In some parts of the world (or in some parts of the same country), too much food is grown. Such overproduction is expensive economically and ecologically. Heavily subsidized surpluses depress international market prices of commodities and thus create severe problems for developing countries whose economies are based on agriculture. They also tend to reduce the incentives for domestic food production. Subsidized disposal of the surpluses (often as food aid) depresses markets for commodities such as rice and sugar, and undermines the economies of the developing countries that depend on them.
Grain production, trade and consumption trends, and the appraisal of factors underlying them, indicate that surpluses, or the persistence of production in excess of effective demand, may now be considered a chronic feature of the world grain economy. The heart of the problem lies in the level of price or income guarantees to producers of wheat and other grains in many exporting as well as importing countries. These guarantees, combined with other aspects of national agricultural policies (if maintained substantially unchanged) will continue, together with technological advance, to stimulate an output larger than can be absorbed by effective demand. Independent measures of surplus disposal may therefore assume a semi-permanent character and affect an increasing part of the international trade in grains, thus adding to the marketing difficulties being experienced by exporting countries.
Overproduction and its attendant environmental and economic ills are greatest in North America and Europe. In 1985 it was estimated that the EEC/EU spends $ 1,000 million per year on storage of agricultural surpluses. In 1993 Europe had a 20 million tonne grain surplus. The cost of public storage of surplus food in the EEC/EU was then estimated to be £3.6 billion in 1992.
In the 1970s the USA deliberately reversed longstanding policy that favoured conservation practices such as fence rows, windbreaks, crop rotation and fallow land. Farmers were advised to plough fence row to fence row and blanket the grasslands with wheat and corn. The extra capacity produced surpluses and lower prices at the same time as farmers were shouldering enormous debt to finance expansion. The average annual federal subsidy to farmers from 1985 to 1995 was $14.9 billion. This was not the cost of maintaining productivity but of destroying it.