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How Huge Food Corporations Will Make Upcoming Food Price Hikes Even Worse

The entire American food system is built on one crop -- corn. And that is really bad news.

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All in all, the U.S. has produced an extremely efficient – but fragile – agricultural system. When all goes well, the U.S. produces massive amounts of incredibly cheap calories. But when something goes wrong, the system can come crashing down like a house of cards.

Strangely enough, the group that won’t be suffering the most this year are the very farmers whose crops are lost to the drought. The vast majority has federally subsidized crop insurance, which will pay them back for about 75 to 80 percent of their losses, depending on the amount of coverage they’ve elected to take. Crop insurance is a relatively new phenomenon, and it’s one that agricultural economist Daryll Ray argues allows farmers to grow corn in riskier areas where – without insurance – they would have elected to plant crops or pastures more appropriate for the area.

Those who will suffer are livestock producers. For any U.S. livestock operation, the choices this year are not good ones. Your animals can eat corn, soybeans or hay, and all are impacted by the drought. Farmers who have entirely given up on producing grain or beans from corn and soybeans are harvesting their entire plants to feed to their livestock as silage or hay, respectively. The USDA is also allowing farmers to harvest hay or graze their animals in 3.8 million acres that had been set aside for conservation, including some wetlands. Another option is culling your herd, slaughtering your animals and selling them for meat to avoid the need to feed them later. Some predict that this will occur, initially driving meat prices down before they go up later.

Naylor, who is not only a farmer but also past president of the National Family Farm Coalition, feels that farmers will not be able to reduce their herd sizes as much as they could have in the past.  “It used to be when farmers were raising livestock, they were a lot more flexible about whether they decided to raise livestock this year or next year. They were using relatively inexpensive facilities,” he recalls. As he sees it, a shortage of feed grains and high prices might have resulted in a drop in demand in the past as farmers reduced their herd sizes.

Nowadays, expensive confinement facilities are used in the majority of livestock operations. Naylor believes they “have a huge investment in the facility itself and if they're not running livestock through there, somebody's going to be paying for that facility regardless…  they are going to try to keep those things full to minimize their losses.” Many such farmers contract with large meatpackers like Tyson or Cargill, and the packers’ interest is in keeping their slaughterhouses running at capacity. Naylor also suspects the packing companies “want to keep up a certain volume and not upset people's typical diets – they want to keep their customers on board as long as they can.” In other words, they don’t want Stephen Colbert’s cheese levels to recede.

Americans certainly will not enjoy paying higher prices for eggs, dairy and meat, nor will they relish reducing consumption of expensive animal products. (That said, it might be a blessing for our health if Americans substituted lower priced but healthier plant-based whole foods in their place.) But if recent history is an indicator, the people who will truly suffer don’t even live in the U.S. Prices spiked a few years ago, in 2008, and Americans took it on the chin. Other countries experienced food riots.

So what can we do to prevent such disasters in the future? Diversify, says O’Hara. The scale of this particular drought is so enormous that we would have suffered consequences no matter what, but we might have reduced them by diversifying the crops we grow, diversifying where we grow them, and diversifying the varieties of each crop grown.

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