Goal 1: Enhance Economic Opportunities
for Agricultural Producers.
Key Outcome
ERS research and analytical activities are designed
to provide policy makers and other decisions makers with
an enhanced understanding of economic issues affecting
the U.S. food and agriculture sector's competitiveness,
including factors related to performance, structure, risk
and uncertainty, marketing and market and nonmarket trade
barriers.
Key Accomplishments
Assessment of Agricultural Policy
ERS assesses the effects of farm policy on the food and
agricultural sector. ERS led the development of analytical
studies that responded to requests for USDA studies in
the 2002 Farm Act. For example, the USDA report, Economic
Effects of U.S. Dairy Policy and Alternative Approaches
to Milk Pricing, provides a comprehensive assessment of
the effects of current U.S. dairy programs that takes
into account the ongoing structural change in consumer
demand, farm structure, and the processing industry. Other
reports on specific commodities where the 2002 Farm Act
changed programs include Policy Change and Adjustment
in the U.S. Peanut Sector and Trends in the U.S. Sheep
Industry.
ERS research on agricultural policy extends beyond individual
commodities and contributes to understanding the links
between agricultural policy, the diverse set of U.S. agricultural
producers, and the rural communities in which they live.
A new briefing room on the ERS website, Farm Policy, Farm
Households, and the Rural Economy, brings together research
findings on the broad effects of policies and explores
policy alternatives and adjustments associated with various
alternatives. In May 2004, ERS and the National Center
for Food and Agricultural Policy jointly organized a workshop
that explored the wide range of policy effects on farm
households and rural America, Agricultural Policy Links
to Farm Households and the Rural Economy.
Market Analysis and Outlook
ERS continues to work closely with the World Agricultural
Outlook Board (WAOB) and USDA agencies to provide short
and long-term projections of U.S. and world agricultural
production, consumption, and trade. Several initiatives
have increased the accessibility, timeliness, and breadth
of the data and analysis. ERS launched a new, dynamic
feature that offers the latest outlook information, data,
and links through a central location on the ERS website.
In addition, USDA’s agricultural baseline projections
are now released as soon as the components are completed.
Global Markets for High-Value Foods
ERS research on high-value product markets have produced
initial findings that lay the foundation to support future
research into understanding the complex trade patterns
for these products. The report, International Evidence
on Food Consumption Patterns, provides statistical evidence
of global food consumption patterns across levels of income
and products. The report’s findings quantify the
degree to which the demand for high-value products increases
with income, and also their relative sensitivity to price
changes across income groups. Among high-value products,
trade in fruits and vegetables has increased rapidly in
recent years in response to consumer demand for fresh
products and variety. Analysis of trade flows in the report,
Global Trade Patterns in Fruits and Vegetables, documents
the importance of regional markets centered on Europe,
Asia, and the Western Hemisphere, as well as the growth
in exports from Southern Hemisphere countries in juices
and off-season fresh fruits.
WTO and Regional Trade Agreement Negotiations
ERS research findings on the level of global agricultural
tariffs and the relative impact of different components
of the WTO Agreement on Agriculture that were presented
in reports published in 2001 (Profiles of Tariffs in Global
Agricultural Markets and The Road Ahead: Agricultural
Policy Reform in the WTO), continue to be used by policymakers
in speeches and cited by key agricultural stakeholders
in their analysis of the benefits of further trade liberalization
through WTO negotiations in the Doha Development Agenda.
In March 2004, ERS released a comprehensive analysis of
the economic effects of the Free Trade Agreement of the
Americas. In addition to published reports, ERS continues
to provide economic analysis of specific issues related
to both the WTO and several regional trade agreements
directly to agricultural trade negotiators at the Foreign
Agricultural Service and the Office of the U.S. Trade
Representative.
Agricultural Biotechnology Patent Database
In summer 2004, ERS released a web-based database of
agricultural biotechnology intellectual property, which
provides an unprecedented compilation of information to
inform research on agricultural R&D and intellectual
property. For over 11,000 U.S. utility patents issued
between 1976 and 2000, the database includes detailed
patent ownership histories that allow users to compare
R&D across sectors (U.S. and non-U.S., private, nonprofit,
public) and to track patent ownership through an extremely
active period of industry mergers and acquisitions in
the 1990s. Patents are also categorized into over 60 technology
classes and subclasses. In addition, the database includes
information on over 7,000 U.S. plant patents and on nonpatent
intellectual property such as plant variety protection
certificates and regulatory release approvals.
The private sector now accounts for a greater share of
investment in agricultural R&D than the public sector,
especially in the area of biotechnology. Preliminary analysis
of the database shows that patenting in agricultural biotechnology
has outpaced the overall upward trend in U.S. patents.
In each of nine technology classes, the number of patents
issued has increased sharply in recent years. The largest
number of U.S. agricultural biotechnology patents belongs
to Commercial firms. Database ownership information shows
that concentration in ownership of agricultural biotechnology
patents has increased since 1995, a result that is clear
only after accounting for industry mergers and acquisitions.
Increasing Access to Agricultural Resource Management
Survey
The Agricultural Resource Management Survey (ARMS), USDA’s
annual national survey of farms, is the primary source
of information about the financial condition, production
practices, use of resources, and economic well-being of
America’s farmers and farm households. This year,
ERS and NASS developed and released an interactive web-based
system with multi-tiered security to enhance the public’s
ability to access, understand, and use the ARMS data,
while protecting the confidentiality of the data contributors.
The tool targets researchers in cooperative relationships
with ERS, but has the potential to expand to other users,
including the general public, with further security, performance
and scalability enhancements. The system provides two
types of data access: a basic tabulation tool and a set
of advanced tools for multivariate analysis. Access to
the system is governed by the newly implemented USDA eAuthentication
procedures.
A wide range of data are available in the ARMS, including
information on farm and operator household financial management,
crop production practices, commodity costs of production,
as well as new information for the 15 major agricultural
States. ARMS is a powerful data source for direct answers
to key questions from USDA policy officials, Congress,
and other decisionmakers within and outside the Federal
Government about the differential impacts of alternative
policies and programs across the farm sector and among
farm families.
U.S. Fresh Produce Markets: Marketing Channels, Trade
Practices, and Retail Pricing Behavior
Retail consolidation, technological change in production
and marketing, and changing consumer demand have altered
the traditional market relationships between producers,
wholesalers, and retailers. Increasingly, produce suppliers
are asked to provide additional marketing services and
incentives in exchange for volume purchases and other
commitments by buyers. This study synthesized the results
from a multiphase project that examined the dynamics of
produce marketing, the produce shipper-retailer relationship,
and how changes in the produce market affect the relative
market influence of producers, retailers, and consumers.
The Effect of Information on Consumer Demand for Biotech
Foods: Evidence from Experimental Auctions
When a food item might be genetically modified (GM) and
divergent information about risks and benefits exists,
do U.S. consumers value information provided by the label?
How is consumer willingness to pay for GM and standard-labeled
food items impacted by the divergent information? This
study addressed these questions by designing and conducting
an experimental auction to elicit consumers' willingness
to pay for GM-labeled and standard-labeled foods under
different information regimes. The evidence gathered for
vegetable oil, tortilla chips, and potatoes show that
labels do matter. In particular, under all information
treatments, consumers discounted, on average, by 14 percent
food items labeled GM. While gender, income, and other
demographic characteristics appear to have only a slight
impact on consumer willingness to pay for GM foods, information
from interested parties and third-party (independent)
sources are found to have strong impacts.
Estimating the Public Value of Conflicting Information:
The Case of Genetically Modified Foods
Much controversy has been associated with the introduction
of GM foods. One important controversy relates to tolerance
levels -- the impurity rate that is tolerated before a
commodity must be labeled as GM. Currently, the United
States has not defined a specific tolerance or threshold
level for GM foods. This paper uses data from experimental
auctions to test whether consumers prefer non-GM foods
with zero, 1-percent, or 5-percent tolerance levels for
genetically modified material. We conclude that consumers
would pay less for food that tolerates GM material, but
the discount is not significantly different for foods
with 1-percent and 5-percent GM content.
Goal 2: Support Increased Economic Opportunities and Improved
Quality of Life in Rural America.
Key Outcome
ERS research and analytical activities are designed to
provide an enhanced understanding by policy makers, regulators,
program managers, and organizations shaping public debate
of economic issues affecting rural development, including
factors related to farm finances and investments in rural
people, businesses and communities, and of economic issues
relating to the performance of all sizes of American farms.
Key Accomplishments
Understanding Rural Diversity
The economies of individual rural areas differ, as do
their resources and the opportunities and challenges they
face. ERS recently released a new county classification
(typology) that captures the broad economic and social
diversity among rural areas. These typologies are widely
used by policy analysts and public officials to determine
eligibility for and the effectiveness of Federal programs
to assist rural America. The new typology identifies six
discrete economic types of nonmetro counties based on
the primary economic activity of the county—farming,
manufacturing, mining, service, Federal/State government,
and other. The typology also identifies seven county types
that distinguish important policy themes, including persistent
poverty, persistent population loss, housing stress, retirement
destination, recreation, low education, and low employment.
The ERS county typology, along with newly revised Rural-Urban
Continuum Codes and the Urban Influence Codes, underlie
the development of Federal policies and programs designed
to enhance the capacity of rural residents, their communities,
and their businesses to prosper. These typologies will
form the basis for an analytical study to assess the determinants
and consequences of diversity in rural America.
Measurement, Determinants, and Consequences of Poverty
An ERS study examines the effects of major changes in
demographic and economic conditions as well as government
policy on rural poverty during the 1990s. During this
period, welfare reform simultaneously scaled back the
social safety net and increased the incentives towards
achieving self-sufficiency for the poor. Also during the
1990s, the rural population grew and both the U.S. and
rural economies experienced one of the longest periods
of economic expansion. These factors had important implications
for changing poverty rates in rural areas. Throughout
the history of recording poverty rates, the incidence
of rural poverty has been consistently higher than urban
poverty. This analysis provides empirical support for
the argument that poverty-reduction programs and policies
need to include components to target nonmetro areas, and
that different policies may be appropriate for different
areas. Policies focused on mitigating extreme poverty
and providing on-the-job training may be of more value
in metro areas, while policies focused on supplemental
income assistance for the elderly and disabled may be
more effective in nonmetro areas.
Income, Wealth, and the Economic Well-Being of Farm
Households
Agricultural policy is rooted in the notion, dating from
the 1930s, that providing transfers of money to the farm
sector translates into increased economic well-being of
farm families. ERS analysis shows that neither change
in income for the farm sector nor for any particular group
of farm business can be presumed to reflect changes confronting
farm households. Farm households draw income from various
sources, including off-farm work, other businesses operated
and, increasingly, nonfarm investments. Similarly, focus
on a single indicator of well-being, such as income, overlooks
other indicators such as the wealth held by the household
and the level of consumption expenditures for health care,
food, housing, and other items. Using an expanded definition
of economic well-being, ERS finds that farm households
as a whole are better off than the average U.S. household,
but that 6 percent remain economically disadvantaged.
Rural Development Strategic Planning and Performance
Indicators
USDA’s Rural Development (RD) mission area operates
a variety of programs designed to help improve the economy
and quality of life in rural areas. RD administers financial
programs to support essential public facilities and services,
such as water and sewer systems and housing; business
loan programs to promote local economic development; and
technical assistance programs to help rural areas undertake
community empowerment programs. ERS provides assistance
useful for program planning and evaluation. For example,
ERS continues to work with RD staff to define indicators
of program success and to identify appropriate data sources
to measure performance outcomes and outputs. In 2003,
ERS developed a web-based mapping utility used by Rural
Business-Cooperative Service (RBS) field staff to determine
eligibility for RBS loan programs. ERS advised the RD
Under Secretary and senior staff on the effects of changes
in the Office of Management and Budget definition of nonmetropolitan
and metropolitan areas for RD program eligibility. Also,
ERS conducted a regulatory impact analysis of a proposed
rule to charge an annual fee on loans made under the Business
and Industry Loan Guarantee Program.
Goal 3: Enhance Protection and Safety of the Nation's
Agricultural and Food Supply.
Key Outcome
ERS research and analytical activities are designed to
provide policy makers and other decisions makers with
an enhanced understanding of economic issues related to
improving the efficiency, efficacy, and the equity of
public policies and programs designed to protect consumers
from unsafe food.
Key Accomplishments
Traceability
Food traceability is a salient issue in discussions ranging
from homeland security, food safety, country-of-origin
labeling, and genetically engineered foods. In March 2004,
ERS released a widely cited study that examined the use
of traceability in the U.S. food system. The study explored
the private and public sector rationale for adapting traceability
schemes and provided details of how food firms and the
government sector are using traceability systems to meet
consumer needs. The findings indicate that mandatory traceability—possibly
a one-size-fits-all regulation—can be costly (since
firms already trace many food attributes) and that other
approaches may be better targeted toward enhancing traceback
for food safety. If mandatory systems fail to allow for
variations in traceability systems, they will likely end
up forcing firms to make adjustments to already efficient
systems or to create parallel systems.
HACCP, Food Safety Technologies, and Food Safety Performance
In May 2004, ERS released the results of a nationally
representative survey of meat and poultry slaughter and
processing plants, designed to collect data on the costs
of implementing Hazard Analysis and Critical Control Point
(HACCP) requirements and firms’ post-HACCP investments
in food safety technologies. Continuing research involves
linking the new survey data with plant food safety performance
data to (1) examine technology effectiveness, e.g. by
linking the data to Salmonella and HACCP performance data;
and (2) create a baseline technology level which could
be used to develop an index of food safety. The index
may then be linked to food safety performance data to
study how changes in technology lead to changes in food
safety performance.
Food Safety and International Trade
Food safety and international trade are increasingly
intertwined as new food safety challenges have emerged
and as trade has expanded and changed to meet global demand.
In November 2003, ERS released a study that examined the
conceptual relationships between food safety and international
trade, and analyzed empirical examples from the meat and
poultry, produce, food crop, and seafood sectors.
Geo-Spatial Economic Analysis Team (formerly known as
SAS-USA)
In FY 2004, the ERS GSEA team developed a standalone
information system for the USDA- Homeland Security Office
to provide spatially oriented economic and production
information during emergencies. The user system interface
can be used without the participation of ERS experts.
The GSEA information system is used to depict the U.S.
agriculture/food supply chain, using a description based
on existing databases that are spatially enhanced to the
sub-county level. GSEA uses economic modeling to connect
the various components of the agriculture/food supply
chain and to describe its upstream and downstream linkages
with other economic sectors (e.g., energy, chemical, etc.),
as well as to U.S. food consumers and to international
markets.
Goal 4: Improve the Nation's Nutrition and Health.
Key Outcome
ERS research and analytical activities are designed to
enhance understanding by policy makers, regulators, program
managers, and organizations shaping public debate of economic
issues relating to the nutrition and health of the U.S.
population, including factors related to food choices,
consumption patterns at and away from home, food prices,
food assistance programs, nutrition education and food
industry structure.
Key Accomplishments
Women, Infant’s and Children (WIC) and the Supermarket
Retail Prices for Infant Formula
Rebates from infant formula manufacturers to State WIC
agencies support over one-quarter of all WIC participants.
However, concerns have been raised that WIC and its infant
formula rebate program may significantly affect the infant
formula prices faced by non-WIC consumers. ERS conducted
the most comprehensive national study to date of infant
formula prices at the retail level. For a given set of
wholesale prices, WIC and its infant formula rebate program
resulted in modest increases in the supermarket price
of infant formula, especially in States with a high percentage
of WIC formula-fed infants. This work from FY 2004 extends
an earlier ERS Report to Congress that examined infant
formula prices and availability. Research is continuing
on factors that affect the wholesale prices established
by infant formula manufacturers.
Understanding the Nation’s Nutrition Assistance
Programs
Several important studies were completed in FY 2003 and
FY 2004 that provide policymakers, program agencies, and
others with information to improve the USDA nutrition
assistance programs. Research on program dynamics and
administration resulted in a report that examined changes
over time in families’ income and Food Stamp Program
(FSP) participation, finding that monthly incomes of participating
households vary substantially less than incomes of eligible
nonparticipating households, many of whom experience a
short-term drop in income. Another report on program administration
examined such outcomes as staff workload, client access,
and quality control errors following the experiences of
four States that adopted FSP options made available in
the 2002 Farm Act. To improve the usefulness and cost-effectiveness
of research on nutrition assistance programs, a set of
reports was completed on data-development proposals that
examined the possibility of linking various databases,
including administrative databases of program participants.
Another major theme in the agency’s research portfolio
is examination of various outcomes of government assistance
programs. One study measured the effect of food stamps
on children's overall well-being, based on various poverty
measures. Another examined the labor market impacts of
the "welfare-to-work" provisions of the Personal
Responsibility and Work Opportunity Reconciliation Act
of 1996 (PRWORA). Research on changes in food insecurity
conditions over time for a set of families with children
resulted in the first longitudinal analysis of food insecurity
and hunger, finding that families who were food insecure
and receiving food stamps were more likely to remain food
insecure if they left the FSP. ERS also continued to publish
successive issues of The Food Assistance Landscape, a
semi-annual periodical that highlights information and
research on USDA’s food assistance efforts.
Economics of Obesity
The United States has experienced rapid growth in overweight
and obesity since the mid-1970s, raising national concerns
about the health and well-being of affected individuals.
In April 2003, ERS hosted a workshop with top health economists
from around the Nation, designed to take stock of the
current state of research on the economic causes and consequences
of obesity. Topics included the role of technological
change in explaining both the long- and short-term trends
in obesity; the role of maternal employment in child obesity;
the impact of obesity on wages and health insurance; behavioral
economics as applied to obesity; and the challenges in
measuring energy intakes and physical activity. The workshop
also discussed policy implications and future directions
for obesity research. In May 2004, ERS published a comprehensive,
non-technical synthesis of the workshop, The Economics
of Obesity: A Report on the Workshop Held at USDA’s
Economic Research Service.
Understanding America’s Food Choices
Combating obesity will require better knowledge of why
people make the food choices they do. A number of projects
were completed that enhance understanding of food choices
and of potential policy interventions designed to influence
them. In FY 2004, ERS published Low-Income Households’
Expenditures on Fruits and Vegetables, which examined
how spending by low-income households would change if
they received marginal amounts of additional income. In
FY 2004, ERS also completed a study of how a hypothetical
tax on consumption of salty snacks would affect calorie
intake and tax revenues.
Goal 5: Protect and Enhance the Nation's Agricultural
Resource Base and Environment.
Key Outcome
ERS research and analytical activities are designed to
provide an enhanced understanding by policy makers, regulators,
program managers, and those shaping the public debate
of economic issues relating to development of Federal
farm, natural resource, and rural policies and programs
to protect and maintain the environment while improving
agricultural competitiveness and economic growth.
Key Accomplishments
Invasive Species
ERS research on invasive species focuses on informing
USDA decisionmakers about the economic effects of alternative
policies and programs. An analysis of soybean rust in
FY 2004, Economic and Policy Implications of Wind-Borne
Entry of Asian Soybean Rust into the United States, examined
how the economic impacts of the potential establishment
of an invasive species – soybean rust – would
depend on the timing, location, spread, and severity of
rust infestation and on how soybean and other crop producers,
livestock producers, and consumers of agricultural commodities
respond to this new pathogen. This report provided decisionmakers
with timely research and analysis in light of the discovery
of soybean rust in the United States later in 2004.
Conservation Reserve Program (CRP)
Anecdotal evidence suggests the USDA Conservation Reserve
Program (CRP), a land retirement program established in
1986, has negatively affected some rural communities.
For a Congressionally-mandated study, ERS statistically
evaluated county socioeconomic trends before and after
CRP was implemented and found the aggregate impacts of
the CRP on rural communities to have been limited. The
ERS report found that high CRP enrollment did not significantly
affect rural population trends. Furthermore, while CRP
enrollment was associated with some loss of jobs in rural
counties between 1986 and 1992, this negative relationship
did not persist throughout the 1990s. ERS found no statistically
significant evidence that CRP participation encourages
absentee ownership, or that CRP participation affected
local government services or tax burdens in a systematic
way. ERS research also indicated that the CRP’s
effects on wildlife and water quality led to an increase
in expenditures on outdoor recreation of as much as $300
million per year.
Environmental Compliance
ERS released a report on USDA compliance mechanisms,
Environmental Compliance in Agriculture: Past Performance
and Future Potential. Since 1985, U.S. agricultural producers
have been required to practice soil conservation on highly
erodible cropland and conserve wetlands as a condition
of farm program eligibility. Evidence suggests that these
compliance mechanisms – Conservation Compliance,
Sodbuster, and Swampbuster – have helped reduce
soil erosion and preserve wetlands. Extending compliance
to nutrient management in crop production could yield
additional environmental gains.
Regulations for Land Application of Manure from Confined
Animal Feeding Operations
ERS served an important role in the design of recent
EPA water quality regulations for confined animal feeding
operations. As a result of ERS analysis of the cost-effectiveness
of alternative options for restrictions on land application
of animal waste, EPA shifted to a more cost-effective
option in its final regulations. The ERS researchers were
awarded high-level recognition from both EPA (Bronze Medal)
and from USDA (Secretary’s Honor Award).
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