Agricultural and Applied Economics—Without Apology
The Center for Global Development‘s Charles Kenny, in his weekly column for Foreign Policy:
With supermarket chains from Whole Foods to Safeway trumpeting their healthy produce from farmers just down the road, buying local and eating non-genetically modified (GM) organic food is surely the best thing for you and the planet. And that’s something government should get behind, right?
Seeing as to how I am on the topic of food prices today:
The Food and Agriculture Organization (FAO) of the United Nations’ food price index averaged 231 points in August 2011, nearly unchanged from July and 26 percent higher than in August 2010. The FAO cereal price index averaged 253 points in August, up 2.2 percent, or 5 points, from July and 36 percent higher than in August 2010. The FAO oils and fats price index averaged 244 points in August, following a declining trend since March but still remaining high in historical terms. The FAO dairy price index averaged 221 points in August, significantly down from 228 points in July and 232 points in June but still 14 percent higher than the same period last year. The FAO meat price index averaged 181 points in August, up 1 percent from July. The FAO Sugar Price Index averaged 394 points in August, down 2 percent from July, but still 50 percent higher than in August 2010.
More here (link opens a .pdf document). Overall, this is not very reassuring considering that the world’s poor mostly consume cereals and that the cereal price index is the one sub-index that keeps increasing.
From the US Department of Agriculture’s Economic Research Service:
In 2006, households in the lowest income quintile spent 32.0 percent of their income on food. The 2007-09 recession led to increases in this already high share. Food spending as a share of income for households in the lowest income quintile grew to 35.6 percent in 2009—putting further pressure on thin budgets. Over the same period, food spending as a share of income declined for middle-income households from 12.5 to 11.9 percent and remained flat for the highest income quintile at 6.8 percent.
More here.
A colleague once submitted a paper for publication in which he did a considerable amount of empirical work to show that the quantity demanded of a good he was studying decreased as the price of the same good increased. The referee reports came back, and one of the referees sarcastically noted: “I guess it is always reassuring to discover that demand curves are still downward sloping…”
I guess it is reassuring to note that the cross-sectional version of Engel’s Law — the amount of income spent on food increases as income rises, but the proportion of income spent on food falls as income rises — still holds in the US?