meant to support farm operators, but

• if the operator is not the owner must split the subsidy with the owner

• As much as 60% subsidized land is rented

• Large parts of the subsidies leave the farms

• 1996-2001 residents in major cities rec. 3.5 bil.

• 10,491 Houston residents received $330 mil

• Only if grow certain crops

• Subsidies = higher land prices = small farmers less able to buy

Subsidy for farm conservation

Subsidy for farm conservation

• Some funding is provided for farmland conservation but only 23% of total farm subsidies

• USDA has a growing backlog of 2.5 bil in application for this program

• While 36% of farms share the 130 bil in direct fixed payments all farms must compete for $40 bil in conservation funding

• Some funding is provided for farmland conservation but only 23% of total farm subsidies

• USDA has a growing backlog of 2.5 bil in application for this program

• While 36% of farms share the 130 bil in direct fixed payments all farms must compete for $40 bil in conservation funding

U.S. Commercial Fertilizer Usage

U.S. Commercial Fertilizer Usage

Pesticide and fertilizer cause environmental decay. Fertilizers promote deterioration of soil structure and fertility and leads to water contamination and eutrophication, as mineral components are easily leached out of soil.

Pesticide Use in U.S.Pesticide Use in U.S.First peaked in 1982 when cropping was at its highestDeclined from 1982-90 due do falling commodity prices and land was idle due to government programsIncreased again as the use of chemicals intensified for soil fumigation, defoliant and fungicides for fruits and vegetable

Negative impacts of pesticide

Negative impacts of pesticide

• pest resistance• destruction of natural enemies• Destruction of pollinators and other

agriculturally-beneficial organisms• water contamination and

corresponding wild-life damage• human poisoning and health impacts

• pest resistance• destruction of natural enemies• Destruction of pollinators and other

agriculturally-beneficial organisms• water contamination and

corresponding wild-life damage• human poisoning and health impacts

• Page 32 fig 19• Page 32 fig 19

The homogenization of agriculture is another concern. While it can create economies of scale monoculture threatens biological diversity, makes fields more susceptible to devastating pest outbreaks, and therefore favors reliance on chemical pesticides.US farm payment policy encourages this - only to certain crops

Genetically modified cropsGenetically modified crops

• By 1998 25% of corn, 38% of soy beans and 45% of cotton were genetically modified

• Consumer survey show that 92% of adults wants labeling of GM foods,

• the US Government very active in preventing labeling at home and abroad

• By 1998 25% of corn, 38% of soy beans and 45% of cotton were genetically modified

• Consumer survey show that 92% of adults wants labeling of GM foods,

• the US Government very active in preventing labeling at home and abroad

.

VulnerabilityVulnerability

Genetic uniformity bred into crop, increases yields but makes each plant identically vulnerable to disaster

Structural Adj: Impact on farmersStructural Adj: Impact on farmersTo adjust out of agriculture is to loose:• Work• A home• A lifestyle• A community, in which the family have

often lived for generationsTo stay you have to change:• Grow – ‘get bigger or get out’• Change production (more machinery,

fertilizer and chemicals to ease farm work – time to off-farm work)

• Increase capital spending• Off-farm income (55% depend on off-farm

work - 80% works full time)

To adjust out of agriculture is to loose:• Work• A home• A lifestyle• A community, in which the family have

often lived for generationsTo stay you have to change:• Grow – ‘get bigger or get out’• Change production (more machinery,

fertilizer and chemicals to ease farm work – time to off-farm work)

• Increase capital spending• Off-farm income (55% depend on off-farm

work - 80% works full time)

Impact on farm labor and theImpact on farm labor and the

• As farmers are being squished they try to pass on some of the cost to farm labors:

• Low income• Increased employment uncertainty• Lower benefits• Health implication• Poor nutrition• Higher food prices

• As farmers are being squished they try to pass on some of the cost to farm labors:

• Low income• Increased employment uncertainty• Lower benefits• Health implication• Poor nutrition• Higher food prices

The Percent of Farm Worker Households Below Poverty Line by size

97-98

The Percent of Farm Worker Households Below Poverty Line by size

97-98

• % has increased over time: 1990 half of all families lived below the poverty line, in 1998-99 it was more than 65%

• % has increased over time: 1990 half of all families lived below the poverty line, in 1998-99 it was more than 65%

Average Hourly Wages of Farm Workers and Non-farm Workers in the Private

Sector

Average Hourly Wages of Farm Workers and Non-farm Workers in the Private

Sector

• the average hourly wage for farm workers in 1998 was 48.4 % of that of production workers in the private non-farm sector, 9 years earlier it was 54.3%

• Declining job security. The period during the year where they can find work declined from 26.2 weeks to 24.4 weeks in 6 years

• the average hourly wage for farm workers in 1998 was 48.4 % of that of production workers in the private non-farm sector, 9 years earlier it was 54.3%

• Declining job security. The period during the year where they can find work declined from 26.2 weeks to 24.4 weeks in 6 years

Declining benefitsDeclining benefits• Unemployment rate between 15% and 23%

during 1997 depending on time of year• In 1989 21% reported receiving health

insurance; in 1998 this had declined to 5%• Some issues have improved. In 1989: 19%

lacked access to toilet, 19% lacked access to water for washing, 8% did not have access to drinking water. During 1997/98 these percentages were reduced to 13%, 16% and 2% respectively – but is that acceptable?

• Unemployment rate between 15% and 23% during 1997 depending on time of year

• In 1989 21% reported receiving health insurance; in 1998 this had declined to 5%

• Some issues have improved. In 1989: 19% lacked access to toilet, 19% lacked access to water for washing, 8% did not have access to drinking water. During 1997/98 these percentages were reduced to 13%, 16% and 2% respectively – but is that acceptable?

A Transient WorkforceA Transient Workforce

Approximately 67,000 nonfatal acute pesticide poisonings occur each year, and 20-30 people die from pesticide toxicity.

Impact on human health?

Five mothers with cancer-afflicted children in the Central valley picked pesticide-treated grapes while pregnant – Coincidence or cause ??

Index of farm-to-retail spread for a market basket of goods (1982-1984=100)

Impact on consumers - Do they win?

Farm Value as % of Retail Price

Farm Value as % of Retail Price

While in 1980, farm value comprised 37 % of the retail price, by 2001 that share had decreased to 21%.not only are farmers failing to reap benefits from the market, but neither are consumers

Food pricesFood prices

• Real per capita income has increased 18.3% from 1987 to 2001

• Food prices increased 52.5% during the same period

• USDA estimates that in 2001 33.6 mil people had ‘limited or uncertain access to nutritionally adequate and safe foods’

• Real per capita income has increased 18.3% from 1987 to 2001

• Food prices increased 52.5% during the same period

• USDA estimates that in 2001 33.6 mil people had ‘limited or uncertain access to nutritionally adequate and safe foods’

Public health is not a principal concern for food

producers

Public health is not a principal concern for food

producers• Food companies

spend $33 bil. a year to promote their products

• 70% is for soft drinks, candy and snacks, convenience food and alcohol

• Only 2.2% for fruit, vegetables, beans and grains

• Food companies spend $33 bil. a year to promote their products

• 70% is for soft drinks, candy and snacks, convenience food and alcohol

• Only 2.2% for fruit, vegetables, beans and grains

Obesity and increasing problem

Obesity and increasing problem

• As may overfed as underfed in the world 1.2 bil. of each – global problem of malnutrition

• Increasing portion sizes• 65% of Americans are overweight• Obesity among American children

has doubled since 1980 it has tripled among teenagers

• As may overfed as underfed in the world 1.2 bil. of each – global problem of malnutrition

• Increasing portion sizes• 65% of Americans are overweight• Obesity among American children

has doubled since 1980 it has tripled among teenagers

Impact on Agricultural Communities

Impact on Agricultural Communities

• Fewer farms (1940-92 from 6 mil to less than 2 mil.)

• Fewer family farms, more corporate farms

• Fewer people employed in agriculture• Population decline in rural areas (from 1940-

92 from 30 mil. to 3.9 mil – 1940 one quarter of US population today less than 2%)

• Decline in services in rural areas

• Fewer farms (1940-92 from 6 mil to less than 2 mil.)

• Fewer family farms, more corporate farms

• Fewer people employed in agriculture• Population decline in rural areas (from 1940-

92 from 30 mil. to 3.9 mil – 1940 one quarter of US population today less than 2%)

• Decline in services in rural areas

The consolidation of the food sector and the power of

agribusiness

The consolidation of the food sector and the power of

agribusiness• Top 20 food manufactures accounted for over

50% of food-processing value added in 1995 – double from 1954

• Rapid escalation in the 4-firm concentration ratio occurred in key industries:

1. Beef packing – from 30% in 1978 to 86% in 19942. Malt beverage – from 40% in 1967 to 90% in 19923. Wheat milling – from 30% in 1969 to 77% in 19954. Pasta manufacturing – from 34% in 1967 to 78% in

1992

• The top 6 supermarket retailers now control 50% of supermarket sales versus 32% in 1992

• Top 20 food manufactures accounted for over 50% of food-processing value added in 1995 – double from 1954

• Rapid escalation in the 4-firm concentration ratio occurred in key industries:

1. Beef packing – from 30% in 1978 to 86% in 19942. Malt beverage – from 40% in 1967 to 90% in 19923. Wheat milling – from 30% in 1969 to 77% in 19954. Pasta manufacturing – from 34% in 1967 to 78% in

1992

• The top 6 supermarket retailers now control 50% of supermarket sales versus 32% in 1992

During 1990s corporate

profits in the food industry rose by 80% while net farm income fell by 36%

During 1990s corporate

profits in the food industry rose by 80% while net farm income fell by 36%

Net farm income

WHY the trend towards larger farms

WHY the trend towards larger farms

• Mechanization

• New varieties

• Competition

• Depressed commodity prices

• Genetic modifications GM

• Globalization

• Government policy

• Mechanization

• New varieties

• Competition

• Depressed commodity prices

• Genetic modifications GM

• Globalization

• Government policy