In New Zealand, Farmers Don't Want Subsidies

by Mark Ross and Chris Edwards

Every five years or so, members of Congress from rural areas team up to push through a costly extension of farm programs. They are at it again this year. The Senate recently passed legislation to keep billions of dollars in subsidies flowing to farm businesses, and the House just passed a similarly bloated bill out of committee.

Farm bills are an inside game. Politicians never give the public a good reason why U.S. agriculture needs to be coddled by the government. Members of Congress focus on grabbing more subsidies for home-state farmers, and they rarely discuss or debate whether all this federal aid is really needed.


It isn't needed. New Zealand's farm reforms of the 1980s dramatically illustrate the point. Faced with a budget crisis, New Zealand's government decided to eliminate nearly all farm subsidies. That was a dramatic reform because New Zealand farmers had enjoyed high levels of aid and the country's economy is more dependent on agriculture than is the U.S. economy.

The vast majority of New Zealand farmers proved to be skilled entrepreneurs — they restructured their operations, explored new markets, and returned to profitability. Today, New Zealand's farming sector is more dynamic than ever, and the nation's farmers are proud to be prospering without government Despite initial protests, farm subsidies were repealed in 1984. Almost 30 different production subsidies and export incentives were ended. Did that cause a mass exodus from agriculture and an end to family farms? Not at all. It did create a tough transition period for some farmers, but large numbers of them did not walk off their land as had been predicted. Just one percent of the country's farmers could not adjust and were forced out.




Prior to the 1984 reforms, subsidies stifled farm productivity by distorting market signals and blocking innovation. Many farmers were farming for the sake of the subsidies. For example, nearly 40 percent of the average New Zealand sheep and beef farmer's gross income came from government aid.


When the subsidies were removed, it turned out to be a catalyst for productivity gains. New Zealand farmers cut costs, diversified their land use, sought nonfarm income, and developed new products. Farmers became more focused on pursuing activities that made good business sense.


Official data supports on-the-ground evidence that New Zealand greatly improved its farming efficiency after the reforms. Measured agricultural productivity had been stagnant in the years prior to the reforms, but since the reforms productivity has grown substantially faster in agriculture than in the New Zealand economy as a whole.


Since the reforms, agriculture's contribution to New Zealand's economy has remained steady at about 5 percent of gross domestic product (GDP). Adding activities outside the farm gate, such as processing of milk, meat and wool, agriculture is estimated to contribute over 15 percent of GDP. By contrast, agriculture's share of the economy has fallen in many other industrial countries.


With the removal of subsidies in New Zealand, agricultural practices are driven by the demands of consumers, not by efforts to maximize the receipt of subsidies. At the same time, the whole agricultural supply chain has improved its efficiency and food safety has become paramount. Businesses that deliver inputs to farming have had to reduce their costs because farmers have insisted on greater value for money.


More efficient agricultural production in New Zealand has also spurred better environmental management. Cutting farm subsidies, for example, has reduced the previous overuse of fertilizer. And cutting subsidies has broadened farm operations to encompass activities such as rural tourism that bring management of the rural environment to the fore.


The message to American farmers is that subsidy cuts should be embraced, not feared. After subsidy cuts, U.S. farmers would no doubt prove their entrepreneurial skills by innovating in a myriad of ways, as New Zealand farmers did. And we suspect that — like New Zealand farmers — American farmers would become proud of their new independence, and have little interest in going back on the taxpayer gravy train.


Now would be a great time for America to embrace Kiwi-style reforms because commodity prices are high and U.S. farm finances are generally in good shape. It's true that weather conditions and markets create ups and downs for agriculture, but over the long run, global population growth will likely sustain high demand for farm products. Some people claim that America needs to subsidize because other countries do. But unsubsidized New Zealand farming is globally competitive, with about 90 percent of the country's farm output exported.


The removal of farm subsidies in New Zealand gave birth to a vibrant, diversified, and growing rural economy, and it debunked the myth that farming cannot prosper without subsidies. Thus rather than passing another big government farm bill that taxpayers can't afford, the U.S. Congress should step back and explore the proven alternative of free market farming.

Africa needs biotech crops

By Matt Ridley.

In a strongly worded editorial in Science magazine this week, Calestous Juma, the director of the Agricultural Innovation in Africa program at Harvard's Kennedy School, called for a government-led initiative to introduce biotechnology into Africa. "Major international agencies such as the United Nations have persistently opposed expanding biotechnology to regions most in need of its societal and economic benefits," he wrote.

Genetic modification has had a huge impact on agriculture worldwide. More than 15 million farmers now plant GM crops on almost 370 million acres, boosting yields by 10% to 25%. Despite opponents' fears that the technology would poison people, spread superweeds and entrench corporate monopolies, it's now clear that the new crops have reduced not only hunger but pesticide use, carbon emissions, collateral damage to biodiversity and rain-forest destruction.

Yet, while much of North and South America, Australia and Asia are expanding the use of GM crops, only three African countries have adopted them (a further four are conducting trials). Mr. Juma argues that Africa is the place that most needs a boost from biotech: Many of the continent's farmers cannot afford to buy pesticides, so corn and cotton that are genetically insect-resistant could make a big difference there. Over the past five decades, while Asian yields have quadrupled, African yields have barely budged.

Yet political squeamishness abounds. In an article this week for the Alliance for a Green Revolution in Africa (AGRA), John Kufuor, the former president of Ghana, argued that "Africa's agriculture has been cut off from the scientific advances which have transformed yields in many other parts of the globe"—but he did not mention GM crops. AGRA, whose chairman is former U.N. Secretary-General Kofi Annan, says that the group "does not fund the development of GM crops."

Africa grows a diverse range of crops as staple foods: not just corn, rice and wheat but cassava, yams, black-eyed peas and bananas. Genetic modification has so far focused mainly on the big commercial crops. Ironically, this is because of immensely complex biosafety regulations demanded by environmental pressure groups in the West, which don't apply to crop varieties produced by other means, including mutation by irradiation.

Only big firms can afford this ordeal by red tape, and only for big crops. The pioneering Swiss biologist Ingo Potrykus, who has watched his not-for-profit invention of vitamin-enhanced "golden rice" tied up for 13 years by regulatory procrastination, is no longer in the mood to mince words. He recently wrote that he holds "the regulation of genetic engineering responsible for the death and blindness of thousands of children and young mothers."

Biotechnology's potential in Africa is illustrated by the case of the black-eyed pea, a crop that is attacked by an insect called the Maruca pod borer, which causes $300 million in annual losses to small-scale farmers there and can be controlled only with expensive pesticides that many cannot afford. A university in Nigeria has developed an insect-resistant GM black-eyed pea, but Nigeria does not allow the commercial use of GM crops.

In Uganda, where people often eat three times their body weight in bananas a year, a GM banana that is resistant to a bacterial wilt disease, which causes $500 million in annual losses and cannot be treated with pesticides, is being tested behind high security fences. The fences are there not to keep out anti-GM protesters, as in the West, but to keep out local farmers keen to grow the new crop.

"By creating institutions such as the Convention on Biological Diversity that seek to smother biotechnology at birth," Calestous Juma tells me, "sections of the U.N. are no more than the Pontius Pilate of innovation."

Math Lessons for Locavores by Stephen Budiansky‏

IT’S 42 steps from my back door to the garden that keeps my family supplied nine months of the year with a modest cornucopia of lettuce, beets, spinach, beans, tomatoes, basil, corn, squash, brussels sprouts, the occasional celeriac and, once when I was feeling particularly energetic, a couple of small but undeniable artichokes. You’ll get no argument from me about the pleasures and advantages to the palate and the spirit of eating what’s local, fresh and in season.

But the local food movement now threatens to devolve into another one of those self-indulgent — and self-defeating — do-gooder dogmas. Arbitrary rules, without any real scientific basis, are repeated as gospel by “locavores,” celebrity chefs and mainstream environmental organizations. Words like “sustainability” and “food-miles” are thrown around without any clear understanding of the larger picture of energy and land use.

The result has been all kinds of absurdities. For instance, it is sinful in New York City to buy a tomato grown in a California field because of the energy spent to truck it across the country; it is virtuous to buy one grown in a lavishly heated greenhouse in, say, the Hudson Valley.

The statistics brandished by local-food advocates to support such doctrinaire assertions are always selective, usually misleading and often bogus. This is particularly the case with respect to the energy costs of transporting food. One popular and oft-repeated statistic is that it takes 36 (sometimes it’s 97) calories of fossil fuel energy to bring one calorie of iceberg lettuce from California to the East Coast. That’s an apples and oranges (or maybe apples and rocks) comparison to begin with, because you can’t eat petroleum or burn iceberg lettuce.

It is also an almost complete misrepresentation of reality, as those numbers reflect the entire energy cost of producing lettuce from seed to dinner table, not just transportation. Studies have shown that whether it’s grown in California or Maine, or whether it’s organic or conventional, about 5,000 calories of energy go into one pound of lettuce. Given how efficient trains and tractor-trailers are, shipping a head of lettuce across the country actually adds next to nothing to the total energy bill.

It takes about a tablespoon of diesel fuel to move one pound of freight 3,000 miles by rail; that works out to about 100 calories of energy. If it goes by truck, it’s about 300 calories, still a negligible amount in the overall picture. (For those checking the calculations at home, these are “large calories,” or kilocalories, the units used for food value.) Overall, transportation accounts for about 14 percent of the total energy consumed by the American food system.

Other favorite targets of sustainability advocates include the fertilizers and chemicals used in modern farming. But their share of the food system’s energy use is even lower, about 8 percent.

The real energy hog, it turns out, is not industrial agriculture at all, but you and me. Home preparation and storage account for 32 percent of all energy use in our food system, the largest component by far.

A single 10-mile round trip by car to the grocery store or the farmers’ market will easily eat up about 14,000 calories of fossil fuel energy. Just running your refrigerator for a week consumes 9,000 calories of energy. That assumes it’s one of the latest high-efficiency models; otherwise, you can double that figure. Cooking and running dishwashers, freezers and second or third refrigerators (more than 25 percent of American households have more than one) all add major hits. Indeed, households make up for 22 percent of all the energy expenditures in the United States.

Agriculture, on the other hand, accounts for just 2 percent of our nation’s energy usage; that energy is mainly devoted to running farm machinery and manufacturing fertilizer. In return for that quite modest energy investment, we have fed hundreds of millions of people, liberated tens of millions from backbreaking manual labor and spared hundreds of millions of acres for nature preserves, forests and parks that otherwise would have come under the plow.

Don’t forget the astonishing fact that the total land area of American farms remains almost unchanged from a century ago, at a little under a billion acres, even though those farms now feed three times as many Americans and export more than 10 times as much as they did in 1910.

The best way to make the most of these truly precious resources of land, favorable climates and human labor is to grow lettuce, oranges, wheat, peppers, bananas, whatever, in the places where they grow best and with the most efficient technologies — and then pay the relatively tiny energy cost to get them to market, as we do with every other commodity in the economy. Sometimes that means growing vegetables in your backyard. Sometimes that means buying vegetables grown in California or Costa Rica.

Eating locally grown produce is a fine thing in many ways. But it is not an end in itself, nor is it a virtue in itself. The relative pittance of our energy budget that we spend on modern farming is one of the wisest energy investments we can make, when we honestly look at what it returns to our land, our economy, our environment and our well-being.

Stephen Budiansky is the author of the blog liberalcurmudgeon.com.