Country of Origin Labeling for Meat

About a decade ago, the US Congress passed mandatory country of origin labeling for a variety of food products including beef and pork.  At the time, we did some research on the costs of the law and the demand responses that would be required to offset those costs.  

In the intervening years, the law was implemented, the US was taken to court by Canada and Mexico, and the US labeling law was deemed to be an illegal trade barrier by the World Trade Organization (WTO).  However, rather than dropping the law altogether, lawmakers have doubled down and made them even more onerous and costly in an attempt to comply with the WTO ruling (you can read the current regs here).    ​

There is a key disconnect that is driving much of this debate.  When you ask people on surveys if they want to know the origin of their meat products, almost all say "yes."   But, when you look at the data on whether people read origin labels or whether demand for meat has been affected by the origin laws, a much different story emerges.   ​

Given that backdrop, I found the recent editorial by the president of the National Cattlemans Beef Association interesting (the Kansas Study to which he refers is here, and as you can see, I was a co-author on that publication)​.  Here is an excerpt:

It seems as if the first thing that is said whenever COOL is brought up is, “I am proud of the cattle my family raises,” and that is absolutely correct. I too am very proud of my family’s operation and all the work my wife and I, with our children and grandchildren, do to produce great beef. But a mandatory labeling program run by the federal government is not the way I want to showcase my product and add value. Labeling programs can work - just look at Certified Angus Beef or Safeway’s “Rancher’s Reserve.” These are marketing programs that are run by individuals with a specific interest and that is to promote and sell more beef to put on dinner tables across America. That is why these programs are successful. Additionally there is a tremendous amount of time and effort that goes into marketing these programs to the consumer.. But slapping on a label that says where this product was born, raised and slaughtered does not achieve the same result. In fact, a study by Kansas State University conducted in November of 2012 titled Mandatory County of Origin Labeling: Consumer Demand Impact made some key findings on this subject. The study found that mere country-of-origin information has not impacted consumer demand for beef or other covered products, and in fact, that many consumers are unaware labeling information exists. This is the issue with allowing the federal government to mandate a marketing program - it is not in their wheelhouse. Marketing at its very core relies on the distinction of one product from another. Neither USDA, nor any other government agency, can make that distinction based on origin labeling.

Food Fear Mongering

A colleague forwarded me this story from NBC news.​  It's really hard to know where to start in on all the misleading claims and innuendos.  There first couple paragraphs will give you a sense of the tone:

American eaters, let’s talk about the birds and the bees: The U.S. food supply – from chickens injected with arsenic to dying bee colonies – is under unprecedented siege from a blitz of man-made hazards, meaning some of your favorite treats someday may vanish from your plate, experts say.

Warmer and moister air ringing much of the planet – punctuated by droughts in other locales – is threatening the prime ingredients in many daily meals, including the maple syrup on your morning pancakes and the salmon on your evening grill as well as the wine in your glass and the chocolate on your dessert tray, according to four recent studies.

At the same time, an unappetizing bacterial outbreak in Florida citrus droves, largely affecting orange trees, is causing fruit to turn bitter. Elsewhere, unappealing fungi strains are curtailing certain coffee yields and devastating some banana plantations, researchers report.

​Strictly speaking, each of the above examples does indeed correspond to a real challenge faced in each of the above industries.  But, does it represent a "food supply under assault" as the title of the article suggests?  Are each of these the cause of global warming?  The author later blames problems on "mono-culture" agriculture but that doesn't fit well any of the commodities described above. 

Much of the paranoia seems to stem from an interview with one professor of public health at Johns Hopkins who is quoted as saying things like:​

We need to regard all of these (examples) as a very powerful motivator to try to work on the carbon emissions, to start pushing that parts per million of carbon dioxide back down

​and

“Maybe seeing this impact all this has on our ability to raise the food we depend on will get us to the tipping point of real policy change and real action,” Lawrence said. “I hope so.”

Another professor of environmental science is quoted as saying:

We’re in a situation where the food supply is more vulnerable than it has ever been

​Providing a few anecdotal stories does not constitute scientific evidence.  If we are indeed so vulnerable, why is it that crop prices in the US have come down off their highs a year or so ago.  If late corn planting were really a sign of disaster (as this article suggests), it would be reflected in high corn prices but that's not what we're seeing.    

Moreover, why didn't the author actually go to the data and look at per-capita food availability (which can be found here)​, which doesn't reveal any general lack of scarcity. Or, why didn't they turn to the research on the projected impacts of climate change on agricultural production, which suggests it may be beneficial for agriculture (for some counter evidence, see here).  Either way, yes climate change will likely hurt some regions and some commodities, but it will also help other regions and commodities.  Growing corn and melons in Canada will become much easier (and less costly) if it gets warmer there.  

Its this sort of fear mongering based on anecdotal evidence, rejection of modern technology, ​followed up by ill-advised (and under-researched) policy recommendations that largely motivated me to write the Food Police.

A Vote-Buy Behavior Gap

Glynn Tonsor at Kansas State University has created a great resource for the readers of Feedstuff magazine.  Glynn writes a periodic column where he takes recent research from the academic literature and boils it down to a layman's perspective.  I was pleased to see he featured some work by Kate Brooks at the University of Nebraska and myself in his most recent column.  Here were the implications Glynn took from our research:

Implications: This study highlights the potential pitfalls of inferring public preferences from private choices. In this particular study private choices suggested stronger preferences than were reflected in public preferences for a ban restricting production practice options. Conversely, in other settings the opposite behavioral differences are observed. One of the clearest examples is the approximate 5% market share held by cage-free eggs (revealing that the majority of egg consumers are not willing to pay cage-free market premiums) and majority of residents expressing support in ballot settings for bans on laying hen cages. There are several reasons researchers may find the same individual to behave differently when making decisions as a food purchasing consumer than when making decisions as a voting resident. Identification of these reasons and the economic implications of these behavioral patterns are an area in need of additional research as there is a growing list of parallel examples that present complex dilemmas for livestock producers.

Research on The (lack of) Effectiveness of Bloomberg's Large Soda Ban

Much has been written about the merits or demerits of Bloomberg's large soda ban (here was my recent take on it in the New York Daily News).​

However, there has been much less actual research conducted to determine whether such restrictions might curb consumption or on how retailers might respond.  Well, some researchers from UC San Diego conducted a small scale study on the issue that was just published in the journal PLoS One.

What they showed is that food companies can get around the ban by offering bundles of smaller-sized drinks and that people respond in kind by buying more soda!  The study reminds me of what happened when San Francisco tried to ban giving away toys in Happy Meals; McDonalds decided to instead sell them for a very low price ($0.10).  

That's the problem with a lot of these regulations - people and companies find a way around them in ways that the regulator couldn't envision and, as this PLos ONE study shows, it might even lead to weight gains.  It's like squeezing a balloon - the air doesn't leave it just moves to a different place.  Banning large soda or Happy Meal toys doesn't diminish demand for these items, it just causes people to seek out alternative means to get them.  ​

Here is the study abstract:​

Objectives

We examined whether a sugary drink limit would still be effective if larger-sized drinks were converted into bundles of smaller-sized drinks.

Methods

In a behavioral simulation, participants were offered varying food and drink menus. One menu offered 16 oz, 24 oz, or 32 oz drinks for sale. A second menu offered 16 oz drinks, a bundle of two 12 oz drinks, or a bundle of two 16 oz drinks. A third menu offered only 16 oz drinks for sale. The method involved repeated elicitation of choices, and the instructions did not mention a limit on drink size.

Results

Participants bought significantly more ounces of soda with bundles than with varying-sized drinks. Total business revenue was also higher when bundles rather than only small-sized drinks were sold.

Conclusions

Our research suggests that businesses have a strong incentive to offer bundles of soda when drink size is limited. Restricting larger-sized drinks may have the unintended consequence of increasing soda consumption rather than decreasing it.

While the study findings are intriguing, it must be said that the study is far from perfect.  For example, the study involves a bunch of college students making a number of hypothetical choices.  I'd much prefer to see an experiment where people actually had to pay (and eat) what they bought.  Moreover, as the study authors readily acknowledge, the study doesn't reveal whether people would actually drink both sodas or just give one to a friend, nor did it differentiate between diet or full calorie soda.  Thus, there appears to be fertile ground for additional research. 

Fat taxes may be even less effective than previously thought

An article that just appeared in the most recent issue of the American Journal of Agricultural Economics by Yuqing Zheng of RTI and Edward McLaughlin and Harry Kaiser of Cornell University presents some interesting thoughts regarding fat and soda taxes.

Most of the studies on fat and soda taxes use elasticities of demand to simulate the effectiveness of a tax.  The elasticity of demand tells us how responsive consumption of a product is to a change in it's price.  So, for example, an elasticity of demand of -0.6 would tell us that for every 1% increase in price, consumption would fall by 0.6%

Zheng and colleagues point out, however, that most people don't "see" the tax when they're shopping.  It only shows up on the bill when you check out.  As such, it is incorrect to directly use the price elasticity of demand  ​to infer how consumption of soda or fatty foods will change after a tax.  

They show that an excise tax (​which is levied on the supplier rather than the consumer) is probably more effective at reducing soda (or fat) consumption than a retail sales tax, but even excise taxes are likely to to be less effective at reducing consumption than an equivalent price increase.  

As a result, researchers need to adjust the demand elasticities before calculating the effects of a soda or fat tax (regardless of whether the tax is excise or retail).  Yet, almost no one does this.  The researchers show, however, that the required adjustment can be fairly dramatic.  In their "baseline" scenario, they show that the elasticity of demand needs to be reduced by a factor of 0.14.  So, if the elasticity of demand was -0.6, then we'd project a 1% increase in sales tax would only reduce consumption by 0.6*0.14 = 0.084%.  Instead, previous research on this topic has applied the original elasticity (e.g., 0.6) rather than the adjusted elasticity (e.g., 0.084).  Clearly, the adjusted elasticity will imply much lower effectiveness of the tax.

The authors conclude:​

Therefore, even a large increase in the sales tax rate on food and beverages will only reduce demand by a moderate degree.

and

our analysis of sales and excise taxes offers some explanation (e.g., imperfect tax knowledge, slow learning) on why the impact of sales tax is so difficult to detect, thus bridging the gap between the simulation studies and the empirical findings