Effects of Agricultural Research and Farm Subsidy Policies on Human Julian Alston

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Effects of Agricultural Research and
Farm Subsidy Policies on Human
Nutrition and Obesity
Agricultural
Issues
Center
Julian Alston
Daniel Sumner
Stephen Vosti
Center For Natural
Resources Policy Analysis,
UC Davis
November 2005
TP Tomich
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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
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Children with BMI values at or above the 95th percentile of the sex-specific BMI
growth charts are categorized as overweight.
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Obesity Trends* Among U.S. Adults
BRFSS, 1991, 1996, 2003
(*BMI 30, or about 30 lbs overweight for 5’4” person)
1991
1996
2003
No Data
<10%
10%-14%
15%-19%
Source: Behavioral Risk Factor Surveillance System, CDC.
20%-24%
 25%
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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
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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
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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
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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
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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)
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TP Tomich
One „Smoking Gun‟
Avg. Kcalories/person/day
Trends in Consumption of Corn Sweeteners
250
200
150
100
50
0
1965
1970
1975
1980
1985
1990
1995
2000
2005
Year
Corn sweeteners
http://www.ers.usda.gov/data/foodconsumption/FoodGuideIndex.htm#calories
TP Tomich
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The Suspected Culprit – Corn Policy
Producer Support Estimate -- Corn
Corn Prices
12,000
USD/ton
8,000
6,000
4,000
2,000
III. Producer Support Estimate (PSE)
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
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
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
1. Based on unlimited output
V. Consumption price (at farm gate)
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
VII. Reference price (at farm gate)
Consumer Support Estimate (CSE) -- Corn
4,000
3,000
2,500
2,000
1,500
1,000
500
XIII. Consumer Support Estimate (CSE)
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
93
19
92
19
91
19
90
19
89
19
88
19
87
0
19
86
Millions USD (current)
3,500
19
94
-2,000
19
87
0
19
86
Millions USD (current)
10,000
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The More Complete Story
Avg. Kcalories/person/day
Trends in Consumption of Selected Sweeteners
600
500
400
300
200
100
0
1965
1970
1975
1980
Refined cane and beet sugar
1985
1990
Year
Corn sweeteners
http://www.ers.usda.gov/data/foodconsumption/FoodGuideIndex.htm#calories
1995
2000
2005
All Added sugars
TP Tomich
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White Sugar Policy – What Role?
Sugar Prices in the USA -- 1986-2004
35
30
25
20
15
10
5
0
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
Years
VIII.1 Domestic reference price (New York Spot)
Producer Support Estimate -- Sugar
$1,200
$1,000
$800
$600
$400
$200
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
$0
1986
VII.1 World reference price
Millions USD (1977)
cents/pound (current)
40
PSE
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The Australia Story: Sugar Policy
Sugar Prices -- Australia
300
200
150
100
50
0
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
AUD/ton (current)
250
V. Consumption price (at farm gate)
VII. Reference price (at farm gate)
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The Australia Story: Obesity Trends
TP Tomich
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The Much More Complete Story
Avg. Kcalories/person/day
Calories from Differrent Food Groups
700
600
500
400
300
200
100
0
1965
1970
1975
Meat, eggs, and nuts
Vegetables
Added sugars
1980
1985
Year
1990
Dairy
Flour and cereal products
http://www.ers.usda.gov/data/foodconsumption/FoodGuideIndex.htm#calories
1995
2000
2005
Fruit
Added fats
TP Tomich
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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
112.9
100.0
TOTAL
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Links Between Selected Agricultural
Policies and Human Nutrition
Agricultural R&D
Agricultural Commodity Programs
Farm Production Costs
Commodity Prices
Farm Income
Food Industry
Food Prices
Food Intake
Disposable Income
Available Time
Genetic Factors
Information &
Sociocultural Factors
Activity Levels
Nutritional Status
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Support to Agriculture
General Services Suppost Estimate
Producer Support Estimates
40,000
Millions of USD (current)
60,000
40,000
30,000
20,000
10,000
30,000
25,000
20,000
15,000
10,000
5,000
A. Market price support
M. Marketing and promotion
B. Payments based on output
C. Payments based on area planted/animal numbers
D. Payments based on historical entitlements
F. Payments based on input constraints
E. Payments based on input use
G. Payments based on overall farming income
04
02
01
03
20
20
20
00
20
99
20
97
98
19
N. Public stockholding
Transers from Taxpayers to Consumers -- All Commodities
30,000
40,000
25,000
Millions USD (current)
30,000
20,000
10,000
04
03
02
01
00
99
98
97
96
95
94
93
20,000
15,000
10,000
5,000
20
20
20
20
20
19
19
19
19
19
19
92
19
90
91
19
19
88
87
89
19
19
19
19
86
0
19
Millions of USD (current)
I. Research and development
O. Miscellaneous
Consumer Support Estimates
-10,000
19
96
IV. General Services Support Estimate (GSSE)
III.1 Producer Support Estimate (PSE)
19
94
95
19
19
92
93
19
19
90
89
88
91
19
19
19
19
19
86
19
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
87
0
0
19
Millions of USD (current)
50,000
35,000
0
-20,000
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
-30,000
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
V.1 Consumer Support Estimate (CSE)
Q. Other transfers from consumers (-)
S. Excess feed cost
P. Transfers to producers from consumers (-)
R. Transfers to consumers from taxpayers
State Child Nutrition Program 12-3539-0-1-605
WIC nutrition programs 12-3510-0-1-605
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Trends in Agricultural R&D Spending
Total Federal and State Spending on Ag. R&D
(1925-1997)
3500
3000
2000
1500
1000
500
1997
Year
Total Private Sector Spending on Ag R&D
(1960-1992)
Total Ag. R&D Spending
4000
3500
3000
2000
1500
1000
500
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1962
0
1960
mil. $
2500
1964
1993
1989
1985
1981
1977
1973
1969
1965
1961
1957
1953
1949
1945
1941
1937
1933
1929
0
1925
mil. $
2500
Year
Private Ag R&D Spending
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Trends in Aggregate Productivity Measures
Index of Land Productivity
(1977=100)
140
Index of Labor Productivity
(1977=100)
160
120
140
100
120
80
100
60
80
40
60
40
20
20
1982
1978
1974
1970
1966
1962
1958
1954
1950
1946
1942
1938
1934
1930
1926
1922
1918
1910
Year
1914
0
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
Year
Land Productivity
Labor Productivity
Total Factor Productivity Index
(1948=100)
300
250
200
150
100
50
Year
TFP
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
1957
1954
1951
0
1948
1940
1935
1930
1925
1920
1915
1910
0
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Trends in Crop/Product Productivity
Average Yield of Corn 1900-1997
160
140
100
80
60
40
20
1996
Year
Avg. Corn Yield
Milk Production per Cow
1929-1996
18000
16000
12000
10000
8000
6000
4000
2000
1993
1989
1985
1981
1977
1973
1969
1965
1961
1957
1953
1949
1941
1937
1933
0
1929
lbs./cow
14000
1945
1990
1984
1978
1972
1966
1960
1954
1948
1942
1936
1930
1924
1918
1912
1906
0
1900
bush./acre
120
Year
Milk per Cow
TP Tomich
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Trends in Prices Received By Farmers
Prices received Deflated w ith prices paid (Com m odities,
services, interest, taxes, w ages) (1977=100)
Deflated Prices Received for Selected Grains
(1977=100)
180
250
160
140
200
120
150
100
80
100
60
50
40
20
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1960
2002
1999
1996
1993
1990
1987
Years
Rice (PP)
All Farm Products
Wheat (PP)
Corn for Grain
Deflated Prices Received for Selected Fruits
(1977=100)
250
200
150
100
50
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1963
1960
0
1966
1984
1981
1978
1975
1972
1969
1963
1960
1966
All Crops
Year
Livestock & Products
1963
0
0
Year
Apples
Oranges
Straw berries
Table Grapes
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Prices Paid By Consumers – Basic Stuff
Consumer Prices for Ground Beef Deflated by CPI (food at home)
Consum er Prices for Eggs Deflated by CPI (food at hom e)
2.50
2.00
1.00
0.80
$/lb.
0.60
0.40
1.50
1.00
2004
2000
1996
1992
1988
0.00
Year
1984
0.50
2004
2000
1996
1992
1988
1984
1980
0.20
0.00
1980
$/doz.
1.40
1.20
Year
Eggs, Grade A Large
Ground Chuck, USDA Choice Cons.Food_Prices!$N$7, 100% Beef
Consumer Prices for White Sugar Deflated by CPI (food at home)
1.00
0.70
0.90
0.60
0.80
0.50
$/lb.
0.70
0.40
0.60
0.30
0.50
0.20
0.40
Chicken, w hole, fresh
2001
1994
1987
2004
2000
1996
1988
1984
1992
Year
1980
0.10
0.30
1980
$/lb.
Consumer Prices for Chicken deflated by CPI (food at home)
Year
Sugar, w hite, all sizes
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Prices Paid By Consumers – Fruits and Vegetables
Consumer Prices for Oranges Deflated by CPI (food at home)
Consumer Prices for Broccoli Deflated by CPI (food at home)
1.20
0.90
0.80
1.00
0.70
0.60
$/lb.
$/lb.
0.80
0.60
0.50
0.40
0.30
0.40
0.20
0.10
0.20
2004
2000
1996
1992
1988
2004
2003
2002
2001
2000
1999
1998
1997
1996
0.00
1984
1980
0.00
Year
Year
Broccoli
Oranges, Navel
Oranges, Valencia
Consumer Prices for Strawberries Deflated by CPI (food at home)
Consumer Prices for Potatoes Deflated by CPI (food at home)
2.50
0.35
2.00
0.30
$/12 oz.
0.20
0.15
1.50
1.00
0.10
0.50
0.05
Year
Potatoes, w hite
Year
Straw berries, Dry pint
2004
2000
1996
1992
1988
1984
0.00
1980
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
0.00
1986
$/lb.
0.25
TP Tomich
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Getting the Price Story Right: Strawberries
Year
Jan
Feb
Mar
1980
Apr
May
Jun
0.653
0.608
0.66
Jul
1981
0.886
0.69
0.637
0.696
0.77
1982
1.016
0.914
0.73
0.778
0.775
0.728
0.708
0.752
0.863
1983
Aug
1984
0.912
0.663
0.648
0.78
0.827
1985
1.016
0.809
0.646
0.774
0.913
1986
0.637
0.797
0.718
0.84
0.899
1.081
0.937
0.824
0.955
1.071
1.029
1987
Sep
Oct
Nov
Dec
0.943
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
1.505
1.236
1.082
0.957
1.226
1.247
1.164
1.42
1.409
1.514
1.317
1.179
1.073
1.213
1.383
1.375
1.488
2.08
1.751
1.613
1.386
1.413
1.346
1.454
1.469
1.779
2.102
1.96
1.751
1.419
1.49
1.375
1.557
1.679
1.664
1.935
1.825
1.45
1.218
1.187
1.246
1.263
1.416
1.619
2.14
2.01
1.737
1.482
1.465
1.486
1.628
1.916
1.996
2.137
2.137
1.941
1.551
1.527
1.552
1.545
1.695
1.873
1.884
2.224
2.153
1.871
1.762
1.678
1.568
1.776
1.84
1.986
2.246
2.41
2.332
2.124
1.661
1.672
1.847
1.629
1.817
1.843
2.6
3.185
1996
1.692
1997
1998
2.135
1999
2000
2.167
2001
2002
2.498
2003
2004
2.481
1.654
1.948
2.526
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A Closer Look at Strawberry Prices
Consumer Prices for Strawberries Deflated by CPI (food at home)
June Strawberry Prices
(BLS data)
2.50
Price $ per dry pint (12oz)
-
1.50
1.00
0.50
1
0.8
0.6
0.4
y = -0.0089x + 18.289
R2 = 0.5356
0.2
0
1975
1980
2004
2000
1996
1992
1988
1984
0.00
1985
1990
1995
2000
2005
2010
Year
Year
Straw berries, Dry pint
Feb Strawberry Prices
(BLS data)
Price $ per dry pint (12oz)
-
1980
$/12 oz.
2.00
1.2
1
0.8
0.6
0.4
y = -0.0003x + 1.4305
R2 = 0.0003
0.2
0
1988
1990
1992
1994
1996
1998
Year
2000
2002
2004
2006
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Consumer
Prices for
Foods
White Bread: 0.0
Rice: -.031
Pasta: -.008
Lettuce: -.004
Tomatoes: +.003
Carrots: -.003
Potatoes: 0.0
Bananas: -.004
Apples: -.006
Oranges: 0.0
Grapefruit: -.002
White Sugar: -.008
Butter: -.023
Milk: -.011
Cheese: -.033
Statistics report linear trends in real prices over 1980-2003: source; http://data.bls.gov/
Turkey: -.021
Chicken: -.009
Eggs: -.015
Beef: -.031
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Food Prices in Terms of the Wages
• Tomatoes (3 lbs.) (18% of the historical price today)
– 1919: 101 minutes
– 1997: 18 minutes
• An Orange (13% of the historical price today)
– 1919: 68 minutes
– 1997: 9 minutes
• 3-Pound Chicken (9% of the historical price today)
– 1919: 2hours 37 minutes
– 1997: 14 minutes
• Dozen Eggs (6% of the historical price today)
– 1919: 80 minutes
– 1997: 5 minutes
• Hamburger (33% of the historical price today)
– 1940: 27 minutes of work
– 1997: 9 minutes of work
• Pizza (88% of the historical price today)
– 1958: 57 minutes
– 1997: 50 minutes
TP Tomich
Source: Dallas Fed
Alston, Sumner, Vosti UCD/AIC/CNRPA
„Disconnect‟ Between
Commodity & Food
Prices
200.0
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
19
29
19
54
19
57
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
Proportion of Retail Store Prices
Divergence Between Retaurant and Shippers'
Prices
TP Tomich
Restaurant prices
Retail store prices
Manufacturers' and shippers' prices
Alston, Sumner, Vosti UCD/AIC/CNRPA
Costs of Producing Fast Foods
03
20
01
20
99
19
97
19
95
93
91
89
87
85
Year
Year
Producer Price for Beef (1977 = 1)
19
2005
19
2000
19
1995
19
1990
19
1985
19
Ye
1980
83
0.10
0.00
ar
0.2
0.20
19
0.4
0.30
81
1
0.8
0.6
0.40
19
Cost (1982 US$)
1.2
Producer Price for Milk (1977 = 1)
Producer Price for Wheat (1977 = 1)
Hamburger (1/4 lb.)
Hamburger Bun (2 Ounces)
Cheese (8 Grams)
Pecent of Costs and Expenses
McDonalds Corporation
100%
% Selling and administrative
expenses of costs and
expenses
% Occupancy and other
operating expenses of costs
and expenses
% Payroll of costs and
expenses
-
90%
Percent of Cost
Farmer Price
-
1.4
0
1975
Costs to Consumer for Components
MacDonalds Quarter Pounder with Cheese
-
Farmer Prices for the Components of a
McDonalds Quarter Pounder
80%
70%
60%
50%
40%
30%
20%
% food and paper of costs and
expenses
10%
0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
http://www.mcdonalds.com/corp/invest/pub.html
TP Tomich
Alston, Sumner, Vosti UCD/AIC/CNRPA
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
Alston, Sumner, Vosti UCD/AIC/CNRPA
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
Alston, Sumner, Vosti UCD/AIC/CNRPA
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
Alston, Sumner, Vosti UCD/AIC/CNRPA
Muito Obrigado!
TP Tomich
Alston, Sumner, Vosti UCD/AIC/CNRPA
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