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Tariffs and the Corn-Soybean Industrial Complex?

Published on: 02:11AM Dec 05, 2018

Recent trade policy talks and tariffs imposed by the Trump administration have had an impact on soybean prices (see: Trump's And China's Tariffs Could Do Permanent Damage To Soybean Farmers). As a result, one time payments have been proposed to help farmers but going into the next marketing year nothing is on the table. The most recent talk seems positive but who knows.

An interesting observation is that some folks typically critical of the Trump administration have found this to be a silver lining. Their story goes something like this: "Not all that is Trump is bad because hopefully he's breaking down the corn-soybean industrial complex. The trade war is overpowering the effects of the subsidies that usually keep the machine churning out the kinds of crops that are harming the planet and making us sick at the expense of more sustainable and healthy fruits and vegetables."

I don't think I have heard of the industry described as a 'corn-soybean industrial complex' before like that exactly. But, this isn't really new. Its just another version of the same criticisms we often hear from the politically correct food activist crowd (i.e. the nostalgic anti meat, anti-grain, anti-commodity anti-biotech anti-agriculture folks). Frankly, and I don't know if it is intentional or unintentional, but hidden in these arguments seems to be a lot of disrespect and ignorance of what family farmers actually do to provide the healthiest and most sustainable food possible to a growing population. And these folks tend to go at it often making it about subsidies being a big culprit in this.  

Subsidies (primarily crop insurance) can impact marginal changes in the mix and total acres of corn and soybeans each year, but they are not a primary driver in the decision to grow those crops vs. vegetables etc. The difference has more to do with biology than policy.

Economist Jayson Lusk discusses the impacts of reducing or removing these subsidies: 

"complete removal of crop insurance subsidies to farmers would only increase the price of cereal and bakery products by 0.09% and increase the price of meat by 0.5%, and would also increase the price of fruits ad vegetables by 0.7%.  So, while these policies may be inefficient, regressive, and promote regulatory over-reach, their effects on food prices are tiny"

When we try to connect this to food consumption and the impacts on obesity, the evidence is very weak.

Alston (2010) found:

“Eliminating U.S. grain subsidies alone would lead to a small decrease in annual per capita caloric consumption—simulated to be 977 calories per adult per year, which would imply a 0.16% per year reduction in average body weight assuming 3,500 calories per pound. In contrast, removing all farm subsidies, including those provided indirectly by trade barriers, would lead to an increase in annual per capita consumption in the range of 200 to 1,900 calories—equivalent to an increase in body weight of 0.03% to 0.30%.”


The difference in prices between grains and vegetables won't change much with changes in subsidies and the impact on obesity is less than trivial. One reason commodities and grains are favored over other crops is they are more affordable, cost less to produce, and store much better. As Tamar Haspel notes in a previous Washington Post article:

"Factor in that corn delivers 15 million calories per acre to broccoli’s 2-ish million, and the cost to grow broccoli (25 cents per 100 calories) is 50 times larger than corn (half a cent per hundred calories). And that’s just the difference on the farm. After harvest, that broccoli needs to be refrigerated and transported to where it’s going before it spoils. Broccoli has nutrients that corn doesn’t, of course, so it’s a good thing that we eat some. But an all-vegetable, or mostly vegetable, diet is prohibitively expensive for most people"

At the end of the day, labeling the complex network of producers, scientists, retailers, merchandizers, processors, and traders involved in feeding a hungry global population as the 'corn-soybean industrial complex' may have dramatic appeal. But the biology and economics involved tell another story.

References:

Choices. 3rd Quarter 2010 | 25(3)
FARM POLICY AND OBESITY IN THE UNITED STATES
Julian M. Alston, Bradley J. Rickard, and Abigail M. Okrent
JEL Classifications: I18, Q18

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