Demand for food and nutrients and its climate impact: A micro-econometric analysis of economic and socio-demographic drivers

Demand for food in Finland has changed dramatically in recent decades and is continuously evolving as the result of multiple influences, including the relative prices of food items, economic growth, short-term variations in purchasing power, demographic changes, food scares, and other changes in preferences linked to nutrition, animal welfare, and environmental issues. Yet, little is known about the relative importance of those factors in shaping food demand, which appears problematic for both public policy makers and the private stakeholders of the food chain. For instance, it is becoming clear that transition to a low-carbon economy will require adjusments in consumption patterns, given the limited possibilities of mitigation through modification of production patterns and technology, but much debate remains about how to make that change happen. Similarly, the aging population and the growing number of single-person households have implications for the evolution of Finnish food consumption that remain, as yet, poorly understood by the stakeholders of the food chain. Thus, we present a fresh analysis of Finnish food consumption based on the econometric estimation of a complete system of demand for food. The data originates from the 2012 Finnish Household Budget Survey, which contains over 3550 observations and gives a detailed account of household food consumption over a two-week period for more than 200 food categories. Those are aggregated into 19 product categories, hence ensuring the empirical tractability of the behavioural model, which is then linked to technical coefficients describing the nutritional properties and climate impact of each food aggregate. The demand system uses the recently developed Exact Affine Stone Index (EASI) functional form, which offers great flexibility in relating consumption to income and can therefore accommodate the highly non-linear Engel curves typically found in micro-level data. Estimation tackles two issues caused by the nature of the data, namely censored demand due to the high number of zero-consumption observations attributable to the short period of data collection, and the adjustment of unit values to measure prices. The results are presented in terms of elasticities summarizing the responses of food and nutrient demands as well as greenhouse gas emissions to changes in economic and socio-demographic variables. In future work, those elasticities will support the analysis of policies aimed at increasing the sustainability of food consumption patterns in Finland. In particular, the estimated models can be utilised to simulate the effects of fiscal measures (e.g., a carbon tax) as well as dietary recommendations on diet quality, health, the climate, and economic welfare. Elintarvikkeiden kysyntä on muuttunut Suomessa dramaattisesti viime vuosikymmeninä, ja se kehittyy jatkuvasti useiden tekijöiden vaikutuksesta. Näitä tekijöitä ovat mm. eri elintarvikkeiden suhteelliset hinnat, talouskasvu ja ostovoiman kehitys, väestörakenteen muutokset, elintarvikekohut sekä kuluttajien muuttuva suhtautuminen ravitsemukseen, eläinten hyvinvointiin ja ympäristöasioihin. Silti varsin vähän tiedetään siitä, kuinka tärkeitä nämä tekijät suhteellisesti ottaen ovat elintarvikekysynnän muovaamisessa. Tämä on ongelmallista sekä päätöksentekijöille että alan sidosryhmille. On esimerkiksi käymässä selväksi, että vähähiiliseen talouteen siirtyminen tulee vaatimaan muutoksia kulutustottumuksissa, kun huomioidaan tuotantoteknologian rajalliset mahdollisuudet. On kuitenkin edelleen epäselvää, kuinka tällainen muutos saadaan aikaan. Myös väestön vanheneminen ja yhden hengen kotitalouksien määrän kasvu muuttavat elintarvikkeiden kulutusta tavalla, jota elintarvikeketjun sidosryhmät eivät toistaiseksi kunnolla ymmärrä. Tässä tutkimuksessa esitetään sen vuoksi ekonometriseen estimointiin perustuva analyysi suomalaisen elintarvikekulutuksesta ja siihen vaikuttavista tekijöistä. Tietoaineisto on peräisin Tilastokeskuksen vuoden 2012 kulutustutkimuksesta, joka sisältää yli 3 550 havaintoa ja antaa yksityiskohtaisen kuvauksen kotitalouksien elintarvikekulutuksesta kahden viikon ajalta yli 200 elintarvikkeesta. Elintarvikkeet on aggregoitu 19 eri tuoteryhmään, mikä varmistaa estimoidun kysyntämallin empiirisen jäljitettävyyden. Malliin on liitetty teknisiä kertoimia, jotka kuvaavat kunkin tuoteryhmän ravin-toarvoa ja ilmastovaikutusta. Kysyntäjärjestelmä hyödyntää äskettäin kehitettyä Exact Affine Stone Index funktiomallia (EASI), jolla kulutus voidaan suhteuttaa hyvin joustavasti tulotason kehitykseen siten, että analyysiin saadaan mukaan myös mikrotason aineistoissa tyypillisesti esiintyvät erittäin epälineaariset Engelin käyrät. Tämä ratkaisee kaksi tietoaineiston luonteesta johtuvaa ongelmaa, joita ovat ns. piiloon jäävä kysyntä, joka johtuu lyhyen aineistonkeräysjakson synnyttämistä runsaista nollahavainnoista, sekä yksikköarvojen korjaukset hintojen mittaukseen. Tulokset esitetään joustoina, jotka kertovat taloudellisissa ja sosiodemografisissa tekijöissä tapahtuvien muutosten vaikutukset elintarvike- ja ravintoainekysyntään sekä kasvihuonekaasupäästöihin. Estimoituja joustoja voidaan hyödyntää jatkossa arvioitaessa esimerkiksi ruoan kulutustottumusten kestävyyden lisäämiseen tähtäävien poliittisten toimenpiteiden vaikuttavuutta. Estimoiduilla kysyntämalleilla voidaan simuloida esimerkiksi veropoliittisten toimenpiteiden (esim. hiilivero) sekä ruokavaliosuositusten vaikutusta ruokavalion laatuun, terveyteen, ilmastoon ja taloudelliseen hyvinvointiin.201

Can the world feed itself? Some insights from growth theory

This paper develops a two-sector growth model incorporating the essential distinguishing features of agriculture, including the reliance of production on a natural resource base as well as on industrially produced inputs, the low income elasticity of demand for food and the life-sustaining function of food consumption. In this framework, the ability of an economy to supply an adequate supply of food to a growing population can be related to the existence of a steady state. This property is used to define a simple analytical criterion upon which to assess the long-term food situation of a closed economy. This sustainability condition relates all the dynamic parameters of the economy: rates of technological change in the two sectors, rate of population growth and rate of land degradation. The condition is used to highlight the technological characteristics in agriculture conducive to sustainability and to assess empirically the food situation of a number of countries. Although no global food crisis appears to be looming ahead, the data suggest that sub-Saharan Africa is likely to increase its food dependence in the future.Food Security and Poverty,

GROWTH PATTERN, SUSTAINABILITY AND TRADE IN A LAND CONSTRAINED ECONOMY

This paper develops a two-sector model of growth where agriculture is considered explicitly. Key features of the model include: the reliance of agricultural production on a fixed but degrading resource base, the use by the farm sector of industrially produced inputs and differing rates of technological progress in the two sectors. On the demand side, the low income elasticity for food as well as the life-sustaining function of food consumption are recognized. In this simplified framework, the sustainability of growth can be related to the existence of a steady state reflecting the ability of the economy to feed its population. This property is used to identify the characteristics within and outside of agriculture conducive to the sustainability of a land-constrained economy. The empirical application identifies sub-Saharan Africa as the region of the world facing the most important challenges in terms of sustainability. The second part of the paper makes use of the transitional properties of the model to analyse the relationship between agricultural productivity and growth performance. For a closed economy, the model unambiguously supports the view that high agricultural productivity is conducive to fast growth and industrialization. Once the country is allowed to trade, however, the relationship becomes more complex, but a numerical experiment illustrates how trade liberalization can accelerate the growth of a country poorly endowed in agricultural resources.sustainability, agriculture and growth, dynamic general equilibrium model, International Development, O41, O13, F11,

Measuring the Market Power of Finnish Food Retailers

The last twenty years have witnessed substantial changes in retailing across most of Europe. The concentration of retail buying has increased considerably, and this general evolution has been particularly significant in Finland. For example, the top three supermarkets in Finland currently share 88% of the grocery market. As established by the EU commission, a common consequence of high concentration in retailing is a growing power of supermarkets over their suppliers, which may distort competition with upstream suppliers (food processors, farmers). For instance, retailers may use their power to push costs and risks up the supply chain, with the result that smallholder suppliers may be squeezed out. Downstream, consumers may also be affected through less innovation, a reduction in choice and higher prices in the long-run. However, while high concentration is a necessary condition for the existence of market power, it is not sufficient. It is also well known that growing marketing margins, or the imperfect transmission of prices along the food chain, may or may not be related to market power. Thus, the purpose of the paper is to measure market power directly by using the conceptual framework developed in the New Empirical Industrial Organisation. The paper presents a model suitable for that purpose and compatible with the highly aggregated data available in Finland. The empirical application uses data from Tilastokeskus and considers the three supply chains for cereal products, meat and dairy. The results provide evidence that retailers in Finland have significant market power, particularly in the cereals and meat sectors, and that the related distortions have an economically important impact on prices offered to upstream suppliers and downstream consumers. However, the robustness of the results is limited by the nature of the available data as well as the simplifying assumptions of the model. Further, it is evident that other factors, and above all wages in retail, are also important in explaining growing retail margins in Finlan

DETERMINANTS OF FOOD PRICE INFLATION IN FINLAND

The agricultural commodity crisis of 2006-8 and the recent evolution of commodity markets have reignited anxieties in Finland over fast-rising food prices and food security. Although the impact of farm commodity price shocks on the final consumer is mitigated by a large degree of processing as well as the complex structure of the food chain, little is known about the strength of the linkages between food markets and input markets. Using monthly series of price indices from 1995 to 2010, we estimate a vector error-correction (VEC) model in a co-integration framework in order to investigate the short-term and long-term dynamics of food price formation. The results indicate that a statistically significant long-run equilibrium relationship exists between the prices of food and those of the main variable inputs consumed by the food chain, namely agricultural commodities, labour, and energy. When judged by the magnitude of long-run pass-through rates, farm prices represent the main determinant of food prices, followed by wages in food retail and the price of energy. However, highly volatile energy prices are also important in explaining food price variability. The parsimonious VEC model suggests that the dynamics of food price formation is dominated by a relatively quick process of adjustment to the long-run equilibrium, the half life of the transitional dynamics being six to eight months following a shock.Demand and Price Analysis,

An Assessment of the Potential Consumption Impacts of WHO Dietary Norms in OECD Countries

The member countries of the World Health Organization (WHO) have recently endorsed its Global Strategy on Diet, Physical Activity and Health. The strategy emphasizes the need to limit the consumption of saturated fats and trans fatty acids, salt and sugars, and to increase consumption of fruits and vegetables in order to combat the growing burden of non communicable diseases. Adherence to the norms recommended by the WHO would call for major changes in the consumption, production and trade of several key food products and several sectors of the food industry have expectedly raised serious concerns about the potential impact of these norms on their future growth prospects. This paper attempts a broad quantitative assessment of the consumption impacts of these norms in OECD countries using a mathematical programming approach. We find that adherence to the WHO norms would involve a significant decrease in the consumption of vegetable oils (30%), dairy products (28%), sugar (24%), animal fats (30%) and meat (pig meat, 13.5%, mutton and goat 14.5%) and a significant increase in the human consumption of cereals (31%), fruits (25%) and vegetables (21%). The paper also explains the apparent dilemma that some OECD countries face when simultaneously trying to liberalise agricultural markets and promote healthy diets.Food Consumption/Nutrition/Food Safety,

Competitiveness of Northern European dairy chains

Julkaisussa Csaba Jansik merkitty virheellisesti toimittajaksi

Too late to get healthy? A behavioural analysis of the diet-health relationship in the older Italian population

201

Measuring the market power of Finnish food retailers

201