I mentioned agricultural policies in my last post about percentage of income spent on food. When I was collecting data for the post, I came across some interesting data sets on agricultural policies. This post is actually first part of three part series to share the data and my thoughts on the topic. Part one is about agricultural policies and its impact if any on food prices. In part two we will look at comparison between eating out fast food and cooking at home. In part three I will share my personal experience about cooking at home.

Discussions about US agricultural policies and its impact on increasing junk food consumption is not new. In August 2004 Peter Jennings wrote a story How to get fat without really trying?. In the story Peter described marketing junk food to kids as well impact of agricultural polices in increasing junk food consumption. Peter’s argument was based on distribution of subsidy, crop like corn to be precise feed corn getting major share of support. See below Peter Jenning’s findings on food industry in intriguing five part (~ 10 minutes each) video series available now on YouTube.

If you are in a hurry and would like to watch the video series later, refer below chart to know the percentage distribution of subsidy by crop type. Chart is based on data from EWG Farm Subsidies. Per EWG, from 1995 to 2012 ~ $292 billion were paid in subsidies out of which corn crop share was ~ $84 billion, almost 30%.

Food subsidy

Agricultural policies and its impact on food prices is a very complex topic researched by various organizations and individuals on ongoing basis. Consider a project like Effects of Agricultural Research and Farm Subsidy Policies on Human Nutrition and Obesity. This project has produced some thought provoking articles like Farm subsidies and obesity in the United States: National evidence and international comparisons  by Julian M. Alston, Daniel A. Sumner, and Stephen A. Vosti. In the article they provide very compelling argument that impact of US agricultural policy on food prices and increase in obesity is negligible if any. One of the measure referenced in the article is defined by Organization for Economic Co-Operation and Development (OECD). For all countries which participate in OECD, Producer Support Estimate (PSE) and Customer Support Estimate (CSE) data is available. PSE measure includes all transfers to producers by government or consumers while CSE is all about net effect of agricultural policies on consumers (either benefits or increase in food prices). I gathered some PSE and CSE data from OECD website and Body Mass Index (BMI) data from World  Health Organization Global Infobase. See below chart (click to see full size) for some interesting comparison between OECD countries.

2002 Obesity ranking

2010 Obesity ranking

What do we see here? Countries like Switzerland and Japan where producers received more support than say producers in US and Australia are actually ranked lower in Obesity list. CSE numbers though suggest some direct relationship with obesity. In Switzerland and Japan consumers paid for supporting producers (negative CSE) and may be that helped to keep obesity under control. This CSE theory does not work though for Mexico where majority of subsidy is paid by consumers and still they rank higher on obesity list.

In US average CSE from 1986 to 2011 was + 2.84% meaning consumers did receive some benefit from agricultural policy. The number 2.84% is so low though that its impact if any on food prices is probably negligible. FYI between 1986 and 2004 average CSE was negative (-0.03%) meaning consumers were supporting producers.

About recent increase in food prices, if you refer USDA site then outlook for 2014 suggests that Consumer Price Indexes (CPI) for food, food-at-home, and food-away-from-home are expected to increase 2.5 to 3.5 percent over 2013 levels. So the theory that agricultural policies helped reducing prices for crops and in turn junk food probably does not have much merit to it. May be its time to revisit cooking at home from health and finance perspective.