Supply Management, Parity Prices, and Ecological Thinking as the Foundation for a Practical Agriculture System

Kathryn AndersonEconomic Justice, Environmental Resilience, History of Parity

The nature of agricultural markets and production cycles means that farmers in an industrial system tend to overproduce. Overproduction leads to artificially low grain prices for farmers, which subsidize large industrial livestock operations, creating an oversupply of meat, milk, and cheese, leading to government-managed marketing campaigns to sop up the surplus through increased consumption. This is the story behind “Where’s the Beef” and “Got Milk?”

The environmental and public health consequences of this overproduction are extreme. One example – the dead zone in the Gulf of Mexico – can be seen from space. Obesity, cancer, and diabetes all follow from our dietary response to cheap meat and dairy.

A nationwide supply management and parity pricing program that enforceably ties conservation agricultural practices to program participation could relieve these environmental and health burdens while simultaneously achieving economic justice for farms and rural communities. The organic dairy sector – described below – illustrates how this is possible.

The Environmental and Economic Win-Wins in Controlling Overproduction

Most scholarship on supply management and parity pricing emphasizes economic sustainability. Overproduction drives down farm prices by inundating the market with more commodity than consumers want. Controlling overproduction improves prices for farmers, putting more money in their pockets to invest in their farms, support flourishing rural communities, and pay living wages and decent benefits to hired farmworkers.

Here, I focus on how supply management is also prerequisite for making American agriculture environmentally sustainable. Supply management and parity pricing directly mitigate environmental impacts by reducing the total volume of production. Importantly, supply management also indirectly improves agriculture’s ecological footprint by 1) allowing the small and mid-scale farms that are best suited for diverse and ecological farming to thrive and 2) providing sufficient income for farmers to invest in conservation and regenerative practices.

Controlling overproduction improves prices for farmers as well as environmental and public health outcomes – rarely are there such clear win-wins.

Why Sustainable Agriculture Is Important… and Possible!

Agricultural land covers a whopping 43 percent of the world’s ice-free and desert-free land (Poore and Nemecek 2018). This makes sustainable production essential. Even ignoring the intrinsic value and rights of nature, when ecosystems are degraded, the vital “ecosystem services” they provide to people are compromised, causing tremendous economic damage and existential human suffering. US agriculture has increasingly evolved into an energy-, carbon-, and chemical-intensive, monocrop farming system, with tragic environmental and health impacts that cost Americans billions of dollars every year (Pimentel 2005, FAO 2015). These costs are avoidable. Diversified agricultural systems based in agroecological science can offer high yields and avoid environmental costs (Kremen et al. 2012).

Some of the main environmental impacts from industrial agriculture in the United States include:

  • Excessive greenhouse gas emissions (agriculture emits about nine percent of total US GHG emissions (EPA, 2017))
  • Soil erosion and decreased soil fertility, including through reduced soil complexity and functioning of soil biota
  • A plethora of water contamination problems, such as eutrophication of lakes and coastal zones, nitrate pollution of groundwater, and agro-chemicals in drinking water
  • Water scarcity due to irrigation
  • Loss of wetlands, grasslands, and diverse habitats
  • Decreased capacity for flood water storage and mitigation of flood risk
  • Biodiversity loss, from pollinators and other agriculturally beneficial insects to reduced fish and bird abundance and species diversity (Tilman & Clark, 2014).

Each of these comes at exorbitant cost, as is evidenced by a growing body of economic research (Hsiang et al., 2017; Keeler et al., 2012; Swinton, Lupi, Robertson, & Hamilton, 2007). The annual costs of nutrient-related lake and stream eutrophication alone in the United States are at least $2.4 billion (Wurtsbaugh, Paerl, & Dodds, 2019).

Luckily, these environmental and health costs are avoidable. Diversified farming systems based in agroecological principles produce more nutritious food, comparable yields, and far superior environmental outcomes. Ecological agriculture combines traditional conservation-minded farming methods with modern agroecological science and technologies. Agroecological farming adheres to closed-cycle systems that limit energy-intensive and harmful external inputs. Some core agroecological practices include rotating crops, managing pests naturally, diversifying crops and livestock, promoting biodiversity in soil and habitat, relying on natural biological processes, promoting animal welfare, and improving the soil with compost additions and animal and green manures.

How do Supply Management & Parity Prices Promote Ecological Farming?

The complementary policies of supply management and parity pricing are necessary for an ecologically sustainable farm system that provides healthy food for all Americans. Parity and supply management would facilitate three vital changes:

  1. Cutting surplus production would align the total quantity of crops produced with demand, relieving the environmental harm done on millions of acres of unnecessarily farmed land and slashing the use of nitrogen fertilizer and other energy-intensive and ecologically harmful inputs, even without any shift in production methods. This is the direct link between supply management and environmental sustainability.
  2. Raising farm prices would allow a shift to sustainable production methods by allowing those farms best positioned to adopt agroecological farming systems – the small and mid-scale farms – to thrive. This is an indirect link between supply management and environmental sustainability.
  3. With higher farm prices and more money in their pockets, farmers would have the financial flexibility to invest in diverse farm systems and agroecological practices (Anderson 2020). This is another indirect link between supply management and environmental sustainability.

However, while supply management and parity pricing policies are necessary for promoting sustainable agriculture, they do not guarantee this outcome; they are not sufficient. They are necessary because only when the prices are right can the landscape transition to a mosaic of family-scale farmers re-learning diversified and regenerative farm techniques and experimenting with the full potential that agroecology offers. But only when prices are enforceably tied to sustainable methods – methods that internalize negative environmental externalities – will these higher prices actually translate into family farmers delivering the ecosystem services our planet so desperately needs.

Ecological thinking must be the foundation of a practical agriculture system. In the past, supply management and parity pricing policies have not adequately incorporated ecological thinking and consequently they led to monocultures, industrial farming, overproduction, and concentrated land ownership – an agricultural system that makes sustainable farming impractical and financially unprofitable outside of niche markets. If ecological thinking is made a secondary priority not explicitly and centrally foregrounded in all supply management and parity pricing policies, this opportunity will be lost, and farmers will respond to policy programs by investing in ecologically damaging production systems that are very expensive to abandon or reorganize at a later time, if and when efforts are made to incorporate ecological aspects. From the beginning, policies must tie higher prices (which will, as a rule, be used for farm improvements and investments) to ecological farming systems.

Together with a set of complementary agricultural policies and reforms described elsewhere in this series – e.g., land tenure, anti-monopoly, and justice for minoritized farmers – supply management and parity prices that are enforceably tied to agroecological practices are a vital step towards an environmentally sustainable farming system.

The Case of Corn: Overproduction, Band-aid Policies, CAFOs, and the Gulf Dead Zone

The case of US corn production illustrates the environmental and health liabilities of the current regime of overproduction, subsidies, and lax environmental standards, and the potential of parity and supply management to vastly reduce environmental impacts.

The United States is currently the world's largest corn producer. Annually, more than 90 million acres of land in the US are planted to corn. Of the corn used domestically, nearly half of the nation’s corn crop goes to livestock feed, the bulk of which is used in CAFOs.  Since 2007, the amount going to ethanol production has more than tripled, now accounting for nearly 40 percent of total corn use (with substantial amounts of ethanol byproducts additionally going to livestock feed) (USDA, 2015; USDA ERS, 2020).

Three aspects of industrial corn production are especially degrading to ecosystem services: 1) The conversion of grasslands, wetlands, and diverse agricultural landscapes to corn and corn-soy rotations; 2) The use of synthetic fertilizers and pesticides; 3) Intensive tillage and monocropping. These practices devastate macro- and micro-biodiversity (including complex soil biota that is vital to soil fertility), eliminate natural biological control of crop pest insects, and reduce bird diversity. They also disrupt soil carbon storage and cause the sedimentation of wetlands and streams, the pollution of groundwater, and the eutrophication of lakes and coastal zones.


Corn field by Tim Foster on Unsplash

Corn and the Gulf of Mexico’s Dead Zone

A particularly visible tragedy caused by fencerow-to-fencerow corn in the 13 states of the Mississippi River watershed is the enormous “dead zone” in the Gulf of Mexico.  The dead zone refers to the 8,000 square miles of hypoxic ocean where little or no aquatic life can survive. Corn requires immense quantities of nitrogen to grow, much of which leaches into streams and groundwater, degrading drinking water supplies and eventually flowing down the Mississippi River to the Gulf of Mexico, where it causes the dead zone. Nitrogen fertilizer chokes waterbodies with algae and weeds and causes hypoxia (lack of dissolved oxygen needed by fish and other animals). Since the 1990s, the Federal Government has prioritized solving the Gulf dead zone crisis, targeting a 30 percent reduction in nitrogen flowing from cornfields to the Gulf, with no success. Neither the nitrogen load nor the dead zone show any sign of shrinking.

Scientists from the University of Wisconsin calculated the effects of different corn planting scenarios on the size of the dead zone (Donner & Kucharik, 2008). Essentially, they found that hyperproduction of animal agriculture and federal biofuel mandates – two responses to oversupply – are the primary culprits in causing the dead zone. Meeting both the US biofuel mandate (of 36 billion US gallons annually by 2022) and the Federal target of reducing nitrogen to the Gulf by 30 percent would require reducing red meat consumption by 50 percent, and replacing the corn used to feed those animals with crops supporting a plant-based diet along with riparian buffers adjacent to corn and soybean fields. Without reducing animal production, meeting the ethanol mandate would increase nitrogen to the Gulf by 34-38 percent and grow the dead zone. This study shows the tremendous environmental costs of the ethanol mandate and of CAFO livestock production, as well as the tremendous ecological benefits of reduced corn production, if a supply management policy were to be implemented.


Mississippi River Watershed. Image credit: NOAA

Overproduction of Corn: A Brief History

While it may appear that the enormous US corn harvest is a response to demand from livestock producers and environmentalists advocating biofuels, these are in fact artificial market demands that arose in response to marketing and lobbying campaigns designed to absorb surplus corn.  The real story is perennial overproduction of corn causing low corn prices, which farmers respond to by producing even more corn to break even, creating a landscape where only the largest farms can survive and only because of (often indirect) government subsidies. The number of farms growing corn has fallen sharply, with larger farms increasing acreage and smaller farms closing (USDA ERS, 2020).

This cycle began in the late 19th century with westward expansion of the colonized agricultural frontier. The systematic over-production of corn (and other commodities) was a fixture of US agriculture by the 1920s, causing immense soil erosion, plummeting farmgate prices, and rising farm foreclosures.  Farmers responded by producing more and more to make up for low prices, thus exacerbating the problem. Finally, after much farmer-organizing and many failed attempts, production controls were implemented as part of the 1933 Agricultural Adjustment Act. These supply management policies effectively combatted low prices by reducing corn supply by 15 percent from 1932 to 1936, nearly tripling corn prices, and raising farm incomes by over 65 percent (Winders 2009).

Unfortunately, supply management policies were progressively relaxed (under pressure from consolidating agribusiness corporations), beginning in the 1940s, and completely abandoned after 1996, causing US corn acreage to grow from an historic low of 60.2 million acres in 1983 to over 95 million acres in 2013 (USDA, 2015; USDA ERS, 2020). Effective supply management policies were replaced by a series of band-aid measures like export subsidies, income support subsidies and, since 2005, a series of government biofuel mandates that are supported by farm lobbies but have negative net environmental impacts and are vehemently opposed by environmental groups (Sierra Club, 2015; Yang, Bae, Kim, & Suh, 2012).


Cartographer: Riccardo Pravettoni, UNEP/GRID-Arendal

Surplus Corn and Unecological Band-aids: corn ethanol

The biofuel mandate for corn ethanol represents a tremendous financial transfer from taxpayers and drivers to corn growers and agribusiness input companies, at grave expense to the environment. The Renewable Fuel Standard, first set in the 2005 Energy Policy Act, has increased requirements for biofuels to be mixed into US fuel supplies from an initial target of 7.5 billion US gallons of biofuels annually by 2012, to the current mandate of 36 billion US gallons annually by 2022, of which 15 billion gallons can be produced from corn starch. The ethanol mandate costs taxpayers over $1 billion in subsidies each year and likely costs consumers up to $1 billion annually in increased beef prices (Pimentel, 2003). Ethanol requirements dramatically increased corn prices starting around 2007 and incentivized the expansion of corn acreage, taking land from soy, pasture, grasslands, wetlands, fallow, Conservation Reserve Program (CRP), cotton, and other crops (USDA ERS, 2020).

Ostensibly, the motivation for biofuels is the carbon savings from displaced petroleum use. The tragedy is that corn ethanol delivers at best marginal and sometimes negative net energy savings (energy output from ethanol per energy input in producing it), ranging from 0.78 percent to 1.11 percent (Oliveira, Vaughan, & Rykiel, Edward J, 2005; Pimentel, 2003). Specifically, the greenhouse gas (GHG) emissions savings range from quite modest to negative, depending whether land was converted from a carbon storage land use, such as pasture (Yang et al., 2012). When the intense adverse impacts of industrial corn – from erosion and degraded soil quality, insecticides, herbicides, synthetic fertilizers, land use change, and biodiversity loss – are considered, the environmental footprint of corn ethanol is clearly strongly negative, calculated at between 6 percent to 118 percent greater ecological damage than that caused by filling up with gasoline (Yang et al., 2012). Clearly, corn ethanol is a terrible solution for raising farm incomes.


An ethanol fuel plant in West Burlington, Iowa on Wiki, by Public Domain

Surplus Corn and CAFOs Threaten Human and Ecological Health

As it turns out, so are subsidies and industrial livestock facilities. Through various types of subsidies aimed at supporting farm income, taxpayers have allowed farmers to continue producing corn even when market prices cannot cover production costs. Corn sold below production costs translates into a huge indirect subsidy to industrial livestock operations (large concentrated animal feeding operations, or CAFOs) (Hauter, 2012; Wise, 2005). Starmer and Wise (2007) estimate that from 1997 to 2005, government subsidies to corn growers saved US animal agriculture about $3.9 billion per year in feed costs.

Tragically, the availability of cheap grain unfairly advantages industrial confinement livestock operations that typically purchase most of their feed, over family farms that typically grow some or all of their feed and rely more on pasture, thus spurring the forced exodus of family-scale farms and the growth in subsidized factory farms as the primary source of livestock in the United States (Smith, 2019; Winders, 2009).

This strong-armed shift away from diversified small and mid-scale farms to giant CAFOs has contributed to America’s health problems. Through the subsidized proliferation of high-volume CAFOs, corn oversupply has spurred ever greater surpluses in livestock products – resulting in more meat and dairy than traditional American eating habits could absorb. The response was to create massive marketing campaigns to change the American diet. These “checkoff programs,” managed by the USDA, brought us “Got Milk?” and “Beef, it’s what’s for dinner.” Ultimately, successful marketing, artificially low supermarket prices, and the engineering feats of the processed food manufacturing sector, have dramatically increased consumption of both red meat and dairy, at great cost to society.

In excess, red meat has been linked to heart disease, stroke, type 2 diabetes, cancer, and overall mortality (Clark et al., 2019), totaling $285 billion in excess health costs worldwide in 2020 alone (Springmann et al., 2018). The surplus has also contributed to an epidemic of obesity: in 2003, the average adult was 24 pounds heavier than in 1960, and one in three Americans today is obese (Moss, 2013). While fat is not unhealthy in moderation, since the 1970s, American cheese consumption has tripled to 33 pounds per person per year in 2013 – or more than half the maximum recommended saturated fat consumption, just from cheese (Moss, 2013). Halting overproduction can help correct market distortions that effectively subsidize fat and penalize healthy foods like fruits and vegetables (Carolan, 2011).

On top of these health impacts, the shift from small- and mid-scale farms to giant CAFOs has resulted in environmental calamity. Compared with a wide range of food types and farm scales, CAFO agriculture has the most severe impacts with regards to most environmental indicators – for example GHG emissions, land use, acidification, eutrophication, and groundwater pollution (Clark et al., 2019; Willett et al., 2019). The CAFO agriculture system causes both an increase in total volume of livestock – and thus the total environmental impacts – and also a concentration and intensification of their environmental harms due to the structure and practices of CAFO agriculture.


Cattle Feedlot, SRA project

Compared with CAFOs, small and mid-scale farms are better positioned to:

  • use managed rotational grazing on pasture, which has enormous environmental advantages over row crops in terms of soil quality and erosion, species richness and biodiversity, animal health and welfare, and carbon sequestration;
  • grow their own feed in a closed system that recycles nutrients, using manure to fertilize crops – thus reducing GHG emissions from nitrogen fertilizer manufacturing, protecting water quality from unnecessary synthetic fertilizers, and turning nutrient-rich manure from a hazardous waste into valuable fertilizer
  • build healthy soils through diverse crop rotations of legumes and cover crops, applications of compost and animal manure, less compaction and disruption, and foregoing fertilizers and pesticides that kill soil biota
  • promote species biodiversity
  • cause substantially less chemical pollution from synthetic pesticides, pharmaceuticals, antibiotics, and hormones.

The Case of Organic Dairy: Supply Management Saves Farms and the Environment

The organic dairy sector provides a fascinating example of how supply management that is tied to agroecological standards can protect farms and the environment. The ecological practices mentioned above that are possible on small and mid-scale farms are widespread among organic dairy farmers.  This is due in part to de facto supply management – delivering high farm prices so farmers can invest in sustainable practices – and in part to ecological standards enforced by the National Organic Program.

Over the past 30 years, thousands of conventional dairy farms have converted to organic – not necessarily because they wanted to, but because low conventional milk prices caused by oversupply made organic the only way to save the farm.

Milk is one of the most stunning examples of oversupply in the American agricultural system. Even as America started dieting in the mid-1980s, becoming aware of lactose intolerance, and trying to avoid dairy products, the dairy sector kept accelerating its growth. The industry was drowning deeper and deeper in surplus milk as CAFOs tried to be profitable through productivity enhancements and economies of scale – adding to the overall problem. As a result, US dairy farmers have faced a crisis in farm viability. In 2018 alone, nearly 3,000 dairy farms (6.5 percent of all US dairy farms) folded (Barrett, 2019), leaving boarded-up main streets and closed schools in their wake (Semuels 2019). Every few years, oversupply gets so bad that farmers dump millions of gallons of milk (Gee 2016).

I use the word “organification” to describe what happened when conventional dairy farmers were forced to go organic to stay in business. Conventional dairy farmers who were overwhelmingly skeptical both about organic methods and about supply management surprised themselves to discover – once they experienced them – that they liked organic farming and supply management.

Economic organification: While there has never been an explicit, government-supported supply management program in organic dairy, the sector enjoyed a de facto supply management regime from roughly 1995-2015 because: 1) the organic standards (especially the pasture rule) essentially limited farm size, and 2) the market supply was largely coordinated by a nationwide cooperative (Organic Valley) that carefully controlled supply based on predicted demand (Anderson, 2020). High and stable prices from de facto supply management not only saved farms but gave the whole sector hope for the future. For the first time in generations, farm kids could plan a future on the farm. Before going organic, many ardently “free-market” farmers had scoffed at supply management. But once they experienced the financial freedom of stable prices – freedom to invest in farm maintenance and the freedom to sleep at night without anxiety – many became supply management boosters (Anderson, 2020).

Agroecological organification: After going organic, farmers often discovered that what they thought they knew about farming, including what they had learned in agronomy and dairy science university courses, was wrong in some important ways (Anderson 2020). Many of these farmers were angry that no one had told them about the damage that conventional practices (e.g., synthetic fertilizers, intense production per cow, and confinement) can have on soil and animal health. Once they transitioned, the overwhelming majority of organic dairy farmers saw their herd health improve (Anderson 2020).

Without the option of prohibited antibiotics, organic dairy farmers have learned to bolster their animals’ natural immune system and health through growing the most nutritious pasture and feed – by increasing soil organic matter, microbial activity, worms, and pasture species diversity (Anderson, 2020) – thus converting to a holistic agroecological farming system. The pasture rule, which sets a minimum requirement for pasture in the organic cows’ diet, means that cows get more exercise and spend more time in fresh air and off the concrete. Higher organic milk prices allow farmers to invest in long-term soil health and in agroecological practices – like buying compost equipment, experimenting with diverse forage and amendments, and pushing less milk production per cow. Reducing production means less foot and leg problems, acidosis, DA (twisted stomach) surgeries, milk fever, and mastitis.

If our goal is to make American agriculture sustainable, this organification story shows the key role for supply management and tying high prices to ecological practices.

Unfortunately, beginning around 2016, the de facto supply management in organic dairy began to break down. In part due to lax enforcement by the USDA, corrupt evasion of the National Organic Standards, and the increased market share of unscrupulous agribusiness interests, the leaders of the organic dairy sector have lost control of supply and farmers no longer can expect high and stable prices (Anderson, 2020, Cornucopia 2010, Cornucopia 2015). Across the country, organic dairy farmers met to figure out how to control supply.  In thousands of letters and comments, they urged the USDA to act. But without a national consciousness about the importance of supply management, organic dairy farmers did not have the language, political support, or policy analysis tools to make de jure supply management a reality.

A Growing Supply Management Consciousness

Hopefully, this consciousness is building. Today, an unusually broad coalition of dairy farmers and farm groups are calling loudly for supply management. Among others, the Holstein Association, the Milk Producers’ Council, the National Dairy Producers Organization, the Wisconsin Farmers Union, the National Family Farm Coalition, Rural Coalition, and strong factions within the Farm Bureau are all actively investigating potential supply management systems. Their arguments are backed by recent empirical analysis showing that a national supply management program would reduce variation in milk prices, increase farm prices and farm incomes, and decrease US government expenditures, all with minimal impact on retail dairy prices (Nicholson & Stephenson, 2019).


Our industrial agricultural system has increasingly evolved into an energy-, carbon-, and chemical-intensive, monocrop farming system, with tragic environmental and health impacts. Overproduction is a both a hidden outcome of this system and a hidden driver.

The case of corn overproduction shows the folly in solving the crisis of surplus through Band-aids.  Biofuel mandates create more environmental harm than good, and corn subsidies help fuel the replacement of diverse, family-scale livestock farms with giant environmentally damaging CAFOs. American bodies are also absorbing the surplus by eating more red meat and dairy, causing increased heart disease, stroke, type 2 diabetes, cancer, obesity, and overall mortality.

The good news is that alternative agroecological systems are waiting in the wings – closed-cycle systems that limit energy-intensive and harmful external inputs while producing bountiful nutritious food.

Supply management and parity prices that are tied to agroecological practices are an integral and necessary part in transitioning to a truly sustainable agricultural system. Supply management and parity pricing mitigate environmental impacts directly – by reducing the total volume of production – and indirectly – by providing sufficient income for small and mid-scale farms to thrive and to invest in agroecological practices.

The case of organic dairy – which, for over 20 years, enjoyed de facto supply management and parity pricing tied to agroecological practices – illustrates how liberating supply management can be for farmers. And how much sense agroecological methods make to farmers – once they try it.

Together with reforms in land tenure, anti-monopoly, and justice for minoritized farmers, supply management and parity prices that are enforceably tied to agroecological practices are vital to an environmentally sustainable farming system.


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Feature photo: Dan Beard, Iowa organic dairy farmer, courtesy of Practical Farmers of Iowa.