Lit in Review: Food Demand

Roberts and Schlenker (2009), "World Supply and Demand of Food Commodity Calories,"  American Journal of Agricultural Economics November, 1235-42, ungated January version.
They use 2SLS to provide what they term "a useful reality check for whether microcomplexities add up to patterns that are observable in the aggregate data." They gather data on corn, wheat, rice, and soybean production in any country that produces more than 1% of the total (plus one "country" to take care of the remainder) to calculate individual country trends and weather shocks. These are then converted in calories so that there is a single aggregated term.

They assume that demand for calories is unrelated to current weather shocks that affect supply, so current weather shocks trace out the demand curve. There is nothing revolutionary in this, as they point out. The unique idea is that past weather shocks shift the demand for calorie storage but not supply. They is sadly undefended, but if farmers know that demand will be higher the year following a bad one to replenish stocks, there ought to be a supply response too. If their assumption holds, though, they can trace out supply curves too. They estimate a supply elasticity of 0.1 and a demand elasticity of -.04 that may or may not be significantly different from 0. These lead them to conclude that US biofuel policies increased each commodity price by 35%

Toler, Briggeman, Lusk, and Adams (2009), "Fairness, Farmers Markets, and Local Production," American Journal of Agricultural Economics, November, 1272-78.
They perform an experiment at farmers markets and local grocery stores in Oklahoma. Participants write down offers to purchase four tickets, one of which is randomly selected as binding. The tickets pay off:
A) $4 to themselves and $7 to a local farmer
B) $4 to themselves and $7 to an out-of-state farmer
C) $4 to themselves and $1 to a local farmer
D) $4 to themselves and $1 to an out-of-state farmer

The folks at farmers markets were willing to pay a little more for every ticket, but otherwise there was no difference between the groups, nor was there a difference based on how often one went to a farmers market. The average willingness to pay for ticket A was between $3-4; for B and C were $2.50-3, with 54% willing to pay more than $3 for ticket C [giving more to the farmer than themselves in essence]; and $2 for D. They fail to reject the notion that the shoppers at each venue have different concern for inequity or for local farmers. But there was a significant willingness to benefit local farmers over out-of-state farmers, and a significant preference for letting others have the better end of the deal.

Zheng and Henneberry (2009), "An Analysis of Food Demand in China: A Case Study of Urban Households in Jiangsu Province," Review of Agricultural Economics, Vol. 31, No. 4, 873-93.
Uses the update to the Chinese National Bureau of Statistics household surveys to examine basic food consumption elasticities for ten food products. Prices are household specific (amount paid divided by amount consumed according to diary entries). Most of the data is based on 900 households in 2004, and only in-home consumption. Highlighted series of results:

• 1990-2004: Rural households (60% of China) decreased annual grain consumption (262 kg to 219kg) and increased animal consumption (28 kg to 42kg).
• 1990-2004: Urban households decreased grains by more (131kg to 78kg) and increased animals by more (41kg to 73kg).
• Demographics: Average per capita income is $1,286, households usually of 3, it is more likely the third person is a senior than a child, 7% college educated.
• The most price-sensitive foods are grains, oils and fats, dairy, and "other" (tubers, alcohol, cakes, etc.)
• The least price-sensitive foods are aquatic
• As incomes increase, dairy, aquatic, other, poultry, and meats will increase their share of expenditures while fruits, eggs, vegetables, grains, and oils and fats lose share.
• "Pork accounts for more than 70% of ... total meat expenditures."
• Overall, diets are converging to those of Japan, S. Korea, Taiwan, and Hong Kong.
• Poultry consumption was rising steadily, but food safety concerns slowed this process recently.
• Dairy consumption is pretty low, and lower than other estimates have shown, but has increased by 400% percent.
• Half of the cross-price elasticities are significant: meats are substitutes for grains and eggs, but a complement to fish and dairy; vegetables are substitutes for poultry and dairy but complement eggs and fish. If you compensate demand, most everything is a substitute.
• Large portions of meat consumption (over half of poultry) are done outside the home.
• Demand for feed grain will outstrip demand for food grain as incomes increase, requiring an increase in imports from the US. China's land devoted to corn and soy have increased significantly (16% and 25%) with small decreases for rich and wheat (7% and 9%).