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Effects of US Agricultural
Policies on Global Food Prices
Joe Glauber, IFPRIExperts Meeting on Trade and NutritionFAO15-16 November 2016
Food expenditures as share of total household
expenditures
0.0
5.0
10.0
15.0
20.0
25.0
30.0
19
30
19
34
19
38
19
42
19
46
19
50
19
54
19
58
19
62
19
66
19
70
19
74
19
78
19
82
19
86
19
90
19
94
19
98
20
02
20
06
20
10
20
14
Percent
Source: USDA, Economic Research Service
Growth in US household food expenditures
Billion USD
Source: USDA, Economic Research Service
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
19
29
19
33
19
37
19
41
19
45
19
49
19
53
19
57
19
61
19
65
19
69
19
73
19
77
19
81
19
85
19
89
19
93
19
97
20
01
20
05
20
09
20
13
Food Total disposable income
FAO food price index, adjusted for inflation
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
09
20
12
20
15
2002-04 = 100
1961-2000 trend
Source: FAO
FAO food commodity price indices, adjusted for inflation
0.0
50.0
100.0
150.0
200.0
250.0
300.0
Meat Price Index
Dairy Price Index
Cereals Price Index
Oils Price Index
Sugar Price Index
2002-04 = 100
Source: FAO
Food CPI relative to overall CPI
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
19
13
19
17
19
21
19
25
19
29
19
33
19
37
19
41
19
45
19
49
19
53
19
57
19
61
19
65
19
69
19
73
19
77
19
81
19
85
19
89
19
93
19
97
20
01
20
05
20
09
20
13
Source: US Dept of Labor, Bureau of Labor Statistics
2002-04 = 100
Declining farm value of retail food
0
5
10
15
20
25
30
35
40
45
50
19
52
19
56
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
20
00
20
04
20
08
20
12
Farm value share
Revised food dollar
Source: USDA, Economic Research Service
Growth in per capita food consumption away from home
0
200
400
600
800
1,000
1,200
1,400
19
53
19
57
19
61
19
65
19
69
19
73
19
77
19
81
19
85
19
89
19
93
19
97
20
01
20
05
20
09
20
13
At home
Away from home
1988 USD
Farm share of the food dollar
0
5
10
15
20
25
30
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
at home
away from home
Total food dollar
Farm value of selected food prices
Item Share (%) Item Share (%)
Beef 52 Broccoli 24
Whole milk 50 Orange juice from
frozen concentrate
24
Strawberries 44 Pears 22
Apples 32 Iceberg lettuce 21
Grapes 31 Lemons 16
Cheddar cheese 30 Ice cream 15
Pork 30 Fresh oranges 15
Sugar 28 Fresh orange juice 15
Tomatoes 27 Potatoes 15
Flour 26 Grapefruit 12
Peaches 26 Bread 7
Source: USDA, Economic Research Service
Selected policies affecting food prices and demand
ProductionPrice/income supportsSupply control policies
Risk managementR&D
Program that divert production (e.g., marketing orders)
Processing
Imports Border measures(e.g., tariffs)
Programs thatincrease demand(biofuels, exportsubsidies, domesticfood programs)
ConsumptionNutrition programs
Tax policies(e.g., soda tax)
First handler
Selected policies
• Border measures (tariffs, NTBs)• Measures that enhance productivity (R&D)• Measures that restrict production (acreage and production controls;
planting restrictions)• Measures that restrict supply through marketing quotas and price
discrimination (marketing orders)• Measures that enhance domestic demand (nutrition programs,
biofuels)• Measures that enhance export demand (subsidies, credits, food aid)• Market price support (sugar program)• Income support (direct payments, ARC/PLC)• Input subsidies (water)• Disaster/safety net policies (crop insurance)
Effects of US agricultural policies on commodity
prices
Commodity Measure Primary impact Global prices US retail
Sugar Tariffs High border
measure provides
price support
Small Large
Dairy Margin protection Protects dairy
margins
Small Negligible
Marketing orders Diverts fluid milk
to manufacturing
purposes
Small
for powder,
cheese
Large
fluid milk
Cereals CRP Diverts cropland
to conserving use
Small Negligible
ARC/PLC Provides
countercyclical
support—not tied
to production
Small Negligible
Crop insurance Provides yield
and revenue
protection
Small Negligible
Biofuels Diverts maize
production to
industrial use
Small Negligible
Effects of US agricultural policies on commodity
pricesCommodity Measure Primary impact Global prices US retail
Oilseeds CRP Diverts cropland to
conserving use
Small Negligible
ARC/PLC Provides
countercyclical
support—not tied to
production
Small Negligible
Crop insurance Provides yield and
revenue protection
Small Negligible
Biofuels Diverts vegetable oil
production to
industrial use
Small Negligible
Meat and poultry Section 32 purchases Purchases for school
feeding programs
Negligible Negligible
Fruits and
vegetables
Tariffs High MFN tariffs
selected products
Small Negligible
Marketing orders Quality controls;
diversion to export
markets
Small Small
fresh
Planting restrictions Restrict production
on crop base acres
Negligible Negligible
Selected studies
Study Finding
Miller and Coble (2006) Effect of direct payments found to be insignificant in explaining food expenditures as percent of total household expenditures.
Alston, Sumner and Vosti(2008)
Elimination of subsidies and border protection results in price decrease for soybeans, rice, sugar, fruits and vegetables, beef, hogs and milk and small price increase for maize and wheat.
Gerlt, Thompson, Sydowand Johansson (2016)
Elimination of price and income support policies result in 0.14% decrease in cropland; plus elimination of crop insurance 0.30% decrease in cropland; plus elimination of CRP +2.77% increase in cropland
Okrent and Alston (2016) Elimination of grain and oilseed subsidies result in decrease in consumption of 567 cal/year. Removal of all subsidies would result in an increase in consumption of 165 to 1,435 cal/year (large consumption of dairy and fruits and vegetables offset declines in cereals and bakery products)
Projected ethanol demand
Corn use for ethanol (mil bu)
0
1,000
2,000
3,000
4,000
5,000
6,000
04
/05
06
/07
08
/09
10
/11
12
/13
14
/15
16
/17
18
/19
20
/21
22
/23
24
/25
Ethanol use (mil gal)
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
E-10 mid-level E-85 Exports
Source: FAPRI
Effects of a 10 percent increase in R&D spending on US
food prices, consumption and body weight
Price
(% change)
Consumption
(% change)
Per capita caloric
intake (kcal)
Cereals and bakery -1.41 -2.61 -9.19
Meats -8.56 1.10 1.66
Eggs -13.97 3.90 1.08
Dairy -5.65 3.74 7.29
Fruits and
vegetables
-9.90 4.25 5.98
Other foods -3.54 3.85 15.42
Nonalcoholic
beverages
-0.68 -0.80 -1.30
Food away from
home
-0.96 -0.72 -5.30
Alcoholic beverages -0.82 -1.51 -1.09
Consumption (Kcal) 14.54
Body weight (lbs)
One year 1.11
Steady state 1.86
Source: Alston, MacEwan and Okrent (2016)
Global vulnerability to price effects
Source: Bren d’Amour et al. 2016
Conclusions
• Impacts of most US farm programs are small because of move to more decoupled forms of support
• Because farm value of US retail food prices is small, impact of farm programs largely negligible– Exceptions are measures like tariffs, marketing orders, and
biofuel policies which have raised prices– R&D policies have lowered prices but benefits far outstrip costs
• Impacts on consumption are likely larger when policies implemented at consumer level (eg, consumption taxes); externalities less than if implemented upstream
• Agricultural policy impacts may be larger in foreign markets, particularly those where farm-retail spread is less and where imports are important component of diet
