Blog

Bacon Causes Cancer: Do Consumers Care?

That’s the title of a new working paper I’ve co-authored with Purdue PhD student, Xiaoyang He. The answer to the question is: “yes,” retail bacon prices and sales fell following the pronouncement that processed meat was classified as a carcinogen; however, we did not find the same for other processed meat categories, ham and sausage. Maybe all those headlines like “The great bacon freak-out” and “Eating just one slice of bacon a day linked to higher risk…” really served to focus people’s attention. Here is the abstract:

In October 2015, the International Agency for Research on Cancer (IARC) released a report classifying processed meat as a type 1 carcinogen. The report prompted headlines and attracted immediate public attention, but the economic impacts remain unknown. In this paper, we investigate the impacts of the IARC report on processed meat prices and purchases using retail scanner data from U.S. grocery stores. We compare changes in prices and sales of processed meat products to a constructed synthetic control group (using a convex combination of non-meat food products). We find a significant decrease in bacon prices and revenues in the wake of the IARC report release, but we find no evidence of a demand reduction in ham and sausage. At the same time, we find beef sales and revenue increased significantly after the report, while beef price significantly fell.

That bacon prices fell alongside the volume sold is a clear signal that consumer demand for bacon fell as a result of the IARC report.

As we discuss in the paper, a key challenge with identifying the effects of the IARC report rests in constructing a counter-factual prediction of what would have happened to prices and sales of processed meat products had the IARC report not been released. We cannot use data from an unaffected location because the media reports were widely distributed across the U.S. Instead, we use statistical methods (the so-called synthetic control method) to identify alternative food products as controls. We describe the approach as follows:

The synthetic control method sidesteps this problem and uses a combination of candidate controls instead. We Nielsen retail scanner data to determine the effect of the IARC report on processed meat markets. This data contains weekly information regarding sales, price, and revenue for processed meat categories as well as categories that are included in the synthetic control group. We use the data from 2014 to 2016, which includes approximately one year of data before and one year of data after IARC report released date. The post-IARC time period is long enough to determine, if any impact exists, how long it lasts.

In essence we use the the estimated relationship among dozens of possible grocery item prices and bacon prices prior to IARC report release to predict what bacon prices would have been had the report release not occurred. Here is the calculation of actual and counter-factual bacon prices ($/oz) before and after the report release:

baconIARC.JPG

After a few weeks of bacon prices remaining above their predicted values, bacon prices ultimately averaged 6.5% lower than what we predict would have occurred had the IARC report not been released.

You can read the whole thing here.

Resetting the Table: Straight Talk About the Food We Grow and Eat

That’s the tile of Robert Paarlberg’s latest book, set to be released on February 2. I talked to Rob a bit about the project a couple years ago when he was in Indiana interviewing a few farmers for background research. I should note Rob is a West Lafayette native, and his father Don Paarlberg was a faculty member in the Agricultural Economics Department at Purdue, in addition to serving in a variety of government roles including Assistant Secretary of Agriculture under Eisenhower.

Here is my “blurb” for Resetting the Table.

“In Resetting the Table, Robert Paarlberg fact checks the most central myths of the modern food movement. Paarlberg’s firm grasp on the realities of modern agriculture lend credence to his insights on how we might take meaningful steps toward solving our dietary and environmental ills. He argues that food policy, rather than farm policy, should serve as the focal point of action. In doing so, he offers valuable straight talk to commercial farmers and highlights the critical importance of continued innovation and entrepreneurship in agricultural production. This is a must read book for anyone interested in understanding where their food comes from and the policies that affect how we eat

You might also check out a review of the book in the Wall Street Journal, where Paarlberg’s book is reviewed alongside Mark Bittman’s predictably polemical new release entitled Animal, Vegetable, Junk.

Food Insecurity among College Students

Previous research has reported shockingly (dare I say, unbelievably) high rates of food insecurity among college students. For example, here is one 2019 study reporting “60 percent of students had experienced food insecurity within the past thirty days or housing insecurity/homelessness within the past year.” Frankly, I’ve found these results a bit hard to believe given overall food insecurity rates in the U.S. are less than 10% and the data showing that young adults from wealthier households are more likely to go to college than those from poorer households. None of this is to say there isn’t any food insecurity on campus, or that we shouldn’t undertake some efforts to reduce the problem; however, we need more thoughtful discussion about what, precisely, is being measured in these studies. Particularly, when we see that 26% of college students on unlimited meal plans show up as food insecure according to traditional measures.

Thus, I was pleased to see this paper by Brenna Ellison and colleagues just released in the journal Food Policy. As they describe, there are high stakes to getting the estimates of food insecurity right:

A growing body of research among college students has estimated remarkably high levels of food insecurity when compared to food insecurity estimates from the general population over the past decade, with recent literature reviews reporting average prevalence rates of 33–51% compared to 9.8% among U.S. adults. Given these high rates of food insecurity, policymakers at the state- and federal-levels are considering legislation to better understand and ultimately alleviate food insecurity in the college student population. Further, the National Postsecondary Student Aid Study will soon collect national surveillance data on college student food insecurity. However, emerging research suggests that existing food insecurity measurement tools may not perform as expected when used with college students. Indeed, there is no food insecurity measure that has been validated for use with college students.

As they go on to discuss, a big issue is that food security is primarily measured in this country with a set of 18 survey questions, like “I worried whether my food would run out before I got money to buy more.” Importantly, the official government statistics on food security don’t even ask people these questions if people’s income is sufficiently high (it is assumed high income households are, by definition, food secure). Previous research has shown one can get MUCH higher food insecurity measures if you ignore these income thresholds. Ellison et al. write:

To date, only one study has attempted to test the use of screeners in the college population (Nikolaus et al., 2019b), with results indicating that using the two-item screener produces substantially lower (13–15 percentage points lower) food insecurity rates. A recent study in the general population found similar results, with significantly higher prevalence rates of food insecurity without the use of screening protocols (Ahn et al., 2020). It should be noted that the income screener is not easily adapted to the college population due to the challenging nature of estimating income for college students, as they may have financial resources from the federal government (e.g., Pell grants), scholarships, parents/family, or other social supports in addition to any individual income. Therefore, alternative screening procedures may need to be considered to reduce respondent burden among the college population in the future.

The authors argue for more work to derive food insecurity measures specifically designed (and validated) for college students rather than just assuming general population surveys “work” for students as well. College students are a unique population:

For college students who are emerging adults, the ongoing transition from their parents’ households to other housing arrangements may also pose challenges for the use of “household” phrasing in questionnaires. Without clarification, students may interpret this as their parents’ households (in which they still may reside for extended periods of time) rather than their current housing situation. Students may also question whether they should include roommates, partners, or others as members of their “household” (Ames and Barnett, 2019). It is also possible that students experience housing insecurity and lack a “household” altogether (Goldrick-Rab et al., 2018).

The whole paper has solid advice on next steps in designing appropriate food insecurity measures for college student populations.

Resilience through Disruption

That’s the title of a new report on the impact of the COVID-19 pandemic on Indiana and the future of food and agriculture that I helped prepare with Ernst & Young (EY) for Agrinovus Indiana.

The report aims to characterize and document the particular features of the Indiana agricultural and food supply chains (including interviews with key players in the chains) and identify how different segments have been affected by the pandemic. Some key findings include:

  • Aggregate losses attributed to the pandemic across major commodities produced in Indiana (corn, soybeans, hogs, dairy and eggs) are estimated at more than $500 million.

  • During the spring lock-downs, food-away-from-home spending in Indiana fell by over 60 percent, and remains down by over double-digits from January 2020; and

  • The increasing complexity in food retail continues to grow - in the 1960s the average grocery store offered 6,000 products – today, that number is more than 33,000.

Recommendations are:

  • Implement transparency and traceability – Consumers, customers, processors and manufacturers increasingly require transparency, and companies need the ability to see real-time information about their supply chains.

  • Increase collaboration – To meet evolving consumer needs for nutrition, affordability, sustainability and transparency, food companies need to collaborate between buyers and suppliers to measure and manage risk.

  • Build last-mile agility – A balance of efficiency with robustness must exist in the food supply chain to plan for systemic disruption. Manufacturers should consider inventory holding arrangements with adjacent chain participants to build disruption buffers.

  • Reexamine customer segmentation – Consumers are changing the way they shop, the products they purchase and the attributes they prioritize. Companies need to focus on key purchase criteria, shopping behavior and generational differences.

  • Invest in the future – Changes in labor availability and consumer demands offer enormous opportunities for investment, and Indiana has the infrastructure, knowledge and skilled labor to compete for venture capital funding in food and agriculture.

I enjoyed working on this project, which was the brainchild of Mitch Frazier, president and CEO of Agrinovus, with the work being led by Brian Bourquard at EY and assisted by, among other people, Kendra Morissette, a PhD student in Agricultural Economics at Purdue.

Debate on Food Waste

Earlier today, I had the pleasure of participating in a Munk-style debate at the (virtual) 11th Annual Canadian Agri-Food Policy Conference hosted by the Canadian Agricultural Economics Society,

The proposition up for debate was: “Government policies seeking to reduce food waste are an effective means of addressing food security.”

I was asked to take on side against the proposition. Mike von Massow from the University of Guelph took on the side in favor, and Brady Deaton, also from University of Guelph, moderated.

Below was my opening statement.

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It is a pleasure to be with you all today. Thank you for the opportunity to weigh in on this important issue.

I want to start off looking at the proposition that is before us and defining some terms. My task here today is not to convince you that food waste is unproblematic, that food insecurity is acceptable, or that government actions can’t reduce food insecurity. Rather, my task is much narrower. In particular, I aim to demonstrate that food waste reduction is not an effective or efficient means of improving food security; not only that – but government policies, specifically, are likely to be ineffective and inefficient in reducing food security through the means of reducing waste.

What is waste? Food waste is often discussed as an accounting concept, as the gap between what is produced and what is consumed. The implicit idea is that if we narrow the gap, we can save the many resources, including land, water, and energy, that went into producing the food. But, this begs the question: why is there a gap in the first place, and would we really “save” resources by trying to narrow it? Seen in this light, food waste is an economic concept. A challenge with the simplistic notation of waste reduction is that food is discarded in a competitive environment where consumers or producers are generally trying to do the best they can to improve their well-being. Presumably, if more money were to be made by farmers, food processors, or grocers reducing waste, they would do it. Similarly, consumers too would have to give up time or flavor or safety to achieve less food waste. Even if there are externalities or behavioral biases, my opponent would need to articulate a specific market failure that a government policy would ameliorate, and demonstrate that the “fix” actually improves food security. Rather, food waste is the result of a complex equilibrium affected by consumers (including their preferences for convenience, expectations about future food prices and availability, and food safety concerns) and producers (and their cost of holding inventory, cost of transportation and storage, and liability and reputational concerns). Thus, at the onset, I hope to abuse you of the general, and widely held, notion that reductions in food waste are a free lunch

Now, let’s turn to some specific points related to the proposition. I have two main arguments. First, most commonly conceived government policies aiming to reduce food waste would not, in fact, increase the supply of food at any given time, and may in fact do the opposite; thus, not helping food security. Second, if the aim is to improve food insecurity, attempting to do that through reductions in food waste is inefficient and ineffective, and there are likely less costly means to achieve the same end at lower cost and with fewer unintended consequences.

On the first point – would food waste reducing policies actually increase the supply of food for low income households? In developing countries, the bulk of waste occurs at the household level; thus, common approaches of trying to reducing waste involve try to convince consumers, through taxes or information campaigns, to consume all of what they buy and throw out less. Our stomachs and pantries are only so large, and as a result, this presumably means consumers would ultimately buy less food. In economic terms, this leads to a downward shift in demand, which ultimately results in lower prices and, importantly, less food produced and consumed. Less food produced and consumed does NOT sound positive for food security. Moreover, for farmers, this is certainly a bad outcome: selling less food at lower prices means lower revenues and profits.

The recent experience of COVID-19 disruptions is also illustrative in this regard. In mid-March, foot traffic in groceries increased markedly, leading to stock-outs and empty shelves for many basic foodstuffs. Consumers expressed fear and frustration over the stock-outs. However, prior to the onset of the pandemic, groceries and food manufacturers had been under pressure (from investors, politicians, and regulatory bodies) to adopt just-in-time delivery and effectively manage inventories to help prevent waste of perishable food items. As the pandemic revealed, however, systems designed to help prevent food waste, are not well suited to withstand the large, temporary demand spikes like that seen after COVID-19 hit North America. Indeed, one way to reduce risk of severe food insecurity is to hold emergency inventories and stockpiles (which might well eventually go to waste) to make sure you have enough to eat when things get really bad – whether a pandemic, animal/plant disease, or drought comes. Seen in this way, “waste” is a cost that must be paid as a form of insurance against unexpected events. Without such insurance, hunger would almost certainly be higher.

There is also a naïve sense that much of what would “wasted” can simply be re-allocated to food insecure households. So, what is “waste” exactly? Consumers buy raw ingredients like apples, steaks, and avocados; are we to solve food insecurity by providing low-income households inedible cores, bones, seeds, and skins? What of milk that has soured, bread that has molded, or bananas that have browned? Would food security be improved by trying to convince people to take on food safety risks and consume such products? Rather, feeding such items to livestock seems a far better solution to help increase the supply of meat and dairy products, even if some call that “wasteful.” Even if food discarded by a household might become inputs into other. albeit less productive, production processes such as composting or by a municipality using an anaerobic digester to produces fuel – this does not improve food insecurity.

My second argument relates to the effectiveness and efficiency of policies aiming to improve food security through food waste reduction policies. Reducing food insecurity is a laudable goal. Fortunately, we have proven policies that really help with minimal deadweight loss; in the U.S. we have the Supplemental Nutrition Assistance Program (sometimes known as “food stamps”) that provides low income households resources to buy food. The program is means tested, well-targeted, and has been shown to significantly reduce food insecurity. Moreover, because the program is essentially a cash transfer, there are little to know social costs or deadweight loss, other than those that come about from administering the program. Food insecure Canadians would be far better served with the inaction of such a food assistance program than policies aiming to curb food waste.

Additionally, policies to reduce waste are likely to have unintended and undesirable costly effects. Demand side strategies to reduce waste, for example, might rely on educational campaigns such as Canada’s Love Food Hate Waste campaign. If consumers attempt to reduce waste by “cleaning their plate” and eat more food, this would likely have adverse effects associated with the costs of increased overweightness and obesity.

Another potential undesirable effect is that that “waste taxes” are likely to be regressive – hurting the very people that presumable we are trying to help by reducing food insecurity. A well-established empirical phenomenon is that lower income households spend a higher share of their incomes on food, meaning they are bear a proportionately higher burden of policies that increase the price of food. It is also worth noting that there are several studies showing food waste is a “normal” good – rising with income; low income households tend to waste less because they face greater incentives to economize and they spend less on food away from home, where waste tends to be higher. Thus, lower income households (those most at risk for food insecurity) face many private economic incentives to reduce waste and hardly need to be the target of additional policy scrutiny “helping” them make better use of their meager resources.

In pursuing policies to reduce food waste, my fear is that we end up wasting more than we save. Let’s be sure we don’t waste what is one of our most important and precious resources: our time and energy. Rather, let’s use our time and energy to find more effective ways to help people who are hungry.

For these reasons, I encourage you to join me in voting against the proposition.

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The approximately 150 attendees were asked whether they agreed, disagreed, or were uncertain about the proposition both before and after the debate. Before, the figures were 41% agree, 32% disagree, 27% uncertain. After, the figures were 29% agree, 55% disagree, and 16% uncertain.