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September 2010 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

Matt's primary interest is in the biotech industry and ag policy.

A Cheap Food Policy

Sep 18, 2010

By Matt Bogard

In a really great essay I read this week,  (A Cheap Food Policy: Good or Bad?) an Ohio State Ag Economist stands up for modern agriculture and family farms taking on myths and agendas related to farm subsidies, high fructose corn syrup, and sustainability.
 

"Opponents of modern agriculture, who express concerns about the sustainability of improved seeds and fertilizers, call for food that is organic, local, and slow. That is the type of food found in rural Africa, where impoverished farmers do not have the capacity to buy crop inputs, attend school, create infrastructure, and fund research. And with that beginning, a noted economist answers the rhetorical question, "Is there a high cost of cheap food policies?"

 "The OSU economist begins with a response to the criticism about agricultural subsidies, which the critics say are responsible for unhealthy foods. One of those is Michael Pollan, whose attacks on "a plague of cheap corn" target former Secretary of Agriculture Earl Butz, and, according to Pollan, "induced a plague of factory mega farms, fast and cheap food, and obese consumers." Tweeten says commodity programs account for only 2% of consumer expenditures on food and not large enough to have much influence on consumer purchases. ..He is quick to add that since farmers only receive 25% of a consumer food dollar, commodity programs only affected food prices by 1% and not enough to have an impact on either consumption or obesity."

Continue reading hear at The Farm Gate or find Tweeten’s actual essay here.
 
One thing I would emphasize in relation to  agriculture in places like rural Africa is the fact that the largest demographic in terms of green technology adoption (like GMOs) includes resource poor small land holders in developing countries  and the main reason for their adoption is refelctive of the fact that unlike many green technologies that require heavy investment or retooling (where costs are more easily spread over larger operations on a per unit basis), biotechnology is relatively size neutral. Farmers are able to save on inputs and  improve yields (the 'green' aspect) vs. incurring large sunk costs.

"ose"gate

Sep 09, 2010

 

By Matt Bogard

I was having a conversation with someone recently about Sara Lee replacing their High Fructose Corn Syrup ingredient with ‘High Fructose’ table/cane/beet sugar, and they coined the phrase "ose" gate. I thought that summed it up well.

 So what is the "ose" gate scandal/conspiracy? It is a combination of things.  Several scams if you will. First it is the ‘sugar switcheroo’. Unfortunately, many people confuse the compound fructose with high fructose corn syrup (HFCS).  Even worse, because it is "high fructose" corn syrup, they think that it is a sweetener that is really high in fructose compared to others. The undeniable truth is the fructose levels in HFCS are about 50%. But when you look at any other type of sugar, it is also 50% fructose. So, if fructose is bad, then HFCS and regular sugar are equally bad. It is all in a name. If we are comparing sweeteners based on fructose content, we could just as easily call table sugar "High Fructose" table sugar- let’s start calling it what it is ‘HFTS.’ The scandalous part is that food marketers are catering to this ignorance by advertising that they have removed HFCS from their foods and switched it with sugar. It makes no difference in terms of fructose content or calories, and consumers are being duped by the old ‘switcheroo.’

 So, if it makes no difference in fructose content, or calories, then it likely will make no difference on obesity rates, yet that is the next scam. The ‘big fat lies’ scam.  Opponents, (or conspiracy theorists) often like to claim that the massive use of HFCS is leading to obesity, but advocating that we replace it with HFTS (my new acronym). It makes no sense, but anti-agricultural activists and politicians are making hay with it. The argument that sugar sweetened beverages are related to obesity is shaky at best anyway. (1) Besides that, according to USDA data, the most abundant sweeteners in American's diets is not HFCS but HFTS (2) (both are about equal but HFTS has always had the lead)

 Then there are the attacks on farm programs, which sometimes come from both democrats and republicans.  Those on the left don’t like the idea of subsidizing politically incorrect farming practices (more on this later) and some from the right like to point out unintended consequences of government policies. The misconception is that subsidies lead to more corn production and cheaper HFCS and then cheaper high calorie foods- that lead to obesity. (I’ve already addressed obesity). Research from UC Davis blows this myth out of the water. If we get rid of all corn subsidies the impact on corn production would not be large enough to have a major impact on retail prices or consumption  (they estimated that consumption would decrease by at most .2%) (3) Subsidies , which amount to less than ½ of 1% of our federal budget become a scape goat for all of our problems.

 Next, there is the dilemma of the Omnivore’s Dilemma:

 "If you eat industrially, you are made of corn. It holds together your McNuggets, it sweetens your soda pop, it fattens your meat, it is everywhere. It is fed to us in many forms, because it is cheap- a dollar buys you 875 calories in soda pop but only 170 in fruit juice. A McDonalds meal was analyzed as almost entirely corn."-Michael Pollan Omnivore's Dilemma (4)

 This is bad how? The fact that modern family farmers are able to feed the world in so many different ways and do it cheaply should be considered a miracle.  Although not his intention, the quote from Pollan is actually a statement of accomplishment for farm families everywhere!

 Finally, there is the myth that HFCS is the product of industrial agriculture and industrial farms, which are unsustainable and are having a negative impact on our environment. These beliefs have made modern family farming practices politically incorrect, or socially irresponsible in the minds of many consumers and politicians.  According to USDA data, 98% of all farms in the U.S. are family farms and they account for 85% of all production.(5) Large family farms are more diversified (5) and benefit the community according to recent research at Iowa State(6) In terms of sustainability, the technology used on modern family farms has led to drastic reductions in greenhouse gases, decreased soil erosion, decreased groundwater pollution, improved water use efficiency, and has increased wildlife diversity and food safety. (7)

 So, to review I have outlined the 5 ‘sweet’ scams that define the "ose"gate conspiracy:

1)    The Sugar Switcheroo Scam

2)    Big Fat Lies Scam

3)    The Subsidy Scape Goat Scam

4)    The Dilemma of the Omnivore’s Dilemma

5)    The Political Correctness Scam

 What can you do? You can support your local family corn farmer by having a drink sweetened with HFCS. Maybe get that with a supersized burger and fries.

 Refernces:

1 Adolescent beverage habits and changes in weight over time: findings from Project EAT1,2,3Am J Clin Nutr (October 28, 2009). doi:10.3945/ajcn.2009.27573

Nutrition July-August 2007, Volume 23, Issues 7-8, Pages 557-563 "Is sugar-sweetened beverage consumption associated with increased fatness in children?"

http://www.ers.usda.gov/Briefing/Sugar/data/table49.xls

3 Farm Subsidies and Obesity in the United States

Julian M. Alston, Daniel A. Sumner, and Stephen A. Vosti

Agricultural Resource Economics Update

V. 11 no.  Nov/Dec 007

U.C. Davis

4  http://www.treehugger.com/files/2007/01/food_fight_is_c.php

5 Structure and Finances of U.S. Farms: Family Farm Report, 2007 Edition / EIB-24 Economic Research Service/USDA

6 Large Agriculture Improves Rural Iowa Communities

http://www.soc.iastate.edu/newsletter/sapp.html

7 Matt Bogard. "Sustainable Agriculture Bibliography" 2010 Available at: http://works.bepress.com/matt_bogard/6

Rush Was Right (According to Nation's Chief Economist)

Sep 07, 2010

By Matt Bogard

White house chief economist Christina Romer (former chair of the WH Council of Economic Advisers) is calling for more tax cuts and spending. This is odd given that some commentators have tried to link the tax cuts of the early 2000s with the financial crisis and incorrectly claim that they lead to budget deficits. (from 2003-2007 revenues increased 35% and deficits as % of GDP more than halved). Aside from that there is no accepted theory of business cycles (which would explain the financial crisis and the current recession) that hinges on marginal tax cuts. But most commentators and politicians could care less about economic evidence.

According to Romer's research $1 in tax cuts translates into about $3 in stimulus while many other economists estimate that $1 in spending translates into about $1.50 in stimulus.

Despite the evidence, the last stimulus package contained lots of spending, but made no attempt to further lower current marginal income taxes, or extend the tax cuts of the early 2000s. (note it did contain tax credits, but tax credits are in effect spending under a different name). Based on the evidence, it seems the thing to do now is extend or lower current marginal income taxes. Oddly enough, our nation's former Chief Economist is starting to sound a lot like Rush Limbaugh:

'Limbaugh Stimulus Plan of 2009: 54% of the $900 billion -- $486 billion -- will be spent on infrastructure and pork as defined by Mr. Obama and the Democrats; 46% -- $414 billion -- will be directed toward tax cuts, as determined by me...In this new era of responsibility, let's use both Keynesians and supply-siders to responsibly determine which theory best stimulates our economy -- and if elements of both work, so much the better." -Rush Limbaugh

With democrats like Florida Governor Sink supporting extension of these tax cuts, it looks like we may start to see the kind of bipratisan and independent embrace of evidence based policies that Mr. Limbaugh advocated long ago and head off a double dip recession.

References:

My Bipartisan Stimulus
Wall Street Journal January 29,2009
Rush Limbaugh

WH Economist Calls For More Spending, Less Taxes
AP/Yahoo News September 1, 2010

Tax Cuts: The Fruitful Multipliers
National Post
January 5, 2009
Greg Mankiw

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