Table Of ContentAGRICULTURAL POLICY, AGRIBUSINESS, AND
RENT-SEEKING BEHAVIOUR
Costing billions of dollars annually, international trade in agricultural products is impactful
and influenced by several factors, including climate change, food policy, and government leg-
islation. The third edition of Agricultural Policy, Agribusiness, and Rent-Seeking Behaviour pro-
vides comprehensive economic analyses of the policies that affect agriculture and agribusiness
in Canada and the United States.
Looking at current agricultural policies, the third edition includes new chapters on food
pyramids, climate change, and GMOs, while also highlighting the effect of international
policies on Canadian trade, including the problematic US ethanol policy. The new edition
addresses current issues, including how the COVID-19 pandemic has negatively affected agri-
cultural value chains and played a hand in the ongoing growth in opioid use.
Including a number of key findings, and discussing current debates on topics including foreign
ownership of Canadian farmland, Agricultural Policy, Agribusiness, and Rent-Seeking Behaviour
will appeal to students in agricultural economics and policy, as well as policymakers, agricultural
firms, energy companies, and readers wishing to reduce their nation’s carbon footprint.
andrew schmitz is a Ben Hill Griffin Jr. Eminent Scholar and professor of food and resource
economics at the University of Florida.
charles b. moss is a professor of food and resource economics at the University of Florida.
troy g. schmitz is an associate professor in the Morrison School of Agribusiness and the W.P.
Carey School of Business at Arizona State University.
g. cornelis van kooten is a professor of economics and Canada Research Chair in Environ-
mental Studies and Climate at the University of Victoria.
h. carole schmitz is a freelance journalist writing on economics.
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Agricultural Policy, Agribusiness,
and Rent-Seeking Behaviour
Third Edition
ANDREW SCHMITZ, CHARLES B. MOSS, TROY G. SCHMITZ,
G. CORNELIS VAN KOOTEN, AND H. CAROLE SCHMITZ
UNIVERSITY OF TORONTO PRESS
Toronto Buffalo London
© University of Toronto Press 2022
Toronto Buffalo London
utorontopress.com
Printed in the U.S.A.
ISBN 978-1-4875-2280-3 (paper)
ISBN 978-1-4875-1841-7 (EPUB)
ISBN 978-1-4875-1840-0 (PDF)
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Licensing Agency – is an infringement of the copyright law.
Library and Archives Canada Cataloguing in Publication
Title: Agricultural policy, agribusiness, and rent-seeking behaviour / Andrew Schmitz, Charles B. Moss,
Troy G. Schmitz, G. Cornelis van Kooten, and H. Carole Schmitz.
Names: Schmitz, Andrew, author. | Moss, Charles B. (Charles Britt), author. | Schmitz, Troy Gordon, author. |
Van Kooten, G.C. (Gerrit Cornelis), author. | Schmitz, H. Carole, author.
Description: Third edition. | Includes bibliographical references and index.
Identifiers: Canadiana (print) 20220132763 | Canadiana (ebook) 20220132828 | ISBN 9781487522803 (paper) |
ISBN 9781487518417 (EPUB) | ISBN 9781487518400 (PDF)
Subjects: LCSH: Agriculture and state – Canada. | LCSH: Agriculture and state – United States. | LCSH: Agriculture
and state – European Union countries. | LCSH: Agriculture – Economic aspects – Canada. | LCSH: Agriculture –
Economic aspects – United States. | LCSH: Agriculture – Economic aspects – European Union countries.
Classification: LCC HD1787 .S37 2022 | DDC 338.1/8 – dc23
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University of Toronto Press acknowledges the financial support of the Government of Canada and the Ontario Arts
Council, an agency of the Government of Ontario, for its publishing activities.
Contents
Introduction vii
1 Food and World Agriculture: Trade, Agricultural Policy, and Agribusiness 1
2 Agricultural and Food Policy 23
3 Theoretical Considerations 41
4 Farm and Food Policy, Agricultural Trade, and Macroeconomic Policies 65
5 The Interface between Trade, Food, and Agricultural Policies 91
6 Disruptions in the Value Chain 107
7 United States Agricultural Policy 129
8 Canadian Agricultural Programs 163
9 European Union Agricultural Policy and Reforms 191
10 Insurance Mechanisms in Agriculture 215
11 Agricultural Productivity and R&D Policy 243
12 Policy and Land Markets 267
13 The Economics of Biofuels 295
14 Climate Change and Agriculture 321
vi Contents
15 Multifunctionality in Agriculture: Externalities and Non-traded Goods 343
16 Food Quality and Safety 367
17 Food Pyramids and Nutritional Guidelines 395
18 Biotechnology and GMOs 415
19 Conclusions and Future Directions 435
Notes 443
References 445
Index 475
Introduction
This book is for readers who have a basic understanding of microeconomics and an interest
in agricultural policy. Although this may include students in disciplines such as history and
political studies, our target audience is undergraduate and graduate students in general eco-
nomics, agricultural economics, and agribusiness. This may not be a book many students wish
to read from cover to cover, so we have structured it in such a way that chapters may be used
individually. For advanced students, we have included appendices to many of the chapters;
these contain more rigorous developments of selected topics.
The focus of this book is on agricultural policies in the United States, Canada, and the Eu-
ropean Union. The scope is much broader and more current than the book by Schmitz, Furtan,
and Baylis (2002). Since then, the United States has passed a new farm bill in 2008, Canada
has introduced a new safety-net program, and the European Union has moved towards a more
developed farm program. Also, European Union policy is covered in depth along with the lit-
any of arguments as to why agriculture should be protected. New topics have emerged that we
cover in this book, including biofuels and genetically modified organisms (GMOs).
Several important books discuss various aspects of agricultural policy; we include them
in our extensive reference list, which may be used as a guide to supplemental reading. For
example, more in-depth analyses on the history of US policy are contained in several volumes,
including those by Benedict (1953), Cochrane and Runge (1992), Cochrane and Ryan (1976),
Gardner (1987), and Tweeten (1970). Other policy books (e.g., Helmberger and Chavaz 1996;
Knutson, Penn, and Flinchbaugh 1998) cover some of the same topics we do in this volume, but
their focus is largely restricted to US policy. We include additional important topics, such as
the impact of agricultural policy on agribusiness, and we provide an economic framework for
analysing policy options. Ours is not a detailed analysis of the development of US agricultural
policy and its implementation; the design, support, and implementation of US farm policy
viii Introduction
are discussed by Orden, Paarlberg, and Roe (1999). Rather, our book considers contemporary
agricultural policy worldwide. Our framework employs aspects of several economic theories,
including welfare economics, public choice, transaction-cost theory, and the economics of reg-
ulation. Combined, these approaches broaden the understanding of agricultural policy. Our
focus is not only on producers (farmers), but also on the various entities that comprise the
agribusiness sector. We discuss policy in the context of vertical market structures.
C H A P T E R O N E
Food and World Agriculture: Trade,
Agricultural Policy, and Agribusiness
Without a prosperous agriculture, there is no prosperity in America ...
– Dwight Eisenhower
If money could have solved the farm problem, we would have solved it a long time ago ...
– Ronald Reagan
1.1 THE SCOPE OF FOOD AND AGRICULTURAL POLICY
Historically, books on agricultural policy have restricted the discussion to farm programs that
impacted the agricultural industry. But agriculture is impacted by many forces outside the pur-
view of farm programs. For example, US agriculture was impacted greatly by US energy policy
that provided subsidies to produce ethanol from corn. Further, food policy that restricts the
consumption of certain foods impacts agricultural resource use. Trade also has a major impact
on agriculture worldwide, and agricultural policy is highly intertwined with trade. Thus, for
example, US tariffs on Chinese goods and China’s response to such tariffs have targeted the US
farm sector, causing many US commodity prices to plummet. At least part of the hurt felt by
US farmers has been offset by US farm policy programs (Swinnen 2019).
1.2 FOOD POLICY
The influence of consumer demand upon food production and food policy has increased sub-
stantially over time and has changed the landscape of food policy in the United States. For
example, organic food production and demand have grown significantly.
