1st Quarter 2015
The United States has a very efficient agri-food system. The average U.S. resident spends only 6.4% of their annual expenditures on food, which is less than for the 83 other countries for which data are available (USDA, 2014). This efficiency is driven by productivity rooted in scientific progress, much of it generated in the public land grant system. Oftentimes, however, scientific progress is laden with consumer perceptions of uncertainty and unintended consequences, in part due to the complexity of the agri-food supply chain. Agricultural production and marketing systems can have a variety of impacts, such as impacts on the nutritional content and safety of the food and on the environment. Additionally, production systems are related to the structure of agriculture and the larger agri-food processing and marketing parts of the supply chain.
The supply chain responds to consumer demand which traditionally has been concerned about the affordability, convenience, and variety of food choices. But a number of factors affect consumer demand for food, and increasingly consumers are expressing preferences for how their food is produced. Consumer preferences are expressed through their purchases, as well as through the involvement of special interest groups in the political processes governing our agri-food systems (Armbruster and Knutson, 2013).
The current era of consumer interest in the nature of the agri-food system contrasts to previous times when consumers and consumer advocates lacked knowledge and interest in the technical aspects of the system. Today's consumer is better informed and recognizes that production systems and the full supply chain are connected to other aspects of the economy that they care about, even if these connections are not fully understood. Moreover, as is true for many of our institutions, there has been an erosion in the public's level of trust of agri-food systems. Many in the general business community have expressed concerns about the erosion of trust, and indeed the topic is the subject of scientific inquiry, because of the connection of trust to competitiveness. On a conceptual level, there is a keen interest within the business community evidenced by the fundamental debate about whether a business' sole role is to generate profits or whether businesses should be contributing more to society (World Economic Forum Leadership, 2015). The practical aspect of the debate is the recognition that a lack of trust by consumers—as defined by consumers—affects the bottom-line.
The World Economic Forum Leadership (2015) addresses 4 barriers business leaders must overcome to develop trust with their customers:
The contemporary agri-food system is in the midst of grappling with these barriers to trust as it manages for profit, in a highly competitive global agricultural system, while meeting the demands of the contemporary consumer.
Many of the general challenges of the livestock industry in meeting consumer demands are shared by the crop industry, with the exception of animal welfare. The articles in this Choices theme address how the livestock supply chain is adjusting to managing the traditional profit objectives, in a globalized system, given the emerging and varied preferences of contemporary consumers finding their voices on a variety of issues. The first article by Schulz and Tonsor provides the reader with a description of the predominant modern swine production system using gestation stalls or crates—a system which many consumer voices have criticized due to animal welfare concerns. This has resulted in some businesses adopting animal welfare standards for their suppliers. For example, a major restaurant chain, Chipotle, recently temporarily removed a popular pork dish from its menu because it could not find adequate supplies of pork that were produced to meet its animal standards. The article by Schulz and Tonsor reviews the structural evolution of the industry, the underlying legal framework in animal welfare, and adjustments in impacted markets.
The next article in the theme, by Xia Tian, focuses on a different aspect of hog production. His article describes the purchase of the U.S.-based Smithfield, the world's largest hog producer, by a Chinese company, Shuanghui. The purchase stirred consumer concerns about domestic pork supplies and food safety in the United States, including by then-Chair of the Senate Ag Committee, Senator Debbie Stabenow. Tian discusses the important implications of the acquisition for the U.S. hog and pork industry and for consumers brought about by changes in U.S pork exports to China, concerns about food safety, and market competition.
The third article in the series by Teillant and Laxminarayan addresses another controversial and complex issue in livestock production—the use of antibiotics for swine and poultry production. Antibiotics are commonly used in food animals to treat and prevent disease, as well as to promote growth. The authors review a significant body of scientific evidence which shows that these practices are contributing to antibiotic resistance in humans. Policy-makers are in the process of evaluating the economic value of antibiotics to the livestock industry versus the potential health cost of increasing antimicrobial resistance. For example, the Food and Drug Administration recently issued guidelines for the industry to voluntarily withdraw medically important antibiotics from use in animal growth promotion, and several major suppliers have done so.
The fourth article, by Greene and McBride, describes the state of organic dairy production in the United States and continuing demand growth for organic dairy products, which was somewhat slowed during the recent recession. However, the U.S. has experienced recurrent shortages of organic milk since it gained popularity with consumers in the 1990s. This article reviews the economics of organic milk production and the factors contributing to its higher costs, including the impacts of stricter pasture rules in the 2011 National Organic Standards.
The fifth article in the series considers the controversial issue of horse slaughter for human consumption. Horse slaughter for human consumption was discontinued in the United States in 2007 when Congress withheld funding for inspection in an appropriations bill. It continues to be a highly controversial issue. Lawler and Geyer discuss the compelling pros and cons of the decision to slaughter horses for human consumption, which center on animal welfare and economic issues.
Armbruster, W. and R. Knutson. 2013. US Programs Affecting Food and Agricultural Marketing. New York: Springer Science.
U.S. Department of Agriculture. 2014. Food Expenditures. Data Product. Economic Research Service. Available online: http://www.ers.usda.gov/data-products/food-expenditures.aspx
World Economic Forum Leadership. 2015. The Evolution of Trust in Business from Delivery to Values. Trust and Performance Equation Project. Prepared in cooperation with Pricewaterhousecooper. World Economic Forum.