effects of agricultural research and farm subsidy policies ...tp tomich alston, sumner, vosti...

TP Tomich

Alston, Sumner, Vosti UCD/AIC/CNRPA

Effects of Agricultural Research and

Farm Subsidy Policies on Human

Nutrition and Obesity

Julian Alston

Daniel Sumner

Stephen Vosti

Center For Natural

Resources Policy Analysis,

UC Davis

November 2005

Agricultural

Issues

Center

TP Tomich


Presentation Outline

• Obesity in the U.S. – Trends, Costs and Presumed

Causes

• One „Smoking Gun‟ – HFCS and „Related‟ Ag Policies

• A Broader Look at Agricultural Policy – Farm Subsidies

and R&D

• Commodity Prices

• Food Prices

• Policy Instrument „Test‟

• Preliminary Conclusions and Implications for Research

and Policy

TP Tomich


Children with BMI values at or above the 95th percentile of the sex-specific BMI

growth charts are categorized as overweight.

TP Tomich


Source: Behavioral Risk Factor Surveillance System, CDC.

1991

2003

Obesity Trends* Among U.S. AdultsBRFSS, 1991, 1996, 2003

No Data <10% 10%-14% 15%-19% 20%-24% 25%

1996

(*BMI 30, or about 30 lbs overweight for 5’4” person)

TP Tomich


Economic Costs

• Direct

– Increased health care costs

• $78.5 billion in the U.S. in 1998

• $7.8 billion in California alone, 1998-2000

• Indirect

– Morbidity costs

• Lost productivity

• Absenteeism

– Mortality costs

• Over 300,000 death per year attributable to obesity

• Obese individuals have a 50 to 100% increased risk of premature

death from all causes

TP Tomich


Key Issues

• Why Is Obesity on the Rise?

– Long-Term and Worsening Energy Imbalance

• Energy Intake > Energy Expenditure

• Drivers of This Imbalance

– Types and sources of food

– Food portions

– Energy expenditure patterns

• What Role of Agriculture and Agricultural Policy?

– Getting us to this point?

– Course correction?

TP Tomich


Food Types and Sources Are Changing

• Eating More Energy-Dense Foods

– Potato chips (23kJ/g), donuts (18 kJ/g), cheese (17 kJ/g),

low-fat milk (1.6 kJ/g), raw vegetables and fruits (0.4-2.0

kJ/g)

• Snacks Versus Meals

– Snacks – increasing proportion of caloric intake

– Meals – decreasing proportion of caloric intake

• Meals Eaten Away-from-Home

– 1977: 16% of food, 38% of all food expenditures

– 1997: 29% of food, 49% of all food expenditures

TP Tomich


Food Portions On The Rise

• McDonalds French Fries

– 1950: one size (210 cal.)

– 1970: small (210 cal.) and large (320 cal.)

– 1990: small (210 cal.), large (450 cal.) and Super 450 cal.)

– 2000: small (210 cal.), medium (450 cal.), large (540 cal.) and super (610 cal.)

• Coke

– Original: 6.75 oz. (75 cal.)

– Kids: 10 oz. (120 cal.)

– Small: 12 oz. (150 cal.)

– Medium: 18 oz. (230 cal.)

– Large: 24 oz. (300 cal.)

– King: 36 oz. (450 cal.)

– Extreme Gulp: 52 oz. (650 cal.)

TP Tomich


Is Agricultural Policy (Partially)

Responsible?• “[Our] cheap-food farm policy comes at a high price: . . .

farmers in the United States have managed to produce

500 additional calories per person every day; each of us

is, heroically, managing to pack away 200 of those extra

calories per day.” (Pollan 2003)

• “Commodity prices . . . are so low that restaurants have

been able to double serving sizes without doubling

prices.” (Davis 2003)

• “Why healthier foods are slipping out of reach of large

segments of the US population is a question with many

policy and political implications.” (Drewnowski and

Barratt-Fornell, 2004)

TP Tomich


One „Smoking Gun‟

Trends in Consumption of Corn Sweeteners

0

50

100

150

200

250

1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Avg

. K

calo

rie

s/p

erso

n/d

ay

Corn sweeteners

http://www.ers.usda.gov/data/foodconsumption/FoodGuideIndex.htm#calories

TP Tomich


The Suspected Culprit – Corn Policy

Consumer Support Estimate (CSE) -- Corn

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1

986

1

987

1

988

1

989

1

990

1

991

1

992

1

993

1

994

1

995

1

996

1

997

1

998

1

999

2

000

2

001

2

002

2

003

2

004

Mil

lio

ns U

SD

(cu

rren

t)

XIII. Consumer Support Estimate (CSE)

Producer Support Estimate -- Corn

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

Millio

ns U

SD

(cu

rren

t)

III. Producer Support Estimate (PSE) 1. Based on unlimited output

C. Payments based on area planted D. Payments based on historical entitlements

E. Payments based on input use E. Payments based on input use

F. Payments based on input constraints G. Payments based on overall farming income

Corn Prices

0102030405060708090

100110120130140150

1

986

1

987

1

988

1

989

1

990

1

991

1

992

1

993

1

994

1

995

1

996

1

997

1

998

1

999

2

000

2

001

2

002

2

003

2

004

US

D/t

on

V. Consumption price (at farm gate) VII. Reference price (at farm gate)

TP Tomich


The More Complete Story

Trends in Consumption of Selected Sweeteners

0

100

200

300

400

500

600

1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Avg

. K

calo

rie

s/p

erso

n/d

ay

Refined cane and beet sugar Corn sweeteners All Added sugars


TP Tomich


White Sugar Policy – What Role?

Sugar Prices in the USA -- 1986-2004

0

5

10

15

20

25

30

35

40

1

986

1

987

1

988

1

989

1

990

1

991

1

992

1

993

1

994

1

995

1

996

1

997

1

998

1

999

2

000

2

001

2

002

2

003

2

004

Years

cen

ts/p

ou

nd

(cu

rren

t)

VII.1 World reference price VIII.1 Domestic reference price (New York Spot)

Producer Support Estimate -- Sugar

$0

$200

$400

$600

$800

$1,000

$1,200

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

Mil

lio

ns

US

D (

19

77

)

PSE

TP Tomich


The Australia Story: Sugar Policy

Sugar Prices -- Australia

0

50

100

150

200

250

300

1

986

1

987

1

988

1

989

1

990

1

991

1

992

1

993

1

994

1

995

1

996

1

997

1998

1999

2000

2001

2002

2003

2004

AU

D/t

on

(cu

rren

t)

V. Consumption price (at farm gate) VII. Reference price (at farm gate)

TP Tomich


The Australia Story: Obesity Trends

TP Tomich


The Much More Complete Story

Calories from Differrent Food Groups

0

100

200

300

400

500

600

700

1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Avg

. K

calo

ries/p

ers

on

/day

Meat, eggs, and nuts Dairy Fruit

Vegetables Flour and cereal products Added fats

Added sugars


TP Tomich


Types and Magnitudes of Agricultural Policies

USDA Program Expenditure

in 2004

Percent of

Total

billions of dollars percent

Food, Nutrition, and Consumer Services 45.4 40.2

Farm Service Agency (mainly farm

commodity programs)

27.4 24.3

Rural Development 15.5 13.7

Natural Resources and Environment 8.4 7.4

Foreign Agricultural Service 6.4 5.7

Risk Management (mainly crop insurance) 4.1 3.6

Research, Education and Economics

(mainly ag. R&D)

2.5 2.2

Marketing and Regulatory Programs 1.8 1.6

Other 1.4 1.2

TOTAL 112.9 100.0

TP Tomich


Links Between Selected Agricultural

Policies and Human Nutrition

Agricultural R&D

Farm Production Costs

Food Prices

Disposable Income

Available Time

Genetic Factors

Agricultural Commodity Programs

Activity LevelsFood Intake

Nutritional Status

Commodity Prices Farm Income

Food Industry

Information &

Sociocultural Factors

TP Tomich


Support to Agriculture

Consumer Support Estimates

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

Millio

ns

of

US

D (

cu

rre

nt)

V.1 Consumer Support Estimate (CSE) P. Transfers to producers from consumers (-)

Q. Other transfers from consumers (-) R. Transfers to consumers from taxpayers

S. Excess feed cost

General Services Suppost Estimate

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

Millio

ns

of

US

D (

cu

rre

nt)

IV. General Services Support Estimate (GSSE) I. Research and development

M. Marketing and promotion N. Public stockholding

O. Miscellaneous

Producer Support Estimates

0

10,000

20,000

30,000

40,000

50,000

60,000

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

Mil

lio

ns o

f U

SD

(cu

rren

t)

III.1 Producer Support Estimate (PSE) A. Market price support

B. Payments based on output C. Payments based on area planted/animal numbers

D. Payments based on historical entitlements E. Payments based on input use

F. Payments based on input constraints G. Payments based on overall farming income

Transers from Taxpayers to Consumers -- All Commodities

0

5,000

10,000

15,000

20,000

25,000

30,000

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Millio

ns

US

D (

cu

rre

nt)

R. Transfers to consumers from taxpayers

Food stamp program 0.36 * 12-3505-0-1-605

Nutrition Assistance for Puerto Rico 12-3550-0-1-605

State Child Nutrition Program 12-3539-0-1-605

WIC nutrition programs 12-3510-0-1-605

TP Tomich


Trends in Agricultural R&D Spending

Total Private Sector Spending on Ag R&D

(1960-1992)

0

500

1000

1500

2000

2500

3000

3500

4000

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

Year

mil. $

Private Ag R&D Spending

Total Federal and State Spending on Ag. R&D

(1925-1997)

0

500

1000

1500

2000

2500

3000

3500

1925

1929

1933

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

Year

mil. $

Total Ag. R&D Spending

TP Tomich


Trends in Aggregate Productivity MeasuresIndex of Land Productivity

(1977=100)

0

20

40

60

80

100

120

140

1910

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

Year

Land Productivity

Index of Labor Productivity

(1977=100)

0

20

40

60

80

100

120

140

160

1910

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

Year

Labor Productivity

Total Factor Productivity Index

(1948=100)

0

50

100

150

200

250

300

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

Year

TFP

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Trends in Crop/Product ProductivityAverage Yield of Corn 1900-1997

0

20

40

60

80

100

120

140

160

1900

1906

1912

1918

1924

1930

1936

1942

1948

1954

1960

1966

1972

1978

1984

1990

1996

Year

bu

sh

./a

cre

Avg. Corn Yield

Milk Production per Cow

1929-1996

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1929

1933

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

Year

lbs

./c

ow

Milk per Cow

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Trends in Prices Received By Farmers

Deflated Prices Received for Selected Fruits

(1977=100)

0

50

100

150

200

250

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

Year

Apples Oranges Straw berries Table Grapes

Prices received Deflated with prices paid (Commodities,

services, interest, taxes, wages) (1977=100)

0

20

40

60

80

100

120

140

160

180

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

Year

All Crops Livestock & Products All Farm Products

Deflated Prices Received for Selected Grains

(1977=100)

0

50

100

150

200

250

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

Years

Rice (PP) Wheat (PP) Corn for Grain

TP Tomich


Consumer Prices for Eggs Deflated by CPI (food at home)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1980

1984

1988

1992

1996

2000

2004

Year

$/d

oz.

Eggs, Grade A Large

Prices Paid By Consumers – Basic Stuff

Consumer Prices for Chicken deflated by CPI (food at home)

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1980

1984

1988

1992

1996

2000

2004

Year

$/lb

.

Chicken, w hole, fresh

Consumer Prices for Ground Beef Deflated by CPI (food at home)

0.00

0.50

1.00

1.50

2.00

2.50

1980

1984

1988

1992

1996

2000

2004

Year

$/l

b.

Ground Chuck, USDA Choice Cons.Food_Prices!$N$7, 100% Beef

Consumer Prices for White Sugar Deflated by CPI (food at home)

0.10

0.20

0.30

0.40

0.50

0.60

0.70

1980

1987

1994

2001

Year

$/lb

.

Sugar, w hite, all sizes

TP Tomich


Consumer Prices for Strawberries Deflated by CPI (food at home)

0.00

0.50

1.00

1.50

2.00

2.50

1980

1984

1988

1992

1996

2000

2004

Year

$/1

2 o

z.

Straw berries, Dry pint

Consumer Prices for Broccoli Deflated by CPI (food at home)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1996

1997

1998

1999

2000

2001

2002

2003

2004

Year

$/lb

.

Broccoli

Consumer Prices for Potatoes Deflated by CPI (food at home)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Year

$/lb

.

Potatoes, w hite

Prices Paid By Consumers – Fruits and Vegetables

Consumer Prices for Oranges Deflated by CPI (food at home)

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1980

1984

1988

1992

1996

2000

2004

Year

$/lb

.

Oranges, Navel Oranges, Valencia

TP Tomich


Getting the Price Story Right: StrawberriesYear Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1980 0.653 0.608 0.66

1981 0.886 0.69 0.637 0.696 0.77

1982 1.016 0.914 0.73 0.778 0.775

1983 0.728 0.708 0.752 0.863

1984 0.912 0.663 0.648 0.78 0.827 0.943

1985 1.016 0.809 0.646 0.774 0.913

1986 0.637 0.797 0.718 0.84 0.899 1.081

1987 0.937 0.824 0.955 1.071 1.029

1988 1.181 0.693 0.919 0.937 1.059 0.971 1.216

1989 1.218 0.966 0.831 1.055 1.117 0.986 1.087

1990 1.638 1.338 1.109 0.781 0.987 0.965 1.081 1.21

1991 1.467 1.268 1.112 0.976 0.924 0.948 0.961 1.014 1.035

1992 1.43 1.173 0.96 0.831 1.048 0.988 1.185 1.473 1.19

1993 1.467 1.26 0.908 0.874 1.066 1.013 1.069 1.151 1.261

1994 1.318 1.262 0.91 0.983 1.047 1.085 1.108 1.209 1.286

1995 1.926 1.34 1.001 1.14 1.18 1.209 1.398 1.355 1.316

1996 1.692 1.505 1.236 1.082 0.957 1.226 1.247 1.164 1.42 1.409

1997 1.514 1.317 1.179 1.073 1.213 1.383 1.375 1.488 1.654

1998 2.135 2.08 1.751 1.613 1.386 1.413 1.346 1.454 1.469 1.779

1999 2.102 1.96 1.751 1.419 1.49 1.375 1.557 1.679 1.664 1.948

2000 2.167 1.935 1.825 1.45 1.218 1.187 1.246 1.263 1.416 1.619

2001 2.14 2.01 1.737 1.482 1.465 1.486 1.628 1.916 1.996 2.137 2.526

2002 2.498 2.137 1.941 1.551 1.527 1.552 1.545 1.695 1.873 1.884 2.224

2003 2.153 1.871 1.762 1.678 1.568 1.776 1.84 1.986 2.246 2.41

2004 2.481 2.332 2.124 1.661 1.672 1.847 1.629 1.817 1.843 2.6 3.185 3.602

TP Tomich


A Closer Look at Strawberry Prices

June Strawberry Prices

(BLS data)

y = -0.0089x + 18.289

R2 = 0.5356

0

0.2

0.4

0.6

0.8

1

1975 1980 1985 1990 1995 2000 2005 2010

Year

Pri

ce $

per

dry

pin

t (1

2o

z)

-

Feb Strawberry Prices

(BLS data)

y = -0.0003x + 1.4305

R2 = 0.0003

0

0.2

0.4

0.6

0.8

1

1.2

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Year

Pri

ce $

per

dry

pin

t (1

2o

z)

-

Consumer Prices for Strawberries Deflated by CPI (food at home)

0.00

0.50

1.00

1.50

2.00

2.50

1980

1984

1988

1992

1996

2000

2004

Year

$/1

2 o

z.

Straw berries, Dry pint

TP Tomich


Consumer

Prices for

Foods

White Sugar: -.008

Butter: -.023

Statistics report linear trends in real prices over 1980-2003: source; http://data.bls.gov/

Milk: -.011

Cheese: -.033

Lettuce: -.004

Tomatoes: +.003

Carrots: -.003

Potatoes: 0.0

Turkey: -.021

Chicken: -.009

Eggs: -.015

Beef: -.031

White Bread: 0.0

Rice: -.031

Pasta: -.008

Bananas: -.004

Apples: -.006

Oranges: 0.0

Grapefruit: -.002

TP Tomich


Food Prices in Terms of the Wages

• Tomatoes (3 lbs.) (18% of the historical price today)– 1919: 101 minutes

– 1997: 18 minutes

• An Orange (13% of the historical price today)– 1919: 68 minutes

– 1997: 9 minutes

• 3-Pound Chicken (9% of the historical price today)– 1919: 2hours 37 minutes

– 1997: 14 minutes

• Dozen Eggs (6% of the historical price today)– 1919: 80 minutes

– 1997: 5 minutes

• Hamburger (33% of the historical price today)– 1940: 27 minutes of work

– 1997: 9 minutes of work

• Pizza (88% of the historical price today)– 1958: 57 minutes

– 1997: 50 minutes

Source: Dallas Fed

TP Tomich


„Disconnect‟ Between

Commodity & Food

Prices

Divergence Between Retaurant and Shippers'

Prices

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

1929

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

Pro

po

rtio

n o

f R

eta

il S

tore

Pri

ces

Restaurant prices Retail store prices Manufacturers' and shippers' prices

TP Tomich


Costs of Producing Fast Foods

Pecent of Costs and Expenses

McDonalds Corporation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Pe

rce

nt

of

Co

st

-

% Selling and administrativeexpenses of costs andexpenses

% Occupancy and otheroperating expenses of costsand expenses

% Payroll of costs andexpenses

% food and paper of costs andexpenses

Farmer Prices for the Components of a

McDonalds Quarter Pounder

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1975 1980 1985 1990 1995 2000 2005

Year

Fa

rme

r P

ric

e -

Producer Price for Beef (1977 = 1) Producer Price for Milk (1977 = 1) Producer Price for Wheat (1977 = 1)

http://www.mcdonalds.com/corp/invest/pub.html

Costs to Consumer for Components

MacDonalds Quarter Pounder with Cheese

0.00

0.10

0.20

0.30

0.40

Yea

r

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Year

Co

st

(19

82

US

$)

-

Hamburger (1/4 lb.) Hamburger Bun (2 Ounces) Cheese (8 Grams)

TP Tomich


Policy Instrument „Test‟

• Size of the Externality

– Social costs associated with obesity

• Size of Behavioral Response

– Price elasticities tend to be very low (USA)

• Implementation Costs

• Lags in Intended Effects

• Unintended Effects

• Alternative Policy Instruments

Elasticity estimates from: http://www.ers.usda.gov/Data/InternationalFoodDemand/

TP Tomich


Preliminary Conclusions and Policy Implications

• Agricultural Policy Commodity Prices– Commodity Support Programs

• Effects on farmer income are large; Effects on commodity prices are small, varied and difficult to predict

– Publicly Sponsored Agricultural Research • Chiefly responsible for past yield increases and price declines

• Commodity Prices Food Prices Caloric Intake– Increasing „disconnect‟ between commodity prices and food prices

– Role of food industry needs to be better understood and exploited• Entry points for changes in food preparation technologies and portion sizes

• Managing food consumption via macro-management of commodity prices is probably a bad strategy– Is cheap food a bad thing?

– Can reductions in agricultural R&D reduce obesity?

• Micro-Management of Food Prices Might Not Be Wise– Price responses are generally low

• Agricultural Policy for Dealing with Obesity– Increased yields, and improved quality and availability of fruits/vegetables

• Large role for private sector

• Difficult to Defend the „Increasingly Out of Reach‟ Hypothesis

TP Tomich


Next Steps

• ASSA Paper (Joint Presentation with IFPRI/FCND)– Implications for developing countries of research results to

date

• USDA Small Grant– Effects of agricultural policies on low-income consumers in

the USA

• USDA Large Grant (pending)– Joint with Iowa State University

– Agricultural policies, sweetener subsector, WIC• Research, training, outreach, curriculum development

• Dual-Constraint Model– Combined effects of income and time constraints on

consumption patterns of low-income groups

TP Tomich


Muito Obrigado!

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