The Inflation Reduction Act Neglects Agriculture Research. That's a Mistake.

The Inflation Reduction Act of 2022 (IRA) looks to be the largest, and most significant piece of climate legislation in US history. With $369 billion in climate spending, including $21.25 billion for the adoption of “climate-smart agriculture,” the IRA could reduce US greenhouse gas emissions while keeping energy prices down. But the bill neglects perhaps the most important method for simultaneously fighting both the climate impacts of food production and the price inflation of American food: agricultural research.

To be sure, spending of the kind the IRA envisions—including funding for the adoption of current technologies and practices—can reduce greenhouse gas emissions from US agriculture. In fact, the bill, as it is written, provides crucial investment to working land conservation programs that would stimulate local economies, boost agricultural productivity, and reduce the climate impact of U.S. agricultural production.

But with no funding for the USDA’s research agencies, those interventions will not be enough. The agriculture sector is one of the most difficult to decarbonize because of the lack of low emissions alternatives to agricultural inputs, practices, and products. Eliminating or even dramatically reducing greenhouse gas emissions from our food system requires both development and widespread adoption of technologies that do not yet exist, such as affordable zero-carbon fertilizers or tools to slash emissions from animal agriculture.

Public spending on research and development will get us closer to those technologies. It will also increase agricultural productivity—perhaps the most important metric when considering both agricultural emissions and food prices. Boosting agricultural yields without increasing land use or other resource-intense inputs reduces the environmental impacts of agriculture, while fighting inflation in the long run.

For example, over the course of the twentieth century, US agriculture grew significantly more productive thanks, in part, to public agricultural R&D. American farm output increased massively, all while using less labor and land (especially in the second half of the century). In that time, real food prices declined tremendously—as have the environmental impacts of each unit of food produced. The prices of corn, wheat, and soybeans, for example, are all about half of what they were in 1940, when accounting for inflation (see chart).

In the United States, high productivity agriculture has meant that average US wages have been able to outpace food inflation. In 1960, for example, an hour’s wage for manufacturing labor could purchase five gallons of milk and four and a half dozen eggs. In 2003, that same hour of labor could afford over twelve dozen eggs and upwards of eight gallons of milk.

This is not to say that food prices in the United States are low enough. Americans in the lowest income quintile used 35 percent of their pay on food in 2019. The richest quintile spent only 7 percent on food. Overall, in 2017, approximately 4 million Americans could not afford a calorie-sufficient diet. Compared to the zero French and Germans unable to pay for their requisite calories, that there are millions of Americans who cannot afford to be sated is a policy failure. And more may soon be added to that roster, given the 8.5 to 9.5 percent average increase across food prices by June 2022. Maintaining low food prices, and driving them down even further, ought to be a top policy priority.

There are multiple factors at work in determining food prices over the long term, let alone short or middle run. Global trade dynamics, weather patterns, livestock diseases, and crop pests all play a role. So, too, do corporations and other intermediators who process and distribute agricultural goods. Across all these factors, the actual supply of food plays a central role.

Simply put, when productivity and yields increase, food prices are likely to decrease. Productivity growth, whether stemming from drought-resilient GMO seeds, adoption of precision farming equipment like GPS-guided tractors, or the adoption of other new technologies, is directly linked to the scientific discoveries and breakthroughs made possible by agricultural R&D. Due in large part to its deflationary impact, the marginal benefit for every dollar of public agricultural R&D spent has historically generated about $20 in benefits to society. Productivity growth is also responsible for the drastically improved environmental impacts related to each unit of food we consume. For example, a gallon of cow’s milk produced today is responsible for 68 percent less greenhouse gas emissions than the same gallon produced in 1961.

But, despite the obvious benefits of agricultural innovation, US support for agricultural R&D has dwindled. Decades of stagnant R&D spending led to a slowdown in agricultural productivity growth. While the third quarter of the twentieth century — roughly 1950 to 1975 — saw massive increases in farm productivity growth, the past half century’s growth rates have been meager in comparison. To make matters worse, R&D spending is now falling. One recent analysis by economists at the USDA Economic Research Service found that public funding for agricultural R&D fell by a third—in inflation-adjusted dollars—since 2000.

Increasing US investment in public agricultural R&D will be crucial to boosting productivity growth rates over the next century. This will have the dual benefit of limiting the amount of land needed to produce agricultural goods while keeping food prices low. The benefits will likely not be immediate — productivity growth from agricultural R&D typically lags investment, but are longstanding. For instance, we are still reaping the benefits from corn varieties that the federal government helped develop in the early 1970s. This means that investments made today can continue bearing fruit for decades to come.

Public investment in agricultural innovations related to livestock production, fertilizer use, gene editing, and protein alternatives could all increase agricultural productivity over the long run. Developing plants with increased photosynthetic efficiency, for example, could drastically improve crop yields without requiring more inputs. So, too, could public R&D aimed at overcoming the barriers to high-tech meat and dairy alternatives such as plant-based meat, fermented foods, and cellular agriculture. Countries like Singapore, China, and the Netherlands—as well as the United States—have funded alternative protein R&D, citing food security, inflation, and environmental concerns, among others.

Although R&D funding may not end inflation today, or even tomorrow, investing in innovation will help ensure a prosperous and robust agricultural system capable of producing inexpensive, good food throughout the coming decades. And, even in the short to middle-term, it could have some positive results for food prices. Public research agencies have the capacity to respond to short-term crises — for example, livestock diseases — and curb their impact. The National Institute of Food and Agriculture (NIFA) funds preemptive research into livestock diseases, supporting the USDA’s Animal and Plant Health Inspection Service in maintaining the health of US livestock herds. R&D investment today gives the USDA and livestock producers the best shot at responding quickly to outbreaks. The current outbreak of Avian Influenza in American poultry facilities, which has contributed to inflation in poultry and egg prices, underscores the importance of this work.

The omission of agricultural R&D funding from the Inflation Reduction Act is a dangerous shame, but it’s not surprising. US federal funding for agricultural R&D, after all, has been declining for decades. The lack of R&D investment in IRA ought not to limit support for the Act. Rather, it means the pressure is on for legislators to take advantage of the opportunity in the next Farm Bill negotiations—coming up this year—to turn the tides on our dwindling R&D funding, and make the necessary investments for our future food system.