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US Agricultural and Food Policies: Economic Choices and Consequences

US Agricultural and Food Policies: Economic Choices and Consequences. Authors : Gerald D. Toland, Jr .,, PhD Southwest Minnesota State University William E. Nganje, PhD North Dakota State University Raphael Onyeaghala, PhD Southwest Minnesota State University.

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US Agricultural and Food Policies: Economic Choices and Consequences

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  1. US Agricultural and Food Policies:Economic Choices and Consequences Authors: Gerald D. Toland, Jr.,, PhD Southwest Minnesota State University William E. Nganje, PhD North Dakota State University Raphael Onyeaghala, PhD Southwest Minnesota State University

  2. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Chapter Seven Objectives • In this chapter,we study the USFood Safety-Net’s microeconomic household effects and macroeconomic national impacts • We organize key topics, as follows: • We review federal nutrition assistance programs. • We formalize definitions: What are Hunger and Food Insecurity? • We assess the effects of US Nutrition Programs on Food Insecurity and Hunger.

  3. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Chapter Seven Objectives (Continued) • We utilize an Economic Choice Model to analyze the household-level effects of In-Kind Transfer Programs such as SNAP. • We interpret evidence of how US Nutrition Programs affect Food Insecurity. • We investigate a nutritional policy paradox: Why do we have the dual problems of obesity and food insecurity?

  4. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Chapter Seven Objectives (Continued) • We review the USDA’s Thrifty Food Plan. • What is it, and why is it important? • What are the roles of the additional USDA Food Plans? • We examine the USDA’s Food Pyramid, the MyPlate and MyWins Communication Plans. • We summarize conclusions, and anticipate likely future policy choices.

  5. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US US Federal Nutrition Assistance Programs • Seventy (70) US federal programs are linked to food and nutrition policy. We focus on a select number or programs that directly relate to government-supported food assistance. • USDA’s Food and Nutrition Service (FNS) manages the majority of national food programs. • The US Health and Human Services (HHS) Department oversees the Administration on Aging (AOA). The AOA manages food programs for the elderly under the authority of the 1965 Older Americans Act.

  6. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US When and why did the US Government become involved in food and nutrition policy? • Before US 1930’s Great Depression: Private organizations (churches, volunteers, etc.) “fed the hungry”. • Charitable private efforts continue today; Volunteer food distribution organizations are important in the 21st Century. • 1930’s Farm Economy: Huge commodity surpluses, low farm-product prices, frequent farm foreclosures & the Dust Bowl. • 1933: US unemployment rate = 24.75%; large #’s of US households were impoverished and hungry. Private efforts could not “scale-up” to meet the massive crisisof hunger and poverty.

  7. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US When and why did the US Government become involved in food and nutrition policy? (Continued) • Early 1930’s US Government Food Distribution Programs: Corruption and mismanagement. • Food Stamp Plan: To decrease fraud & improve efficiency, food stamps introduced. Citizens use $1 in cash to buy a $1 orange food stamp.This stamp could purchase nearly any food product. • Food Stamp Plan participants receive a $0.50 blue food stamp to exclusively purchase low-priced surplus foods. • Food Stamps offered financial relief and reduced food insecurity during the severe economic conditions of the 1930’s Great Depression.

  8. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US When and why did the US Government become involved in food and nutrition policy? (Continued) • WWII changed gov’t. priorities; food stamps discontinued. • Early 1960’s – food stamps reintroduced as pilot program • 1964 Food Stamp Act - Establishes permanent funding for food assistance and nutrition policy • 1977 Food Stamp Act - Major program reform. Eliminated the purchase requirement. Increased accuracy and improved capacity to match program benefits with household needs. • 1990 Mickey Leland Memorial Domestic Hunger Relief Act - Included language to establish Electronic Benefit Transfer (EBT) as a food stamp alternative.

  9. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US When and why did the US Government become involved in food and nutrition policy? (Continued) • 2002: Completely implement EBT and phase-out physical stamps. • 2008 Farm Bill: official change-over to Supplemental Nutrition Assistance Program (SNAP) & emphasize current goals • Increase food budgets of needy households • encourage recipients to adopt balanced and nutritional diets • 2014 Farm Bill: Authorizes and funds six nutrition-related programs (See next slide)

  10. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US 2014 Farm Bill: Authorizes and funds six nutrition-related programs (Continued): • SNAP – Supplemental Food Assistance Program • The Emergency Food Assistance Program (TEFAP) • Community Food Project Grants Program (Administered by the USDA’s National Institute of Food and Agriculture [NIFA]) • Commodity Supplemental Food Program (CSFP) • Fresh Fruit and Vegetable Program • Senior Farmers’ Market Nutrition Program

  11. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Beyond the 2014 Farm Bill: Extra Congressional legislation needed to renew the following USDA food & nutrition programs: • Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) • WIC Farmers’ Market Nutrition Program • The following Child Nutrition Programs: • School Breakfast Program • National School Lunch Program (NSLP) • Summer Food Service Program (SFSP) • Special Milk Program • Child and Adult Care Food Program (CACFP)

  12. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US US Dept. of Heath and Human Services’ Administration on Aging (AOA) offers food assistance programs authorized under the Older Americans Act: • Congregate Nutrition Program • Home Delivered Nutrition Program • Grants to Native Americans: Supportive and Nutrition Services • Nutrition Services Incentive Program (NSIP)

  13. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US How Food Policy Works: Program Connections and Agency Coordination • USDA’s Food and Nutrition Service (FNS) administers many programs through ten regional offices, and numerous local offices. • USDA cooperates with state and local government agencies • USDA coordinates with state education departments and school districts to offer School Breakfast and Lunch programs. • State and local health departments work jointly with the USDA to operate WIC and the Child and Adult Care Food Program (CACFP).

  14. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US What are Nutrition Program Effects on Food Insecurity and Hunger? • Definitions:Hunger and Food Insecurity are not identical • National Research Council (NRC) conclusions on hunger • Hunger is a personal physiological state that cannot be properly gauged by a household consumption survey. • Difficult to distinguish chronic from temporary hunger. • NRC and USDA’s ERS established a four-stage food-securityscale (See next slide).

  15. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US NRC and ERS establish a four-stage food-security scale (Continued): • Food Security Levels • High Food Security – A household reliably accesses sufficient food. • Marginal Food Security – A household periodically has anxieties about having sufficient food, but consumption is not significantly reduced. • Food Insecurity Levels • Low Food Security – A household reduces diet quality, but quantity and eating patterns not significantly interrupted. • Very Low Food Security – deficient household income or resources interrupts normal eating patterns and reduces food consumption.

  16. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Applying the four-stage food-security scale: • An ERS study estimated that 86% of the US population had either high or marginal levels of food security. • 8.4% of US households with low food security • 5.6% experienced “very low food security.” • FNS commissioned research: Interviews of 9,811 households across 30 States. Results summarized as follows: • Households with 6-months of SNAP benefits less likely to be food insecure than new SNAP-participant households. • A 6.7% reduction of food-insecurity observed, when comparing newly-accepted SNAP applicants to six-month SNAP-participant households.

  17. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Analyze Federal Food Assistance Program Effects Using a Household Consumer Choice Model • We employ a graphical model to demonstrate how consumers express preferences within the constraints of a finite budget. • We assume rationality. Rational households optimize utility: Maximize their satisfaction subject to product scarcity and limited income. • To analyze food assistance program effects, we divide household consumer purchases into two scarce categories: (1) food and (2) all other goods.

  18. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Household Consumer Choice Model (Continued) • Mechanics of the model (See Fig. 7.4 on next slide): • Each Consumer Household faces a Linear Budget Constraint (LBC): LBC is formed by product quantities purchased at market-determined prices, and a limited income sets the outer limit of household purchasing power. • Every Household possesses a Utility Function,characterized by: (1) diminishing marginal utility for a single product item, and a (2) convex indifference curve revealing a preference for variety in consumption. • Consumer Optimum achieved when: Highest achievable Consumer Indifference Curve is just tangent to the LBC.

  19. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Consumer Choice Analysis: In-Kind Transfer Programs • Suppose a consumer household recently qualifies, and becomes a SNAP participant. • A new SNAP food subsidy is transferred to the qualified household. • Extra SNAP income can only be spent on food items, and nothing else. • Households are prohibited from reselling extra food purchased with the SNAP payment. • The initial effect of a new SNAP payment shifts the household’s budget constraint. • See Figure 7.5 on next slide.

  20. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Consumer Choice Analysis: In-Kind Transfer Programs (Continued) • In Figure 7.5 (previous Slide #21), additional SNAP program payments shift the consumer budget line to the right. Because SNAP dollars can only be spent on food, changes in the Linear Budget Constraint (LBC) are not identical to cash transfers. • Theoretical and Empirical Research on the Consumer Utility response to additional SNAP payments. Three scenarios: • Extra-Marginal Case – Household prefers cash over SNAP payment (Fig.7.6) • Infra-Marginal Case – Household indifferent between cash and SNAP (Fig.7.7) • Empirical Case – Actual household observations reveal increased food purchases, compared to the infra-marginal and extra-marginal cases. (Fig.7.7a) • See next three slides.

  21. (Extra-marginal case)

  22. (Infra-marginal case)

  23. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Hypotheses Consistent with ‘Empirical Case’ (Fig. 7.7a, Slide #25)) for Household Response to SNAP Payment • Explain unanticipated-increase household food-spending budgets with SNAP Participation: • Households may feel morally obligated to spend “Food Stamp” funds to expand their food budgets. • Household Decision-maker possibly predisposed to increase the household’s food security via a larger food budget. • SNAP monthly payments occur early; households may be supplementing food budgets with their own income as they “run out” of food near the end of the month

  24. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Nutritional Policy Paradox: The Dual Problemsof Obesity and Food Insecurity • Food insecurity and obesity occur simultaneously because of their independent association with related factors: • Poverty pressures • Less access to healthy foods • Marketing and cultural influences • Cheap energy-dense foods; expensive healthy diets • Food deprivation and binging cycles • Barriers to regular physical activity • Limited access to health care

  25. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Nutritional Policy Paradox: The Dual Problemsof Obesity and Food Insecurity (Continued) • Households encounter price incentives to purchase energy-dense foods rather than less-dense fruits and vegetables. • Drewnowski and Specter (2004) cite example: The ($/MJ) energy cost of potato chips is about 20 cents (US) /MJ or (1200kcal/$), while the ($/MJ) cost of fresh carrots is 95 cents US/MJ or (250kcal/$). • Microeconomic theory: Rational consumers respond to relative price differences. • Low-income rational households: Price differentials matter when budgets are tight.

  26. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Nutritional Policy Paradox: The Dual Problemsof Obesity and Food Insecurity (Continued) • SNAP, Food Insecurity and Obesity • Published studies: SNAP has mixed impacts on obesity. Improvements needed. • USDA and HHS issued The Dietary Guidelines for Americans, 2010, and applied findings to SNAP participation: • Encourage households to consume nutrient-dense foods and beverages. • Promotes dietary and lifestyle choices to achieve and maintain a healthy weight. • Include food safety to prevent and avoid foodborne illnesses.

  27. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US The USDA’s Thrifty Food Plan • Haskins (2012) offers three main purposes for SNAP: • Augment households’ budget capacity to afford a low-cost, nutritionally sufficient diet.  • Serve as economic stabilizer for individual households, and for the national economy. • Supplement the low-wages of employed SNAP-participant households.

  28. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US The USDA’s Thrifty Food Plan (Continued) • USDA’s Center for Nutrition Policy and Promotion (CNPP): • CNPP sponsors scientific research, studies current consumption patterns and measures actual food costs. • CNPP formulates a household diet to meet national nutritional guidelines at a minimum cost. • The CNPP’s 2006 revision of the inexpensive diet is known as the Thrifty Food Plan (TFP).

  29. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US The USDA’s Thrifty Food Plan [TFP] (Continued) • Scientific View of TFP:A mathematical optimization process determines the TFP to achieve a minimum budget cost, subject to a combination of nutritional goals and constraints. • TFP mathematical model includes: • average consumption across 58 food categories for 15 age-gender groups • US dietary recommendations and the scientific nutrient profiles of the included food groups.

  30. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US The USDA’s Thrifty Food Plan [TFP] (Continued) • Financial View of TFP: When TFP math-formulation is determined, the outcome sets the maximum allowable SNAP payment for a household recipient. • TFP measurably affects SNAP’s cost to taxpayers • TFP directly controls funding received by qualified households • SNAP payment size influence the capacity of participating households to can improve their food security levels and stabilize their household budgets.

  31. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US The USDA’s Thrifty Food Plan [TFP] (Continued) • Professional Nutritionist View of TFP: • TFP assumes most ingredients are raw or fresh; meals are primarily made “from scratch.” • Rose (2007) determined that households using the TFP require about 2.3 hours per day for meal preparation, not including the time needed for shopping and cleanup. • TFP treats household labor time as a plentiful and slack resource. • Political View of TFP: • SNAP is a supplemental program. TFP is primarily a baseline. • Overall Purpose of SNAP – Combine SNAP with a household’s own resources to address the challenges of food security.

  32. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Roles of the Low-Cost, Moderate-Cost and Liberal USDA Food Plans • To complement the TFP; the USDA creates guidelines for alternative household diet plans matched with different income levels. • USDA’s Low-Cost, Moderate-Cost and Liberal Food Plans US Population Quartiles of Food Spending QuartileUSDA, CNPPQuartile LowerFood PlanUpper BoundCategoryBound 0% < Thrifty Food Plan Quartile ≤ 25th % 25th% < Low-Cost Food Plan Quartile ≤ 50th % 50th% < Moderate-Cost Food Plan Quartile ≤ 75th % 75th% < Liberal Food Plan Quartile ≤ 100th %

  33. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Roles of the USDA Food Plans • CNPP ensures that the four food plans meet current scientifically-based nutrition standards and are relevant to the consumption habits of current consumers. • CNPP food plans not just theory; they are placed into service: • TFP - Determines the maximum household SNAP payment. • Low-Cost Food Plan - Cited in bankruptcy courts; defines the % of a bankrupt person’s income constituting his/her food budget. • Divorce Courts - Match the appropriate USDA food plan to determine an accurate alimony payment. • Liberal Food Plan (LFP) - US Defense Department to uses LFP to establish the Basic Allowance for Subsistence Rates for all service-members.

  34. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US My-Plate vs. My My-Pyramid: Changing USDA Nutritional Recommendations to Household Consumers • CNPP’s four plans are technically oriented. To reach a wider household audience, USDA seeks to create easier-to-understand communication formats. • 1992-2005: USDA published the Stepwise Food Pyramid. This model encourages households to design their daily diets based food variety, moderation, and sensible proportions. • 2011: Because of consumer confusion about implementing the Food Pyramid, USDA changed the visual illustration to “MyPlate.” • Most recently, USDA introduced “MyWins” to recommend both healthy diet and bodily activities for US households.

  35. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Chapter Summary • Federal nutrition programs serve as a food safety net. • SNAP and other nutrition programs create a counter-cyclical benefit for the national economy. • While some evidence is mixed, participation in federal nutrition programs generally improves the food security status of needy households. • More program improvements are needed to help sever the connection between food insecurity and obesity • Formal microeconomic consumer analysis helps to predict how households may respond to SNAP and related programs.

  36. US Agricultural and Food Policies:Economic Choices and ConsequencesChapter 7 – Analyzing Effects of USDA Nutrition Programs on Hunger and Food Security in the US Chapter Summary (Continued) • USDA’s Thrifty Food Plan (TFP) determines a minimum cost budget for household nutrition. • USDA designs the Low-Cost, Moderate-Cost and Liberal Food plans for use as reference points in the courts and other government programs. • USDA’s original “food pyramid” model, and now its “MyPlate, MyWins” campaign, are efforts to more effectively communicate and promote better nutrition and healthier lifestyles.

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