Externality Driven Food – What Does it Mean for The Future of Agriculture?<br />Brian Buhr, Professor and Head			<br />App...
In the 1990’s Agriculture Became “Consumer Driven”<br />Delivering a Particular Attribute in Demand by Consumers.  <br />“...
So, What is Externality Driven Agriculture?<br />Externality: Actions You Take That Affect Others.<br />Traditional Agricu...
Externalities Can Also Be Positive!<br />Antibiotics – Reductions in Infectious Disease – herd immunity/complete suppressi...
Sustainable/Organic Agriculture Is Offshoot from Externality Driven Agriculture.<br />Key Point:<br />Potential Reduction<...
..But Is There Any Direct Benefit to Consumers?<br />
2000’s externalities are beginning to include preference and ethical externalities.<br />
Raising the issue of the business and organization of food production<br /><ul><li>Size of Firms
Business Organization
 Methods of Production
Do these really directly</li></ul> affect consumer?<br />
In Case You Think It’s Just “Factory Farms”<br />Obesity Caused by Corn?<br />Why Does Corn Dominate Diet?<br />Changed Co...
A Great Grey Area of Real, Perceived and Ethical Externalities:  Which Is It?<br />
A Ignored Externality: The Economic Externality – Cost of Food Example<br />Sow housing load = $3.1 billion (Buhr)<br />Ba...
Food Cost Increases Imposed By Preferences or Ethics are Very Regressive On Poor<br />Changing Food <br />Composition: “Va...
Key Implication: World Hunger and Food Prices<br />Attributed to Two Crises:<br />Food and Fuel Crisis (2006-2008)<br />Gl...
The Ethics of Efficiency: Egalitarian Food<br />All People Have Equal Access to Safe, Nutritious Food.<br />New Policies D...
Global Average Yields Are Declining Increasing Pressures of Food Security and Costs<br />Source: Philip Pardey, U of M<br />
Ag R&D Spending Rate is Declining – We’re Increasing Costs by Preferences and Reducing Potential to Grow Adequate Supplies...
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Dr. Brian Buhr, head of the Department of Applied Economics at the University of Minnesota

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Dr. Brian Buhr, head of the Department of Applied Economics at the University of Minnesota, presentation for the Minnesota Agri-Growth Council Annual Meeting 2009.

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Dr. Brian Buhr, head of the Department of Applied Economics at the University of Minnesota

  1. 1. Externality Driven Food – What Does it Mean for The Future of Agriculture?<br />Brian Buhr, Professor and Head <br />Applied Economics <br />University of Minnesota <br />
  2. 2. In the 1990’s Agriculture Became “Consumer Driven”<br />Delivering a Particular Attribute in Demand by Consumers. <br />“Listening to What the Consumer Wants”<br />Example: Marinated Pork Loins<br />Consumers Gain Direct Benefit From Attribute <br />
  3. 3. So, What is Externality Driven Agriculture?<br />Externality: Actions You Take That Affect Others.<br />Traditional Agricultural Externalities:<br />Fertilizer Run-off – Hypoxia in the Gulf<br />Row cropping – soil erosion<br />Antibiotics in Livestock – Potential Resistance<br />Manure – Odor, Phosphorus, Nitrogen<br />
  4. 4. Externalities Can Also Be Positive!<br />Antibiotics – Reductions in Infectious Disease – herd immunity/complete suppression.<br />Fertilizer – Increased Productivity --&gt; Greater Wildlife Habitat, Reduced reliance on highly erodable soils.<br />Manure – Less reliance on fossil fuels for fertilizer needs.<br />
  5. 5. Sustainable/Organic Agriculture Is Offshoot from Externality Driven Agriculture.<br />Key Point:<br />Potential Reduction<br />Of True Externality<br />
  6. 6. ..But Is There Any Direct Benefit to Consumers?<br />
  7. 7. 2000’s externalities are beginning to include preference and ethical externalities.<br />
  8. 8. Raising the issue of the business and organization of food production<br /><ul><li>Size of Firms
  9. 9. Business Organization
  10. 10. Methods of Production
  11. 11. Do these really directly</li></ul> affect consumer?<br />
  12. 12. In Case You Think It’s Just “Factory Farms”<br />Obesity Caused by Corn?<br />Why Does Corn Dominate Diet?<br />Changed Corn From Real Food?<br />What’s Wrong With Corn? Why Avoid it?<br />Cheap Food Is a Problem, Pay More?<br />
  13. 13. A Great Grey Area of Real, Perceived and Ethical Externalities: Which Is It?<br />
  14. 14. A Ignored Externality: The Economic Externality – Cost of Food Example<br />Sow housing load = $3.1 billion (Buhr)<br />Ban antibiotics load = $1.04 billion (Hayes et al.)<br />COOL load = $179 million - $1.7 billion (Brester et al. and Lusk et al.)<br />Total policy load = $5.5 billion in pork from what amounts to PERCEIVED externalities with NO REAL SCIENTIFIC EXTERNALITY!<br />
  15. 15. Food Cost Increases Imposed By Preferences or Ethics are Very Regressive On Poor<br />Changing Food <br />Composition: “Value Added”<br />Organic, etc.?<br />20% of Households<br />Spend &gt;20% of <br />Budget on Food<br />50% of Households<br />Spend &gt;14% of <br />Budget on Food<br />
  16. 16. Key Implication: World Hunger and Food Prices<br />Attributed to Two Crises:<br />Food and Fuel Crisis (2006-2008)<br />Global Economic Crisis (2009)<br />“The State of Food Insecurity in the World, FAO 2009.<br />Countries buying land/water/resource base.<br />ftp://ftp.fao.org/docrep/fao/012/i0876e/i0876e.pdf<br />
  17. 17. The Ethics of Efficiency: Egalitarian Food<br />All People Have Equal Access to Safe, Nutritious Food.<br />New Policies Driven by Small Vocal Minority and Appealing to Wealthy– Leveraging Retailers<br />‘Voluntary’ Food Price Increases are a Regressive Tax:<br />10% Increase Food Cost  3.5% tax on low income 0.8% tax on high income<br />Hidden Tax – If you don’t support policy you pay for higher food costs anyway. Consumer Choice?<br />E.g., WTP pST free (Buhr, JARE): 50-86% of respondents no WTP.<br />
  18. 18. Global Average Yields Are Declining Increasing Pressures of Food Security and Costs<br />Source: Philip Pardey, U of M<br />
  19. 19. Ag R&D Spending Rate is Declining – We’re Increasing Costs by Preferences and Reducing Potential to Grow Adequate Supplies<br />Source: Philip Pardey, U of M<br />* Growth rates adjusted for productivity-based R&D over the 1976-2006 period are in parentheses.<br />
  20. 20. A Need to Communicate Across the Left and Right Brain of Agriculture and Food<br />
  21. 21. What Does This Mean?<br />The new battle over food and hunger is not being waged on science/policy issues but rather ETHICS.<br />The Agricultural Community is Not Effectively Engaging in This Discussion but Activists Are.<br />Agricultural Community Typically Engages the Cost Efficiency and Science Arguments Which Are Often Self Serving.<br />YOU must begin to clearly articulate the ETHICS of food production methods and if agriculture finds ethical conflicts it must articulate them and address them. <br />
  22. 22. Get Busy, The Clock is Ticking! <br />

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