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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.  

Stossel on Food

I'm writing this post for two reasons.  The first is to note that John Stossel has been running some interesting pieces on food and he raises a number of interesting points that are often forgotten.

For example, here he is in a piece at Reason.com on impacts of reputation:

Tyson Foods, Perdue and McDonald's have brands to maintain—and customers to lose. Ask Jack in the Box. It lost millions after a food-poisoning scandal. 
Fear of getting a bad reputation makes food producers even more careful than government requires. Since the Eisenhower administration, our stodgy government has paid an army of union inspectors to eyeball chickens in every single processing plant. But bacteria are invisible! 
Fortunately, food producers run much more sophisticated tests on their own. One employs 2,000 more safety inspectors than government requires: "To kill pathogens, beef carcasses are treated with rinses and a 185-degree steam vacuum," an executive told me. She also asked that I not reveal the name of her company—it fears retaliation from regulators. 

The other reason for the post is shameless self promotion.  I filmed a bit yesterday in New York with Stossel on fat taxes, ingredient bans, and the government’s role in food.  The bit is slated to air on a special on Fox News in February.

Some Obesity Math

When I was in graduate school, we had an old book laying around titled something like How to Lie with Statistics.  I don't remember ever actually reading the book but the title says it all: one can tell two entirely different stories depending on how one chooses to report the numbers.

I fear that much of the rhetoric surrounding obesity has fallen into this trap.  According to CDC data, the average weight of men aged 40-49 has increased roughly 15 lbs in the past 10 to 15 years (compare data in this publication to this one showing the average weight going from about 187 lbs in 1988-1994 to about 202 lbs in 2003-2006; I should also note that more recent data shows these weight gains leveling off).  

Fifteen pounds doesn't seem like a huge number to me (I've personally lost and gained much more than this amount in my adult life).  So, how is it that this small to medium sized increase in average weight gets translated into a message that there is an epidemic?  Part of the answer is that when scientists translate averages into prevalence rates, the numbers look a lot scarier.   

Stick with me while I illustrate with an example.  

Let’s take a hypothetical population of men whose average weight is 180 lbs.  Suppose, men’s weights vary in the population according to a normal distribution with a standard deviation of 30 lbs.  This means roughly 68% of the men will have weights between 150 lbs and 210 lbs.  Suppose also, for convenience sake, that all the men are the same height: 5 ft 10 inches. 

Obesity is defined as BMI greater than 30 (BMI is weight in kg divided by height in meters squared).  In our hypothetical example, where everyone is the same height, a man will be obese if he weighs more than 209 lbs.  Moreover, given our assumptions about the normal distribution, we can readily project that 16.6% of men in this population will be obese (1 minus the cdf of a normal distribution with mean 180 and standard deviation of 30 evaluated at the point 209 is 0.166).

What if all men gain a paltry 5 lbs?  The average weight goes from 180 up to 185 lbs.  Yet, (again given the assumption of the normal distribution), obesity prevalence will go up from 16.6% to 21.1%.

Thus, we have what most of us would consider a rather trivial gain in weight (an increase in 5 lbs or a 2.8% increase in weight); however, we have what appears to be a rather dramatic increase in obesity prevalence (prevalence goes up 4.48% or a 27% increase in prevalence of obesity!).

If we run through the same example again assuming men gain an average of 10 lbs, we can find that obesity prevalence goes up almost 58% even though weight only increased 5.5%!

Both statistics are "true" but they tell very different stories.