Import Share of Consumption
As the U.S. population has grown in size and ethnic diversity, the volume and variety of food consumed and imported in the United States has increased correspondingly. In 2013, U.S. food consumption totaled 635 billion pounds, or more than 2,000 pounds per capita. Of this amount, imports accounted for 19 percent (123 billion pounds), or 390 pounds per capita. Imports comprise an increasing share of food consumed by Americans, much of which cannot be produced domestically due to climate conditions and crop seasonality. Further, some imported foods cost less to produce abroad than their domestically grown counterparts. Consumers prefer an increasingly wider selection of food products, such as tropical fruits and vegetables, premium coffee, and a greater variety of wines, beers, cheese, grain products, and preserved meats. As food producers and processors, both domestic and foreign, vie to supply these products, policymakers need to know which commodities are more dependent on imports.
One approach to estimating the percentage of imports as a share of food consumption uses the volume of food imports and consumption, measured as the ratio of the physical weight of imported food to total food consumed. Another approach uses dollar values for food imports and domestically consumed food. This study examines the differences between these two procedures in methodology and results. Policy analysts and other researchers can use this information to gauge the growing importance of imported products as supplements to the food supplied domestically by U.S. farmers and food manufacturers. The sections that follow describe the methods and data used for each approach, explain their strengths and weaknesses, provide import share estimates using both approaches, and analyze the differences between the two sets of results.
Analysts use two approaches to estimating the import share of food consumption. The first is based on the volume, or physical weight, of imports divided by the volume of domestic consumption for each food group or product. The second is based on the monetary values of imports and food consumed domestically. In each approach, the units of measure of imports and consumption should be the same. For example, since most U.S. red meat imports are shipped in carcass form, both red meat imports and consumption should be measured in carcass weight. Similarly, since food imports are generally priced at wholesale value, food consumption should be valued at the producer price level, not at retail value. Neither method accounts for any changes in stock levels that may affect the amount imported but not consumed during the same calendar year.
The Volume Method:
There are a number of data requirements for estimating import shares based on volume. In the Economic Research Service (ERS) food availability and disappearance database, the physical weights of imported processed products are converted into their equivalent fresh or farm weights. Thus, import units are compatible with consumption units that are measured in fresh or farm weights. Liquid or quantity measures for food are converted into weight equivalents using conversion factors or average weight per unit. The ERS food availability database already provides most of these unit conversions. Food consumption (or disappearance) volumes are estimated by adding imports to production, then subtracting exports. Nonfood uses, such as for industrial materials, pet food, seed, animal feed, and losses in storage, handling, and transport, are removed when data are available.
To estimate the import share of U.S. food consumption based on volume, analysts divide the physical weight of imports for each food group or their aggregate by the physical weight of the corresponding food group or aggregate consumed in the United States. Import volumes and consumption estimates of all food groups are found in the ERS Food Availability Data System. The foods derived from farm animals are red meats, poultry meat, eggs, fish and shellfish, and dairy products. Foods obtained from plants are vegetable oils, nuts, fruits (fresh, frozen, canned, and dried), fruit juices, wine, vegetables, legumes (dry), food grains, sugar and sweeteners, tropical products (coffee, cocoa, tea, and spices), and beverages
The Value Method:
Foods are classified as unprocessed or processed for the purpose of valuing their cost of production. The value of unprocessed foods is based on prices received by farmers in the form of cash receipts, as estimated by ERS from National Agricultural Statistics Service (NASS) data. These foods cover all farm commodities that are sold for fresh consumption or for processing into food products. Thus, total U.S. farm cash receipts for food commodities include the cost of materials used by domestic food manufacturers. As a result, the estimated value of processed foods is represented by value added in food manufacturing, since the cost of materials is already included in farm cash receipts for food commodities. The value of food consumption (or use) is estimated as production value plus imports, then minus exports. The production value for unprocessed foods is their corresponding farm cash receipts, whereas the production value for processed foods is their farm receipts plus value added by manufacturers. Commodity and food stocks are not accounted for, given that the change between beginning and ending stocks do not significantly affect the annual value of total food consumption.
The import share of food consumption based on value is the ratio of imported food value to domestic consumption value. Again, no estimates of food losses due to waste or spoilage are accounted for in calculating food consumption value. Assuming that food losses apply proportionally to both imports and consumption, they are expected to offset each other in the import/consumption ratio. While stocks of food commodities owned by farmers are excluded from farm cash receipts, processed food inventories are not accounted for because data on the value of stocks of imported food products are not available.
Unprocessed foods consist of the following groups: Food grains (wheat and rice), peanuts, vegetables and melons, fruits and tree nuts, animal meats, dairy milk, poultry and eggs, and fish and marine products. The groups falling under processed foods are: Grains and oilseed milling products, sugar and confections, preserved fruit and vegetables, dairy products, meat products, fish and seafood products, bakery products, other processed foods, and beverages. Each is identified by a 4-digit North American Industrial Classification System (NAICS) code, with corresponding value added to manufacturing and import values. The data sources are the Annual Survey of Manufactures (U.S. Census Bureau), the International Trade Administration’s trade database (U.S. Department of Commerce), and ERS farm cash receipts.
Estimates of the import share of total U.S. food consumption based on value were found to closely track import shares based on volume. The import share estimate for 2013 is 20 percent based on value and 19.4 percent based on volume. In the early 1990s, the share estimates from volume were 12 percent and the shares from value were close to 11 percent. Over the next two decades, both total import share measures increased until the share based on value surpassed that based on volume in 2011, continuing to do so through 2013. For animal products, volume-based shares (3.8 percent in 1990 to 4.2 percent in 2013) were consistently lower than value-based shares (8.5 to 11.9 percent). For plant products, the reverse was true—volume-derived shares (19 percent in 1990 to 32 percent in 2013) were consistently higher than value-based shares (12.8 to 26.8 percent over the period).
These differences in share estimates are attributed largely to the higher unit prices of animal products relative to plant products. Per unit prices of imported processed foods such as meat products, fish and shellfish, grain products, coffee and confections, and beverages are generally higher than import prices for fresh produce, bulk grains and oilseeds, raw sugar, and live farm animals. Nevertheless, the increasing import shares measured from value or volume reflect the average 2.3-percent annual growth of per capita food imports, from 229 pounds in 1990 to 390 pounds in 2013. During the same period, per capita food consumption grew from 1,900 pounds per year in 1990 to 2,006 pounds in 2013, a much slower rate than imports. As the U.S. population expanded from 250 million in 1990 to 316.5 million in 2013, imported food grew by 66 billion pounds or 115 percent, while total food consumption grew by 160 billion pounds or 34 percent. In fact, U.S. food production increased by an average 1.3 percent annually from 1990 onward, while the population grew at a 1.1-percent pace. The difference between production and population was bridged by higher per capita consumption and by more exports.
The import shares based on value were higher for processed foods than for unprocessed foods largely because of higher import unit prices for processed products. Increasing from 11 percent in 1990 to 23 percent in 2013, the growth of import shares for processed foods exceeded those of unprocessed foods, which climbed from10 percent to 17 percent during the same period. These trends indicate larger amounts of imported processed foods relative to U.S. production of these products for domestic consumption. As the dollar appreciated in 2012 and 2013, U.S. food imports have grown significantly relative to 2011, in both volume and value. However, the dollar’s depreciation from 2003 to 2011 brings the average rise in import prices to 4 percent through 2013.
Given that the value of U.S. food consumption in 2013 amounted to an estimated $587.5 billion at the producer price level and that the corresponding consumption volume was 635 billion pounds, a pound of food consumed in 2013 cost an average of 93 cents at wholesale. In 1990, the cost was 55 cents per pound consumed. The amount of imported food in 2013 cost 95 cents per pound on average compared to 49 cents in 1990. That is, while the cost of total food consumed (including imports) climbed 69 percent from 1990 to 2013, the cost of imported food increased 94 percent. With respect to consumed food minus imports, the cost climbed from 56 to 92 cents per pound between 1990 and 2013, a 64-percent increase in 23 years. Thus, as the dollar depreciated 24 percent from 2002 to 2011 in price-adjusted terms, the cost of imported foods inflated at a faster pace—from 58 cents in 2002 to 95 cents per pound in 2013, a 64-percent jump in only 11 years—than domestically produced food.
One use for the import share of food consumption is to gauge the relative contribution of imports to overall food price inflation as opposed to the effect of domestically produced food. Given that the value-based share of imports in food consumption was 20 percent in 2013, then about 20 percent of wholesale food price inflation in 2013 is explained by import prices. In other words, food price inflation is a weighted average of imported food prices and domestically produced food prices, with import share of consumption acting as the weight with respect to import prices. Because of the fluctuating pattern of food commodity prices such as grains, oilseeds, and tropical oils, as well as the changing dollar in recent years, import prices may distort import shares based on value for certain food groups that are highly dependent on imports.
Among the major food groups with the highest import shares are fish and shellfish, fruits and nuts, sweeteners, and wine. The import share for tropical products such as bananas, mangos, coffee, cocoa, tea, spices, olive oil, and tropical oils are at or near 100 percent since domestic production is close to zero. Other examples of highly import-dependent products include cashew nuts, pecans, apple juice, table grapes, melons, and fresh tomatoes. Foods with increasing import shares include lamb meat, orange juice, frozen potatoes (french fries), rice, and candy. As consumer incomes have risen, demand for off-season produce and premium quality products such as coffee, chocolate, nuts, beer, and cheeses has also gone up.
Foods with the lowest import shares¾those that are mostly domestically produced¾include poultry meat and eggs, milk and other dairy products, wheat, and oilseeds. Only 4.7 percent of pork was imported and 2.7 percent of peanuts, 5.3 percent of head lettuce, and 9 percent of fresh oranges. Other products produced abundantly on domestic farms are almonds, apples, potatoes, canned tomatoes, and fresh mushrooms. Nevertheless, 27.5 percent of rice consumed by Americans is imported, along with significant shares of grain products such as pasta, noodles, flour/dough mixes, and other intermediate bakery products. Some imports are produced in foreign countries by U.S.-owned enterprises, such as Dole pineapples and other fruit, Del Monte canned fruit, and Chiquita bananas.
Characteristics of Estimates
Import shares can be calculated from either volumes or values of imports and food consumption. Each method has advantages and disadvantages. An advantage to using volumes is that the effect of prices on import share is excluded (in the short run). If import and consumption volumes change at the same rate from one year to the next, import shares should remain the same. However, if import prices rise relative to domestic prices (perhaps due to a depreciated U.S. currency), import shares based on value will be higher even if import volumes did not change in proportion to domestic consumption. Disadvantages of using volumes (physical weight) to estimate import share include the need to transform liquid and other nonweight quantities into weight-equivalent units, as well as to convert product or processed weight into farm or fresh weight units. Another shortcoming is that water-laden products such as fresh produce are heavier than grains, nuts, or spices with little moisture content, so that for $1 million worth of each commodity, for example, fresh produce will typically weigh more than the low-moisture crops. As a result, the aggregate volume of different commodities is biased toward crops that are physically heavier per unit.
If the value of food consumption is based on consumer food expenditures, its import share will be underestimated because of value added in the form of retail and food service margins, overhead expenses, and labor costs. Since import values are generally based on wholesale prices, they do not reflect food service or retail costs. Thus, in order for import share to be calculated from consistent or similar units, food consumption value has to reflect wholesale or producer prices. If the shipment value of domestically processed foods is used in estimating the value of food consumption, the cost of materials (raw and intermediate inputs in food processing) has to be discounted to avoid double-counting farm receipts for food commodities sold to processors/manufacturers. That is, total U.S. farm cash receipts are added to value-added in domestic food manufacturing to estimate food consumption value at producer prices, after adding imports and subtracting exports.
Given that food import and consumption volumes are more readily available (in the ERS food availability database), calculating import share from them is straightforward. For import share based on values, due to there being no available data at wholesale prices, food consumption value has to be roughly estimated from farm cash receipts, value added in food manufacturing, and net imports. Since farm sales receipts are recorded by commodity while value added is by industry, import share estimates by food group combine commodity data with industry data in measuring food consumption value. Thus, for the sake of expediency and relative accuracy, using food import and consumption volumes is the easier choice. While there are sharply contrasting costs in terms of data-gathering and calculation effort between the two import share estimation methods, their results should be mutually consistent if measurement errors are minimal. Indeed, judging from the estimation results, the import share estimators—one based on volume and the other on value—are found not to be significantly different from each other.
Some imports compete with domestic products, such as grain products, processed meat, cheese, sugar, wine, and beer. If the responsiveness of import demand to price changes is high, the analysis of contributions of import prices of these products relative to those of domestic prices to overall food price inflation will be dynamic. That is, if import prices of competing products rise faster than their domestic counterparts, consumer preference is expected to shift in favor of the domestic products, at least over the short term. The change in preference will be reflected in a lower import share of consumption in terms of volume for that food group in the following year (if annual data is used). Indeed, the price elasticity of import demand is lowest for products with minimal to no domestic competition, and highest with respect to products with many close domestic substitutes. Thus, import shares for products that are not produced domestically will depend more on other drivers such as income and tastes than on prices. And for products with many domestic substitutes, import shares will depend largely on relative prices.
Data and Methodology
ERS maintains an online database of the food available for consumption in the United States. The ERS Food Availability (Per Capita) Data System includes historical supply and use tables for most of the food commodities that make up the American diet. The data cover imports and domestic food disappearance (consumption and waste). Estimates of the import share of the volume of each food item or food group are derived from this database. For import shares based on value, estimates are calculated using the U.S. Census Bureau’s Annual Survey of Manufactures, which provides data on value added in manufacturing and processing of farm commodities. ERS farm cash receipts estimates provide data on production value for unprocessed food commodities. USDA’s Global Agricultural Trade System (GATS) provides data on import values.
In ERS’ Food Availability Data System, foods consumed in the United States are categorized into 10 groups, 4 that are produced from farm animals and 6 produced from plants (crops). U.S. food imports are divided into these groupings as well:
- Red meat
- Poultry and eggs
- Dairy products
- Fish and shellfish
- Grains and products
- Fruits and nuts
- Tropical products
- Wine and beer
Nonfood agricultural products, such as animal feed or industrial materials, are excluded from these food groups. The ERS Food Availability database provides data for volume of production, imports, exports, stocks, and disappearance (consumption and waste) for each food commodity. The 10 food groups can also be classified as either unprocessed or processed. Within these groups, unprocessed foods that are consumable without further processing include fresh fruit, fresh vegetables, tree nuts, and eggs. The remaining foods are classified as processed or manufactured products before final sale to consumers, including all food commodities that are cut, frozen, dried, canned, bottled, preserved, prepared, juiced, or fermented. All meat, dairy, grain, oilseed, and sweetener products are considered processing commodities as they require further processing before consumption.
Industry data defined by NAICS codes are used for the production, import, and export values of processed foods in estimating the value of U.S. food consumption (use) at the wholesale level. Farm cash receipts as estimated by ERS are used as production values of unprocessed food commodities, much of which are inputs in food manufacturing. U.S. Census trade values for unprocessed food commodities are then combined with farm cash receipts to calculate consumption values of unprocessed foods. Finally, consumption values of processed and unprocessed foods, as well as values of imported processed and unprocessed foods, are added together to calculate the combined import share for all foods consumed. Thus, the aggregate import share of all consumed foods reflects commodity as well as industry data.
The following food groups represent nonmanufactured products of the crop production industry (NAICS 111) whose import and export values and corresponding farm cash receipts are used in estimating the import share of food consumption:
- Grains and oilseeds (NAICS 1111)
- Vegetables and melons (NAICS 1112)
- Fruits and tree nuts (NAICS 1113)
- Beef cattle; swine (NAICS 1121, 1122)
- Poultry; sheep and goats (NAICS 1123, 1124)
- Farm fish and products (NAICS 1125)
- Fish and marine products (NAICS 114)
The source of import and export data for these food groups is the U.S. Department of Commerce’s International Trade Administration, which identifies product groups by 4-digit NAICS codes. This is also the source for trade data of the manufactured food industry (NAICS 311), whose product groups are listed below:
- Grain and oilseed milling (NAICS 3112)
- Sugar and confections (NAICS 3113)
- Preserved fruits and vegetables (NAICS 3114)
- Dairy products (NAICS 3115)
- Meat products (NAICS3116)
- Fish and seafood (NAICS 3117)
- Bakery products (NAICS 3118)
- Other processed food (NAICS 3119)
- Beverages (NAICS 3121)
The production value for beverages is corrected to remove value added in distilleries (for spirits and liquor).