Some things never change
Never trust a dog to watch your food.
Patrick, age 10
Our country has witnessed sweeping changes—from the untamed wild times of Buffalo Bill to the techno-
logical era of Bill Gates—but food has never lost its central role in our lives. Food not only sustains life but also
enriches us in many ways. It warms us on cold, dreary days, entices us with its many aromas, and provides end-
less variety to the everyday world. Food is also woven into the fabric of our Nation, our culture, our insti-
tutions, and our families. Food is on the scene when we celebrate and when we mourn. We use it for
camaraderie, as a gift, and as a reward (and sometimes as a crutch).
We are all aware of how food has changed. At the turn of the 20
th
century, home cooking
and canning were fixtures of life in America. Lard, seasonal vegetables, potatoes, and fresh
meats were the staples of our diet. And 40 percent of Americans lived on farms. Today, con-
venience foods and dining out are common. Ethnic diversity has influenced our tastes
and the variety of foods available. Technology and trade allow us to enjoy most foods all
year round. And only 1 percent of the population grows our food, while 9 percent are
involved in the food system in some way—in processing, wholesaling, retailing, serv-
ice, marketing, and inspection.
What Americans often forget, however, is the remarkable system that delivers
to us the most abundant, reasonably priced, and safest food in the world. The
American food system—from the farmer to the consumer—is a series of intercon-
nected parts. The farmer produces the food, the processors work their magic, and
the wholesalers and retailers deliver the products to consumers, whose choices
send market signals back through the system. Every piece fits every other piece,
notwithstanding an occasional gap and pinch. Our mission at the Economic
Research Service (ERS) is to understand this system and effectively communicate
our findings to the players in the system.
Some of those gaps and pinches currently receiving ERS scrutiny include
obesity and food choices, the need for better targeting of food assistance benefits,
as well as the environmental impacts of agriculture. The challenges of biotech
foods and of emerging global markets and competitors (including Brazil, China, and
Ukraine) are also among the issues analyzed by ERS.
At the end of the day, it is safe to say the U.S. food system has done a remarkable
job of using technology and inventiveness to its advantage and ultimately to the benefit
of the consumer. We get the foods we want, when we want them, in the form we want
them, all at affordable prices. Thanks to this system, Americans spend less of their income
on food than do consumers anywhere else in the world.
Despite the dramatic evolution of the American food system, there are some constants in
our ever-changing world. Americans will always love food. The American food system will continue
to adapt, grow, and provide us with the products we desire. And yes, that timeless advice stands:
Never trust a dog to watch your food.
James R. Blaylock, Associate Director
Food and Rural Economics Division, ERS
C
HINA’S
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ROWING
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FFLUENCE:
How Food Markets are Responding
H. Frederick Gale
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FEATURES
P
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R
ESOURCES:
New Rules for International Exchange
Kelly Day-Rubenstein and Paul Heisey
The increased spending power and changing eating habits of
China's 1.3 billion people are transforming the country's
food sector, creating new opportunities and challenges for
U.S. farmers.
With one of the largest collections of plant germplasm in
the world, the U.S. weighs the costs and benefits of a new
treaty in germplasm exchange.
4
MARKETS ANDTRADE
Nontraditional Exporters Increase Role in
Wheat Markets
Are U.S. and European Union Agricultural Policies
Becoming More Similar?
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DIET AND HEALTH
Information Sways Consumer Attitudes
Toward Biotech Foods
U.S. Hog and Poultry Marketing:
Similar Paths, Similar Outcomes?
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RESOURCES AND ENVIRONMENT
Manure Management:
A Growing Challenge in the Chesapeake
Bay Watershed
Will Land Degradation Prove Malthus Right
After All?
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RURAL AMERICA
Low-Skill Workers Are a Declining Share
of All Rural Workers
The Dynamics of Hired Farm Labor
FINDINGS
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Lessons Learned
Leslie A.Whitener
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Recent Insights from Two USDA Food Assistance Programs
Mark Prell
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Policymakers strive to make efficient use of taxpayer dollars
in the design and administration of USDA's food assistance
programs. Balance must be struck between keeping costs
low and serving program goals.
The transition from welfare to work is proving more difficult
in rural than in urban areas, especially in remote, sparsely
populated areas where job opportunities are few.
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DATA FEATURE
Trends in U.S. Per Capita Consumption of
Dairy Products, 1909 to 2001
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INDICATORS
Selected statistics on agriculture and trade, diet and health,
natural resources, and rural America
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GLEANINGS
Snapshots of recent events at ERS, highlights of new
publications, and previews of research in the works
52
PROFILES
Recent accolades for ERS researchers
Though the volume of world wheat
trade has changed little in the past 15
years, shares of trade volume in exporting
countries have changed quite a bit. The
U.S. remains the largest exporter, but U.S.
farmers are increasingly producing other
crops, like corn and soybeans, so the U.S.
share of the wheat market has fallen from
40 percent in the 1970s to 23 percent
(forecast) for 2002/03. This shift in U.S.
agricultural production, combined with
rising prices caused by drought in three of
the largest exporters—U.S., Australia, and
Canada—has created opportunities for
“nontraditional” wheat exporters.
With their favorable climates and
large land bases, the former Soviet Union
(FSU) and Central and Eastern Europe are
traditional places for wheat production.
Reductions in agricultural subsidies dur-
ing the 1990s, however, caused a sharp
drop in livestock production, which, in
turn, curtailed domestic demand for
wheat as an animal feed. While wheat
output also fell, recent large harvests,
caused largely by favorable weather, have
supported wheat exports. FSU wheat
exports surged in 2001/02 and 2002/03 as
increasing world prices generated the
investment needed to expand port
capacity. In 2002/03, Russia is expected to
be the world’s third largest wheat
exporter, behind the U.S. and the
European Union (EU).
India, Pakistan, and China have also
become net exporters of wheat in recent
years. High government production sup-
ports during the 1990s boosted production
and stocks. When the cost of maintaining
these stocks became burdensome, exports
increased, particularly as prices increased
in 2002/03. However, these opportunistic
exports are not expected to persist
because these countries are unable to pro-
duce wheat cheaply enough to sustain
increased exports without large subsidies.
The EU continues to be a large wheat
exporter. Historically, EU wheat produc-
tion and exports depended on large
subsidies. Despite lower domestic wheat
prices, EU wheat production has grown
because of favorable net returns compared
with those for other crops. Lower prices
have increased the domestic feed use of
wheat, limiting exports.
The U.S. is expected to remain the
world’s largest wheat exporter, though its
share will likely decline if U.S. producers
continue to turn to other crops and if
other countries find wheat profitable. As
export shares shift, changes in U.S. supply
will not affect prices as much as in the
past. For example, when the U.S., Canada,
and Australia suffered from drought in
2002/03, nontraditional exporters and the
EU were able to export enough to keep a
lid on prices.
Edward W.Allen
,
ewallen@ers.usda.gov
RonaldTrostle
,
rtrostle@ers.usda.gov
This finding is drawn from . . .
WheatYearbook
, 03.27.03, available at:
www.ers.usda.gov/publications/so/view.asp?f=
field/whs-bby
ERS Wheat Briefing Room, at www.ers.usda.
gov/Briefing/Wheat
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Nontraditional
Exporters
Increase Role in
Wheat Markets
U.S. share of world wheat market is declining
0
20
40
60
80
1960 62
64
66
68
70
72
74
76
78
80 82
84
86
88
90
92
94 96
98
00 02
100
120
Exports, million metric tons
Source:
USDA Production, Supply, and Distribution database.
Other
Former Soviet Union & Central and Eastern Europe
European Union 15
Canada, Australia, & Argentina
U.S.
Photo by Tim McCabe, USDA/NRCS
Throughout much of the post-World
War II period, agricultural policy in the
U.S. and European Union (EU) has focused
on supporting farm income primarily
through price supports. Both countries
supported commodity prices through pur-
chase and storage of surplus commodities.
The U.S. relied more on producer loans
secured by commodities and acreage con-
trols, while the EU relied more on export
subsidies to dispose of surpluses. Both the
U.S. and the EU have significantly changed
their commodity policies in the past
decade. While their policies have evolved
in similar directions in some respects,
important differences remain.
Both the U.S. and the EU have
reduced their reliance on price support for
several commodities for the same reasons:
to improve their competitiveness, reduce
burdensome stocks associated with high
support prices, and rein in rising costs of
operating commodity programs. Both
countries now make greater use of income
support through payments to producers.
Lower support prices and govern-
ment purchases have reduced the need for
surplus disposal, including export
subsidies. Since 1995, U.S. use of export
subsidies has been limited essentially to
dairy products and poultry. The EU con-
tinues to use export subsidies for many
price-supported commodities, although
World Trade Organization (WTO) obliga-
tions have required the EU to reduce
subsidy levels.
Despite similarities in policy changes,
EU and U.S. policies differ. The EU main-
tains a higher overall support level to its
farm sector and relies more on price sup-
port than does the United States. Although
some EU support prices have been
reduced, higher tariffs
contribute to market
price support by pre-
venting the entry of
lower priced imports.
Both U.S. and EU
agricultural policies
will
continue
to
respond to domestic
needs, the interna-
tional environment,
and obligations under
trade agreements. In
addition, public pres-
sure
on
broader
issues, including envi-
ronmental protection,
rural development, and food safety,
is increasingly shaping agricultural
policy.
Mary Anne Normile
,
mnormile@ers.usda.gov
This finding is drawn from . . .
ERS Briefing Room on Farm and Commodity
Policy: www.ers.usda.gov/Briefing/FarmPolicy
ERS Briefing Room on the European Union:
www.ers.usda.gov/Briefing/EuropeanUnion
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Are U.S. and European Union Agricultural
Policies Becoming More Similar?
Percent
1989-91
1999-01
1989-91
1999-01
Source: Producer support estimates, as reported in
Agricultural Policies in
OECD Countries:
Monitoring and Evaluation, 2002
, Organization for Economic
Cooperation and Development.
Income support
(producer payments)
Market price
support
U.S. and EU shift toward income support
U.S.
EU
100
80
60
40
20
0
PhotoSpin
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Information Sways Consumer
AttitudesToward Biotech Foods
Scientists use modern biotechnology
(biochemical manipulation of genes or
DNA) to develop new varieties of foods
and agricultural products, commonly
called biotech foods. Large shares of com-
mon crops, such as corn and soybeans, are
grown from bioengineered seed. Many
processed foods on U.S. supermarket
shelves contain biotech ingredients.
Labeling of biotech foods has been a
contentious issue in the U.S. and between
the U.S. and its trading partners.
Proponents of mandatory biotech food
labeling argue that consumers have a right
to know how their food has been pro-
duced. Opponents argue that such labeling
will confuse and, in many cases, unneces-
sarily alarm consumers. In the U.S., when
biotechnology introduces a known allergen
or substantially changes a food’s nutrition-
al content or composition, Federal regula-
tions require that the label indicate this
change. So far, no biotech foods on the
market have required labeling.
In 2001, ERS and university
researchers held experimental auctions to
gauge consumers’ willingness to pay for
food items with and without biotech
labels. In the absence of sales data, exper-
imental auctions more closely simulate
purchasing behavior and better gauge
consumer preferences than surveys of
consumer attitudes. Auction participants
could bid on and purchase three different
food products—potatoes, vegetable oil,
and corn tortilla chips—with and without
a label indicating that the food contained
biotech ingredients. None of the foods had
biotech-enhanced attributes or traits that
could be detected without sophisticated
testing technologies, if at all.
Before the bidding, each participant
received one of six information packets
containing statements about biotech-
nology gathered from a variety of sources.
Information played a powerful role in
shaping how the participants responded
to biotech foods. They reacted not just to
the information itself, but also to whether
the information came from biotech firms,
an environmental advocacy group, or
independent third-party sources.
Participants who received only pro-
biotech information actually put a slight
average premium of 2 percent on the
biotech-labeled foods relative to foods
without biotech labels for two of the three
products. Participants who received only
anti-biotech information discounted the
biotech-labeled foods by an average of 36
percent. Those who received both pro- and
anti-biotech information discounted the
biotech-labeled foods by an average of 23
percent. Interestingly, participants placed
a greater weight on negative information
than on positive information, a result
consistent with other studies. The ERS
study also looked at the role of science-
based information on consumer attitudes
towards biotech foods.
AbebayehuTegene,
ategene@ers.usda.gov
This finding is drawn from . . .
The Effect of Information on Consumer Demand
for Biotech Foods: Evidence from Experimental
Auctions
, by Abebayehu Tegene,Wallace
Huffman, Matt Rousu, and Jason Shogren,
TB-1903, March 2003, available at:
www.ers.usda.gov/publications/tb1903
Consumers' reactions to biotech-
labeled foods depend on the
information they receive
40
35
30
25
20
15
10
5
0
-5
Vegetable
oil
Percent of price discount
Tortilla
chips
Potatoes
Participants who received only negative information.
Participants who received only positive information.
Participants who received both positive and negative
information.
Participants who received positive, negative, and
third-party information.
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Recent changes in the structure of the pork industry echo past
changes in the poultry industry.
How U.S. pork producers and processors sell and buy hogs has
changed significantly since 1990. The use of long-term contracts
has largely replaced production for the open, or spot, market. Over
70 percent of hogs are sold under contracts, where producers are
required to deliver a specified number of hogs to the processor at
a specified time. In return, the producer receives the spot price,
adjusted for the size and quality of the hogs.
These developments raise concerns by some about anticom-
petitive behavior of large processors and the demise of small,
independent farmers. Others emphasize how contracts facilitate
steady flows of high-quality farm products for processing, among
other benefits.
In the U.S. poultry industry, contracts and common owner-
ship of production and processing (called “vertical integration”)
expanded in the 1950s. By 1977, contracts and vertical integration
accounted for over 85 percent of broiler, turkey, and egg
production. Today, these arrangements account for over 90 percent
of production in each of the three sectors. At the same time, the
poultry industry significantly improved production efficiencies. It
also capitalized on consumers’ interest in lower fat sources of pro-
tein and responded to their quest for convenience with a wide
variety of processed, branded poultry products. These develop-
ments were reflected in large supplies of poultry products that
were priced low relative to other meats.
The pork indus-
try has also improved
production efficiency.
Offspring from a typi-
cal breeding hog pro-
duced 30 percent
more pork in 1999
than in 1990. The
industry is offering
more lean, further-
processed, case-ready
products. From 1995
to 1999, the number
of new pork items on
foodservice
menus
more than doubled, and the number of pork mentions on menus
exceeded all other meats in 1999, except for chicken, according to
a study by the National Pork Producers Council.
These efficiencies and expanded product offerings have led to
larger pork supplies that have lowered pork prices and may have
tempered declines in demand dating back to the 1970s. From 1990
to 2002, pork production increased by 2 percent per year, and
deflated retail pork prices fell by 1 percent per year. From 1980 to
1995, the demand for pork fell by 34 percent. Since 1995, the
demand for pork has increased by 8 percent.
The pork industry is also following the lead of poultry in
export markets. The U.S. poultry industry has experienced consid-
erable growth in exports, as indicated by its status as the world’s
largest exporter of poultry meat. Similarly, reliable supplies
tailored to customer specifications have helped boost U.S. pork
exports fivefold in the 1990s.
Steve Martinez
,
martinez@ers.usda.gov
This finding is drawn from . . .
Vertical Coordination of Marketing Systems: Lessons From the Poultry, Egg,
and Pork Industries
, by Steve W. Martinez, AER-807, April 2002, available
at: www.ers.usda.gov/publications/aer807 and from
Vertical Coordination
in the Pork and Broiler Industries: Implications for Pork and Chicken
Products
, by Steve W. Martinez, AER-777, April 1999, available at:
www.ers.usda.gov/publications/aer777
U.S. Hog and Poultry
Marketing: Similar Paths,
Similar Outcomes?
Contracts dominate the share of
hogs delivered to processors
1970
80
93
99
2000
01
02
0
20
40
60
80
100
Percent of slaughter
WWW.ERS.USDA.GOV/AMBERWAVES
Corbis
Farmers who run confined animal feeding operations (hog,
cattle, dairy, and poultry farms) usually dispose of manure by
spreading it on cropland as a soil amendment and source of nutri-
ents. Because manure is expensive to transport, producers may
apply more than crops can use, especially on fields nearest the
production facility. Excessive manure applications increase the
potential for contamination of surface and ground water. To
address water quality concerns, USDA and the U.S. Environmental
Protection Agency (EPA) together developed a strategy for improv-
ing manure management. A primary emphasis of the joint strate-
gy is to limit application of manure nutrients to rates that the soil
can store and crops can use. USDA will provide technical and
financial assistance to help operators develop and implement
comprehensive nutrient management plans (CNMPs). EPA pub-
lished regulations in February 2003 that will require over 15,000
concentrated animal feeding operations to implement CNMPs.
This emphasis on manure management presents a new challenge
to large livestock and poultry operations, particularly in areas with
relatively high animal concentrations such as the Chesapeake Bay
watershed, which covers parts of Maryland, Virginia, West
Virginia, Delaware, Pennsylvania, and New York.
Recent ERS analysis indicates that better manure manage-
ment will likely require manure to be applied to more land than
currently, raising hauling costs for many animal producers. An
operator’s need to access additional land for manure application
will depend on the volume of manure for disposal relative to crop-
land area currently receiving manure and the nutrient uptake of
the crops. The willingness of crop farmers to accept manure on
their land—considering manure’s variable nutrient content,
potential odor, and handling cost—affects the amount of land
available for manure application and the distance manure must be
hauled. A low willingness by crop producers to accept manure
may cause some manure to be hauled long distances to access
sufficient land to avoid overapplication of manure nutrients.
As part of the ERS study, analysts examined the feasibility
and cost of applying manure in the Chesapeake Bay watershed at
rates not exceeding crop uptake. For all the nitrogen in manure to
be used by crops within 100 miles of the manure’s origin, crop
farmers in the region would have to accept manure as the only
nitrogen fertilizer source on at least 20 percent of total cropland.
Under a more stringent standard, where applied manure does not
exceed crop phosphorus needs, crop farmers within a 100-mile
radius would have to accept manure as the only phosphorous
source on at least 60 percent of the total cropland.
USDA financial and technical assistance in managing
and utilizing the nutrients in manure could increase crop
farmers’ willingness to accept manure application on their
land. Where hauling costs for manure land application are
high, the ERS analysis indicates potential to reduce the
amount of land receiving manure by expanding industrial
processes that use manure to produce energy or commercial
fertilizer products, and by feeding animal rations that lessen
manure nutrient content.
Marcel Aillery
,
maillery@ers.usda.gov
Noel Gollehon
,
gollehon@ers.usda.gov
This finding is drawn from . . .
A broader ERS study of farm, regional, and national level implica-
tions of new animal waste regulations and guidelines:
Manure
Management for Water Quality: Costs to Animal Feeding Operations of
Applying Manure Nutrients to Land
, by M. Ribaudo, N. Gollehon, M.
Aillery, J. Kaplan, R. Johansson, J.Agapoff, L. Christensen,V.
Breneman, and M. Peters,AER-824, USDA/ERS, June 2003,
available at: www.ers.usda.gov/publications/aer824
Manure Management: A Growing
Challenge in the Chesapeake Bay Watershed
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60% willingness to
accept manure
100% willingness to
accept manure
Higher willingness of crop farmers to accept manure would
reduce out-of-county transport in the Chesapeake
Bay watershed
S ource: B ased on 1997 C ensus of A griculture data.
The Chesapeake Bay watershed is outlined in red.
Maps show all manure being applied under a
phosphorus standard that restricts manure
application to crop phosphorus needs.
Inter-county m anure m ovem ent
1,000 dry tons of net transfer
-60 to -40
-40 to -20
-20 to -5
-5 to 5
5 to 35
35 to 140
140 to 355
Im ports
Exports
Photo by Ken Hammond, USDA