Structural Adjustment in
Agriculture
The United States – A case study
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
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
1985 - The Export Enhancement Program:
• export at discounted prices to eligible
countries- USDA paid the difference (198788: 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:
• 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
Diminishing Agricultural Trade Surplus
• 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
Farms, farm size and farmed area
• 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 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
Net U.S. Farm Income
• 2001 net farm income 35.9% lower
than 1989
Average Prices Received and
Paid by Farmers
• 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
• Page 23
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
Source: Georgia Agricultural Facts
Direct Government Payments to Farmers
• The US
Government
preaches
‘free market’
but in reality
subsidizes
heavily
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
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
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.
First peaked in 1982
when cropping was at
its highest
Declined from 1982-90
due do falling
commodity prices and
land was idle due to
government programs
Increased again as the
use of chemicals
intensified for soil
fumigation, defoliant
and fungicides for
fruits and vegetable
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
• 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 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
Vulnerability
.
Genetic uniformity bred into crop, increases yields but makes
each plant identically vulnerable to disaster
Structural Adj: Impact on farmers
To adjust out of agriculture is to loose:
•
•
•
•
Work
A home
A lifestyle
A community, in which the family have often
lived for generations
To stay you have to change:
• Grow – ‘get bigger or get out’
• Change production (more machinery, fertilizer
and chemicals to ease farm work – time to offfarm work)
• Increase capital spending
• Off-farm income (55% depend on off-farm
work - 80% works full time)
Impact 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
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 199899 it was more than 65%
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
Declining 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?
A Transient Workforce
Impact on human health?
Approximately 67,000 nonfatal acute pesticide poisonings occur
each year, and 20-30 people die from pesticide toxicity.
Five mothers with cancer-afflicted children in the Central valley
picked pesticide-treated grapes while pregnant – Coincidence or
cause ??
Impact on consumers - Do they win?
Index of farm-to-retail spread for a market
basket of goods (1982-1984=100)
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 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’
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
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
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
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.
2.
3.
4.
•
Beef packing – from 30% in 1978 to 86% in 1994
Malt beverage – from 40% in 1967 to 90% in 1992
Wheat milling – from 30% in 1969 to 77% in 1995
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%
Net farm income
WHY the trend towards larger farms
• Mechanization
• New varieties
• Competition
• Depressed commodity prices
• Genetic modifications GM
• Globalization
• Government policy