One of my friends and colleagues was recently traveling through northern California and stopped to eat in a restaurant that presented the following menu:
Back in the 14th century you could buy indulgences from the Catholic church. I'm amazed that assuaging the sin of gluttony has fallen to an all time low of just $0.75.
This article by Clare Malone offers a fascinating look at the history of the U.S. wine industry. Here's one tidbit about Teresa Carrara an Italian immigrant who married a man named Franzia and who was mother-in-law to Ernest Gallo. Seems she's responsible for a huge chunk of today's U.S. wine production.
““She provided the seed money for Gallo, which probably does 40 percent of the wine business in the US; for our company, which does about 15 percent of the wine business in the US; and then her grandsons—yes, grandsons: Fred and Joe and John—started the Bronco Winery, which probably does another five percent of the business in the US,” Arthur Ciocca, former CEO of the Wine Group, remarked in a 1999 oral history project on the California wine industry for the University of California at Berkeley. “[She’s responsible for] more than half of the wine business [in the US].””
And there's this, and much more
“Towards the end of Prohibition, California winemakers began to advocate for certain changes in regulation that would drastically alter their business structure and possibly put their lives at risk—they wanted to ship juice.
In 1929 they got their wish when the federal government overrode stipulations in the Volstead Act—the era’s defining policy—that outlawed selling grape juice concentrate. This was good news for California farmers, but bad news for the Chicago mob. One key ingredient to bootlegged wine was the syrupy juice derived from grapes—grapes that Capone’s network had, until the law was overturned, controlled.
The gangster was enraged and issued death threats again certain growers and shippers. The problem was big enough that the FBI decided to investigate, and Joe Gallo was on a list of grape shippers to be interviewed by authorities”
The September 2015 edition of the Food Demand Survey (FooDS) is now out.
Compared to last month, consumer willingness-to-pay (WTP) fell for all the products (meat and non-meat alike) on our survey. Among meat products, WTP for deli ham witnessed the highest percentage decrease of approximately 21%. Steak only saw a slight decrease from last month at approximately -2.5%.
These reductions in WTP might seem problematic for meat industry participants but it is useful to put these in a longer context. WTP for steak, chicken breast, deli ham, and chicken wing are all higher relative to this time last year. Here is a graph of the WTP values since the beginning of FooDS. While there are ups and downs, the overall trends are positive for each of the meat cuts shown below, and in fact, last month was the highest WTP observed for several meat products since we started the survey over two years ago.
We observed a noticeable uptick in consumer awareness of Salmonella in the news this month - likely a result of widely publicized Salmonella outbreaks. Interestingly, however, concern for Salmonella did not increase this month compared to last. Concern for GMOs was down a bit this month.
Several new ad hoc questions were added to the survey this month.
One set of questions related to food waste. These will be reported separately at a later date.
Another set of questions dealt with consumers’ satisfaction with farmers and agriculture, and the survey was designed to see how the framing affected satisfaction. The questions came about after a conversation with Mary Ahearn at USDA-ERS.
Respondents were randomly allocated to one of three conditions. In the 1st condition, participants were asked: “How satisfied are you with the decisions and manage practices of farmers these days?" Respondents in the 2nd condition were asked the same question but the words “of farmers” were replaced with “of agricultural producers”. Respondents randomly allocated to the 3rd condition were asked the same question but the words “of farmers” were replaced with “in agriculture”.
All responses were on a 1 to 10 slider scale where 1 was “completely dissatisfied” and 10 was “completely satisfied.”
Overall, respondents were more satisfied than dissatisfied with farmers, producers, and agriculture, with means higher than 5 our of 10 for all three. However, respondents were affected by framing. On average (on the 1 to 10 scale), there was greater satisfaction with “farmers” at 6.63 than for “producers” at 6.29 and than for “agriculture” at 5.93.
Whereas almost 10% expressed 10=completely satisfied for “farmers”, only 5.8% said the same of “agricultural producers”, and only 5.5% of “agriculture.” Here's the entire distribution of responses.
In the Food Police, I wrote the following about local foods when critiquing the argument that a larger local food system would be better for the environment and for food security:
“Because of common weather and temperature, all farms within a region are likely to have their produce come to market around the same time. In a world with regional and international trade, that isn’t a big deal as the surplus can be shipped out to other locations. But, in the locavore’s world, the result is inevitable: spoilage and waste.
...
It would be foolish to invest all your retirement savings in a single stock. The financial experts tell us to diversify. And if we shouldn’t keep all our financial eggs in one basket, the same goes for the real ones. One of the things that makes farming unique compared to other businesses is its unusually large reliance on the weather. An unexpected drought, a rain at the wrong time, an early freeze, or a hail storm can devastate a whole farming community or even an entire region. While farmers protect themselves financially against these kinds of risk by buying crop insurance, what about the food consumer? ”
This new paper in the Journal of Agriculture and Applied Economics by some Hawaiian researchers provides some empirical evidence of the price volatility I mention surrounding local foods. Here's a graph from their paper showing production and prices of local tomatoes over 12 months of the year
There is a very clear negative correlation between production and price. When tomatoes are "in season" and local producers have a lot to sell, prices are low, and vice versa.
Of course, that inverse relationship is true for most of agricultural production. But, here's the difference for a lot of local food production: A) with grains you can store the commodity to help smooth out prices over time (something much harder with perishable fruits and vegetables) and B) with trade you can ship to locations with different seasons (where there is less supply and therefore higher prices).
In short, by limiting sales to local consumers, producers are opening themselves up to a lot of potential price volatility, and to lower prices at the exact time they have produce ready to sell. How can the producers partially mitigate such effects? Find people in other locations with different seasons with whom to trade.
The authors write:
“It can be seen that local price premiums/discounts vary depending on product type and season. For grape and cherry tomatoes, there is an 18.18% local premium during season 1 (before the peak season). However, starting from season 2 (local peak season), price difference declines and becomes insignificant. On the other hand, there are constant local discounts for other tomatoes throughout the year, although prices are considerably lower in seasons 2 and 3. Comparing the results for both types of product, there is a clear downward effect on prices of local tomatoes during the peak production season, suggesting that market prices are likely influenced by the local production level.
One further contributing factor to the price discounting may be the capacity limitations in marketing and distribution by local producers in Hawaii. Since large national producers with more marketing and logistics competence have access to a larger market, production surpluses can be spread over more market areas with less need for discounting. In comparison, small local farms are often constrained by lack of distribution channels and market outlets (Martinez et al., 2010). In the case of Hawaii, because local tomatoes are exclusively supplied to the Hawaiian Islands, this may result in discounting at the retail level in times of production surplus.
Lastly, the Armington analysis shows that consumer choices with respect to locality and organic origins are elastic, and that both local and organic tomatoes are quite substitutable to import nonorganic tomatoes. ”
The journal Applied Economic Perspectives and Policy just accepted a paper I've written with Glynn Tonsor, which provides new estimates of consumer demand for different meat products using what is probably one of the largest and longest-running surveys choice experiments (a survey method) to date.
The graph below showing changes in retail meat prices from January 2010 to January 2015 is what motivated the paper. Beef and pork prices rose dramatically over this period (note: in the past few months they've come back down) whereas chicken prices were and still are fairly stable. The following is further motivation from the paper:
“Industry observers have expressed surprise about how consumers have responded to recent price changes (Ishmael, 2014). In particular, expenditures for beef and pork have not fallen as much as some people expected given the high prices. Industry analysts have asked “where is the tipping point” when consumers will stop buying beef and pork (Rutherford, 2014), but it may be that demand elasticities are more non-linear than previously realized. Moreover, relative price swings would have seemed to have favored chicken over beef and pork, and yet there does not seem to be a high degree of substitution in the current market environment. Such observations raise the possibility that cross-price elasticities have changed or are lower at higher price levels.”
You can read the paper for the methods. Here I'll just highlight what we found.
First, people with different incomes choose different things. High income consumers are more likely to choose steak and chicken breast than are low income consumers, and the opposite is the case for chicken wings, ground beef, and deli ham.
Second, beef prices are more sensitive to changes in the price of chicken than the reverse. Here's an illustration of that phenomenon using our estimated model for middle income consumers.
Third, and somewhat surprisingly (though consistent with industry observations over this period), the quantity of beef and pork demanded is less sensitive to price changes when prices are high as compared to when prices are low. In econ-jargon, demand is more inelastic as prices rise. You can see that in the graphs above, and the paper fleshes out that finding a bit more by showing the bias in models that ignore this non-linearity in demand.
Hopefully these new estimates will help us better predict in the near future what happens when beef and pork prices fall, and will help producers better anticipate the impacts of future price hikes.
This analysis used a huge data set (110,295 choices made by 12,255 consumers) collected over a year and half long period. This is of course from my Food Demand Survey (FooDS). The present analysis assumed people's preferences staid the same over this period. Up next on the research agenda is to look at how these demand estimates have been changing (or not) over time using even more data over a longer time period., and investigating whether these survey-based demand changes can forecast changes in retail meat prices.