This article should, by rights, be an entire book: the consequences of agricultural commoditization are profound and far-reaching. By necessity, I am concentrating on a few key points.
Where’s The Real Food?
One of the largest movements in 20th century agriculture was the commoditization of food.
In 1900, 41% of the US workforce was directly employed in agriculture, and each farm produced over five different crops for sale—not counting food consumed on the farm or sold locally, outside the commodity system. Furthermore, 60% of Americans lived in rural areas. (Source: USDA.) This means that the majority of Americans either grew their own food, or had direct access to the producers of the food they ate.
In 2000, just 1.9% of Americans were employed in agriculture, farms produced an average of just over one crop for sale, and less than 1 out of 4 Americans lived in rural areas. The number of farms has fallen 63%, while the average farm size has risen 67%.
All charts above from the USDA Economic Research Service:
The 20th Century Transformation of U.S. Agriculture and Farm Policy
by Carolyn Dimitri, Anne Effland, and Neilson Conklin
Economic Information Bulletin No. (EIB-3) 17 pp, June 2005
In other words, we no longer have direct access to the food we eat. How did this happen?
As usual, the answer is simple: follow the money.
A Silly and Far-Fetched Scenario
Let’s consider a silly and far-fetched scenario for a moment.
The US government decides that Hollywood’s dominance of the world entertainment industry should be encouraged at the creative end as well as the financial end, and offers the following incentive:
“We will pay $100 for every new song of two minutes or longer, recorded in English by an American citizen in America, upon registration with the Copyright Office.”
(Subject to a raft of rules and red tape, of course.)
Right away we can see the problem: there is no incentive to write a song that anyone else wants to hear! The only incentive is to write lots and lots of ‘songs’…and it would probably take about six hours for enterprising programmers to write song-generation programs that put together random chord progressions and random sentences off the Internet, automatically play them with a synthesizer, and send them into the Copyright Office as quickly as they could record the vocals.
In other words, such an incentive would not result in more entertainment: it would result in a tsunami of unlistenable crap.
Commoditization: What Does “Fungible” Mean?
The definition of a commodity is “a good supplied without qualitative differentiation across a market.” This property is called “fungibility”.
Sadly, the term “fungible” has nothing to do with either fungi or dirigibles. A fungible good is capable of mutual substitution: one unit is defined to be just as good as any other.
We can see that fungibility is a necessary property of money. If I loan you 100 dollars, I don’t expect to get the same $100 back I loaned to you…any $100 will do, because dollars are fungible.
Similarly, we can see that fungibility is a necessary property of commodities. If I contract to deliver you 1000 pounds of copper in March of next year, you shouldn’t have to care where the copper comes from.
Fungibility also applies to agricultural commodities: if I contract to deliver 100 bushels of corn in September of next year for a set price, it’s clearly impossible for you to inspect or evaluate corn that I haven’t even grown yet! So certain minimum standards for delivery are defined—and beyond that, all corn is the same.
Like most commodities, grains are mixed without regard to source: the producers sell their corn, whereupon it’s transferred via an elevator to a silo and mingled with all the other corn from the area, and anyone who buys corn simply gets whatever comes out of the elevator first.
We can see that an attempt to make non-fungible creations (songs) into a fungible commodity, as in the silly example above, would result in both an oversupply of unlistenable songs and an economic catastrophe.
Problem #1: Real Food Is Not Fungible
The alert reader will see several problems with this “fungible food” scenario right away. The first problem is that real food is not fungible.
For instance, when we go to buy onions, tomatoes, melons, or other produce, we don’t just choose them at random. We choose the variety that will taste best in our recipe, and from that, we choose the ripest, least damaged, best-looking, best-smelling ones available. We may even reject all the choices as unsuitable and visit a different store…or the farmer’s market.
A grain elevator.
Problem #2: Fungibility Begets Mediocrity
The second problem, which is a consequence of the first, is that fungibility begets mediocrity.
Consider: if you are a farmer, and the only standard for corn is that there be as many bushels of it as you contracted to deliver, are you going to care about nutrition? About taste? About pesticide contamination?
No. You’re not going to care about anything but producing the maximum quantity possible for the least cost, because it doesn’t matter. You can produce the most nutritious corn in the world…but you won’t be paid any more for it than your neighbor who’s just trying to cut costs.
Furthermore, we can see that agricultural price supports make this problem far worse. Think back to the songwriting example above: if you’re absolutely guaranteed to get paid by Uncle Sam as long as your ‘song’ is two minutes or greater, why bother creating anything meaningful? You’ll make far more money by creating unlistenable crap as quickly as you can.
Similarly, if you’re growing a crop (such as corn, wheat, cotton, or soybeans) that receives price supports, you’re not going to care about taste, nutrition, or any other measure of quality—let alone topsoil depletion or groundwater contamination. You’re paid by the bushel, and all that matters is how many bushels you can grow.
Is it any wonder that these “commodity crops” are so devoid of nutrients that products made from them must, by law, be “fortified” with vitamins and minerals in order to avoid massive outbreaks of deficiency disease?
Follow the money. We get what we reward.
Problem #3: Fungibility Impoverishes Farmers And Enriches Middlemen
The next problem I’ll discuss here is a consequence of the first two. It’s less obvious, but more far-reaching: turning a crop into a fungible commodity impoverishes farmers and consumers, while enriching middlemen.
Wagyū beef. To get this much fat inside your own muscles, make sure to feed yourself a similar diet of whole grains!
However, if you’re forced into the commodity system, where you receive the same price for your crop regardless of quality, that means you can no longer differentiate your crop from anyone else…
…which means that you’re competing directly with everyone else, and your profit margins drop to nearly zero.
Processors and other middlemen benefit dramatically from this arrangement: they use these cheap commodity crops as raw materials to produce a bewildering variety of packaged pseudo-foods, which they differentiate and sell at the markup that used to belong to producers of actual food.
Most products in the snack and breakfast aisles are made from disassembling artificially cheap corn into its constituent parts, adding some artificial flavoring and coloring, and reassembling them into something that costs more per pound than pork, chicken, or hamburger. Cheetos, Fritos, Doritos, Tostitos, Corn Flakes, Corn Pops...
Furthermore, this allows the financial industry to profit by “making the market” (inserting themselves as middlemen in all transactions, e.g. “futures”), taking another slice of income out of the farmer’s remaining profit margin, and increasing prices to us at the supermarket.
All this fun doesn't come for free.
Here’s an illustrative example: since eggs are not completely fungible, an egg farmer—even a giant industrial egg farmer—makes over fifty cents per dollar of eggs sold. A corn farmer makes about four cents per dollar of corn syrup.
Problem #4: Fungibility Causes Environmental Devastation
The final problem I’ll discuss here is the environmental devastation wrought by commodity agriculture.
When commoditization prevents anyone from earning a margin on their crops by differentiating theirs from everyone else’s, and the market is further distorted by artificial incentives to produce as much as possible without regard to quality, we can expect that an unsustainable exploitation of resources will quickly result.
This is, in fact, the case. As I previously wrote in this article:
…Industrial grain production impoverishes our farmers, destroys our soil and our water, and leaves barren land, salt flats, and dead ocean deltas in its wake. It demands unimaginable amounts of fossil fuels to create nitrogen fertilizer, toxic herbicides and pesticides, and giant sowing and harvesting machines, and to transport the grain from the Midwest to where people actually live. It demands giant, river-killing dams to fill irrigation canals. It strip-mines fossil water, pumped from underground aquifiers that took millions of years to fill—all to grow corn, wheat, and soybeans on land best suited for grazing livestock on perennial grasses. And 3-5% of world natural gas production—1-2% of the entire world energy supply—is required just to make ammonium nitrate fertilizer.
In short, industrial agriculture is an unmitigated environmental catastrophe.
(Follow the links for more information about each issue.)
Conclusion: Eat Food, Not Commodities
Unfortunately my silly and far-fetched example above isn’t far-fetched at all: it’s become the foundation of our nation’s food policy.
The problems of industrial agriculture are primarily caused by a combination of commoditization and the broken farm policy that subsidizes it, leading to massive overproduction of corn, wheat, and soybeans that generates profits for middlemen and the financial industry at the direct expense of farmers and the consumer…
We overproduce so much corn that our government has to force us to add it to gasoline in order to get rid of it all—at a net energy loss, and at considerable environmental damage!
…and our farm policy has steadily become crazier and more destructive throughout both Democratic and Republican administrations.
While our tax dollars will most likely continue to subsidize the cheap grain-based packaged foods that are making us fat and diabetic, we can always take action at an individual level by buying and eating real, nutritious, delicious food…
…not “commodities”.
Live in freedom, live in beauty, eat like a predator.
JS
Further Reading
This article only begins the discussion of agricultural commoditization. Richard Manning’s “Against The Grain: How Agriculture Has Hijacked Civilization” not only covers these issues in depth—it goes much farther into the consequences of agriculture in general, not just the modern industrialized version. I highly recommend it.
great read, thanks.
and posted to fbook too 😀
The music analogy really works. Great article for people new to the paleo lifestyle.
Now I want some Wagyu beef…
Very informative, thank you !
Well said!
And here in europe they’re trying verry hard to expand the fungibility to all (plant) matter. E.g. there’s a norm for cuccumbers which gives min-max for length, diameter and degree of bend even. If you’re outside the norm your cuccumbers are not fit for trade in the EU!
And I know of no consumer here who gives a rat’s ass about the shape and size of the cuccumber as long as it is tasty. A quality which is somehow lost in the commoditization process not only in cuccumbers. Dutch “water-tomatoes” come to mind as well.
If I think about, skinless chicken/turkey breasts seem the most fungible meat.
But industrial grain feed beef and pork aren’t far from it as well.
Farmed salmon? One like the other.
How boring…
Franco, all your talk about cucumbers brought back memories of my days clubbing along the Mediterranean (just replace cucumbers with johnsons)! Thanks dog taste is where it’s at!
Anyway, J, thanks again for the stimulating read.
Well done, well done.
There is a lack of awareness regarding the consequences of the industrialization of agriculture. Your exposition is excellent. The current situation is evidently unnatural and, thus, as unfeasible as toxic (both long and short-term).
I have just read a post by Nikoley that also takes advantage of the Paleo angle to bring back to the fore essential matters (his post is more “out there” topic-wise but just as on target).
Vague thoughts here:
I am no fan of the industrial food supply that is malnourishing much of the US population, but I have to wonder where we would be today if we still had 41% of the workforce directly employed in agriculture. Who would be doing… all the other stuff? Commoditization allowed a huge amount of resources to be diverted from agriculture to other economic activity. Real food might be vastly more expensive than it would seem at first glance.
@Jen – all what stuff? Employment-wise, the number of people who provide services outnumbers the people who produce things 5-to-1 in the United States alone (111.5 million compared to 22.1 million).
Another excellent post, JS – between you and Richard Nikoley, y’all have gotten me ALL political today. 🙂
Jen:
Perhaps the 14 million unemployed workers we have right now.
http://www.tradingeconomics.com/united-states/unemployment-rate
While you know I’m a big fan of real food, I think a lot of what you wrote violates basic economics.
First of all, just because something is a commodity, doesn’t mean there’s no quality assurance to it. Steel is a good example of that. American steel went bankrupt partly because it was producing low-quality high energy open hearth steel and relying on handouts and tariffs to prop it up. At the same time US Steel declared bankruptcy after having just built an expensive obsolete factory, smaller American steel factories were doing quite well. Steel is a commodity, yet high supply led to higher quality.
That’s pretty typical, actually. I remembered reading about that many years back re: coffee. Many governments had subsidized their subsistence farmers to switch to coffee thanks to high prices in the eighties, the result was that coffee was deeply oversupplied. This drove the crappier stuff off the market. People became more aware of high-quality coffee of course. Same thing has happened with wine as so many countries have come online to compete with the traditional producers like France and Napa Valley (who itself was an upstart not so long ago). Now with all the competition from Australia, Argentina, Chile, etc, wine has gotten better and cheaper. Of course, wine has never really been a commodity but the principle is the same. In order to compete in a commodisized market one must distinguish themselves on quality.
We are seeing the same thing happening now as there is more of a market for high-quality food. The main problem for a small producer trying to get their high quality food to the market is the government’s insisting on regulating what is organic or whatever. It is even worse here in Europe with these regional appelations and an EU bureaucracy that loves to create paperwork and regulations.
As far as future traders somehow living off of the poor farmer like a parasite, I could spend another five paragraphs explaining what’s wrong with that, but I’ll just say it is bullshit. Currency traders help businesses by minimizing the risk of international trades. By betting on the future value of the dollar in euros or whatever. Same thing with commodities futures. I’m betting that a pork belly will be worth this much in six months, it’s my risk and no one is forcing you to trade with me. On the other hand, the government IS forcing me to handing over part of my income so that it can choose to subsidize corn farmer, and whoever the hell else it is politically expedient to grease. Those guys are the ones I have the problem with.
“Hidden in plain sight,” is a phrase that often comes to mind with revelations like this one. Just like bird food parading as human food leaves a wake of health devastation, but eating hearthealthywholegrains is so, um, ingrained in our culture that few see the problem.
I have some other favorite “Hidden in plain sight” observations of modern life, like all the increase of mental illness, behavioral disorders, suicide, etc. as we become less and less communal. Think primal mental health. We NEED to be part of society, have face time, not Facebook. But I fear the genie is out of the bottle.
Anyway, I ramble……..
I can recommend Colin Tudge's So Shall We Reap for an excellent discussion on the race to the bottom that is the Western agricultural model.
The majority of our food flows through highly restricted and controlled markets (not free markets), that are run by a handful of corporations who have vertically and horizontally integrated throughout the food chain and who profit from the hegemony, soaking up most of the grants and incentives made available by governments, whilst avoiding taxes through the use of offshore 'shell' companies and flags of convenience.
Tudge's most pithy statement is “we can envisage a post-industrial society, but we cannot envisage a post-agricultural society”. That is a deeply profound observation.
Wonderful article, and I would add that the other problem is that what they call food; is not.
Commoditization is the bane of the past century. Everything is homogenized and standardized; the music industry decides what we will listen to, and the publishing industry decides what will get put in books, and the agricultural industries decides what we are allowed to eat.
But the rebellion is already underway; bands and writers and farmers are all finding their own distribution chains. Spread the awareness… there is a better way!
For those who enjoy reading completely different viewpoints, check out the “Room for All” essay by Matt Ridley. Available at the rationaloptimist.com blog.
I am kinda curious of what do you think the alternatives (on the social, not personal level) are.
Do you want 40% of the US population to go back to being small farmers? How do you think that will work out?
Artisanal, hand-grown food is *expensive*. Who’ll be able to afford it?
Productivity on small farms is notoriously low. What do you think will happen to the economy if a large number of people switch from whatever they are doing to small farming?
eddie:
You beat me to it!
Paul:
“But it seems so unreasonable when YOU say it.” Exactly my point: if we actively encouraged commoditization with anything else but food, it would be immediately obvious why it's a stupid idea. If a good can be commoditized, the market will do it by itself, with no help require from our government.
Tim W:
Apparently you have to grain-feed cattle for a long time to make them that obese…just like humans.
That being said, it is incredibly delicious.
Adeline:
You're welcome!
Franco:
There's a difference between “truth in labeling” and “you can't sell it unless it's a certain size”. From what I understand about EU commodity rules, they're often arbitrary and very restrictive, preventing people from selling goods at all.
Stipetic:
I do my best.
More to come!
JS
Txomin:
I've said for some time that “paleo is not just a diet and exercise plan”. Richard needs to hurry the hell up and read The Gnoll Credo.
Jen:
There is the unemployment Brandon mentioned.
More importantly, as Jan mentioned, artificially subsidizing grains simply shifts employment to things that become cheaper as a result of the subsidies, like fast food and 'family restaurants'. I'm not sure flipping burgers or waiting tables is a big improvement over growing food.
Then, recall that produce is still usually planted and picked by hand…there is a lot of seasonal migrant labor not counted in that 1%. It's the planting and harvesting of grain that we've successfully mechanized.
Finally, keep in mind that as of 1900, tractors and cars didn't exist! People still plowed their land with animals, and transported their food to market via horse and buggy. We've invented quite a few labor-saving devices since then…so it is likely that the percentage of agricultural employment would decrease somewhat, and farm size would increase somewhat, independently of commoditization.
Most importantly, the extra costs we pay in health care for an obese, diabetic nation are difficult to pin down…but they're staggering.
Jan:
Exactly. Given the number of people employed in dead-end jobs like call centers and waiting tables, I'm not sure we have an improvement to crow about.
Brandon:
Yes. And that 14 million figure is dramatically understated, as it doesn't count those who have stopped looking, or the underemployed.
More to come!
JS
Sean:
I don't think we're arguing, except where you write that “a lot of what you wrote violates basic economics”. I take umbrage at that: I think you're reflexively projecting statist beliefs to me that I don't have. Be warned that I'll throw down with you or anyone on any economic issue, anytime, anywhere 🙂
Moving on…
In a free market, commoditization would occur to the degree the market demanded it, and no more.
We don't have that. As I mentioned, our government subsidizes commoditization through price supports on certain carefully selected crops — primarily corn, wheat, cotton, and soybeans. This discourages the production of the food we actually want to eat, and encourages the production of fungible commodities.
“In order to compete in a commodisized market one must distinguish themselves on quality.”
By definition, it is impossible to compete in a commoditized market on quality — because the definition of a commodity is “a good supplied without qualitative differentiation across a market.”
The only way to compete on quality is to sell outside the commodity market. Again, this is perfectly reasonable, assuming you have a free market where transportation is not a monopoly (railroads — oops), where storage is not a monopoly (grain elevators — oops), and where trade is unrestricted (government regulations on buying and selling food — oops).
Further discussion on “why real food isn't a commodity”:
Raw materials, such as steel, make excellent commodities…because fungibility is a desirable characteristic for raw materials. When casting, forging, or machining metal parts, I want to know that the metal I receive is absolutely consistent from run to run.
Furthermore, raw materials have no value to us, as consumers: I'm willing to be that none of us has ever taken delivery of a contract of steel, copper, or October corn, because we have no way to process them into a finished product. Even a blacksmith buys blanks cut and shaped to appropriate size. The value is added by the manufacturers who turn raw materials into a usable, finished product.
So it is with grains: I'm willing to bet no one here has ever bought raw wheat stalks and threshed, winnowed, and ground them into flour. Most people don't even buy flour: we buy bread, cookies, and crackers.
Real food, in contrast, is not a raw material: we eat it in something approximating its natural state. In fact, that's basically the definition of real food: something we can either eat raw or prepare in our kitchen. In this case, we value homogeneity far less than we value subjective perceptions like taste and texture, and difficult to measure qualities like nutrition.
Furthermore, homogeneity is usually achieved only by descending to the least common denominator, as I mention above in the article.
Re: trading
“Currency traders help businesses by minimizing the risk of international trades. By betting on the future value of the dollar in euros or whatever. Same thing with commodities futures.”
Are you claiming that a significant proportion of commodities trading is farmers hedging their production — not traders and trading houses attempting to profit by outguessing the farmers, or by large firms frankly manipulating commodity prices and front-running their clients? (See: $150+ oil.)
I think you have a naive view of real-life markets.
Furthermore, it is an indisputable fact that any profit made by traders comes out of the pockets of farmers and consumers.
In closing: commoditization of food is not primarily driven by consumer demand. It's driven by government policy — and this inappropriate commoditization is destructive to food quality and our health. Clear?
JS
Paul:
The more true something is, the more obvious it will seem in retrospect.
Asclepius:
Thanks for the reference! Manning refers to Tudge a few times: “Neanderthals, Bandits, and Farmers” also looks like an intriguing read. I've added them to the list.
WereBear:
Commoditization is both convenient and profitable for middlemen — but it sucks for producers and consumers.
The Internet allows us to bypass them, which is great! Over 90% of my books are sold through the Internet, either from Web retailers or directly from my publisher.
Kirk:
That essay, like all cornucopian propaganda, is comprised almost entirely of unsupported, incomplete, misleading, or frankly counterfactual assertions.
For starters, you can bring up historical charts of oil, copper, nickel, and steel prices. And read the links I posted above: topsoil and ocean depletion are catastrophic and ongoing. Did I mention the agricultural productivity curve has flattened out?
Cornucopians are the young-earth creationists of political economics.
Kaa:
The first action we need to take is to stop subsidizing commodity agriculture. It's not my place to dictate what should take its place: the market ought to decide that.
Furthermore, real food isn't expensive: grains appear artificially cheap at the checkout counter due to government subsidies. This cheapness is an illusion — we're paying the rest in taxes.
Also see my reply to Jen above: in 1900 people plowed their fields with oxen and brought their produce to market via horse and buggy. We've made some changes in the meantime.
JS
Brilliant,
Here is an EU list for those of us who are European
http://farmsubsidy.org/countries/
I worked in agriculture for years but as it is a small local family (fruit) farm we get absolutely no government help.
“Furthermore, real food isn’t expensive: grains appear artificially cheap at the checkout counter due to government subsidies. This cheapness is an illusion — we’re paying the rest in taxes.” — JS
This is an excellent point and bears repeating. Being of a more liberal bent, I don’t have an inherent problem with some of my tax dollars subsidizing cheaper food for people of lower incomes–my issue is with the fact that only the crappy food gets subsidized! I would be much happier if there were no grain subsidies and poorer people simply got extra food stamps (or SNAP cards or whatever they’re called now), even if it was the same amount of money coming out of my pocket! At least then they would have price signals that are balanced against the actual market value of the food they’re buying.
@Neal,
thanks for that link. Quite interesting.
@JS,
“From what I understand about EU commodity rules, they’re often arbitrary and very restrictive, preventing people from selling goods at all.”
Yep, that’s exactly what I mean with “not fit for trade” and it’s for sure not by consumer demand.
JS,
OK, sorry for economically projecting.
If raw materials like steel (and not food) make excellent commodities, then how did higher quality steel manage to displace lower quality? The “definition” of a commodity and it’s behavior in actual practice are two different things.
You are saying that by making wheat a commodity its homogeneousness becomes valued over its quality and it is no longer real food. But wheat and these other cereals you talk about never were real foods.
I don’t have a problem with food commodities per se. If I buy NZ grass-fed butter that is a commodity to me. A high quality commodity to be sure, but a fungible one. If I lent you a pound of it, I’d expect a pound of it back, not the same butter molecules, but the same quality stuff. I could also trade in NZGF butter futures without “screwing” the NZ farmer or lowering its quality.
Traders and trading houses trying to make a profit by outguessing the farmers? You mean like insurance companies trying to make a profit by guessing when people die? Currency speculators trying to guess the future value of a currency? It is also an “indisputable fact” that any profit an insurance company makes comes out of the pocket of the people it insures. The real question is whether or not these pursuits are providing a service or are simply a parasitical drain. When you show a picture of a trading floor with the caption “all this fun doesn’t come free”, then talk about the “enriched middleman”, I somehow got the impression that you think traders are simply parasites.
Come to think of it, it is not an “indisputable fact that any profit made by traders comes out of the pockets of farmers and consumers.” It could simply come from making the market more efficient. Again, this comes from the perspective of thinking of traders as providing a service rather than simply being market parasites.
There’s no monopoly on transportation nor storage for cereal farmers. Build your own grain silo and hire a truck to ship it. That would make your grain more expensive, but that’s not the same thing as a monopoly at all. No one’s forcing these farmers to take government handouts nor to even farm grain in the first place.
BTW, writing “clear?” at the end comes across as smug so I’m going to take umbrage with that 😉
I don’t think we are arguing except perhaps on the free market aspects which are, of course, heavily clouded by government distortions of all aspects of the food chain from production to regulation to telling us what is allegedly healthy. Ultimately it is simply up to consumers to be more aware and choose higher quality food the market will follow as much as it is allowed.
One point worth bringing up is the overhead of extending the food supply chain. If you buy from a local producer he may be subject to a degree of legislation covering the welfare of his animals and their slaughter, but more importantly as you have a personal relationship with him/her, it is in his/her interests to develop that relationship with YOU the consumer, the fundamental basis of which HAS to be honesty. It is also in the interests of the producer to produce sustainably and without excessive commercial pressures, this is likely.
Commoditized agriculture is characterised by middlemen and traders (all of whom require regulating and so you now have to add another layer of beaurocracy). Animals as 'units' are traded and traffiked large distances and so you now have more complicated issues of animal welfare – which are resolved with systems of licences and regulation. When animals are 'pooled' from different regions and so you also have greater issues of health and safety (in the name of disease control and management as transporting animals all over the country encourages the spread of infectious disease such as Foot and Mouth). Disease like BSE resulted in the creation of animal passports and basically added to farming a tragic level of burdonsome paperwork to enhance 'traceability' – which in itself is incredibly complicated when produce can move quickly over distance through several companies and traders. Also, we know we can't go places without vaccinations and the like; the same with animals.
And becuase you'll trade against some guy whose produce is grown in a country where they pay people $1 a day, you'll have to compete with that guy by cutting your costs (a race to the bottom). This normally comes from economies of scale, so you go to the bank for a loan, buy more hardware and rip up your hedgerows to maximise the land available to you. You will probably aim for subsidized produce to maximise profit (as you now have a big debt to service), and quality will fall to the point at which you can still get optimal price.
Crops and meat – once slaughtered, have to be tagged and tracked on the markets. Certain produce has to be carefully stored (and prove to have been carefully stored), to ensure quality. And so it goes on….
Once you allow your food supply chain to extend you lose that personal relationship. Everyone has to make a cut, and it is in the interests for each link in the chain to optimise profits. Without a personal relationship with an end consumer to protect, deviance is often a consequence.
You start to question to true cost of modern agriculture. I'd say that the same number of people are involved in agriculture as ever there was, but instead of them being employed on the farm they have swapped the plough for the pen.
Have to admit, I’m confused. How do ‘historical charts of oil, copper, nickel, and steel prices’ apply to either your or Ridley’s arguments?
you scooped the LA Times!
http://latimesblogs.latimes.com/money_co/2011/09/taxpayers-funding-junk-food-farm-subsidies.html
Great, now more people are going to understand how much they’ve been duped all these years by this kind of stupidity from higher up, and be all kinds of pissed off. Good job 🙂
Kirk:
they don’t i think, using a product which is not a food to show a problem with a product which is a food could be an error i feel?
i don’t think there is a food product comparison available though.
also…i was first to comment!
thought i would be as i logged on to see new update, there wasn’t one, so i logged onto something else, then came back to see prev update comments and the new one was here!
literally 5-10 seconds later!
There’s a movie called “King Corn” that illustrates this beautifully. It’s available on Netflix. It tracks what happens to the corn grown in Iowa, and covers pretty much everything in this post.
I don’t want to depress readers but it may be wise to look at the forces we are up against.
Apples to Twinkies: Comparing Federal Subsidies of Fresh Produce and Junk Food
Breaking Down the Chain: A Guide to the soft drink industry
Excellent links. It's stunning how politicians can say “The public shouldn't know what we're doing in their name with their money” with a straight face.
Uncephalized:
Exactly. And pundits talk seriously about taxing soft drinks and other “unhealthy” food…we're supposed to pay agribusiness to grow corn we don't want, and then pay again because it's “too cheap”?
Franco:
I've been surprised more than once by the EU rules for “fit for sale”. I can understand protected designations, i.e. you can't call it “Champagne” unless it's from Champagne, but I don't understand not being able to sell a cucumber unless it's of a particular size. I guess they get turned into pickles?
Sean:
Point taken. I apologize for any implications of my phrasing.
I'm pretty sure we're not in substantial disagreement here. We agree that inappropriate intervention in the market is causing these particular issues — by pushing commoditization on the one hand, and on the other end, by regulating or outright prohibiting food transactions between producer and consumer.
Perhaps I need to clarify what I mean by “commoditization”.
Clear expectations are one thing: if I buy butter, I should expect it to be made from cow's milk, and to contain appx. 100% butterfat within reasonable limits of processing technology. Furthermore, I should expect it to be free of adulterants (e.g. margarine), or contaminants (e.g. cleaning agents, excessive bacteria).
Most importantly, I have a choice of origins and brand names, and “butter” as a product is not itself fungible. A stick of Kerrygold is not equal to a stick of Wal-Mart house brand butter, and there are no butter futures on the COMEX. This is because consumers like you and me understand that there is a difference and are willing to pay for it, and because government policy doesn't enforce uniformity of butter. (Dairy price supports are based on milk production AFAIK, not on downstream products like butter.) In other words, butter has not been fully commoditized.
Steel is similar to butter in that it is a downstream product, not a true commodity. Iron is the fungible raw material, and it is indeed traded on commodity exchanges. Steel, like butter, is not completely fungible, because (as you correctly note) quality varies between producers. Indeed, steel is purchased in a specific form from a particular foundry, not on a commodity market, though since there are only so many producers of steel it is possible to come up with average “market prices” for it. (See: metalprices.com)
Moving on to the function of markets and trading: commoditization indeed allows the farmer the security of selling his crop forward — at the cost that he can no longer differentiate the quality of his product from anyone else's, and must compete purely on price and volume.
My contention is that this is a bad tradeoff, and that the profit from farming has consequently shifted from the farmer to middlemen and processors, as evidenced by the relative profit I mentioned from eggs (58 cents per consumer dollar) vs. corn syrup (4 cents per consumer dollar).
I don't blame traders for profiting via trading! I blame the government for inappropriately forcing farmers into the commodity system via price supports — and the fact that 36 percent of all American farms disappeared between 1970 and 1992 supports my argument. The tradeoffs you mention, of predictability and efficiency vs. profit for the middlemen, make a lot more sense when talking about truly fungible raw materials, i.e. iron, copper, etc.
“Ultimately it is simply up to consumers to be more aware and choose higher quality food the market will follow as much as it is allowed.”
Absolutely. By not consuming corn, wheat, or soybeans, we're opting out of the vast majority of this broken system.
Thank you for your thoughts! We'll probably continue to butt heads here and there, but our goal is shared, and I always appreciate your contributions.
Asclepius:
That's an excellent set of points. If you want anonymous, fungible transactions over long distances (i.e. “exchanges”), you're going to require a large infrastructure to enforce the uniformity that makes it possible. What looks like “efficiency” mostly just ends up moving profits from the producer to traders, middlemen, and other functionaries. We see this in the relative cost of food at the supermarket vs. the cost of the agricultural products from which they are produced. (I gave some examples in this article.)
Again, inappropriate commoditization.
Kirk:
The cornucopian argument is that we have plenty of every resource we need to support eleventy-billion people. Continually rising commodity prices show that this is not the case.
Matt:
Unfortunately that report counts grains as healthy! They're only counting as “junk food” the fraction of corn and soy that gets turned into HFCS, seed oil, and cornstarch. It's all environmentally destructive, it's all junk food, and the true numbers are many times worse.
James:
We're spreading the knowledge as best we can. All we can do is make it available for those with eyes to see and ears to hear.
Eddie:
You can look at agricultural commodities and see a similar curve (though less sharply rising).
More importantly, fossil fuels are absolutely necessary to bring you the results of modern commodity agriculture: as I've said many times before, the Haber process alone (by which ammonium nitrate fertilizer is made) consumes 3-5% of world natural gas production.
No more fossil fuels, no more 200 bushels per acre of Iowa corn.
I have charts and maps showing US agricultural productivity previous to the Haber process, and it's perhaps a fourth of where it is now.
Raul:
King Corn is a great film. It moves a bit slowly, but it shows just how disconnected from any sort of rationality our modern system of food production has become.
Ted:
You're correct. And as I said to Matt, the PIRG numbers are vastly understated since they're only counting the HFCS, seed oil, and cornstarch parts as unhealthy. 100% of grain subsidies are unhealthy for Americans.
JS
Commodity prices go up, commodity prices go down. The trend over time is mostly down. Check out the Simon-Ehrlich wager for an example. As for oil, some speculate that the price of gasoline might drop to $2 a gallon by the end of next year. Yes, petroleum products are used to increase food yield. So? There is a world-wide race to create alternate sources of energy. Once these come online, the price of oil will drop. Emerging technologies in agriculture also hold promise to reduce agriculture usage of petroleum. Wikipedia has a good list of emerging technologies.
Fungible food is both good and can be real. I like being able to buy half a dozen different brands of decent-tasting tomatoes, year-round, from the many grocery stores within 10 miles of my house. The best-tasting ones cost the most. That’s the marketplace at work. My wife and I visited a rural self-sufficient community several years ago; even though it was late summer, the people we stayed with complained about how few fresh vegetables were available, and how far they had to drive to buy them. The book “Potato, a History of the Propitous Esculent” describes how food shortage riots were common in the 16th century, and that France typically responded with ‘an invasion of troops, summary trials and gibbets groaning under the weight of corpses.’
Commoditization works for real food. I buy organic potatoes. It doesn’t matter to me whether they were grown within fifty miles or 1500 miles of my house. I don’t need to know the name of the farmer. I do need to know whether I can trust the store which sells them; if I find a particular store is lying, I will never buy from that store again, and they know that. Meanwhile, the commoditization of organic potatoes reduces the price to me, the consumer.
I think we agree on farm subsidies. I don’t understand why my taxes are paid to tractor-driving welfare queens. I don’t like the government distorting the marketplace. Ezra Klein has a good column about the issue ( voices.washingtonpost.com/ezra-klein/2011/03/vilsack_i_took_it_as_a_slam_on.html ).
As for all that processed food in the middle of the grocery stores, as long as my tax dollars don’t go to support those companies, well, so what? Those of us who buy fresh food and prepare it ourselves will, over time, will be healthier, and our neighbors, friends, and family will notice and follow our lead, and eventually the food system will shift. I went gluten-free 25 years ago. Back then, it was difficult finding anything GF. Now, even normal grocery stores have half-aisles devoted to GF products.
I haven’t studied the issue about farmland destruction. I remember reading the same allegations in the early ’70s. (One would think the farmland would have been destroyed by now.) It doesn’t make much sense from a marketplace perspective (why destroy farmland because there will be no buyers?), but then, as I said before, I haven’t studied the issue. Per your recommendation, I have ‘Against the Grain’ out from the library.
[…] food is not fungible recipe: […]
[…] food is not fungible recipe: […]
I disagree. This post is atypical of you as it lacks _nuance_. Commodity grains have saved millions of people from starvation – yeah they are poor food but food nonetheless.
And improving productivity is the FUNDAMENTAL MECHANISM OF ECONOMIC GROWTH. We want productivity to increase – in every single endeavor.
Thirdly, I DONT WANT TO PAY MORE TO THE PRODUCER – in a market, the consumer should be king – I don’t want Wagyu beef, thank you very much – i can’t afford it.
Fourth, the market makers are a superb resource for the farmer – they help hedge against risk. Yeah I don’t want to defend any particular institution, just the role.
I have a severe beef with the government-subsidized, corporatized and regulated agricultural system we have today. That’s what should be attacked – subisidies, regulations against consumer self-production, zoning laws against gardening, sanctions against raw dairy, the massive, corrupt food “safety” inspection scheme to name a few. Instead, you end up attacking things like productivity and financial products which are fundamental hallmarks of a market-based society. They will STILL exist when u end Big-Ag.
Consider Africa, where root flour is king – cassava root. Then, consider the first world where huge expanses of land are given over to grain and corn production. Yes, there will be some who fall foul of a world where real food is produced. For the human species, no big deal.
Of course, if you're one of “them” now … jump ship … become one of “us” now and enjoy the future.
We're very adept at striking up deals with real farmers … real farmers who raise real cattle, not commodity farmers who kill other farmers' cattle. We're very good at making deals with real smallholders who grow real vegetables, not supermarkets who buy other peoples' vegetables. We're very good at growing our own and are getting better at rearing our own.
A future where people who are empowered to live their own lives, live on their own production, co-operative production with like-minded neighbours and communities, grow, protect and share our own produce … that's a future I strive for; that's a future I live in many respects already and one which I dearly hope I can continue to grow into … while I do whatevere it is I do for a “job”.
There will be casualties.
Breaking elitist selfishness now is largely a perogative of those who can. Once we do that, those who cannot yet afford to do that might well have a chance … if they decide to come along with us and show their metal, show their worth in a world where every man is as good as what he can offer.
I gather the folks States-side call this Libertarianism – we've been calling it Anarchism for many years this side of the pond. We're of the same mind, whatever the label.
[…] Originally Posted by jfh If something has a long expiration date, I worry about the preservatives. Also cooked foods that are old cause me worry as well. Rancid. But we should be aware that if stuff sold as food has an inordinantly long best before date that should tell us it is so processed NOTHING will degrade it = it isn't food our bodies recognise. Real Food Is Not Fungible: How Commoditization Eliminates Nutrition, Impoverishes Farmers, and Destr… […]
Kirk:
The Simon-Ehrlich wager ended in 1990. Please refer to current events. As Jeremy Grantham correctly noted:
“If the bet were from 1980 to 2011, Ehrlich would have won:
Simon would have lost posthumously, and by a lot! (Even of the original
five, he is only one for five, having won the least significant of the
five: tin.) So, please “Cornucopians,” let’s not hear any more of the
Ehrlich-Simon bet, which proves, in fact, both that man is mortal and
must make short-term bets, and, more importantly, that Ehrlich’s
argument was right (so far).”
Here are some common commodity indices, and their performance over the last 30 years:
CPI: +360%
http://www.indexmundi.com/commodities/?commodity=commodity-price-index&months=360
Petroleum: +195%…and that includes the tail end of the OPEC shock.
http://www.indexmundi.com/commodities/?commodity=petroleum-price-index&months=360
Metals index: +310%
http://www.indexmundi.com/commodities/?commodity=metals-price-index&months=360
Industrial inputs index: +240%
http://www.indexmundi.com/commodities/?commodity=industrial-inputs-price-index&months=360
Commodity non-fuel index: +215%
http://www.indexmundi.com/commodities/?commodity=non-fuel-price-index&months=360
Agricultural raw materials index: +150%
http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=360
I think this qualifies as a robust trend — one which is far
more than “commodity prices go up, commodity prices go down”. Our
population is steadily increasing, and we are coming closer and closer
to the limits of a finite set of resources. Look up our current supply
of rare earths sometime, and realize that 99% of them are in one hole in
China…
“Emerging technologies in agriculture also hold promise to reduce agriculture usage of petroleum.”
And how do we plan to replace the minerals and nutrients necessary
for human life? As stated, topsoil is disappearing at roughly 1% per
year, and food is more depleted of trace minerals each year…which is
because we're growing our crops, transporting them to cities and
feedlots, eating them, and flushing the manure into the nearest body of
water instead of returning it to the soil, causing huge fish kills and
dead zones the size of Eastern states. I've covered all of this
already, with links, in the passage quoted above: feel free to read them
at your leisure.
Please note that when I speak of commoditization, I'm speaking of the process that creates a fungible product
traded on major exchanges. Your supermarket offers you a choice of
produce, and you can select from different varieties and vendors.
That's not fungibility. Read my reply to Sean, above, in which I
discuss this at length.
And I believe we fundamentally agree that the driver of inappropriate
commoditization is governmental interference. As I said in my
Conclusion, “The problems of industrial agriculture are primarily caused
by a
combination of commoditization and the broken farm policy that
subsidizes it.”
Contemplationist:
“Commodity grains have saved millions of people from starvation – yeah they are poor food but food nonetheless.”
I disagree. Commodity grains — in fact, agriculture in general — create famines by their very nature.
For example, the introduction of the potato to Ireland produced a population boom — and a subsequent population bust. The Potato Famine left Ireland's population roughly the same in 1911 as it had been in 1780, before the potato.
From 2500 to 1500 years ago, the Roman Empire recorded at least 35 major famines. Between A.D. 500 and 1500, there were 95 major famines in England and 75 in France. Eastern Europe recorded 150 famines between 1500 and 1700. Russia recorded roughly 100 famines between 971 and 1974. And China has recorded roughly ninety famines per century — almost one per year, somewhere in the country — for the last two thousand years.
It's easy to see why: agriculture directs the entire productivity of the land into human mouths, leaving no margin for drought, soil exhaustion or erosion, or simple human error.
“improving productivity is the FUNDAMENTAL MECHANISM OF ECONOMIC GROWTH.
We want productivity to increase – in every single endeavor.”
How do we expect that to go on forever on a finite surface with finite resources? Plants are made of dirt, water, and energy from the sun. When we harvest them and take them elsewhere, we're literally trucking away the soil. Increasing the productivity of strip-mining just means we run out of resources faster.
“I have a severe beef with the government-subsidized, corporatized and regulated agricultural system we have today.”
So do I! I thought my conclusion was clear in this regard: “The problems of industrial agriculture are primarily caused by a combination of commoditization and the broken farm policy that
subsidizes it.”
Paul:
Absolutely. When a system is so far in overshoot, casualties are guaranteed. And no, the definitions of “libertarian” and “anarchist” are the same over here…it's just that we have a lot of libertarians and few anarchists.
I'm glad you're past the delusion of being able to save everyone. People don't need or want saving: they need the opportunity to save themselves. “Saving the world” is how well-meaning people create dietary guidelines that push grain-based vegetarianism and tax saturated fat.
JS
Excellent post! As both a producer (small) and a consumer of FOOD…I heartily concur.
Scotlyn:
I'm glad to hear that from someone directly affected. Thank you.
Armchair economists don't realize that these subsidies are even worse for the farmer than they are for the consumer. They're designed to generate profit for middlemen at both our expense.
JS
The term ‘fungibility’ is defined in terms of the perspective of the buyer. The precise definition can be looked up any online dictionary; of more interest is how it is used in practice for a fungible commodity. The Chicago Mercantile Exchange web site defines a contract for corn to consist of 5000 bushels of ‘#2 Yellow at contract Price, #1 Yellow at a 1.5 cent/bushel premium #3 Yellow at a 1.5 cent/bushel discount.’ That’s fungibility in action. Notice, from a buyer’s point of view, there are distinct differences in field corn . . . apparently at least 3 grades of yellow corn. To you and me, it’s just yellow field corn. And the buyer is willing to accept different grades, albeit with some financial adjustments.
I like the way Wikipedia puts it: ‘There is a spectrum of commodification, rather than a binary distinction of “commodity versus differentiable product”. Few products have complete undifferentiability and hence fungibility; even electricity can be differentiated in the market based on its method of generation (e.g., fossil fuel, wind, solar). Many products’ degree of commodification depends on the buyer’s mentality and means. For example, milk, eggs, and notebook paper are considered by many customers as completely undifferentiable and fungible; lowest price is the only deciding factor in the purchasing choice. Other customers take into consideration other factors besides price, such as environmental sustainability and animal welfare. ‘
This is why I part ways with your reply to Sean, where you said, ‘By definition, it is impossible to compete in a commoditized market on quality — because the definition of a commodity is “a good supplied without qualitative differentiation across a market.” ‘ I disagree with that definition. I know, I know, you pulled at definition from Wikipedia. And I pulled the ‘spectrum’ definition from Wikipedia. Which definition is correct? From a buyer’s perspective at the Chicago Mercantile Exchange, does the buyer want to receive any grade of corn, or does the buyer want specific grades of yellow corn? From a buyer’s perspective, is it any old pesticide-dunked-root-crop, or is it organic potatoes?
I think it’s a spectrum. I don’t care if the organic potatoes I buy at my local grocery stores are grown locally or grown hundreds of miles away. I don’t care if a particular bag of potatoes comes from one farm or multiple farms. What do I care about? I want potatoes, not turnips. I want organic potatoes, not pesticide. Organic potatoes are a commodity, and they’re fungible, and they’re real food.
Grantham noticed that if the wager had ended in 2011, then Simon would have lost. What Grantham did not discuss is that if the bet had ended in 2009, Simon would have won. Simon also would have won in 2005, as discussed in detail at http://www.aabri.com/manuscripts/08085.pdf .
How confident are you that humanity has reached that precise moment in history when the price of commodities will perpetually climb from their current high value? I suggest looking at the historical value of metals as documented by the U.S. Geological Survey. For any particular metal, compare the yearly changes in the column which expresses the value in terms of 1998 dollars [Unit value (98$/t)]. Data found at minerals.usgs.gov/ds/2005/140/ .
And the rare earth shortage due to the current China monopoly . . . is it your position that zero government initiatives will be launched to encourage exploration and mining for rare earth elements in other countries? That mining companies will not search for and develop alternate sites? That consumers of rare earths will choose not to search for substitutes?
Regarding ‘topsoil is disappearing at roughly 1% per
year, and food is more depleted of trace minerals each year’ . . .
The second allegation can be countered by the following analysis: en.allexperts.com/q/Agriculture-2377/Soil-Depletion-Myth-Fact.htm . I am not fully convinced on either side of this argument; I think I have too little information and not enough interest to pursue the issue any further.
As for the ‘topsoil disappearing at 1% per year’ allegation, I don’t understand why the owners or shareholders of a farm corporation would destroy an asset. Land cannot be depreciated. Furthermore, the following analysis indicates that the allegation is based more upon models than on observed data: http://www.wou.edu/las/physci/taylor/g473/refs/trimble_crosson_2000.pdf .
The ‘Against the Grain’ book was an interesting read in places. Thanks for the recommendation.
[…] Food for Thought…good read! […]
You are correct that an entire book could be written about this topic (and more). In fact there is an entire economic history that could be written about this topic alone. It might surprise you that many of the ills of commoditization you describe easily pre-date the era of price supports–in fact, price supports (as well as paying farmers NOT to plant crops) were earnest attempts by the government to stabilize the cash-crop (=corn) market after two successive decades of deflation AND a devastating environmental collapse!
In fact, the corn market may have caused more human suffering than we know! Historians allege that the ‘opening of the West’ in the post-bellum era led to such an increase in corn production that corn prices in the 1st breadbasket of the world–the Ukraine–collapsed in 1872, leading to a worldwide market panic and deflationary crunch. The misery and starvation caused by the panic contributed to civil unrest… which may have motivated the Russian government to pen the fraudulent “Protocols of the Elders of Zion”, which attempted to affix blame for the peasants’ suffering not on the greedy nobility and ineffectual government, but (by some conspiracy theory involving bankers) on their Jewish neighbors. The vicious progroms, mass forced migrations, and ultimate genocide across Eastern and Central Europe at the hands of the Nazis are all well-known.
As for fungibility, I believe that corn quality in the marketplace is actually fine for my needs. It’s the eggs and milk and poultry that seem to suffer the most with lax USDA standards. The big guys have colonized the USDA, hence the attempted ban on even labeling milk rBGH free! (I always buy rBGH free b/c it supports small dairies–only the big boys use that stuff, and they use it to grind the little guys out of business.)
Beyond fungibility, there is fraud. Looked into “Italian EVOO” lately? How about honey? How would you feel if you knew that imported olive oil was actually deodorized soybean oil from Brazil and that some national brands were caught selling honey that was banned for human consumption in India and smuggled into the US to be repackaged? CBoT, which regulates trade of pork bellies, coffee beans, OJ, and corn, is not going to be cheated, but CONSUMERS frequently are!
Kirk:
That allexperts.com “analysis” (i.e. one guy saying “I know of no studies…”) can be debunked by the following scientific reference:
Nutrition and Health, 2007, Vol. 19, pp. 21–55
THE MINERAL DEPLETION OF FOODS AVAILABLE TO US AS A NATION (1940–2002) – A Review of the 6th Edition of McCance and Widdowson*
David Thomas
“As for the 'topsoil disappearing at 1% per year' allegation, I don't understand why the owners or shareholders of a farm corporation would destroy an asset.”
Most people can't seem to think ahead by more than one paycheck, let alone multiple decades. Especially when, as noted, farmers are guaranteed a base price for their corn, soy, wheat, or cotton, no matter how much of it they grow. The seemingly inevitable destruction of land by agriculturalists goes all the way back to the first farmers in the Fertile Crescent — now a desert.
I'm glad you enjoyed Against the Grain. It's a thought-provoking book. I forget if Manning quotes Dwayne Andreas in it, but if not, I'll put it here:
“There isn't one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians. People who are not in the Midwest do not understand that this is a socialist country.” -Dwayne Andreas, ex-CEO of Archer Daniels Midland
CF:
The Dust Bowl is a whole another story, due in large part to government-subsidized homesteading (i.e. stealing of Indian land) on agriculture-sized plots of land that were, in reality, only suitable for grazing (at much lower population densities). It turns out rain doesn't follow the plow.
That's an interesting speculation about corn overproduction leading to destabilization of Tsarist Russia…I don't know enough about that era of history to make a useful comment.
The problems of fraudulent misrepresentation of food are legion, as you indicate, and they're a whole another subject entirely. I think the reason we don't see fake corn is that it's so cheap to grow the real thing in a world where the costs of petroleum/pesticide/GMO farming are so heavily externalized. If corn were $300/bushel we'd see all sorts of things passed off as “corn”.
JS
I don't perceive agriculturalists as being fundamentally greedy. I see the Dust Bowl as being caused mostly by ignorance. (If the agriculturalists who remained in the Dust Bowl area after the Dirty Thirties were greedy as you describe, the land would be completely destroyed. Instead, one can find reports such as this: amarillo.com/news/local-news/2011-07-17/landscape-changes-make-new-dust-bowl-unlikely ).
The destruction of the soil in the Fertile Crescent is more likely to be caused by one of three causes: (1)ignorance of non-destructive agriculture techniques (2) the tragedy of the commons (which goes on today; look at the Ogallala Aquifier), or (3) authoritarian regimes making stupid decisions, such as described at news.nationalgeographic.com/news/2001/05/0518_crescent.html.
I think the following story more accurately describes what happens when farmers are given control over their own land: (link)
Kirk:
It's refreshing that dust storms are less frequent than they were in the 1930s…but we're still losing topsoil in a way that never happened before we first broke the land to the plow (destroying the root systems of the perennial grasses which had kept the Panhandle looking so fertile). And it's still amusing that we're paying them to grow crops with one hand, and paying them not to grow crops with the other (the CRP).
Back to the subject: all the things you mentioned most certainly contribute to the problem — but the fundamental issue remains, which is that agriculture is not sustainable. At its best (e.g. Mexican peasants owning their own small plot, growing the Three Sisters, and returning their own poop to the land) it's zero-sum…but in every other case, it's fundamentally extractive. There's little incentive to look 10-50 years ahead and every incentive to extract more productivity right now…
…especially when the land isn't feeding you or your family. In the case of commodity agriculture, land is simply a profit center for the farmer — who usually doesn't own the land he's farming. As such, they treat farmland much more like a gold mine: get what you can out of it, move on, and leave the mess to someone else.
JS