The debate over the 2007 Farm Bill follows a familiar script, one acted out most recently in 1996 when Congress approved the Freedom to Farm Act. With prices high, farmers are portrayed as the greedy beneficiaries of lavish farm programs. Today, the debate takes place in the haze of the ethanol-fueled runup in corn and soybean prices. Critics argue that in the “food vs. fuel” fight choosing fuel will lead to rising retail food prices, particularly for meat and dairy products. The nation’s largest meat companies are some of the most vocal critics, advocating for policies that would increase corn and soybean production and reduce the cost of feed.

In fact, these same livestock giants, not farmers, have been among the main beneficiaries of U.S. farm policies since 1996. With the elimination of most remaining supply-management measures, the 1996 Farm Bill stimulated widespread overproduction and a drop in commodity prices, often to levels below production costs. Farm subsidies made up only a share of the difference; farm families made up most of the rest with off-farm income. While family farmers’ net incomes stagnated or declined, even with subsidies included, industrial livestock operations were treated to a bonanza of low-priced feed.

Between 1997 and 2005, factory farms saved an estimated $3.9 billion per year because they were able to purchase corn and soybeans – the main components of most feed mixtures – at prices below what it cost to produce the crops, a reduction amounting to 5%-15% of operating costs. Estimated savings to industrial hog, broiler, egg, dairy, and cattle operations totaled nearly $35 billion over the nine-year period.

Download the full Global Development and Environment Institute policy brief no. 07-03.