Can We Blame Obesity on Farm Subsidies?

10/23/2014

Obesity rates in the United States, along with many other countries, have rapidly increased. The simple reason for this is because people consume more food energy than they use. But could farm subsidies have contributed to the obesity epidemic by making some commodities more abundant and, therefore, more affordable?

Dr. Julian Alston from the University of California-Davis, doesn’t think so.

Dr. Alston:

For farm subsidies to have had a significant effect on obesity rates, each of several component elements must be true. However, the magnitude of the impact in each of these steps is zero or small, so the overall effect is negligible.

Let’s look at the first two steps:

1. Farm subsidies must have made farm commodities significantly more abundant and cheaper.

2. The lower commodity prices caused by farm subsidies must have resulted in significantly lower costs to the food industry.

Farm subsidies have had very modest (and mixed) effects on the total availability and prices of farm commodities that are the most important ingredients in more fattening foods. U.S. farm subsidy policies include both Farm Bill programs and trade barriers that raise U.S. farm prices and incomes for favored commodities. These policies support farm incomes either through transfers from taxpayers, or at the expense of consumers, or both. Thus, they might make agricultural commodities cheaper or more expensive and might therefore increase or reduce the cost of certain types of food. Indeed, for several important food products that have been associated with obesity – dairy, sugar and orange juice – barriers to imports are used to raise the prices paid by consumers in order to support the prices received by producers. In fact, balancing the effects of these types of policies with policies that make other food commodities cheaper, such as corn, wheat and soybeans, the effect of farm price support policies has been to make food commodities overall a little more expensive for buyers.

Such small commodity price impacts would imply very small effects on costs of food at retail, which, even if fully passed on to consumers, would mean even smaller percentage changes in prices faced by consumers. The cost of farm commodities as ingredients represents only a small share of the cost of retail food products; on average about 20 percent, and much less for products such as soda and for meals away from home, which are often implicated in the rise in obesity. Hence, a very large percentage change in commodity prices would be required to have an appreciable percentage effect on food prices.

Now, let’s examine the last two steps:

3. The cost savings to the food marketing firms must have been passed on to consumers in the form of lower food prices.

4. Food consumption patterns must have changed significantly in response to these policy-induced changes in prices.

Given that food consumption is relatively unresponsive to changes in market prices, the very small food price changes induced by U.S. farm subsidies could not have had large effects on food consumption patterns. Simple causation from farm subsidies to obesity is also inconsistent with international patterns across countries. For example, obesity trends for adult males and children in Australia are similar to those in the United States, but Australia phased out its farm commodity programs over the 1980s and 1990s.

Corn is often the target of criticism as a contributor to obesity, especially because of its use to make high fructose corn syrup (HFCS), which is used as a caloric sweetener in many foods and beverages. Farm subsidies are responsible for the growth in the use of corn to produce HFCS as a caloric sweetener, but not in the way it is often suggested. The culprit here is not corn subsidies; rather, it is sugar policy that has restricted imports, driven up the U.S. price of sugar, and encouraged the replacement of sugar with alternative caloric sweeteners. Combining the sugar policy with the corn policy, the net effect of farm subsidies has been to increase the price of caloric sweeteners generally, and to discourage total consumption while causing a shift within the category between sugar and HFCS. In this context, eliminating the subsidy policies would result in cheaper caloric sweeteners and, if anything, more rather than less total consumption of sweeteners, with a switch in the mix back towards sugar.

Most corn, however, is actually consumed in the form of meat or dairy products. Corn and other feed stuffs represent less than 8 percent of the retail cost of meat such that a 10 percent cut in the farm price of corn would imply at most a 0.8 percent reduction in the retail price of meat, and similar calculations apply for other retail foods. Consequently, eliminating corn subsidies could not be expected to have large and favorable effects on consumer incentives to eat healthier diets such that obesity rates would be meaningfully reduced.

Farm commodities have indeed become much more abundant and cheaper over the past 50 years in the world as a whole as well as in the United States, but not because of subsidies. This abundance mainly reflects the effects of technological innovations and increases in farm productivity that have rescued billions of the world’s poor from the shackles of poverty and starvation, while at the same time reducing pressure on the world’s natural resources. If cheaper and more abundant food has contributed to obesity, then we should look to agricultural innovation rather than farm subsidies as the fundamental cause. Even so, it would be a dreadful mistake to seek to oppose and slow agricultural innovation with a view to reducing obesity rates. Eliminating U.S. farm subsidies would have negligible consequences for obesity rates.

The challenge for policy makers is to find other, more effective and more economically rational, ways to reduce the social consequences of excess food consumption while at the same time enhancing consumption opportunities for the poor and protecting the world’s resources for future generations.