China's Food Economy

Bloomberg has a great feature article on food and agriculture in China with excellent visuals.  The article makes the case (correctly in my view) that China will have to rely on technology to sustainable feed its growing population.  

“But China’s efforts to buy or lease agricultural land in developing nations show that building farms and ranches abroad won’t be enough. Ballooning populations in Asia, Africa and South America will add another 2 billion people within a generation and they too will need more food.

That leaves China with a stark ultimatum: If it is to have enough affordable food for its population in the second half of this century, it will need to make sure the world grows food for 9 billion people.

Its answer is technology.”

Check out the whole thing to see graphs on rapidly increasing protein consumption and high levels of fertilizer use in the country compared to the US and other locations.

New Competition for Meal Kits

About a year and a half ago I was interviewed by the Atlanta Tribune about a story they were running about prepared meal kit services (think Blue Apron, HelloFresh, or my family's favorite Martha and Marley Spoon)  One of the questions they asked me was whether I expected the market to grow  Here's what I said then.

“Hard to say. It will depend on the ability of the box services to continue to offer competitive offerings with grocery stores and restaurants, and it will depend on how these other food service outlets respond in turn. For example, restaurants already offer take out. And, what’s to stop Walmart or Kroger from offering their own boxes ready for pickup?”

As it turns out, I heard a story on NPR this morning by Dan Gorenstein with Marketplace covering precisely this topic.  Apparently Kroger and Publix are, in fact, going to create their own prepared kits.  It's doesn't take a genius to see that this was going to happen.  Gorenstein interviewed Northwestern economist Mike Mazzeo who said supermarket chains are "well positioned" to take a bite out of the growing business.  Mazzeo said  

“Supermarkets can get things at lower prices. They have access to all of the ingredients for these meals. They don’t have to do marketing. They can just put it on their shelves. ”

That is, grocery stores can provide a similar service at a fraction of the cost.  In some ways the grocery story offerings will be more convenient because one doesn't have to sign up for a subscription and pre-plan which and how many meals to buy and plan to be home when the box is delivered.  But, it would require you to go to the store, and that's part of the convenience of the meal delivery service - not having to visit the store.  

While I'm sure Blue Apron et al. can't be thrilled to see new competition from grocery stores, this is a good sign for consumers.  We'll have wider availability of options at lower cost.  

Escalating health care costs . . . for pets

I was intrigued by this article by Stanford and MIT professors, Liran Einav, Amy Finkelstein, and Atul Gupta in the most recent issue of the American Economic Review (ungated version here).  We are all aware that Americans spend a lot on health care, but there seems to be a lot of disagreement as to why.  Some say it's too much government regulation.  Others say too little.  These authors point out, however, that spending on pet health care roughly mirrors that on humans despite the fact that this is a largely unregulated industry. 

The authors write:

“The fact that despite these differences—often mentioned as potential explanations for the large and rapidly growing health-care sector in the United States—some pet health-care patterns appear qualitatively quite similar to the analogous human health-care pattern, strikes us as noteworthy. It should give us pause before attributing the large and rising health-care costs in the United States solely to the prevalence of insurance and government involvement. The similar growth patterns in US human and pet health care may also suggest that technological change in human health care may have spillover effects on related sectors, including perhaps pet health care or human care in other countries.”

A couple figures from the paper.

Food Demand Survey (FooDS) - May 2017

The results from the May 2017 edition of the Food Demand Survey (FooDS) are now in.

Some observations from the regular tracking portion of the survey:

• Willingness-to-pay for the "premium" cuts from each meat species (steak, chicken breast, and pork chop) all increased this month compared to last; exactly the opposite was true for the the lesser-valued cuts (ground beef, wings, and deli ham).  Willingness-to-pay for non-meat items declined significantly.
• Awareness and concern for a list of 17 items all fell this month compared to last. Concern for antibiotic use rose to the top three behind E Coli and Salmonella.
• Compared to last month, consumers increased expenditures on food at home but reduced expenditures on food away from home.  
• Fewer people declared vegetarian status or indicated suffering from a food borne illness this month than has been the case for more than a year.

Several new ad hoc questions were added to the survey this month.  

The first set of questions was added in response to some queries by Ranjith Ramanathan who is a meat scientist at Oklahoma State. He was interested in some issues related to how consumers buy and cook ground beef.  To focus in on ground beef eaters, we first asked: “Do you eat ground beef patties (i.e., hamburgers)?” About 88% of the participants answered “yes”.  Those who answered yes were then asked several questions related to cooking and buying ground beef patties. 

Ground beef eaters were asked: “How do you determine the doneness of ground beef patties when cooking hamburger?”  Choice options were: A) By using a meat thermometer, B) By visual observation (i.e., looking at the color of meat in the center of the patty), C) By cooking a certain length of time, or D) Other ways.  

Approximately two-thirds of the participants who said they eat ground beef patties, stated they determine doneness by visual observation.  Next most common, selected by about 18% of respondents, was determining doneness by length of cooking time.  Only about 13.5% said they used a meat thermometer to determine doneness.   

The next question asked: “What is your preference for the cooked internal color of ground beef patties?”  Response options were: Red, Pink, Brown, or Another color.

The majority of participants, about 69%, stated they prefer the internal color of ground beef patties to be brown.  About 26% of participants stated pink as their preferred cooked internal color. Only 5% of participants stated they would want a red center in their ground beef patties.  Less than 1% stated they would want another color. 

Participants were then asked: “To what internal temperature (degrees Fahrenheit) does the USDA recommend cooking ground beef patties?”  Respondents could answer on a slider scale that ranged from 100 to 200 in one degree increments.

The average temperature stated by participants was 162 degrees Fahrenheit (the median was 161).  The figure is remarkably close to the actual USDA recommendation of 160F.  Nonetheless, a large share of participants were incorrect in their assessment.   Thirty one percent stated a temperature less than 160 and 54.5% stated a temperature higher than 160.  Even providing a five-degree margin of error, 28% stated a temperature less than 155 and 37% stated a temperature greater than 165.  Thus, 28%+37%=65% of respondents gave an answer that was at least 5 degrees higher or lower than the USDA recommendation.  Below is a histogram showing the distribution of responses.

Next, participants were asked: “How is the ground beef you normally buy packaged?”  Response categories included text and photos of six different packaging options including: vacuum sealed, in a box as frozen patties, in butcher wrapped paper, as a chub, film wrapped, and in a tray.

Of those who eat ground beef, about one third stated they buy packaged ground beef in a tray.  Ground beef in a film wrapped packaged was selected by about 28% of participants.  About 18.7% of respondents stated they buy ground beef packaged as a chub.  8.5% said they normally buy ground beef in a box as frozen patties.  Only 5.6% of participants said they normally purchase ground beef in a vacuum sealed package. 

Finally, as I was grading final projects from one of my classes, I noticed one team, comprised of Ph.D. students Bernadette Chimai and Pedro Machado, asked an interesting question on a survey they'd posed to students.  I modified it an included it on FooDs.  Here is a screenshot of the question asked:

Participants most frequently stated that free range chickens were the most efficient (i.e., used the least amount of feed to produce a pound of meat) followed by grass fed cattle and grain fed chickens.  However, response patterns were not necessarily symmetric.  Thirty percent of participants believed feedlot cattle were least efficient (i.e., used the most feed to produce a pound of meat) followed by 25%, who indicated grass fed cattle as most inefficient.  About an equal number of respondents thought free range pigs were both most and least efficient.  
 

To help summarize the results, I calculated the difference in the percent of respondents who viewed an animal and production system as most efficient and subtracted it from the percent who viewed it as least efficient.  Overall, free range and grain fed chickens were ranked highest in perceived efficienciency followed by free range pigs.  Grain fed pigs and feedlot cattle were perceived as least efficient.  

Productivity and Sustainability

Last week, I noted the possibility of using measures of farm productivity and efficiency as a means of measuring sustainability.  It seems I wasn't the only one thinking along these lines.  In the newest issue of the journal Applied Economic Perspectives an Policy, three professors at Wageningen University in the Netherlands, Daniel Gaitan-Cremaschi, Miranda Meuwissen, and Alfons Lansink, offer a more fully developed proposal along the same lines.  Here's the abstract from the paper.  

“Sustainable agricultural commodities should be favored in international trade negotiations to meet the growing demand for food in a context of environmental conservation, population growth, and globalization. There is a need for a metric that allows for the differentiation of traded agricultural commodities according to how sustainably they were produced. In this context, this paper develops two single metrics, based on a Total Factor Productivity indexing approach, for benchmarking products in terms of their sustainability performance. Both metrics are adjusted to internalize the social and environmental externalities of food production, and to account for the sustainability effects of stages along agri-food supply chains. Key aspects such as data availability, the selection of variables, and the selection of sustainability standards and targets are discussed.”