Huge government impact on industry
Nov. 9, 2013
by Morton I. Sosland
Governmental actions affect consumer demand for grain-based foods in both direct and indirect ways, sometimes powerfully and other times without moving the consumption needle. How such actions vary from country to country presents one of the dilemmas facing grain-based foods, no matter where. That is especially the case when the industry might envision a positive role the government could perform while the bureaucracy, no matter how well intentioned, differs considerably from what makes sense to people involved in building demand.
In the United States, government has direct and even considerable influence on actual consumption of specific products through two programs. One is the National School Lunch Program where schools are told what items may be offered to eligible children and what are prohibited. The other is the food stamp or Supplemental Nutrition Assistance Program (SNAP) where billions are expended to bolster food purchases by millions of low-income consumers. Beyond these federal programs directly impacting how much and what consumers buy is the influence Washington seeks to exert over eating patterns. Specific recommendations are made as to how much bread should be eaten each day and week, including just how much should be whole wheat, as well as urging reduced eating of foods high in calories and fat.
Making comparisons with what other countries may be doing along the same lines, either purposely to influence foods that are eaten or indirectly impacting consumption levels, shows that the American efforts are unusually specific. At the other end of the spectrum is China where eating patterns have been powerfully affected by soaring personal incomes during the past several decades. As might be expected, higher incomes have meant a sharp decline in per capita consumption of grain-based foods, specifically of wheat and rice. The fall has mainly occurred in rural areas, while urban per capita use has stabilized. The latter occurred as new wheat-based foods captured a major role in China’s fast-growing food service sector.
The role of China’s government in influencing food consumption has mainly been through its stimulus to incomes. Whenever China embarks on a new effort to boost the growth of its manufacturing sector, the impact on food consumption has been as dramatic as it has affected all the other elements of the economy. China’s food focus has been less on grain-based foods, except to assure adequate crops, and more on poultry, meat and fish, which have been the primary beneficiaries of rising consumer incomes. Efforts to assure safe food have received greater attention than worrying about nutrition.
While personal income levels have been the primary force making for rapid changes in Chinese eating preferences, urbanization has gained a powerful position. Prior to the 1970s, hardly 20% of China’s population lived in cities and 80% were rural. With mechanization of agriculture, that rural-urban divide began changing to the point currently that the two populations are equal. The government has declared its intent to speed up depopulation of the countryside in the hope of having only 20% living in rural areas by mid-21st century.
Modernization and industrialization are words joined with urbanization in the current Chinese undertaking. But these are not the fundamental goal. The latter is building domestic demand by moving people from rural areas, where they are largely self-reliant in meeting daily needs, to towns and cities where needs are purchased and thus stimulate economic activity. It requires little imagination to understand how urbanization affects food demand as much or more than higher incomes. Yes, urbanization accounts in part for the downtrend in per capita consumption of wheat in total, but it also stimulates demand for baked foods made from wheat flour in ways that make for a hugely different grain-based foods industry from what existed before these government programs began. Regardless of these huge differences, the governments in the United States and China have much to do with the well being of grain-based foods.