Vastine, William J.

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Texas A&amp;M Repository

A Consumer View ofTexes' Food end Fiber SystemL-1199William J. Vastine~Food, clothing and shelter are basic to man'ssurvival. Until man's basic biological needs havebeen met he has little concern for exploring space,improving medical services, and expanding hisrecreational opportunities, for example. Meetingour food and fiber needs has been taken forgranted during recent years. Agricultural pro-grams have resulted in low food prices, thus themere thought of scarcities of food and fiber arebeyond the comprehension of most of today'sgeneration. Recent price increases may thereforebe a blessing in disguise.Headlines, news broadcasts, and featurestories about American agriculture have re-kindled an appreciation for the everyday miracleof feeding the nation's 208 million people.Agriculture is much more than farming andranching. Modern agriculture encompasses agri-cultural production to be sure, but it also includessupply and service industries who aid producerswith fertilizers, seed, machinery, and information.Marketing and distribution are also included.Thus, modern agriculture engulfs the entire com-plex required to move goods from producers toconsumers.Consumer spending for food reached $125billion for 1972, making food retailing the na-tion's largest retail industry. In Texas alone con-sumers spent about $6.4 billion at food stores andeating and drinking establishments. The impor-tance of modern agriculture to the Texas economyis further highlighted by noting that approxi-* Extension Economist-Marketing, Food Distribution, Texas Agri-cultural Extension Service, The Texas A&M University System.mately 30 percent of all gainfully employedTexans are employed in some part of modernagriculture.Because Texas is one of the nation's leadingagricultural states, production and distributionof food and fiber by Texans is vital for not onlyTexas consumers, but for all Americans and con-sumers around the world. Yes, Texans have aright to be proud of their agricultural complex,but the greatest challenge may yet lie ahead.FOOD PRICES AND SUPPLY AND DEMANDNearly everyone has heard someone makereference to the fact that the "laws of supply anddemand" explain why the current price situationexists. Let us take a look at supply and demandconditions for food and fiber.Demand Has GrownPopulation-Increases in population havebeen substantial. With almost 55 percent of 11.6million Texans being under 30, and 9 percent 65or older, it is clear that the composition of thepopulation has changed as well as the number. Asimilar pattern exists for the U. S.Income-Per capita disposable income hasincreased (Chart 1). Increases in per capita dis-posable income has not only expanded the demandfor food, but it has resulted in expanded demandfor services associated with food. For example, 30percent of all civilian food expenditures for U. S.farm foods was for food consumed away fromhome during 1972.Texas Agricultural Extension Service • The Texas A&M University System • John E. Hutchison, DirectorCollege Station, Texas$ THOUS.CHART 1 confronts her with many competing demands forher time. Eating out and convenience food~ havebecome an important part of modern family lifestyles.Food Substitutes-Per capita consumption ofmeat synthetics and analogs (usually restructuredprotein derived from other agricultural products)has increased from nearly zero in 1960 to aboutone-quarter pound in 1970. Some experts havepredicted this ·consumption will increase to about5 pounds in the next 5 years, and 20 pounds in thenext 20 years. Recent entry of textured vegetableprotein (TVP) mixed with fresh ground beef asan extender appears to be well received.Has Foreign Trade Affected Beef Prices? Theanswer is "yes," but the temporary effect hascaused a more dramatic increase than is expectedin the long run. To understand why U. S. agricul-tural products have been sold abroad, one mustrealize that the majority of the world's 3.8 billionpeople live in developing countries where 50 per-cent or more of the population must be employedin food and fiber production just to meet theirbasic needs. Contrastingly, less than 5 percent ofthe U. S. population provides us with a relativelyabundant supply of food and fiber. Internationalbad weather has resulted in food shortages incountries where food supplies have barely ex-ceeded subsistence levels during this past year.As the dollar was devalued, U. S. agriculturalproducts became less expensive for other coun-tries. This fact coupled with World food shortageshas stimulated sales of our products. The nation'seconomy has benefited through an improvementof our balance of payments position. Indeed, agri-culture's $5.6 billion net contribution was mostwelcomed.Foreign Consumption Is Not Temporary-Wemarket crops abroad from about 1 acre out ofevery 4. If this supply were made available domes-tically, our U. S. prices for food products would belowered. However, the long-run price we wouldpay for all goods and services would probablyincreas~ substantially. Agricultural products arevital to our trading for oil and gas, and othergoods which our economy desperately needs.Furthermore, as weather conditions abroadimprove, the impact will not be as dramatic. Thisdoes not mean that world demand can be expectedto disappear. Many countries in Europe as well asO...&..---I.._...I.-----L_--'-----'_--I------.J'----I------.J'----'--_'--.......1960 1962 1964 1966 1968 1970 1972INCOME FROM ALL SOURCESNEG. fR'l8438- 12(') ECONOMIC RnEARCH SERVICEU.s. DEPARTMENT OF AGRICULTUREDISPOSABLE PERSONAL INCOME PER CAPITA,;"""3 ......"'---+--------1Of nonfarm pOPUlation--''''1I I ......~ ............2 --I---~~r~~~ iOf farm populationTABLE 1. FEMALE LABOR FORCE AS A PERCENT OF THEPOPULATION, UNITED STATES, 1960-1972.Source: U. S. Bureau of the Census, Statistical Abst1"actof the United States: 1972. Washington, D. C.1960 1970 1972All females 34.8 42.6 42.5Single 44.1 53.0 52.7Total married 31.7 41.4 41.4Husband present 30.5 40.8 40.8Widowed or divorced 37.1 36.2 35.7Changing Consumers-Consumers have shift-ed their consumption during the decade of the 60'sand even during the last couple of years. As in-come has increased per capita meat consumptionhas increased 17 percent and beef alone has in-creased 36 percent since 1960. Also, the per capitaconsumption of fiber has increased about 20pounds in the 12 years between 1960-1972. Thistrend may reflect our preoccupation with appear-ances and style.Consumers have demanded more processedand semiprepared foods also. For example, con-sumption per capita of fresh fruits and vegetableshas decreased, but consumption of processedfruits and vegetables has increased.Not only has the number of persons employedincreased, but the rate of unemployment is low.Working wives are no longer restricted to an ex-ceptional few, as was the case a couple of genera-tions ago (Table 1). With more than 40 percentof all wives working, the "homemakers" dual roleCHART 2TABLE 2. TYPICAL $10 EXPENDITURE IN A SUPERMARKET.$ 2.83.761.03.11.34.502.751.68$10.0019761972 A1968e"SED OH o"rA. 01" DE"'" ItTIiAEH T OF COMMERCE.6.I'REL'.'H"ItY.1964ENTFood shar~ of income----I"""""-- I \I---i- I -I I I I I I I I I I I I15101960100+-.........~~=TOTAL200PERC20FOOD EXPENDITURE -INCOME TRENDS% OF 19603001------+-----+-----+------1MeatProduceDairyIce CreamFrozen FoodsBakeryDry GroceryNon-foodsaimed at providing increased food services forthose in need have also been expanded. Foodstamps valued at $3.6 billion were distributed in1972 in the U. S.Where Does Your Food Dollar Go·! If youspend $10 in a grocery store, your typical ex-penditure may resemble that presented as Table 2.Japan are examples of emerging affluent nationswhich represent significant markets for our agri-culture products in the years to come.Supply Conditions-Because of the unique na-ture of agricultural products, small changes insupplies result in relatively larger changes inprice. Many consumers have wondered why agri-cultural producers do not produce the right quan-tities of products, i. e. no surplus and no short-ages. There are several reasons why they do not.For one, it is difficult to forecast the amount re-quired, but that is a simpler task than projectingweather conditions. Inclement weather has beenresponsible for decreased grain, fruit, and vegeta-ble production in the U. S. As a result feed costshave increased, adding to the cost of producingmeats and poultry.Agricultural producers deal with biologicalorganisms and supply cannot be turned on and offas easily as most industrial goods. Beef cattleare an excellent example. About 30 months arerequired to produce a 1,000-pound finished steerfrom conception to consumption. Even though thisis longer than is required for most agriculturalcommodities, even poultry requires 6-9 months torealize any appreciable expansion in production.How Do You Win? During the 1960's muchpublic furor was raised over the fact that we hadgenerated food surpluses. Programs designed toeliminate that situation have been successful andthere essentially are no agricultural surpluses to-day except for peanuts. Even the USDA's Plenti-ful Foods Program has been eliminated as ofAugust 1973. Now public furor is once again evi-dent, but this time surpluses appear to be favored.CONSUMER'S FOOD DOLLARSource: Adapted from Progressive G1'ocer,April 1973, p. 208.In spite of recent price increases, food is stillone of the best bargains left in the U. S. (Chart2), and compared to other developed countries ofthe world we are also better off. Additionally,more items are available to seleet from. In 1962the average supermarket carried about 6,600 itemscompared to nearly 8,000 in 1972. Quality im-provement has been substantial also. For example,60 percent of all beef was graded choice in 1972compared to 45 percent in 1960.This may be of little comfort, however, if youare on a fixed or a small income. But, programsWithin the distribution system, the share ofconsumers' dollars going to farmers and marketershas been rather stable (Chart 3). Differencesamong products and the amount of processing re-quired results in some prodocts having most oftheir value added after it leaves the farm (Chart4) .The total marketing bill has increased(Chart 5) and marketing costs have also increased.During 1972 the net profit before taxes experi-enced by chain stores was about 1.57 cents out ofNEG. EltS S661- n (8) ECONOJillIC RESEARCH SERVICE1960 1971\ /.JZmCHART 4FARM-FOOD MARKETING BILL ANDCONSUMER FOOD EXPENDITURESCHART 5POULTRY MEAT DAIRY MARKET FATS FRUITS & BAKERY && EGGS PRODUCTS PRODUCTS BASKET & OILS VEGETABLES CEREAL.PRODUCTSFARMER'S SHARE OF THE MARKET BASKETDOLLAR, BY FOOD GROUP'72'69'66'6330 t:::=::::±=::::::::±=:::::±::=±::::::::::t::::::::t=:::::±:::::::::::::t::::=:±:::::::::::t:::::::::±::::::::j1960CHART 3every dollar sale. Independent supermarkets faredbetter with 1.9 cents out of every dollar going tonet profits before taxes. Independents still domi-nate the food retailing industry with about 80percent of all stores and 51 percent of total sales.SHARES OF THE MARKET-BASKET DOLLAR40 f-------,,---+-SHARE OF DOLLAR CDHSUM£RS SPEHT 11'1 RETAIL FOOD STORES FOR DOlJlESTlC FARM-ORIC/HATED FOOD PROaUCTS..6 PRELIMIHAIt'!'.50 f-------+-----+------+--------i'66 '68 '70 '72 A '74FOR DOMESTIC FAR,. FOODS ,.UItCHASED 8'( U.S. CIVIL/Ali COHSUMEItS FOR CDHSU.O'T/OH'OTH AT /'fONE AHO AWAY FItOIll HOME. t:."ItELI.,HAltyo1958 '60 '62 '644080 I----+--_+_-$ BIL. ,---,----,-------,.---,----,------,.---,----,America's agriculture is vital to the U. S. andworld economy. Recent supply and demand con-ditions have resulted in increased food prices, butfood is still a bargain compared to most items.Consumers around the world would gladly ex-change life styles and living standards with mostAmericans.The Land-Grant System has served consum-ers well, but the greatest challenge is in the yearsahead. To satisfy the nation's food and fiberneeds as well as meet overseas commitments willrequire a strengthened agricultural complex.Never before has there been so many careeropportunities and challenges for modern agricul-ture. It is not overdramatic to say that the futuresuccess of our nation and the world depends onour agricultural leadership.Source: Marketing and T1'ansportation Situation,ERS, USDA, August 1973, p. 13.REFERENCES1. Mctrketing and T1·ctnsp01·tation Situation, ERS, USDA,August 1973, pp. 13 & 20.2. Progl'essive Grocer, April 1973, pp. 80, 84, & 208.3. U. S. Bureau of the Census, Statistical Abstract of theUnited States: 1972. Washington, D. C.Educational programs conducted by the Texas Ag1'icultural Extension Service sel've people of all ages rega'rdless of socio-economic levels, race, color, sex, religion or national origin.Cooperative Extension Work in Agriculture and Home Economics, The Texas A&M University System and the UnitedStates Department of Agriculture cooperating. Distributed in furtherance of the Acts of Congress of May 8, 1914, asamended, and June 30, 1914. 30M~10-73-AECO-7

A Consumer View of Texas' Food and Fiber System.

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A Consumer View of Texas' Food and Fiber System.

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A Consumer View of Texas' Food and Fiber System.

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