Should Retailers be Required to Stock Conventional Eggs?

According to the Des Moines Register: 

“The Iowa Senate gave final passage Monday to a controversial bill requiring Iowa grocers in a supplemental food program to offer conventional eggs if they sell eggs from chickens housed in a cage-free, free-range or enriched colony cage environment.

House File 2408 was approved 32-17, sending it to Republican Gov. Kim Reynolds for her consideration. It was approved in the House last week on an 81-17 vote.

Sen. Herman Quirmbach, D-Ames, opposed the bill, complaining that it’s clearly contrary to free enterprise, anti-regulation policies espoused by Republicans. “This is really direct interference in the marketplace,” he said.

But Sen. Dan Zumbach, R-Ryan, who farms in northeast Iowa, lauded the legislation for assuring that a low-cost choice for protein is available when many low-income Iowans head to the grocery store. Free-range or cage-free eggs are typically more expensive than conventional eggs from large farming operations.”

The background context here is that many retailers have made pledges to only stock cage free eggs, and some states have passed laws banning the sale of eggs from hens in the most confined cages. 

As readers of this blog likely know, I'm a big fan of consumer choice, and have done a fair amount of research on the costliness of policies that would remove products from the marketplace.  I've also routinely pointed to the benefits of practices and technologies that increase agricultural productivity.  Thus, one might suspect I'd be a proponent of the new law.  While I'm not necessarily opposed to it, I'm less sanguine about the long-run potential benefits.   

I suspect the bill will largely be interpreted as a producer protectionist measure.  One concern with a bill like this is that it might raise an issue to the attention of consumers that wasn't previously on the radar screen and might create a PR problem for the industry and invite threat of future disadvantageous legislation.  A consumer who wasn't thinking about this issue now sees a bill supported by the egg industry requiring sellers to offer a certain option.  What is their reaction?  It could be: "What's the egg industry trying to do that retailers are forced to stock an option they don't want to stock?" Or, maybe even: "I now need a bill requiring that cage free is also provided."  If one is skeptical that issue like this might create PR problems, the failure of the question 777 "right to farm" initiative in Oklahoma is instructive.

I'm not sure there are many other parallels for policies that would force sellers to provide an option.  That is, shouldn't freedom work both ways? Freedom for consumer to choose from what is offered but also freedom for producers/retailers to decide what to produce and sell?

If consumers really won't bear the cost of retailer pledges to go cage free, there will be a pretty strong incentive for retailers to reverse course.  I view retailer pledges to go cage free in fundamentally different light than a law to ban conventional eggs; one is a market-based decision and the other is not.  If retailer A pledges to go cage free and most consumers aren't willing to pay the higher cost, then there will be an incentive for retailer B to offer a lower-cost conventional version for people who are more price sensitive.  No such option is available if there is a blanket ban.

The egg industry is surely trying to "fight fire with fire" by using the political process in a way that animal advocacy organizations have to advance their interests.  If animal advocacy organizations can convince voters or a legislature to ban conventional egg production, then the egg industry can use a similar process to require conventional egg sales.  In that sense, perhaps all is fair in love and war.  What I'd rather see both sides do, however, is to try to convince consumers (and the retailers who sell to them) of the the merits of their cause rather than to get to a desired end by fiat.     

Gains to Chinese Agricultural Research and Extension

Last week, Nature published this piece on a massive study conducted by Chinese agricultural researchers.  Accompanying the piece was a summary/editorial describing the study:

“Running from 2005 to 2015, the project first assessed how factors including irrigation, plant density and sowing depth affected agricultural productivity. It used the information to guide and spread best practice across several regions: for example, recommending that rice in southern China be sown in 20 holes densely packed in a square metre, rather than the much lower densities farmers were accustomed to using.

The results speak for themselves: maize (corn), rice and wheat output grew by some 11% over that decade, whereas the use of damaging and expensive fertilizers decreased by between 15% and 18%, depending on the crop. Farmers spent less money on their land and earned more from it — and they continue to do so.”

The project appears to have created substantial economic benefits.  The authors of the study write:

“Direct profit, calculated from increased grain output and reduced nitrogen fertilizer use, was US$12.2 billion (Table 1), which does not include relevant environmental benefits associated with reductions in reactive nitrogen losses and in GHG emissions. On the basis of the rough estimates, the cost:benefit ratio would be 1:226. ”

The cost-benefit ratio is in some ways over- and in other ways under-estimated.  The benefits are over-estimated in the sense that it does not appear it takes into consideration the fact that greater grain production will dampen prices (it is also unclear how the benefits and costs are discounted or not over time).  The benefits are under-estimated because they do not include any of the environmental improvements.  

It is useful to contrast these findings with the rather large research on the value of agricultural R&D and extension investments in the U.S.  Jin and Huffman calculated the rate of return on spending on agricultural extension in the U.S. at 100%.  More broadly, Julian Alston gave the fellow's address at this this year's AAEA meetings on precisely this topic, and his remarks were recently published in the American Journal of Agricultural Economics.  He writes:

“Our estimates (Alston et al. 2010a, 2011) indicate that U.S. federal and state government expenditure on agricultural research and extension generates benefit-cost ratios of at least 10:1 (more likely 20:1 or 30:1)—evidence of a serious underinvestment. Pardey and Beddow (2017), echoing Pardey, Alston, and Chan-Kang (2013), suggested that a reasonable first step would be to double U.S. public investment in agricultural R&D—an increase of, say, $4 billion over recent annual expenditures. A conservatively low benefit-cost ratio of 10:1 implies that having failed to spend that additional $4 billion per year on public agricultural R&D imposes a net social cost of $36 billion per year”

Given the lower level of development in China, it is certainly possible to imagine that the rate of return on investments in agricultural research and extension being higher than is the case in the U.S.  But, can the benefit cost ration really be 10 times higher in China than the U.S. (226:1 vs. 20:1)?  One interesting thing about Chinese study in Nature is that, if I read correctly, it didn't entail development of any new genetics, pesticides, etc; rather it seemed to largely entail the application of previously developed "science" and practices to the particular geographies in question, and as such, the costs might have been much lower than in situations where new technologies are being created. 

In a sense, the shows an enormously high value to "better information."  This contrasts with perspectives such as this one by David Pannell, who argues that better technologies are much more impactful than "better information."  One way to reconcile this seeming paradox is that that the "information" conveyed to the Chinese farmers was to use better technologies and practices that were already known to exist.  Here in the developed world, the knowledge/technologies are likely already more widely dispersed.  

I'll end with this quote from Alston's paper, who articulated the value of increased productivity in a createive way:

“Clearly agricultural productivity growth is enormously valuable. Of the actual farm output in 2007, worth about $330 billion, only one-third (i.e., 100/280 = 0.36) or about $118 billion could be accounted for by conventional inputs using 1949 technology, holding productivity constant. The remaining two-thirds (i.e., 180/280 = 0.64) or about $212 billion in that year alone, is attributable to the factors that gave rise to a 180% increase in productivity since 1949—including improvements in infrastructure and inputs (if not captured already in the indexes), as well as new technology, developed and adopted as a result of agricultural research and extension, and other sources of innovations.”

Understanding the Impacts of Food Consumer Choice and Food Policy Outcomes

The journal Applied Economics Perspectives and Policy just published a special issue in which  agricultural and applied economists provide their thoughts on how we might help tackle some of society’s most difficult problems and challenges.  I co-authored one of the articles with Jill McCluskey.  Here's the abstract:

“The food consumer plays an increasingly prominent role in shaping the food and farming system. A better understanding of how public policies affect consumer choice and how those choices impact health, environment, and food security outcomes is needed. This paper addresses several key challenges we see for the future, including issues related to dietary-related diseases and the efficacy of policies designed to improve dietary choices, trust in the food system, acceptance of new food and farm technologies, environmental impacts of food consumption, preferences for increased food quality, and issues related to food safety. We also identify some research challenges and barriers that exist when studying these issues, including data quality and availability, uncertainty in the underlying biological and physical sciences, and the challenges to welfare economics that are presented by behavioral economics. We also identify the unique role that economists can play in helping address these key societal challenges.”

Other contributions in the special issue include:

• "Agricultural and Applied Economics Priorities for Solving Societal Challenges" by Jill McCluskey, Gene Nelson, and Caron Gala
• "Economics of Sustainable Development and the Bioeconomy" by David Zilberman, Ben Gordon, Gal Hochman, Justus Wesseler
• "Sustaining our Natural Resources in the Face of Increasing Societal Demands on Agriculture: Directions for Future Research" by Madhu Khanna, Scott Swinton, Kent D Messer
• "Climate Change as an Agricultural Economics Research Topic" by Bruce McCarl and Tom Hertel
• "Big Data in Agriculture: A Challenge for the Future" by Keith Coble, Ashok Mishra, Shannon Ferrell, and Terry Griffin
• "The Economic Status of Rural America in the President Trump Era and beyond" by Stephan Goetz, Mark Partridge, Heather Stephens
• "Food Insecurity Research in the United States: Where We Have Been and Where We Need to Go" by Craig Gundersen and James Ziliak
• "The Farm Economy: Future Research and Education Priorities" by Allen Featherstone
• "A Research Agenda for International Agricultural Trade" by Will Martin
• "Energy Economics" by Wally Tyner, and Nisal Herath

Do consumers care how a genetically engineered food was created or who created it?

That's the tile of a new paper I co-authored with Brandon McFadden at University of Florida and Norbert Wilson at Tufts that was just released in a special issue of Food Policy, which is focused on genetically engineered food (aka GMOs).

In some ways, our paper is like three papers smushed into one: we tie several analyses together under one theme.  Here's part of the motivation:

“heterogeneity [in preference] across products or breeding technologies rather than people is important because a “GMO” is not a single thing, but rather represents a class of many possible foods and technologies that could have been created for many different reasons by different innovators. The ever-changing capability to modify genomes in new ways requires asking new questions. Understanding consumer reactions to different GE foods, technologies, and innovators is increasingly important as new technologies such as CRISPR or gene editing have
emerged which avoid transgenic manipulations. Additionally, new start-ups and non-profits have entered the space with new products that differ from those commercialized by large agribusinesses”

In addition to documenting whether concern for GMOs has increased over time (answer: they haven't), we study whether:

“(1) certain kinds of GE foods or plant breeding technologies are more acceptable to consumers, (2) consumers prefer that all biotech applications applied to food be regulated identically, and (3) preferences for GE food depend on the innovator. ”

We find that people are most supportive of regulations that focus on the outcomes from plant breeding rather than focusing on the particulars of which breeding method was used.  We also find that support or opposition to a GMO depends on who created the GMO.  Finally, concerns about the safety of GMOs are related to consumers' perceptions of who benefits from the GMO.  Here's one of the key figures.  

USDA Economic Research Service

The president's latest budget proposal suggests the following: 

“The Budget proposes to streamline the research efforts of the Economic Research Service by eliminating low priority research that is being conducted within the private sector and by non-profits and focusing on core data analyses in line with priority research areas. The Budget fully funds the anticipated needs for the release of the Census of Agriculture and provides a framework to better streamline the Department’s statistical functions, leverage administrative efficiencies, and focus on core data products similar to other statistical agencies elsewhere within the Government.”

This budget document (page 69) proposes a significant 47.7% cut for the Economic Research Service (ERS) - from $86 million to $45 million.  

Of course this is just a proposal and may not be enacted, but the size of the proposed cut is sufficient to raise eyebrows.  This is particularly true for agricultural economics profession, which often relies on ERS for data, funding, leadership, and employment. 

If you're not familiar with the ERS, there is a good chance a google search about almost any important topic related food or agricultural economics will ultimately point you to their website (here is one summary of the agency by a former ERS administrator). 

Ever wonder how we know things like: the farmer's share of the retail dollar, or per-capita consumption of beef, or cost of producing corn, or how food prices will change next year or the price of broccoli, or how farm sizes and structure have changed over time, or whether US agriculture is more or less productive now than in the past?  If so, you can thank the ERS.  It is true that many university researchers also work on these topics and produce similar statistics, but the ERS often provides widely established benchmarks and "gold standards." 

If you want to see the kinds of things the ERS does, following their daily "chart of note" is a good place to start.