The price consumers pay for animal products at the grocery store does not reflect all of the costs society as a whole pays for these products. One of the important ways these costs are masked is through the provision of subsidies to CAFOs (Confined Animal Feeding Operations). Some subsidies may go directly to CAFOs; others (so-called indirect or implicit subsidies) go to other parts of the economy and are then passed on to CAFOs. These indirect subsidies may easily go unnoticed by the general public, but are just as important to CAFOs in facilitating their operation and growth. Where subsidies go to CAFOs preferentially over other production systems, they provide an especially important advantage.

One particularly substantial indirect CAFO subsidy has been payments made to commodity crop growers, largely for corn and soybeans, which are passed on to the CAFO industry in the form of artificially low feed grain prices. These low prices have largely been the result of the elimination of grain supply controls that were intended to keep prices at a reasonable level. This and other changes in federal farm legislation have allowed the price of feed grains to drop below the cost of production in many years. In response, lawmakers have compensated grain growers for most of the difference between their cost of production and low market prices. Such indirect crop subsidies have amounted to a windfall of several billion dollars per year for the CAFO industry.

A second type of subsidy is direct payments made to the CAFO industry through the federal Environmental Quality Incentives Program (EQIP), which provides about $100 million per year to CAFOs to reduce some of the environmental damage they cause. EQIP subsidies, like commodity crop subsidies, are ultimately paid for by taxpayers, and could become increasingly important as pressure is applied to the industry to clean up its practices.

Although the reduction of harm caused by CAFOs is desirable, EQIP payments raise legitimate questions about whether the public should underwrite CAFOs in this way. This is especially important when considered in the context of alternative production systems that are efficient, cause fewer problems, and have greater societal benefits.

Subsidies are appropriate buffers for the agricultural sector against the uncertainties of nature and price dips due to overproduction, and they encourage conservation and technological innovation. It is essential, however, that subsidies also encourage and support desirable agricultural practices.

How Crop Subsidies Have Propped Up CAFOs

Livestock raised in confinement eat an enormous amount of corn and soybeans. Grain and animal production (and their respective costs) are therefore inseparable when evaluating CAFO production. Over the last 80 years or so, U.S. farm policy has subsidized the production of commodity crops such as corn and soybeans in a variety of ways; currently, some payments are made to commodity farmers regardless of market prices or production costs. Here we examine whether these subsidies have contributed to the growth of CAFOs, which are the primary users of these crops.

A majority of the two most widely cultivated crops in the United States, corn and soybeans, is fed to livestock. In 2007, corn was grown on about 93 million acres and soybeans on about 64 million acres. Alfalfa is grown for livestock forage on about 22 million acres (out of the 60 million total acres devoted to various types of hay); sorghum (mostly for feed) is grown on about 8 million acres and substantial amounts of corn stover (stalks and leaves) are also used for cattle forage or silage.

By contrast, wheat (the crop most widely grown primarily for food in the United States) is planted on about 60 million acres, and rice on less than 3 million acres. Most familiar vegetable and fruit crops are grown on even smaller acreages. For example, potatoes are grown on about 1.1 million acres, tomatoes on about 425,000 acres, apples on about 360,000 acres, lettuce on about 310,000 acres, and carrots on about 100,000 acres.

The tremendous amount of corn and soybeans grown for animal feed reflects the huge amount of animal production in the United States. Feed grain costs make up a large proportion of the cost of raising animals in CAFOs: corn and soybeans generally make up about 50 to 60 percent of the cost of producing chickens, eggs, and pork, and somewhat less for dairy and beef. Because cows can efficiently digest the cellulose that comprises most of a plant’s stalks and leaves, cattle could survive on those parts of crops rather than on kernels or beans. However, in CAFOs a cow’s diet is largely composed of grain, which has high caloric or protein content, can be easily transported to the animals compared with bulkier forages, and is relatively cheap.

Because of the close connection between crop prices and CAFO costs, it is important to understand the forces that determine grain prices in the United States. Federal government policy, for one, has a significant effect on the price of corn, soybeans, and a few other crops. The government has implemented various programs under Title I of the farm bill to buffer farmers against loss (such as losses resulting from farmers’ tendency to overproduce commodity crops, leading to crop prices that are often below the cost of production). Farmers also tend to accept lower market prices because they are not as economically concentrated as farm input industries or food processors and retailers, and their commodities are perishable.