Incentives for and Costs of Commodity Crop Production

by James Rose

Published: 3/24/17, Last updated: 5/24/19

When considering what crops to plant, farmers are influenced by many factors, including soil condition, expected rainfall or access to irrigation and what climate they are in. There are also financial factors like the expected price they may receive for their harvest, how they can sell their products and incentives that are governed by policy like crop insurance. Once all of these factors are considered, it’s possible to see how policy drives farmers to produce commodity crops at a large scale.

Treatment Under the Farm Bill

Under the Farm Bill, specialty crops (fruits and vegetables) and commodity crops (corn and other feed grains, wheat, rice, soybeans and other oilseeds, peanuts and pulses) are treated as separate categories. Commodity producers can elect one of the two programs that are newly offered in the 2014 Farm Bill. The Price Loss Coverage program provides payments when market prices drop below a reference price for each bushel or hundredweight of a commodity. As an alternate, the Agriculture Risk Coverage program uses a more complicated formula to derive a payment that references the economic conditions at the county or individual level. Commodity producers also can take advantage of crop insurance products to protect against losses related to crop yield and price risk.

Feeding Factory Farms

Corn belt, cotton belt and the country’s breadbasket are probably familiar terms. Commodity crops are grown on a massive scale and certain regions have the best resources for growing certain types of crops. The Midwestern states in the US are famous for their corn and soybean fields, and much of those crops are used for animal feed. The Midwest is less famous for the intensity of industrial animal production, but according to the Factory Farming Map much of the region is home to an extreme level of density of concentrated animal feeding operations (or CAFOs).

Impacting the Environment

As it the case with other commodities, producers can take advantage of economies of scale. This has led to the consolidation of farms and monoculture of farming practices. Genetically modified commodity crops that rely on specific pesticides, like glyphosate and glufosinate, can give rise to “super weeds” that become resistant to these chemicals. And widespread application of fertilizers can result in nutrient runoff pollution. As a result of consolidation, farmers now make up less than two percent of the workforce.

Human Health Impacts

The abundance and availability of commodity crops has also led to affordable processed food, notably produced from corn and wheat. While corn and wheat are generally considered healthy as whole grains, as commodities, they are also transformed into products like refined flour and high fructose corn syrup. The junk food and soda created by these products are linked to obesity and diabetes, and several cities in the US are considering or implementing a tax on these products.

Use Agroecology to Help Manage Risks

When considering the environmental, animal welfare and human health costs of the current method of commodity crop production, we should rethink some of the payment and insurance subsidies that incentivize farmers to plant intensely monocultured crops and instead motivate farmers to grow healthy, sustainable crops throughout the country. For 10,000 years before federal support for industrial farming began and Agricultural Secretary Earl Butz said, “Get big or get out,” farmers faced many risks. Because of the modern food system, there is still need for some forms of safeguards for farmers, but adjusting those protections and incentives to allow more farmers to shift away from monocultured crops and implement crop diversity and other agroecological practices could pay big dividends for farmers, the environment and consumers.

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