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Impacts of US policies on obesity

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Joseph Glauber, IFPRI
Expert consultation on trade and nutrition
15-16 November 2016, FAO Headquarters, Rome
http://www.fao.org/economic/est/est-events-new/tradenutrition/en/

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Impacts of US policies on obesity

  1. 1. Effects of US Agricultural Policies on Global Food Prices Joe Glauber, IFPRI Experts Meeting on Trade and Nutrition FAO 15-16 November 2016
  2. 2. Food expenditures as share of total household expenditures 0.0 5.0 10.0 15.0 20.0 25.0 30.0 1930 1934 1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 Percent Source: USDA, Economic Research Service
  3. 3. Growth in US household food expenditures Billion USD Source: USDA, Economic Research Service 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 1929 1933 1937 1941 1945 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Food Total disposable income
  4. 4. FAO food price index, adjusted for inflation 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2002-04 = 100 1961-2000 trend Source: FAO
  5. 5. FAO food commodity price indices, adjusted for inflation 0.0 50.0 100.0 150.0 200.0 250.0 300.0 Meat Price Index Dairy Price Index Cereals Price Index Oils Price Index Sugar Price Index 2002-04 = 100 Source: FAO
  6. 6. Food CPI relative to overall CPI 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1913 1917 1921 1925 1929 1933 1937 1941 1945 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 Source: US Dept of Labor, Bureau of Labor Statistics 2002-04 = 100
  7. 7. Declining farm value of retail food 0 5 10 15 20 25 30 35 40 45 50 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Farm value share Revised food dollar Source: USDA, Economic Research Service
  8. 8. Growth in per capita food consumption away from home 0 200 400 600 800 1,000 1,200 1,400 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 At home Away from home 1988 USD
  9. 9. Farm share of the food dollar 0 5 10 15 20 25 30 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 at home away from home Total food dollar
  10. 10. Farm value of selected food prices Item Share (%) Item Share (%) Beef 52 Broccoli 24 Whole milk 50 Orange juice from frozen concentrate 24 Strawberries 44 Pears 22 Apples 32 Iceberg lettuce 21 Grapes 31 Lemons 16 Cheddar cheese 30 Ice cream 15 Pork 30 Fresh oranges 15 Sugar 28 Fresh orange juice 15 Tomatoes 27 Potatoes 15 Flour 26 Grapefruit 12 Peaches 26 Bread 7 Source: USDA, Economic Research Service
  11. 11. Selected policies affecting food prices and demand Production Price/income supports Supply control policies Risk management R&D Program that divert production (e.g., marketing orders) Processing Imports Border measures (e.g., tariffs) Programs that increase demand (biofuels, export subsidies, domestic food programs) Consumption Nutrition programs Tax policies (e.g., soda tax) First handler
  12. 12. Selected policies • Border measures (tariffs, NTBs) • Measures that enhance productivity (R&D) • Measures that restrict production (acreage and production controls; planting restrictions) • Measures that restrict supply through marketing quotas and price discrimination (marketing orders) • Measures that enhance domestic demand (nutrition programs, biofuels) • Measures that enhance export demand (subsidies, credits, food aid) • Market price support (sugar program) • Income support (direct payments, ARC/PLC) • Input subsidies (water) • Disaster/safety net policies (crop insurance)
  13. 13. Effects of US agricultural policies on commodity prices Commodity Measure Primary impact Global prices US retail Sugar Tariffs High border measure provides price support Small  Large  Dairy Margin protection Protects dairy margins Small  Negligible Marketing orders Diverts fluid milk to manufacturing purposes Small  for powder, cheese Large  fluid milk Cereals CRP Diverts cropland to conserving use Small  Negligible ARC/PLC Provides countercyclical support—not tied to production Small  Negligible Crop insurance Provides yield and revenue protection Small  Negligible Biofuels Diverts maize production to industrial use Small  Negligible
  14. 14. Effects of US agricultural policies on commodity prices Commodity Measure Primary impact Global prices US retail Oilseeds CRP Diverts cropland to conserving use Small  Negligible ARC/PLC Provides countercyclical support—not tied to production Small  Negligible Crop insurance Provides yield and revenue protection Small  Negligible Biofuels Diverts vegetable oil production to industrial use Small  Negligible Meat and poultry Section 32 purchases Purchases for school feeding programs Negligible Negligible Fruits and vegetables Tariffs High MFN tariffs selected products Small  Negligible Marketing orders Quality controls; diversion to export markets Small Small fresh Planting restrictions Restrict production on crop base acres Negligible Negligible
  15. 15. Selected studies Study Finding Miller and Coble (2006) Effect of direct payments found to be insignificant in explaining food expenditures as percent of total household expenditures. Alston, Sumner and Vosti (2008) Elimination of subsidies and border protection results in price decrease for soybeans, rice, sugar, fruits and vegetables, beef, hogs and milk and small price increase for maize and wheat. Gerlt, Thompson, Sydow and Johansson (2016) Elimination of price and income support policies result in 0.14% decrease in cropland; plus elimination of crop insurance 0.30% decrease in cropland; plus elimination of CRP +2.77% increase in cropland Okrent and Alston (2016) Elimination of grain and oilseed subsidies result in decrease in consumption of 567 cal/year. Removal of all subsidies would result in an increase in consumption of 165 to 1,435 cal/year (large consumption of dairy and fruits and vegetables offset declines in cereals and bakery products)
  16. 16. Projected ethanol demand Corn use for ethanol (mil bu) 0 1,000 2,000 3,000 4,000 5,000 6,000 04/05 06/07 08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 Ethanol use (mil gal) 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000 E-10 mid-level E-85 Exports Source: FAPRI
  17. 17. Effects of a 10 percent increase in R&D spending on US food prices, consumption and body weight Price (% change) Consumption (% change) Per capita caloric intake (kcal) Cereals and bakery -1.41 -2.61 -9.19 Meats -8.56 1.10 1.66 Eggs -13.97 3.90 1.08 Dairy -5.65 3.74 7.29 Fruits and vegetables -9.90 4.25 5.98 Other foods -3.54 3.85 15.42 Nonalcoholic beverages -0.68 -0.80 -1.30 Food away from home -0.96 -0.72 -5.30 Alcoholic beverages -0.82 -1.51 -1.09 Consumption (Kcal) 14.54 Body weight (lbs) One year 1.11 Steady state 1.86 Source: Alston, MacEwan and Okrent (2016)
  18. 18. Global vulnerability to price effects Source: Bren d’Amour et al. 2016
  19. 19. Conclusions • Impacts of most US farm programs are small because of move to more decoupled forms of support • Because farm value of US retail food prices is small, impact of farm programs largely negligible – Exceptions are measures like tariffs, marketing orders, and biofuel policies which have raised prices – R&D policies have lowered prices but benefits far outstrip costs • Impacts on consumption are likely larger when policies implemented at consumer level (eg, consumption taxes); externalities less than if implemented upstream • Agricultural policy impacts may be larger in foreign markets, particularly those where farm-retail spread is less and where imports are important component of diet

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