How Huge Food Corporations Will Make Upcoming Food Price Hikes Even Worse

Farmer George Naylor sounds a little too much like the fictional character Eeyore from Winnie the Pooh when I ask about his corn crop. June is usually a wet month, but not this year. One time it “rained” so little it just barely wet the bottom of his rain gauge. Add that to several days of triple-digit temperatures that accelerated evapotranspiration (water loss from his soil and his crop) and his corn is in a sad state. But he’s actually relatively lucky because he is in Iowa, which got some rain early in the season. Farmers in Illinois and Indiana are faring much worse.

The 2012 drought is now the worst drought our country has faced in half a century. As of the end of June, a third of the nation was in severe to extreme drought, and more than half faced moderate to extreme drought. All in all, June ranks as the 14th warmest and 10th driest June on record. By the end of July, the USDA had declared 1,584 counties in 32 states as primary disaster areas, making farmers and ranchers in those counties eligible for federal relief programs. Analogies to the Dust Bowl are becoming common.

Most of the time, Americans don’t need to worry much about how the food gets to our table and whether the weather has anything to do with it. It gets hot, and we put on the air conditioning. It doesn’t rain for weeks on end, and we celebrate the sunshine. But now, the fate of the corn crop on Midwestern farms even has comedian Stephen Colbert worried. Agricultural economist Bruce Babcock appeared on his show, warning him that the prices of meat, dairy and eggs will increase because “American livestock are fed a corn-heavy diet.” As Colbert put it, “It is one thing for global warming to make sea levels rise, but nobody told me it would make my cheese levels recede.”

Now is perhaps a good time to reflect on the extent to which the entire American food system is built on one crop – corn. And within that one crop, we rely on a very narrow range of genetics; although there are more than 250 known genetic races of corn, the U.S. almost exclusively relies on just two of them. Because the U.S. is the world’s number-one producer, consumer and exporter of corn, global food prices are also linked to America’s ability to grow corn. This year, we are going to find out what happens when the crop fails in many parts of the country. Now is a good time to ask ourselves: is it smart to bet the global food supply on a few varieties of one crop grown in one country?

Within the U.S., every state except for one (Alaska) grows corn, but the corn is concentrated geographically in the Midwest. Two states, Iowa and Illinois, grow more than 30 percent of America’s corn (measured by acreage). Add in three more states (Nebraska, Minnesota, and Indiana) and you’ve got nearly 60 percent of U.S. corn. Another six states (South Dakota, Kansas, Ohio, Missouri, Wisconsin, and Michigan) can also be considered major producers. These 11 states grow more than 80 percent of U.S. corn, mostly without irrigation, and right now half of them are severely suffering from the epic drought.

Where does all the corn go? Well, we aren’t eating it on the cob. Most of the crop is split between livestock feed and ethanol production with a smaller percentage going to exports and smaller amounts still going to produce foods we actually eat directly like high-fructose corn syrup. Over the past decade, we’ve seen a dramatic increase in the percent of the crop that goes to produce ethanol.

Experts debate how much biofuels impact food prices, but a few trends are clear. As we’ve devoted more and more of our corn crop to ethanol, corn prices have gone up. Once upon a time, prices hovered around $2.50 per bushel. Now they are well above $7 per bushel. Jeffrey O’Hara, an agricultural economist for the Union of Concerned Scientists, recalls when organic corn sold for $4 per bushel just a few years ago. Now it is going for $16 per bushel. “People are going to start wondering why they don’t see organic milk at the grocery store,” he says.

With corn prices so high, farmers have devoted more and more acreage to growing corn. Perhaps when prices were lower, a farmer might have rotated between corn and soybeans, but now he might choose to grow corn every year. Maybe in the past she would have enrolled some of her more marginal land in a conservation program, earning money to keep the land in prairie instead of growing corn there, but now it is more profitable to grow corn on that land. As a result, U.S. farmers are growing more acres of corn than any other year since the bad old days of the Dust Bowl.

But U.S. corn production has not only increased because of increased acreage. Since 1960, the U.S. has increased average corn yields from around 60 bushels per acre to over 160 bushels per acre. Yields of over 200 bushels per acre are not unheard of. But this has come at the cost of genetic diversity. By selecting corn seed for yield and yield alone, the U.S. has sacrificed other valuable traits – like, perhaps, drought tolerance.

In recent years, the already narrow range of corn genes has been impacted by a lack of competition in the seed market. Together, Monsanto and Pioneer control about 70 percent of the corn seed market. Pioneer, now owned by DuPont, has been a giant in the market for decades as it was the first company to commercialize hybrid corn nearly a century ago, but Monsanto is a relative newcomer.

As it jumped into the corn seed market, Monsanto bought up major corn seed companies like Holden’s and DeKalb. The acquisition of Holden’s was especially significant as Holden’s produced inbred lines of corn seed and sold them to independent seed companies around the U.S. The independent seed companies then used those inbred lines to produce and sell their own hybrids. Monsanto now not only controls a huge share of the market, it also has the means to deprive independent seed companies of the germplasm they once relied on.

Globally, the U.S. produces more than 40 percent of the world’s corn. Next in line is China, which produces less than half as much corn as the U.S., but we are the world’s largest exporter whereas China is the world’s largest importer. We export more than five times as much corn as the world’s second largest exporter, Argentina. When the U.S. corn crop suffers, the global corn supply suffers – and prices go up around the world.

The full picture of U.S. farming includes more than just corn, of course. But not much more. Nearly 90 percent of U.S. cropland is comprised of just four crops. This year, the USDA estimates that the nearly 30 percent of U.S. cropland is planted in corn, 23 percent in soybeans, 18 percent in hay, and 17 percent in wheat. Of these, only wheat is significantly different from the others: it mostly goes to feed humans (not livestock), it is less affected by the drought in the U.S., and the U.S. is not the world’s top producer (it’s fourth).

All in all, the U.S. has produced an extremely efficient – but fragile – agricultural system. When all goes well, the U.S. produces massive amounts of incredibly cheap calories. But when something goes wrong, the system can come crashing down like a house of cards.

Strangely enough, the group that won’t be suffering the most this year are the very farmers whose crops are lost to the drought. The vast majority has federally subsidized crop insurance, which will pay them back for about 75 to 80 percent of their losses, depending on the amount of coverage they’ve elected to take. Crop insurance is a relatively new phenomenon, and it’s one that agricultural economist Daryll Ray argues allows farmers to grow corn in riskier areas where – without insurance – they would have elected to plant crops or pastures more appropriate for the area.

Those who will suffer are livestock producers. For any U.S. livestock operation, the choices this year are not good ones. Your animals can eat corn, soybeans or hay, and all are impacted by the drought. Farmers who have entirely given up on producing grain or beans from corn and soybeans are harvesting their entire plants to feed to their livestock as silage or hay, respectively. The USDA is also allowing farmers to harvest hay or graze their animals in 3.8 million acres that had been set aside for conservation, including some wetlands. Another option is culling your herd, slaughtering your animals and selling them for meat to avoid the need to feed them later. Some predict that this will occur, initially driving meat prices down before they go up later.

Naylor, who is not only a farmer but also past president of the National Family Farm Coalition, feels that farmers will not be able to reduce their herd sizes as much as they could have in the past. “It used to be when farmers were raising livestock, they were a lot more flexible about whether they decided to raise livestock this year or next year. They were using relatively inexpensive facilities,” he recalls. As he sees it, a shortage of feed grains and high prices might have resulted in a drop in demand in the past as farmers reduced their herd sizes.

Nowadays, expensive confinement facilities are used in the majority of livestock operations. Naylor believes they “have a huge investment in the facility itself and if they’re not running livestock through there, somebody’s going to be paying for that facility regardless… they are going to try to keep those things full to minimize their losses.” Many such farmers contract with large meatpackers like Tyson or Cargill, and the packers’ interest is in keeping their slaughterhouses running at capacity. Naylor also suspects the packing companies “want to keep up a certain volume and not upset people’s typical diets – they want to keep their customers on board as long as they can.” In other words, they don’t want Stephen Colbert’s cheese levels to recede.

Americans certainly will not enjoy paying higher prices for eggs, dairy and meat, nor will they relish reducing consumption of expensive animal products. (That said, it might be a blessing for our health if Americans substituted lower priced but healthier plant-based whole foods in their place.) But if recent history is an indicator, the people who will truly suffer don’t even live in the U.S. Prices spiked a few years ago, in 2008, and Americans took it on the chin. Other countries experienced food riots.

So what can we do to prevent such disasters in the future? Diversify, says O’Hara. The scale of this particular drought is so enormous that we would have suffered consequences no matter what, but we might have reduced them by diversifying the crops we grow, diversifying where we grow them, and diversifying the varieties of each crop grown.

Michael Pollan, who agrees about the importance of diversification, says, “It’s also worth pointing out that organic soils perform much better in drought than conventional, because of the superior water retention of organic matter.” In fact, the Rodale Institute, in its 30-plus-year long Farm Systems Trial, found that organic corn and soy yields match conventional yields in most years but exceed them in drought years. In addition to building up the soil with manure or compost, their methods also improve water retention by utilizing a thick layer of mulch on top of the soil. They also found that organic methods use less energy and sequester more carbon in the soil, helping to mitigate the climate crisis in the long term. But a minute percent of U.S. corn is grown organically, and some organic farmers use excessive tillage to control weeds, thus negating many of the benefits organic methods should offer in a drought.

When asked, Secretary of Agriculture Tom Vilsack dodged a question about whether the drought was related to the climate crisis and instead used it as an occasion to promote drought tolerant seeds. But Union of Concerned Scientists found that Monsanto’s new genetically engineered “drought tolerant” corn provides minimal benefits in the face of drought. So maybe we should take a serious look at diversifying our food system and reducing carbon emissions instead of counting on drought tolerant seeds to bail us out after we break the climate.