Agricultural Policy of the United States

Historic Foundations and 21st Century Issues

Stephanie A. Mercier, Steve A. Halbrook

• Publisher: Palgrave Macmillan
• Year: 2020
• ISBN:
  9783030364526
• Topic: Business
• Subtopic: Industria agricola
• Index: Business

This book serves as a foundational reference of U.S. land settlement and early agricultural policy, a comprehensive journey through the evolution of 20 th century agricultural policy, and a detailed guide to the key agricultural policy issues of the early 21 st century. This book integrates the legal, economic and political concepts and ideas that guided U.S. agricultural policy from colonial settlement to the 21 st century, and it applies those concepts to the policy issues agriculture will face over the next generation.

The book is organized into three sections. Section one introduces the main themes of the book, explores the pre-Columbian period and early European settlement, and traces the first 150 years of U.S. agricultural policy starting with the post revolution period and ending with the "golden age" of agriculture in the early 20 th century. Section two outlines that grand bargain of the 1930s that initiated the modern era of government intervention into agricultural markets and traces this policy evolution to the early days of the 21 st century. The third section provides an in-depth examination of six policy issues that dominate current policy discussions and will impact policy decisions for the next generation: trade, environment/conservation, commodity checkoff programs, crop insurance, biofuels, and domestic nutrition programs.

© The Author(s) 2020

S. A. Mercier, S. A. HalbrookAgricultural Policy of the United StatesPalgrave Studies in Agricultural Economics and Food Policyhttps://doi.org/10.1007/978-3-030-36452-6_1

Begin Abstract

1. Introduction

Stephanie A. Mercier¹   and Steve A. Halbrook²  

(1)

Farm Journal Foundation, Alexandria, VA, USA

(2)

University of Arkansas at Fayetteville, Fayetteville, AR, USA

 

 

Stephanie A. Mercier (Corresponding author)

 

Steve A. Halbrook

Email: [email protected]

End Abstract

In the United States, the relationship between the agricultural sector and the government is complex. This book is designed to help the reader understand that complexity, its origin, and its evolution over time, and provide the reader with a framework to analyze future policy options.

One element of this complexity is the values, beliefs, myths, and sometimes facts that surround the relationship between agriculture and government. The Native Americans generally believed that land and nature were gifts of the Deity. The Native Americans held land in common and decisions about agriculture and land use were strongly influenced by the tribal leadership and community. The early European settlers quickly learned that agriculture and settling the land were keys to economic success, so they adopted government policies that encouraged land ownership and westward expansion. President Thomas Jefferson, building on the philosophy of the French physiocrats, held up the yeoman farmer as the American ideal, building the foundation for agricultural fundamentalism. Legendary Purdue agricultural economist Dr. Don Paarlberg called agricultural fundamentalism, and its focus on the “family farm,” as one of the defining myths of the American experience (Paarlberg 1986).¹ Paarlberg also argued that the relationship between myth and policy is complex, and that some myths are necessary for a workable society. As we explore the evolution of agricultural policy in the United States, we will strive to be as objective as possible, knowing that values, beliefs, and myths are always a part of the policy-making mix.

Another element of complexity in the relationship between agriculture and government is the rapid technological change that has occurred over the last 250 years. Again, quoting Don Paarlberg from 2000: “If a farmer from Old Testament times could have visited an American farm in the year 1900, he would have recognized—and had the skill to use—most of the tools he saw: the hoe, the plow, the harrow, the rake. If he were to visit an American Farm today, he might think he was on a different planet (Paarlberg and Paarlberg 2000).”

The substitution of mechanical technology powered by carbon-based fuels for human and animal power vastly increased the productivity of farmers, the efficiency of processing agricultural commodities, and reduced the expense of transporting and marketing food to consumers. Gregor Mendel’s seminal work on genetics and the discovery of DNA less than 100 years later led to the ability to breed plants for maximum productivity and resistance to biological pests and weather conditions. The perfection of the Haber-Bosch system to convert gaseous nitrogen and hydrogen into ammonia made basic nitrogen fertilizers inexpensive and readily available, and combined with the discoveries of carbon-based fungicides and other chemical pesticides, increased yields across the board. The information revolution of the second half of the twentieth century, and continuing in the twenty-first century, vastly increased the ability of farmers to manage larger and larger operations with greater efficiency. The combination of mechanical power and energy, biology, chemistry, and information technology has produced profound and fundamental changes in agriculture. A generation ago, University of Minnesota agricultural economist Dr. Willard Cochrane² calculated that in 1830, it took 250–300 man hours with then existing technology to produce 100 bushels of wheat on five acres. By 1975, that same 100 bushels of wheat could be produced with 3–4 man hours on three acres of land with existing technology (Cochrane 1993). Today, it might take an hour or less. Consequently, over the long run, agricultural productivity tends to increase faster than demand, so real commodity prices fall (Fig. 1.1).

Fig. 1.1

Nominal versus real US corn prices by marketing year, 1912/1913–2018/2019. Note: Prices are adjusted for Inflation to October 2019 prices using the Consumer Price Index as presented by the Bureau of Labor Statistics. (Source: based on data from USDA)

A third element of complexity in the relationship between agriculture and government is the basic economics of agricultural markets and the risks associated with these markets. Both the supply of and demand for agricultural goods are highly inelastic (not responsive to price changes) in the short run. Once the wheat crop is planted, you can only produce so much wheat that year. The amount of milk produced by a cow is relatively constant day to day. If the price of wheat or milk goes up, it takes a long time for farmers to produce more wheat or raise more cows to produce more milk in response. At the same time, people tend to eat about the same amount of food every day. If the price of some foods goes up, consumers may do a little substitution of one food for another, but it takes a long time for overall dietary habits to change. Kids tend to drink the same amount of milk every day regardless of the price of milk. When both supply and demand are relatively inelastic, small changes in supply or demand can cause big changes in prices. Thus, if there is a drought in the Midwest, the price of corn or soybeans can increase significantly. A year later, farmers may respond to those higher prices by planting more acres resulting in a bumper crop, and prices fall dramatically. Conversely, if there is a health scare associated with milk or bread and a significant number of consumers stop buying those products, the price of wheat and milk can fall dramatically. In addition, agriculture is a biological production process and is subject to any number of weather, pest, and disease risks. These inherent biological risks combined with the relative inelasticity of agricultural markets can make these markets very volatile.

Farmers are price takers. Production agriculture is a purely competitive industry. The action of any individual farmer has no impact on the market. Conversely, farmers face few buyers for their products. So farmers deal with buyers who have more power to impact the markets for agricultural products. Farmers frequently look to their government to rebalance market power.

A final element of complexity in the relationship between agriculture and government is the evolution in the way society interacts with agriculture due to the following factors:

• rising population and incomes,
• modern technology and the rethinking of trade relationships has made the global economy more interconnected, and
• the deepening of our understanding of the fragility of natural resources and climate.

In 1798, when Thomas Malthus published his essay on population, the global population was about one billion people. Over 200 years later, the global population is about 7.5 billion people, and, while there are hungry and even starving people in the world—821 million as of the latest estimate—their malnutrition is largely the result of uneven distribution of wealth rather than outright lack of food globally. In other words, we have avoided the Malthusian calamity as agricultural productivity has increased at a rate sufficient to feed the global population. Over that same period, global per capita GDP has risen to the point that the percentage of the global population living in absolute poverty (defined at $2 per day in current dollars) has dropped from 94 percent of the population in 1820 to less than 10 percent of the population today. People with more income can afford to diversify their diet and start demanding different foods. Technological change has made the transportation of agricultural goods around the globe more feasible and less expensive. After generations of protectionism modeled after the English Corn Laws of the early nineteenth century, the global economies began to reduce trade barriers for agricultural goods and today about 40 percent of US agricultural output is exported. Global trade of agricultural goods is part of today’s reality. The publication of Rachael Carson’s Silent Spring in 1962 initiated a sea change in the way citizens viewed the impact of agriculture on the natural environment. Almost 60 years later, the public demands more environmental sensitivity from agriculture and expects agriculture to produce food using methods that are benign for the environment.

The evolution of agricultural policy is influenced by legal, economic, and political forces, overlaid with myths, beliefs, values, and facts. In recent decades, agriculture’s relationship with government has been greatly influenced by the revolution in technology which increases productivity, and the basic structure of agricultural markets. Agriculture continues to play an outsized role in American political and cultural life, at a time when less than 2 percent of the population has direct contact with production agriculture. This book is designed to document and highlight the historic foundations of agricultural policy in the United States, trace the development of agricultural policy from the colonial period to the twenty-first century, spotlighting themes that recur over time, and provide in-depth analysis on the issues that dominate the current policy landscape.

Unless otherwise specified, all estimates expressed in US dollars included in this book (commodity prices, land values and purchase prices, budgetary expenditures and program costs, agricultural export values, installation costs [under the Rural Electrification Act], farm incomes, and stock market losses) are in nominal terms for the period in which they were recorded.

References

1. Cochrane, Willard W. 1993. The Development of American Agriculture: A Historical Analysis. Minneapolis: University of Minnesota Press.
2. Paarlberg, Don. 1986. Values, Beliefs and Myths in Agricultural and Rural Policy. In Increasing Understanding of Public Problems and Policy. Chicago: Farm Foundation.
3. Paarlberg, Don, and Philip Paarlberg. 2000. The Agricultural Revolution of the 20th Century. Ames: Iowa State University Press.

Footnotes

1

Dr. Don Paarlberg also served as a special assistant to President Dwight D. Eisenhower, and advised him on the Food for Peace program established in 1954. He later served as the coordinator of that program. He returned to Purdue University in 1961 but served as an informal adviser to Presidents Nixon and Ford later in his career.

 

2

Willard Cochrane served on the faculty of the University of Minnesota for many years and was a leading agricultural economist of his generation. He was an informal advisor to Senator John F. Kennedy during Kennedy’s campaign for president and served as USDA’s Chief Economist during the Kennedy administration.

 

© The Author(s) 2020

S. A. Mercier, S. A. HalbrookAgricultural Policy of the United StatesPalgrave Studies in Agricultural Economics and Food Policyhttps://doi.org/10.1007/978-3-030-36452-6_2

Begin Abstract

2. Native American and Colonial Agriculture

Stephanie A. Mercier¹ and Steve A. Halbrook²

(1)

Farm Journal Foundation, Alexandria, VA, USA

(2)

University of Arkansas at Fayetteville, Fayetteville, AR, USA

Stephanie A. Mercier (Corresponding author)

Steve A. Halbrook

Email: [email protected]

End Abstract

Native American Beginnings

The study of agricultural policy in the United States rightly begins with an understanding of how the Native Tribes of North America viewed agriculture within their soc...