40 Chances
Page 25
Ever since the Depression, when market prices for a bushel of these crops fell below price-support levels (these have been adjusted by Congress over time), farmers received federal money for the difference. The more bushels a farmer produced, the bigger the federal check. Farmers could afford to operate at full production even when prices were low. That gave us surpluses to sell on international markets and to provide to countries in great need. And it meant that in the case of a natural disaster or a food shock of some kind, US farmers were ready, willing, and able to support unexpected needs.
This strategy has generally been a good thing, I would argue. We are not talking about subsidies for exotic financial instruments or the luxury car industry; we are talking about food. Ensuring the safety and productivity of our food supply is the right role for government, and these programs have helped do that.
However, the food situation in the United States has changed. Although we do have significant food insecurity, Americans generally have access to sufficient quantities of affordable food. According to the US Department of Agriculture, US families devote a smaller percentage of their household spending to groceries than do families in any other country it surveys. Americans spent less than 10 percent of their disposable income on food in 2010, down from 25 percent in 1933. In nations such as Nigeria, Kenya, and Pakistan, about 40 percent of household expenditures are for food. For the poorest people in Chad or Cambodia, the number can top 80 percent.
The financial situation on the US farm has changed a lot too. USDA farm subsidies rarely end up in the pockets of the poor anymore. Farmers now represent less than 2 percent of the population and farmers today operate on a larger scale.5 Thanks in part to labor-saving technologies, the size of the average US farm has more than doubled since 1950 to 420 acres. That figure doesn’t do justice to how US food production has become dominated by larger and more sophisticated farming operations. Farms that generate at least $1 million in annual revenue now control more than half of industry-wide sales compared to about a quarter of that market in 1982, according to the USDA.6
In 1933, Americans spent 25 percent of their disposable income on food. Today it’s less than 10 percent. American farmers like my Illinois neighbor pictured here can feed eight times as many people as they did in 1940; one US farmer now produces enough to feed 155 people. Photo: Howard G. Buffett
THE NEW CHALLENGE
I am concerned that Washington’s decades-old way of encouraging farmers to produce food is hurting our long-term food security. Our farm subsidy programs are still entrenched in the Great Depression era, but the threats to our food security as a nation have changed. Primarily output-based subsidies are encouraging short-term thinking by farmers, in the same way that “contract” farming motivates farmers who do not own their land to maximize their yield for a single year. Sometimes farmers are rewarded for pushing their land as hard as possible, which makes it easy for them to put off investing in readily available and well-understood technology to conserve soil and water. I believe the critical issue today is not whether US farmers can produce enough food for our current needs, but whether the way we are producing our food is mortgaging our ability to produce food tomorrow.
While US farmers reduced the amount of soil erosion by 43 percent between 1982 and 2007, that isn’t nearly enough to protect America’s long-term agricultural capacity, considering that experts believe it takes five hundred years or more for nature to form one inch of topsoil. It’s also possible we are not even measuring that impact accurately. The adoption rate of soil-saving, no-till farming techniques has slowed in the United States in recent years even as more and more research shows its benefits. We lost 1.73 billion tons of soil from US cropland in 2007 due to water and wind erosion.7
The impact of losing fertile soil is bad enough for the farmer, but the soil washing away from the farm belt carries fertilizer and pesticide into Midwestern rivers. This is a big factor in the hypoxic zone in the Gulf of Mexico near the mouth of the Mississippi River. In an area roughly the size of Rhode Island or Delaware, the excessive nitrogen and phosphorus fuel explosive growth in the algae population, which monopolizes so much life-giving oxygen that marine life can’t survive. In 2011, when widespread flooding across the Midwestern farm belt pushed a large amount of nutrients into the Mississippi River, the dead zone grew to an area the size of New Jersey, or about 6,770 square miles, according to the National Oceanic and Atmospheric Administration (NOAA).
The amounts of nitrogen, phosphorus, and sediment running off farms into the Mississippi River have attracted the attention of environmental groups, and it is only a matter of time before the Environmental Protection Agency will propose daily load limits similar to what the EPA is already doing to a half dozen states in the watershed of Chesapeake Bay. If that happens to the Mississippi River, farmers in states such as Iowa and Illinois would have to cut back on their use of fertilizer so sharply that their yields could be affected. Yet if we can limit the soil loss with cover crops, as well as no-till and strip-till farming, this contamination can be limited. Right now, shifting to more soil-sustaining farming techniques is the smart and right choice. We need to motivate farmers to make that choice before conditions get so bad that the transition is forced on farmers.
Also the modern farming methods being used across the country are consuming water more quickly than it is replaced. Agriculture is using water from the Ogallala Aquifer for irrigation faster than the massive underground reservoir can possibly replenish (in fact, as a so-called “fossil” aquifer, it holds water trapped eons ago, not constantly refreshed by rainwater or snow melt). When I drive across Nebraska, I still see fields flood irrigated, which is extraordinarily wasteful, and twenty-five-year-old center pivots that aren’t nearly as efficient as today’s technology.
A farmer can cut water use in half by converting from flood irrigation to modern and efficient center-pivot equipment or drip irrigation. If we realign subsidy payments around conservation-based efforts, including incentives for improved irrigation methods, we could trigger a modernization push and significant water conservation across the country. By further expanding the Environmental Quality Incentives Program (or EQIP), in which the USDA shares part of the cost with farmers who voluntarily make environmental improvements to their land, our government can encourage better and smarter use of our water.
I am impressed with the strides that California farmers have made in implementing drip irrigation over thousands of farm acres in the state’s rich Central Valley growing region. They had to: California has been battling droughts for decades, and urban development is laying more and more claims on water. California’s water battles are going to be repeated around the country. State and federal laws have mostly protected farming’s claim on resources such as water. But I would bet that the presumption of agriculture being the owner of these rights will be challenged during the next twenty to thirty years, as America becomes more and more urban, and water becomes more scarce.
GREENER FARMING FOR THE LONG HAUL
Government subsidies should be a long-term investment in society, not an incentive for producers to maximize short-term profits. Everything we do in agriculture consumes finite resources. Soil is finite. Water is finite. Phosphate is finite. If we don’t farm in a thoughtful and planned way, we will end up where many African countries are today: unable to feed their own people, let alone export food to the ever-growing world.
The USDA does have voluntary conservation programs, but they are underfunded and often first to get cut during any budget crisis. In 2011 the USDA spent about $5.9 billion on programs for such things as paying farmers to idle land for up to ten years and sharing costs of conservation-related improvements. That amount can’t compete with the $15 billion the USDA spent in 2011 on programs that encourage growing crops through subsidies on farm income, production, and crop insurance.
Washington needs to shift money from production-oriented crop subsidies and put it behind “green payments,” which
I think can be done relatively quickly. We don’t have to build a green payment system from scratch. The USDA already has plans that pay farmers for conservation performance. Created as part of the 2008 Farm Bill, also known as the Food, Conservation, and Energy Act of 2008, the Conservation Stewardship Program has many elements that could be used to build an incentive system that would extend the life of our farm belt. Unfortunately, it has been underfunded and must turn away participants due to a lack of resources.
HWB signed up our Nebraska farm for the Conservation Stewardship Program in 2011. It pays a farmer up to $40,000 annually to start new conservation practices and to maintain existing ones. As he explains, “CSP is a contract program, so the federal government contracts me to improve the general environment through my conservation practices. That contract makes it possible to take on new conservation practices that a farmer might not otherwise be able to afford.” The plans vary from state to state, but farmers can choose from dozens of practices, from installing drift-reducing nozzles on spray equipment, to planting a cover crop that scavenges excess fertilizer from a field so that it doesn’t end up in the river.
Part of what has held back conservation practices is that the financial benefits are slow to materialize compared to the quick money that can come from farming the land aggressively. If a farmer had a way to compute the dollar value of the topsoil scoured from a cultivated field by a single thunderstorm, conservation practices would be a much easier sell. What’s exciting about this program is that the USDA is putting a monetary value on specific soil-saving or water-saving practices for farmers to see for the first time.
HWB joined the Conservation Stewardship Program by signing a five-year contract with the government that obligates him to plant up to four hundred acres of cover crops, such as radishes, and to upgrade monitoring equipment to increase the efficiency of his center pivots. The cover crops help replenish nutrients in the soil, and the changes to his pivots help him gauge more precisely how much water his crops need, preventing water waste and allowing for resource conservation.
Because the United States plays such a vital role in world agriculture, it is essential that we figure out how to get more farmers on board with plans that conserve our resources. In the process, we can set an example that could even help African governments leapfrog straight to smart subsidies the way they leapfrogged telephone landlines to a vast cell phone network. If African governments begin subsidy programs by connecting them to the goal of long-term food security, they won’t have to figure out how to change farming behavior designed to maximize short-term yields at all costs. Societies have been focused on how to get the most food out of the ground today. Now we have to think about how the world can produce enough food in the future.
Story 29
Chains That Unlock Potential
By Howard W. Buffett
I can vouch for the expression “strong as an ox.” Oxen can also be stubborn as mules, especially when pulling a plow.
In 2010 I was in Afghanistan’s Bamiyan Valley breathing thin air above eight thousand feet in elevation. The temperature was in the low forties, but I was dripping with sweat. I had been steering a plow pulled by two oxen for only a few minutes, and twice they had dragged me onto my knees on the brown, hard-clumped soil. Despite the handmade plow’s guidance system and accelerator (respectively, a stick broken off a nearby tree and an occasional swat to the ox), the furrow I left behind in the hard soil looked like the trail of a drunken stagger.
The local farmer who let me try to plow was laughing his head off, as were my father and other members of the US agricultural delegation I had brought to visit the region. That is, they were laughing until some of them tried it too.
I think about this day quite often. The physical setting was stunning. The Bamiyan Valley has a rich history, falling along ancient trade routes of the Silk Road. We had flown here from Kabul by Blackhawk helicopters, and the snow-covered mountain ranges were spectacular from the air. However, there was no snow on the valley floor, and the day was clear, opening up the view of the golden brown limestone mountains speckled with caves on both sides.
The landscape was extraordinary, but the truly inspiring aspect of meeting these hardworking farmers in Bamiyan was their desire to improve their families’ livelihoods. Photo: Howard G. Buffett
On the valley walls a few miles behind the potato farmer’s field, we could see the reconstruction efforts under way on the famous Buddhas of Bamiyan, huge statues that had been built by Asian Buddhists who lived in the valley in the sixth century. These statues, some standing nearly two hundred feet high, have been vandalized several times in their history. Most notably, in 2001, Taliban leaders dynamited them for being “un-Islamic,” to the dismay of most Afghans and historians and archaeologists around the world.1
We had just emerged from inspecting a dark, cold potato storage facility when we stumbled by accident upon the farmer plowing his potato field. The Afghan potato farmer was typical of so many subsistence farmers all over the world. Day after day, he performed backbreaking, difficult labor to coax a crop out of nutrient-poor soil to feed his family. If he was lucky, he harvested enough to eat and perhaps some small surplus to sell or trade locally.
Yet unlike many parts of the world where our foundation is involved in development efforts, Afghanistan had once played a significant role in global agricultural markets. It had a tradition of growing and exporting a wide array of crops, from pistachios to raisins. Decades of conflict and chaotic political control, however, had taken a terrible toll. Many farmers had been displaced, and their markets and transportation options were limited. In addition, as the consequences of war plunged the country into poverty, many farmers had switched from food crops to poppies, the raw material of heroin. The Taliban banned poppy production but were known to be using it selectively to raise funds. Since the early 1990s, opium poppies had become the nation’s premier crop, and in 2010, Afghanistan supplied more than 90 percent of the world’s heroin.2 Much of the agriculture infrastructure needed to grow food crops, such as irrigation, had been destroyed over the years, and production of legal crops suffered as a result.
I was in Afghanistan working as part of a special task force established by the Secretary of Defense. We were trying to restore Afghanistan’s agricultural infrastructure and develop innovative ways to modernize it as quickly as possible. We were there to help the people rebuild, reduce widespread food insecurity, and thrive again. Among other priorities, it was important to me to make sure we did not repeat the kinds of mistakes I had seen in post-tsunami Thailand. That meant getting out in the field and talking to farmers in order to learn what they were up against—and what mattered to them.
It was hard to judge the Bamiyan farmer’s age from his weathered skin and few remaining teeth. If he hadn’t been working so hard he would have been freezing out here, I thought, as he wore just a thin V-neck sweater over a single layer of clothing. His brother was breaking up sod clumps with a pickax as the farmer drove his oxen in their crude wooden yoke up and down the field. This plowing is hard on the farmer, and it’s not a good way to protect the topsoil, of which there was precious little on this field. His grit and resiliency were typical of the Afghans I met. What they lacked, however, was the infrastructure and what we call the “value chain” support that begins well before planting and continues long after harvest.
Value chain development may sound abstract, but it can be the difference between success and failure when you are trying to help poor farmers participate in a viable economy. When my father writes about his disillusionment with one-off projects, the lack of a value chain is a big component of what he is talking about. If you just provide bags of seed or fertilizer, you can increase yields and feed more people for a short time, but when you leave, the situation will slip right back to where it was when you arrived. Value chains are about creating an agricultural ecosystem that is sustainable and where individuals and businesses have an incentive to work together to
create a strong economic sector.
DRUG WARLORDS UNDERSTAND VALUE CHAINS
The irony of the poppy trade is that drug warlords and traffickers understand value chains all too well. They realize that to succeed, they have to surround the actual production of opium (or coca or marijuana, depending on where you are in the world) with the necessary resources: ranging from fertilizer to sufficient water to the downstream processing facilities and transportation assets needed to prepare and ship the product. They are also aided, of course, by bribing police or government officials and employing violence to make sure their form of the chain holds together. In Afghanistan, the drug chain is further reinforced by strong incentives put in place for the farmer. Farmers are paid for their crops up front, which provides financial security and opportunities such as education for their children. Poppy seeds and fertilizer are delivered directly to the farmer, and the harvest is picked up when he’s done. That means he has no capital outlay, no crop risks, and no loans. These kinds of guarantees and incentives can make it nearly impossible for a farmer to find a more advantageous alternative.
Building legitimate agricultural value chains requires a much different approach. The ideal value chain is a voluntary, cooperative structure where everyone benefits by working together. It reflects local culture and people’s actual desires, it often involves community leaders, and it tends to inspire entrepreneurs who fill gaps in the chain with services or resources that make it work better and more profitably for everyone.
My road to Bamiyan began in 2010, when I joined a Department of Defense task force focused on economic development in Iraq and Afghanistan. I had worked in the Department of Agriculture and then in the White House, but I was eager to make a difference in these challenging conditions. Our goal was to bring private enterprise, foreign investment, and philanthropy into Afghanistan to help reactivate agriculture, stabilize communities, and support a more secure environment for agribusiness. DoD called the task force “an expeditionary group of business specialists,” and we had a unique authority to request direct help from the military to move throughout the countryside. That helped us avoid the bureaucracy and the stricter security protocols that many other US agency personnel had to grapple with every day. This form of economic development was seen as critical, and the top of the military command urged us to take the risks required to get results.