Blog

Spending on Beef over Time

Meat demand has been a frequent topic on this blog (e.g., see here, here, here, or here). As some of the previous posts indicate, “demand” is a hard thing to measure. A slightly easier thing to measure is spending. As it turns out, the Bureau of Labor Statistics (BLS) has been tracking consumer spending at the household level on food at home in a number of categories, including beef, pork, and poultry, in their annual Consumer Expenditure Survey.

Using these data, I constructed the following animation showing the relationship between spending on beef and total household expenditures by quintiles of income.

The figure shows, at any point in time, higher income households (or those with greater total spending) spend more on beef than lower income households (or those with less total spending). In econ-speak, beef is a “normal” good. However, for any given income (or total spending) level, spending on beef has fallen precipitously since 1984 (all figures are in inflation-adjusted 2017 dollars). The change over time is most dramatic for the higher income/spending households. In 1984, the lowest and highest quintile income households spent $265 and $681 per year (in 2017 dollars), respectively, on beef for consumption at home. By 2017, these figures had fallen to $158 and 352, respectively.

These data could be reflective of downward demand shift - i.e., consumers willing to pay less for each pound of beef than they were in the past. Other possible explanations for the downward decline in spending include changing beef prices over this period, changing household demographics (the average number of people in today’s households is slightly smaller today than in the mid 1980s; fewer people normally means less spending), other protein sources, such as poultry, becoming relatively less expensive or more attractive, a shift toward more food spending away from home (the BLS only tracks spending for individual food categories for food eaten at home), and more.

How do the data in the above figure square with measures of demand (such as these constructed by Glynn Tonsor), which show no clear trend in beef demand since the early 1990s? Well, as I mentioned above, spending isn’t “demand” because while the figure controls for income, it doesn’t control for prices. Another possible explanation is that the data in the figure above are for households, while aggregate demand statistics like those created by Tonsor are calculated nationally. It is possible for total aggregate demand to rise even if each individual household’s demand is falling if population is increasing and more households are being added. That is, in fact, what has happened. There were about 86 million households in the US in 1984. Today there are about 128 million households.

The Political Polarization of Meat Demand

There is growing criticism of meat production industries in popular culture and mainstream media. Examples include the recent release of the EAT-Lancet report, the World Health Organization pronouncement on red meat and cancer, the proposed Green New Deal and “farting cows,” and much more. The result is an increasing number of news stories linking beef consumption with climate change and other adverse environmental impacts. As shown in this report (co-authored by Glynn Tonsor, Ted Schroeder, and myself), the number of news stories mentioning beef and climate change increased almost 800% since the early 2000s.

Here’s the thing. We know climate change is a politically polarized issue. Might linking beef and meat consumption to a politically polarized issue in turn cause meat consumption itself to become politically polarized? As I’ve shown in previous posts (e.g., see here or here), self defined political ideology (on a scale of very liberal to very conservative) is one of the strongest predictions of whether someone says they are a vegetarian or vegan.

To investigate this issue, I turned to the body of work that referred to as the Cultural Cognition Project that is most associated with Dan Kahan at Yale. The basic idea is that individuals conform their beliefs about disputed matters of fact to values that define their cultural identities (or match their tribe). In one of the most interesting demonstrations of this concept, Kahan shows that the likelihood of agreeing with the statement “There is solid evidence of recent global warming due mostly to human activity such as burning fossil fuels” is increasing in a person’s measured scientific intelligence (essentially a score on a science quiz) but only for people who identify as liberal democrats. For people who identify as conservative republicans, higher scientific intelligence is associated with a reduced likelihood of agreeing with the above sentence. The result is that (unlike what we’d expect if “more education” was the answer), the greatest disagreements are among the most scientifically literate but of opposite political parties. One take home message from these sorts of findings is that the smarter you are, the easier it is to fool yourself.

Ok, back to meat. As readers of this blog likely know, I ran the Food Demand Survey (FooDS), which surveyed 1,000 consumers every month (different samples of consumers were drawn every month) for five years. On the survey, we asked every respondent to answer 9 simulated shopping questions in which they choose between two beef, two pork, two chicken, and two vegetarian meal options at different prices (or a “I wouldn’t buy any of these” option). These data can be used to construct a very simple measure of demand, in which we simply count the number of times (across the nine choices) beef or any meat product was chosen (see this post for some discussion on these data). For reference beef (either ground beef or steak) was chosen about 2.2 times on average across the nine choices and any meat option was chosen a bit less than 7 times on average across the nine choices. (One important note is that despite all the negative news about beef alluded to at the beginning of this post, we do not find overall downward trends in beef demand in recent years; this is also consistent with Tonsor’s demand indices).

The question is how these measures of demand relate to political ideology and education (I use education because, unlike Kahan, I did not ask a scientific intelligence quiz on my surveys). I estimated equations that relate beef or overall meat demand to an extensive set of demographics (age, income, gender, region of residence, household size, etc.), political ideology (I asked both a party affiliation question and a very liberal to very conservative scale from which I create two groups: liberal democrats and conservative republicans), education, a time trend, and interactions between the last three sets of variables. The sample size is about 60,000 observations.

Here’s a graphical illustration of the results for beef. Beef demand is higher for conservative republicans than liberal democrats (holding constant all other demographic factors), and this demand gap grows with education. Liberal democrats reduce their demand for beef as their education increases, but for conservative republicans, beef demand is essentially flat across education levels. The other interesting result, shown in the bottom panel, is that beef demand is becoming increasingly politically polarized over time. The beef demand gap between the average conservative republican and liberal democrat is increasing over time.

beefdemand_kahan.JPG

Here is the same analysis for overall meat demand (beef + pork + chicken). The results here are even stronger. There is very little partisan gap among lower educated liberals and conservatives, but a large gap in meat demand among liberal democrats and conservative republicans who have a graduate degree. The gap results mainly from liberal democrats reducing meat demand as education increases. Again, the partisan gap is growing over time.

meatdemand_kahan.JPG

What does all this mean? Unfortunately, I suspect it implies conversations about the meat consumption will become more difficult and tumultuous in the coming years. It may also mean that disagreements about the impacts of meat consumption on the environment and health are less likely to be “settled” by science because they are becoming wrapped up in people’s cultural values and tribe identities. Fortunately, there are a number of resources provided via the Cultural Cognition Project that provide insights about effective communication in this polarized world..

Farming Isn't Just about Food

All businesses and industries have mantras and mental models that are used to motivate and inspire. A common motivator and rallying cry for those of us in agriculture is that we “feed the world.” You’ve no doubt seen bumper stickers on the back of a pickup truck proclaiming, “If you eat, thank a farmer.”

That message (“we need to feed the world”) is a good motivator inside the industry, although in the past I’ve argued it might not always be selling point to people outside the industry. The message is not entirely inaccurate, but it’s not entirely accurate either. There are other ways to think about what agriculture is “doing” that might also be productive and enlightening.

Another way to think about agriculture is as a means to harness and store energy and nutrients. Or, as a producer of biomass, some of which later gets turned into food. An apt analogy is think of corn (and many other staple crops) as living solar panels. The plants capture energy from the sun and store the energy in many tiny batteries (i.e., seeds) that are easily storeable and transportable.

So, how much of agriculture is about “food” vs. other things? A while back, I showed trends in farm acreage over the last century in the United States. As those data reveal, just four crops account for about 95% of all planted farmland: corn, soybeans, wheat, and cotton. Cotton (at about 5.6% of the total) is, of course, a fiber with a few minor food uses (oil and hulls/seeds fed to livestock). The two biggest crops, corn and soy, with roughly the same acreage planted to each, together account for about 70% of planted crop acres in the U.S. What happens to all that corn and soy?

Here’s a graph I a created about a year ago, showing the supply and use of corn in the U.S. (data are from the USDA). Of the total corn supplied to the U.S. market in the 2016/17 marketing year (454 million metric tons, MMT), more than 40% went to a category the USDA calls “food, alcohol, and industrial use,” which is mainly alcohol for fuel or ethanol. Some of this indirectly ends up as animal feed in the form of "spent” or “distillers” grain left over after fermentation (livestock as food waste preventers is a vastly underappreciated aspect of our food supply chain). More than 30% of corn supply goes directly to animal feed. The rest is exported, stored, or is seed for next year.

cornuse.JPG

Here is a similar figure for soy. About 44% is exported and then 41.5% is crushed for meal and oil. Most of the meal is used for livestock feed, and a little less than one-third of the oil goes to producing bio-diesel.

soyuse.JPG


In these two figures, we see that our two main commodity crops grown in the U.S. are primarily used to produce fuel, alcohol, and to feed animals.

There are of course many critics of agriculture who look at these facts and bemoan the amount of acreage devoted to feeding livestock and producing fuel. But, this get’s back to my original point. The criticism is premised on the notion that the purpose of agriculture is to grow food, but what if we instead re-imagined the purpose of agriculture is something different: to produce energy and nutrients? I’ve written a lot about whether it is proper to view corn and soy fed to livestock as an inefficiency or waste, so I won’t delve into that whole bit again in this post; the point for now is that this only looks inefficient if one views the entire point of agriculture as a means to produce calories that end up on our plate. (BTW, see this tweetstorm for a humorous and eye opening look at the ubiquity of corn in our food and daily lives. My favorite quote in all of it: “Corn is not a food. Corn is a platform.”).

If corn is a solar panel and seeds are batteries, then livestock and poultry are machines that are “hooked up” to the batteries, which power the animals to produce useful outputs, some of which are food and some of which are not.

When we take a closer look at animal production, we see that a big portion (maybe most?) doesn’t go to human food. A simple way to look at this is to consider the dressing percentage of cattle, hogs, and broilers. The dressing percent is the weight of the carcass (which contains most of the edible meat plus bones) divided by the live weight of the animal just prior to harvest multiplied by 100. For hogs, a typical dressing percent might be around 70%, so for a 250 lb live hog, one only has 175 lb of carcass, and much of that is bone. Or, for cattle, a 1,200 lb steer equates to only a ~750 lbs carcass. (I should note that some of the weight removed from the carcass is “food” - hearts, kidneys, etc., - that is infrequently eaten in this country unless we’re talking about our pets). From the carcass, one might end up with 400 to 500 lbs of edible meat, depending on how it is cut and the amount of fat. So, only about 30 to 40% of the live weight of a finished steer ends up in form of what we typically think of as “food.”

One might be temped to think: that’s really wasteful. But, it isn’t as if the other 60 to 70% of the animal is just thrown away! There are interesting stories of the late 19th century meat mogul Gustavus Swift trudging out in his dark suit and top hat to inspect the sewer pipes that flowed out of his Chicago packing plants to look for trace amounts of fat or hair in the river, because anything that escaped was lost revenue. Where do all the modern animal byproducts go? Check out this interesting video - cows end up in everything from lipstick to jet fuel.

A Case for a Carbon Tax - Meat and Livestock Edition

Frequent readers of this blog know I’m not a big fan of many food and agricultural regulations (I did write the Food Police after all), and I’ve been skeptical of “externality” arguments use to advance food and agricultural interventions. As such, the title of this post might seem out of place. However, stick with me for a moment.

Anyone who has been paying attention knows animal agriculture has come under various lines of attack in recent years (something I recently referred to as the coming meat wars). Whether it be animal welfare, health, or environmental arguments, there is a fairly consistent refrain in many media circles that we are eating “too much” meat and dairy.

What does it mean to say someone is “over-consuming” or having “too much” of any product? There is paternalism: I think I know better what someone else should be eating/consuming. Beyond cajoling our children or spouse, few will concede this motivation for broad policy action. There are claims of information asymmetries: perhaps people don’t know or understand the impacts of consumption on their health or the environment. This would seem to point to policies surrounding information provision rather than outright prohibitions or taxes. Finally, the most cogent argument is that of externalities: your consumption is imposing a cost on me that you’re not considering when deciding what to buy.

If “externality” is the basis of one’s claim that another is “over consuming,” then the economist’s normal answer to fix the problem is some sort of tax to encourage buyers to factor in the costs imposed on others (in fact, I’ve argued elsewhere it’s often more complicated than that, but let’s ignore those arguments for now).

Here’s an often overlooked point about taxing exernalities: even after such a tax, consumption will not be zero, and indeed consumption might still be very high if its a good (like meat) people enjoy consuming. I ran across a quote from the now retired agricultural economist, Luther Tweeten, which colorfully summed up the way economists think about the issue:

St. Augustine called for people to ‘Love God and do as you please.’ The economist advises to ‘Price right and do as you please.

Once the prices are “right” - perhaps via some sort of tax - there is no need for the buyer/consumer to feel guilt or discomfort in their purchases; they’ve already paid for their costs on others and can eat and consume as they please. Here is Steven Landsburg in his book The Big Questions in a section entitled A Cost is Not A Sin:

When things are priced correctly, there’s no need to moralize about them. Every time you eat an orange, you leave the world one orange poorer. But nobody thinks it’s sinful to eat an orange, because the eater pays for the privilege - and thereby reimburses the rest of us for the damage done. Under the right tax system, emitting small amounts of additional pollution would be as unobjectionable as eating an orange.

Ok, back to meat and dairy consumption. Much of the popular writing on the subject casts consumption of such products as almost sinful. One advantage of a carbon (or carbon-equivalent) tax is that it would undercut much of the argument that people are “over consuming.” It’s not the cow or meat that’s the “sin,” it’s the carbon and methane.

There are several factors to consider before such a tax would be effective in this regard.

First, it must be broad based across the economy, not just focused on meat and livestock, otherwise, there is no guarantee people wouldn’t just substitute from one emitting category to a now relatively cheaper emitting category and have no impact on overall emissions. If it is indeed the case that, as the EPA suggests, agriculture in general and livestock in particular, are relatively small sources of greenhouse gas emissions in the U.S., then the impacts of such a tax on the sector need not be particularly pronounced, especially if revenue from the tax is refunded to taxpayers. Indeed, in a global context, such a worldwide tax might be competitively advantageous to U.S. producers greenhouse gas emissions per pound of meat or gallon of milk produced is much lower in the U.S. than in other parts of the world because of greater efficiencies here.

Second, a cow isn’t just a cow. Any effective system of this sort would need to reward producers who are more efficient and who find ways, whether it be different genetics, different feed, or different grazing practices, to reduce greenhouse gas emissions. That is, any effective system would have to allow possibilities for producers to monitor, register, and update their own particular impacts. Something as crude as $X per cow or $Y per pound lacks the incentives to motivate innovation in greenhouse gas reducing activities. Such a policy would be as silly as charging a fixed tax per car regardless of whether it was a Honda civic or a Hummer.

Finally, if producers (and everyone else) are taxed for emitting greenhouse gases, it seems logical that producers (and others) ought to be paid for sequestering carbon. I know there is a lot of debate on this subject, and it’s a topic about which I’m intimately knowledgeable, but suffice it to say that it is not unrealistic to imagine particular farming or ranching practices that sequester more carbon than they emit.

I suspect many environmental organizations would be downright shocked if meat and livestock industry associations banded together in support of a carbon tax. I’m not necessarily advocating such a tax, as indeed there are many complications and unintended consequences that I haven’t discussed here, but it is one mechanism available to address the combat much of this implicit “sinful” type rhetoric suggesting that people are “over consuming” meat. Of course, there’s also the possibility some anti-animal agriculture groups might balk at the proposal. Here’s Landsburg again:

So why don’t we have such taxes? I suspect it’s at least partly because in a world with rational taxation, there would be fewer jobs for priests. Solve a social problem and there’s no evil left to rail against.

I’ll end with one last observation. Let’s say you are a conscious consumer worried about the greenhouse gas emissions that result from meat eating. Is the answer to completely refrain from burgers, yogurt, and steak? No. Just reduce your consumption by the amount you would have reduced it had the price been slightly higher. Landsburg described how to follow the Economist’s Golden Rule (EGR) in the context of the question: Is it okay to burn carbon-based fuels?

In our less then ideal world [without a carbon tax], the EGR tells you to curb your pollution as if you were paying a fair price. It’s been estimated that you cause about 50 cents’ worth of environmental damage for every gallon of gas you burn. If you believe that estimate, and if you currently pay $3 for gas, pretend you’re paying about $3.50 and adjust your driving habits accordingly.

And, I should add: drive without guilt.

So, what does that mean for meat consumption. The first website that came up when I searched the subject, suggested 1 burger is responsible for 8.8 kg of carbon-equivalent emissions [this is probably an overstatement; see a previous crude calculation I made here based on EPA’s numbers]. A commonly used social cost of carbon is about $40/ton or $0.04/kg. So, the questions is: how many fewer burgers in a year would you consume if the cost were $0.04*8.8 = $0.35 higher?

The Future of Meat

Several weeks ago, I was interviewed by Stephen Dubner for Freakonomics radio and their associated podcast. The topic was the future of meat, and they just released the episode today. It’s not uncommon to do an hour long interview only to have the producers pull out a half minute clip to include in the show, so I was surprised to see how much of our interview they used. The other voice that gets a lot of air time is Pat Brown, a Stanford biomedical researcher who is the CEO and Founder of Impossible Foods - a company aiming to replace meat by using genetically engineered yeast to produce animal-like proteins via a fermentation process (I’ve reviewed the Impossible burger in a previous post). The transcript of the Freakonomics show is here. Or, download the episode from your favorite streaming service.