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Is Wal-Mart Devouring the Food System?

Stacy Mitchell posted a really creative info-graphic over at Huffington post, which I've reproduced below.  

The graphic gets a lot of the statistics right, but draws many wrong inferences.  A few comments:

  • The typical concern expressed about Wal-Mart is that they price "too low" and thereby drive all their competition out of business.  I do not doubt that Wal-Mart bankrupts some competitors and creates some adverse consequences for communities (yet the studies cited in this graphic are not a representative selection of the academic research - they convey only the side of the story the author wants to tell).  Moreover, low prices are good for you and I the food consumer.  After all, I've never seen Wal-Mart employees forcing anyone into their stores.  This paper in a 2006 issue of the American Journal of Agricultural Economics, for example, reported: 
    Consumers, in contrast, appear to benefit from Wal-Mart's entry in the form of lower prices. Studies focusing on consumer impacts have found that a Supercenter's entry reduces grocery prices. Not only do Supercenters offer lower prices, but their entry may have the indirect effect of lowering prices at competing stores. Estimates of this indirect effect range from 3% overall to as high as 13% for specific items (Basker 2005b; Hausmann and Leibtag 2005).
  • The facts reported below could be framed very differently.  Rather than saying Wal-Mart "captures $1 out of every $4" why not say they "earn $1 out of every $4"?
  • Yes, production and retailing of food are highly concentrated industries.  The question is why.  Market power is only one possible explanation, and there is theory and evidence that this concentration could relate to economies of scale and cost savings, capacity constraints, and risk reduction, among many factors. And, you can't just look at size, you have to look at how firms behave.  Coke and Pespi are both very big but anyone watching TV ads knows they are in fierce competition.  
  • It is a red-herring to cite the farmer's share of the retail dollar as evidence of nefarious processor or retailer behavior.   Processing and retailing costs have risen over time.  Here is a nice paper by Gary Brester and colleagues showing that the farmer's share of the retail dollar is uninformative in this regard and "should not be used for policy purposes."
  • It is  untrue that many "farmers are struggling to get a fair price."  Prices for many agricultural commodities are near record highs.  Farm-land values are exploding, in part, due to the extra income on the farm.  For commodities like milk (which is pictured just below the above quote), there are complex government rules that determine the prices farmers get paid.  
  • Worker wages may have fallen in real terms, but this is not unique to the food processing industry but is true of real median wages across the entire economy.  People like Tyler Cowen  have argued that this is a result of declines in productivity growth.  So, again, the statistical "fact" is probably right, but the interpretation is misplaced.   

You may still want to visit local farmers markets or local grocers as this graphic exhorts.  But make it an informed decision.   

stacymitchell.JPG

A New Food Documentery

From the celebrity Chef Tom Colicchio and the producers of Food, Inc comes a new documentary on food entitled A Place at the Table slate for release in March.  I look forward to watching it.  

I see that the subtitle of the new documentary is One Nation Underfed.  I haven't, of course, seen the documentary, but their web site suggests that the film will focus on the problem of hunger.  Ironically, however, here are the folks involved in the movie: 

 sociologist Janet Poppendieck, author Raj Patel and nutrition policy leader Marion Nestle; ordinary citizens like Pastor Bob Wilson and teachers Leslie Nichols and Odessa Cherry; and activists such as Witness to Hunger’s Mariana Chilton, Top Chef’s Tom Colicchio and Oscar®-winning actor Jeff Bridges

Some of these people have been on record in the past talking about how we Americans are Over-fed . And, they've been on record as harshly criticizing precisely those firms and technologies that have made food more convenient and affordable than it once was.  I wish for once the producers of these documentaries would pick (even at random) some of the excellent agricultural scientists working in Land Grant Universities across the U.S. to weigh in on some of these issues.  

I'll withhold final judgement till I watch the movie.  For the time being, however, I will say that I am more sympathetic to the angle that seems to be taken in this food documentary than I was with many of the other's I've seen.  Let's hope this time around the facts are presented in a balanced manner and the suggested alternatives are more well reasoned.  

My TEDx talk is up

If you care to watch my TEDx talk from a couple weeks back, it is now up.  I'm not sure why the organizers gave it the title they did, but the talk is really about food innovation, food prices, and the poor.

Oklahoma State University Professor Jayson Lusk researches many aspects of the economics of food health, safety and quality. Lusk points out in his TEDxOStateU talk that an ideology that blanket-rejects "unnatural" food is one that will ultimately doom us to poverty.

The Need for Agricultural Research

Five agricultural economists published an article in the latest issue of Science on the effects of public and private R&D spending on agricultural research.   

Here is the summary:

Most of the increase in global agricultural production over the past half-century has come from raising crop and livestock yields rather than through area expansion. This growth in productivity is attributed largely to investments in research and innovation (1). Since around 1990, there has been a decline in the rate of growth in yield per area harvested for several important crops (2). In parallel, the rate of growth in public spending on agricultural research and development (R&D) has also fallen, which may account for declining crop yield growth and may be contributing to rising food prices (3).

To this, I would add that a deluge of books and documentaries on food have demonized precisely those research developments responsible for yield growth.  It's hard to know exactly what effect these cultural influences have had on firm and government decisions to invest in agricultural research.  

However, many in the food community haven't connected the dots.  Mark Bittman wrote just two days ago about hunger, saying:

It seems absurd to have to say it, but no one in this country should go hungry.

His answer for the problem was more government spending on food stamps and food banks.  Yet, he has repeatedly denounced modern agricultural technologies and has called for food policies that will ultimately increase food prices.  

There is the old saying that if you give a man a fish, you feed him for a day; If you teach him how to fish, you can feed him for a lifetime.  Food stamps give people fish for the day.  Developments in agricultural R&D are the gifts that keep on giving.