Cheap Food Policy: Fact or Rhetoric?

The term “cheap food policy” has frequently been used as a descriptor for U.S. commodity programs by those who contend these payments to farmers ultimately result in lower food costs for consumers. More recently, farm policy has been criticized for contributing to the obesity problem in the U.S. by making large quantities of fattening foods widely available and relatively inexpensive. This paper econometrically evaluates the impact of direct government payments to farmers from 1960-1999 on the proportion of disposable income consumers spend on food. The model finds the payments do not significantly affect the affordability of food. Copyright 2005 by James C. Miller and Keith H. Coble. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. * Corresponding author. The authors wish to thank Barry Barnett of the University of Georgia for helpful comments on previous drafts of this article. Introduction Americans spent just over ten percent of their disposable income on food in 2003. This amount equals the lowest level recorded since 1929, and is well below the peak level of 25.2 percent experienced in 1933. The percentage of disposable income Americans dedicate to food purchases has consistently fallen since 1947, and has hovered near ten percent since 1997. The downward trend over time can be observed in Figure 1. This article focuses on a long-asserted source of the declining proportion of consumer income devoted to food, U.S. agricultural commodity policy. For many decades, U.S. farm policy has been described as a “cheap food” policy—in the broadest sense meaning the results of actions taken by the federal government to affect agriculture include lower retail food prices for consumers. In their textbook Agricultural and Food Policy, a cheap food policy is described by Knutson, Penn, and Flinchbaugh (1998) as one that “involves the government overtly pursuing policies that hold down the price of food below the competitive equilibrium price.” Cheap food policy remains in the milieu of the debate about federal farm program payments. For example, a recent farm publication editorial stated, “They [farm payments] really are a food subsidy assistance in disguise . . . and every person in this county [sic] who buys food and eats three squares a day are the beneficiaries of it—U.S. citizens pay far less for food than anyone on the planet” (Brandon, 2004). Cheap food policy has also made its way into the recent debate surrounding the nation’s emerging obesity problem. According to the National Center for Health Statistics (2004), the proportion of obese adults in the U.S. increased from 14.6 percent in 1971 to 31.1 percent in 2002. Many articles in the popular press over the last 18-24 months have been highly critical of what their authors contend are the deleterious effects of U.S. agricultural policy concerning