US agricultural policies have had small effects on global food prices, though some policies like sugar tariffs and biofuel mandates have increased prices. Most programs have negligible impacts because support is decoupled from production. Impacts are larger in other countries where farm policies directly affect consumer prices. Research and development spending decreases prices and consumption more than it increases body weight.

1. Effects of US Agricultural
Policies on Global Food Prices
Joe Glauber, IFPRI
Experts Meeting on Trade and Nutrition
FAO
15-16 November 2016

2. Food expenditures as share of total household
expenditures
0.0
5.0
10.0
15.0
20.0
25.0
30.0
1930
1934
1938
1942
1946
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
2014
Percent
Source: USDA, Economic Research Service

3. Growth in US household food expenditures
Billion USD
Source: USDA, Economic Research Service
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
Food Total disposable income

4. FAO food price index, adjusted for inflation
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2002-04 = 100
1961-2000 trend
Source: FAO

5. FAO food commodity price indices, adjusted for inflation
0.0
50.0
100.0
150.0
200.0
250.0
300.0
Meat Price Index
Dairy Price Index
Cereals Price Index
Oils Price Index
Sugar Price Index
2002-04 = 100
Source: FAO

6. Food CPI relative to overall CPI
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1913
1917
1921
1925
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
Source: US Dept of Labor, Bureau of Labor Statistics
2002-04 = 100

7. Declining farm value of retail food
0
5
10
15
20
25
30
35
40
45
50
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
Farm value share
Revised food dollar
Source: USDA, Economic Research Service

8. Growth in per capita food consumption away from home
0
200
400
600
800
1,000
1,200
1,400
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
At home
Away from home
1988 USD

9. Farm share of the food dollar
0
5
10
15
20
25
30
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
at home
away from home
Total food dollar

10. Farm value of selected food prices
Item Share (%) Item Share (%)
Beef 52 Broccoli 24
Whole milk 50 Orange juice from
frozen concentrate
24
Strawberries 44 Pears 22
Apples 32 Iceberg lettuce 21
Grapes 31 Lemons 16
Cheddar cheese 30 Ice cream 15
Pork 30 Fresh oranges 15
Sugar 28 Fresh orange juice 15
Tomatoes 27 Potatoes 15
Flour 26 Grapefruit 12
Peaches 26 Bread 7
Source: USDA, Economic Research Service

11. Selected policies affecting food prices and demand
Production
Price/income supports
Supply control policies
Risk management
R&D
Program that divert
production
(e.g., marketing orders)
Processing
Imports Border measures
(e.g., tariffs)
Programs that
increase demand
(biofuels, export
subsidies, domestic
food programs)
Consumption
Nutrition
programs
Tax policies
(e.g., soda tax)
First handler

12. Selected policies
• Border measures (tariffs, NTBs)
• Measures that enhance productivity (R&D)
• Measures that restrict production (acreage and production controls;
planting restrictions)
• Measures that restrict supply through marketing quotas and price
discrimination (marketing orders)
• Measures that enhance domestic demand (nutrition programs,
biofuels)
• Measures that enhance export demand (subsidies, credits, food aid)
• Market price support (sugar program)
• Income support (direct payments, ARC/PLC)
• Input subsidies (water)
• Disaster/safety net policies (crop insurance)

13. Effects of US agricultural policies on commodity
prices
Commodity Measure Primary impact Global prices US retail
Sugar Tariffs High border
measure provides
price support
Small  Large 
Dairy Margin protection Protects dairy
margins
Small  Negligible
Marketing orders Diverts fluid milk
to manufacturing
purposes
Small 
for powder,
cheese
Large 
fluid milk
Cereals CRP Diverts cropland
to conserving use
Small  Negligible
ARC/PLC Provides
countercyclical
support—not tied
to production
Small  Negligible
Crop insurance Provides yield
and revenue
protection
Small  Negligible
Biofuels Diverts maize
production to
industrial use
Small  Negligible

14. Effects of US agricultural policies on commodity
prices
Commodity Measure Primary impact Global prices US retail
Oilseeds CRP Diverts cropland to
conserving use
Small  Negligible
ARC/PLC Provides
countercyclical
support—not tied to
production
Small  Negligible
Crop insurance Provides yield and
revenue protection
Small  Negligible
Biofuels Diverts vegetable oil
production to
industrial use
Small  Negligible
Meat and poultry Section 32 purchases Purchases for school
feeding programs
Negligible Negligible
Fruits and
vegetables
Tariffs High MFN tariffs
selected products
Small  Negligible
Marketing orders Quality controls;
diversion to export
markets
Small Small
fresh
Planting restrictions Restrict production
on crop base acres
Negligible Negligible

15. Selected studies
Study Finding
Miller and Coble (2006) Effect of direct payments found to be insignificant in
explaining food expenditures as percent of total
household expenditures.
Alston, Sumner and Vosti
(2008)
Elimination of subsidies and border protection results in
price decrease for soybeans, rice, sugar, fruits and
vegetables, beef, hogs and milk and small price increase
for maize and wheat.
Gerlt, Thompson, Sydow
and Johansson (2016)
Elimination of price and income support policies result in
0.14% decrease in cropland; plus elimination of crop
insurance 0.30% decrease in cropland; plus elimination of
CRP +2.77% increase in cropland
Okrent and Alston (2016) Elimination of grain and oilseed subsidies result in
decrease in consumption of 567 cal/year. Removal of all
subsidies would result in an increase in consumption of
165 to 1,435 cal/year (large consumption of dairy and
fruits and vegetables offset declines in cereals and bakery
products)

16. Projected ethanol demand
Corn use for ethanol (mil bu)
0
1,000
2,000
3,000
4,000
5,000
6,000
04/05
06/07
08/09
10/11
12/13
14/15
16/17
18/19
20/21
22/23
24/25
Ethanol use (mil gal)
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
E-10 mid-level E-85 Exports
Source: FAPRI

17. Effects of a 10 percent increase in R&D spending on US
food prices, consumption and body weight
Price
(% change)
Consumption
(% change)
Per capita caloric
intake (kcal)
Cereals and bakery -1.41 -2.61 -9.19
Meats -8.56 1.10 1.66
Eggs -13.97 3.90 1.08
Dairy -5.65 3.74 7.29
Fruits and
vegetables
-9.90 4.25 5.98
Other foods -3.54 3.85 15.42
Nonalcoholic
beverages
-0.68 -0.80 -1.30
Food away from
home
-0.96 -0.72 -5.30
Alcoholic beverages -0.82 -1.51 -1.09
Consumption (Kcal) 14.54
Body weight (lbs)
One year 1.11
Steady state 1.86
Source: Alston, MacEwan and Okrent (2016)

18. Global vulnerability to price effects
Source: Bren d’Amour et al. 2016

19. Conclusions
• Impacts of most US farm programs are small because of
move to more decoupled forms of support
• Because farm value of US retail food prices is small, impact
of farm programs largely negligible
– Exceptions are measures like tariffs, marketing orders, and
biofuel policies which have raised prices
– R&D policies have lowered prices but benefits far outstrip costs
• Impacts on consumption are likely larger when policies
implemented at consumer level (eg, consumption taxes);
externalities less than if implemented upstream
• Agricultural policy impacts may be larger in foreign
markets, particularly those where farm-retail spread is less
and where imports are important component of diet