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Mark Griffith

Yeh

Sustainability

February 23, 2011

Removal of corn subsidies effect on prices in grocery store

Since the mid 1970’s farming has been revolutionized. It is no longer about

diversity in crops and helping out your neighbors to provide food fresh produce to

grocery stores, it is now about surplus; it is about buying your neighbors land to grow

more of the same crop, a crop that is not even worth its own cost. This crop is mainly

corn; it has caused the big farms to get bigger and the small farms to go out of business.

Corn farmers heavily rely upon government subsidies because without it farmers would

not make any money growing it; in fact, they would lose money by growing it3. What

would happen to the corn industry if government subsidies ceased to exist? How would

this change affect the other areas of agriculture?

Before discussing today’s farming problems it is important to know the history of

corn farming and its subsidies. Prior to the 1970’s Midwest farmers found themselves

growing diverse crops in an area of land small enough themselves and a few helpers

could manage by hand. Supply of the crops was not very high forcing consumers to

spend nearly 40% of their earning towards food. The government during the New Deal

era decided it was time to bring supply into line with demand. The government set a

price floor guaranteeing farmers a decent price for corn and set the tone of farming onto

industrial-style monocropping. From this, a single type of corn, yellow #2, became the

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dominant corn crop due to its invulnerability5. Corn was now sold primarily to industries

and businesses rather than the general public to which it had before5. The businesses

needed this corn to make their commodities quicker and cheaper. For example in the

beef industry it took four to five years for a cow to become the correct size for slaughter

eating solely off of grass. After the new farm deal in the 1970’s, slaughterhouses began

feeding corn to their cattle instead of grass, and it drastically reduced the amount of time

it took the cow to reach the correct size; about one and a half to two years, half the

amount of time that it used to take. Technology began to improve to where one man

could farm not only his land but also had the ability to farm his neighbors as well. This

created a competition where only the farms with the most output could survive and those

that did not sold their land, inevitably to the bigger and more successful farm that had ran

it out of business creating a vicious cycle.

The price of corn collapsed soon after the 1996 Freedom to Farm Act which

resulted in huge taxpayer bailouts and in 2000, subsidies from the government increased

staggeringly making up 49% of the average farmer’s income5. There are many different

subsidies farmers are paid: direct payments by just telling the government you are going

to growing a certain amount of corn, crop insurance subsidies to ensure there are new

crops coming up every year, price support payments the most iconic subsidy, this is

active because the price at which a farmer can sell his corn is less than the money he put

into it. This also goes in hand with the market loss assistance subsidy and the counter-

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cyclical programs5. These subsidies added up cost a total of 73.8 billion dollars of the

taxpayers just from 1995-20095.

So what would happen if the government decided to stop subsidizing corn? There

is no specific research done on all of the effect it would have but there are many things

we know for certain that would happen. The extremely common sweetener, High-

fructose corn syrup (HFCS), which is used by many companies today to sweeten their

product for cheap because of the subsidies that make the corn cheap in the first place. If

companies did not have this commodity to use for their products the cost of making their

products would increase substantially because of the tariffs placed on sugar. For one

example if the Coca-Cola bottling company had only a 1/10 of a cent increase in the cost

of sweetener they use, per serving, it would cost the company roughly 122 million dollars

per year which would translate over to the price at which they sold their beverages6. At

the same time according to a report by Center for Agricultural and Rural Development

(CARD) claims, if the removal of corn subsidies caused a theoretical increase in corn

price by 5%, the price of pork would increase by 53%. As stated in the report,

“Pork chops that cost $3.00 per pound with farm subsidies would increase in price

by less than two cents per pound. If corn prices were to rise by 10 percent with

the removal of subsidies, then pork chops would cost only three cents per pound

more than they currently do. Because corn represents a smaller share of the final

value of beef and dairy products, retail prices for these products would go up by a

smaller amount (in percentage terms) than the price of pork.”1

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If this claim by CARD would become the truth then it seems as if not all prices of

groceries would increase substantially. The products that used HFCS would still increase

because of the tariffs placed on sugar but it seems the theoretical end result in the

supermarkets and grocery stores would only go up by a few cents for most meat products.

With the removal of government subsidies on corn it would also make the

population more healthy. Corn fed beef has been proven to have higher saturated fat

content than the traditional grass fed beef2. Since 1974 the use of HFCS has

exponentially increased and the obesity epidemic in America has been on the same track

as the increase of HFCS, nearly matching it as a perfect fit4. At the Princeton

Neuroscience Institute a study found conclusive evidence that lab rats become more

obese eating HFCS than regular sugar, with the amount of calories of both the HFCS and

regular sugar totaling the same. Hillary Parker one of the researchers on the project said,

“The rats in the Princeton study became obese by drinking high-fructose corn

syrup, but not by drinking sucrose. The critical differences in appetite,

metabolism and gene expression that underlie this phenomenon are yet to be

discovered, but may relate to the fact that excess fructose is being metabolized to

produce fat, while glucose is largely being processed for energy or stored as a

carbohydrate, called glycogen, in the liver and muscles.”8

The rats in this study show the addictive nature of HFCS and the dangerous effects it has

on our bodies.

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In conclusion the changes made in the 1970’s in the agriculture industry going

from the private farms to industrial monocropping where yellow corn #2 became the

dominant species has completely reshaped our economy as a whole. With spending of 73

billion dollars in 14 years on subsidies for corn and selling corn to companies and

industries rather than grocery stores and consumers it is now nearly impossible to touch a

product at the grocery store without some form of corn in it. The removal of corn

subsidies found through research seems to be a significant one in some areas while it

would cause barely a dent in others. For example the 1/10 of a cent increase in sweetener

per serving for Coca-Cola would cost them roughly 122 million dollars whereas with the

removal of subsidies pork, dairy and beef products would only go up by a matter of cents

according to research by CARD. Along with the price differences would come the health

benefits, which have not been conclusively identified as the main reason of the obesity

epidemic in the U.S. it has many similarities placing it as the main source of our obesity.

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Works Cited

1 Babcock, B. A. (2006, March 13). Cheap Food and Farm Subsidies: Policy Impacts of a Mythical Connection. Center for Agricultural and Rural Development, 12(2), 55-63. Retrieved from http://www.card.iastate.edu/iowa_ag_review/spring_06/article1.aspx

2 Calca, J. (2009, Winter). Withdrawal of Corn Subsidies. National Academy of the Public, Retrieved from http://opengov.ideascale.com/a/dtd/8198-4049

3 Ellis, C. (2007, Fall). Facts behind King Corn. Sustainable Table, Retrieved from http://www.sustainabletable.org/features/articles/kingcorn/

4 Hartman, P. (2010, November 23). Stop Federal Corn Subsidies to Decrease Childhood Obesity. Childhood Obesity, 67-71. Retrieved from http://childhoodobesitynews.com/2010/11/23/stop-federal-corn-subsidies-to-decrease-childhood-obesity/

5 Herzberg, J. (2009, Spring). King Corn Fact Sheet. National Family Farm Coalition, 47-51. Retrieved from http://www.nffc.net/Learn/Fact%20Sheets/King%20Corn%20Fact%20Sheet.pdf

6 Hopkins, K. (2006, January 4). Tariffs and Subsidies - The Literal Cost of High Fructose Corn Syrup. Accidental Hedonist, 32-35. Retrieved from http://www.accidentalhedonist.com/index.php/2006/01/24/tariffs_and_subsidies_the_literal_cost_o

7 Landrigan, P. J. (2006, Summer). Why Are We Subsidizing Childhood Obesity? Mount Sanai School of Medicine, 15(4), 37-38. Retrieved from http://docs.google.com/viewer?a=v&q=cache:Iq3XgoBRq5wJ:www.mountsinai.org/static_files

8 Parker, H. (2010, March 22). A sweet problem: Princeton researchers find that high-fructose corn syrup prompts considerably more weight gain. Princeton Journal, 24(6), Retrieved from http://www.princeton.edu/main/news/archive/S26/91/22K07/

9 US Price of Beef. (2010, January 2). Retrieved from http://www.mongabay.com/commodities/price-charts/beef-price.html