Changing Structure of Global Food Consumption and Trade. Anita Regmi,

editor. Market and Trade Economics Division, Economic Research Service,

U.S. Department of Agriculture, Agriculture and Trade Report. WRS-01-1.

Abstract

Higher income, urbanization, other demographic shifts, improved transportation,

and consumer perceptions regarding quality and safety are changing global food

consumption patterns. Shifts in food consumption have led to increased trade and

changes in the composition of world agricultural trade. Given different diets, food

expenditure and food budget responses to income and price changes vary between

developing and developed countries. In developing countries, higher income results

in increased demand for meat products, often leading to increased import of livestock feed. Diet diversification and increasing demand for better quality and laborsaving products have increased imports of high-value and processed food products

in developed countries. Consumer groups in developed countries have also brought

attention to organic production of food and the topic of animal welfare. One way

in which the public and private sectors have responded to consumer demand for

these quality attributes has been by developing and implementing mandatory and

voluntary quality control, management, and assurance schemes.

Acknowledgements

Appreciation is extended to Mary Bohman, John Dunmore, and Joy Harwood for

their role in the oversight and review of the project’s development. The authors

would also like to extend sincere thanks to Neil Conklin, John Dyck, Praveen

Dixit, Janet Perry, Barry Krissoff, Noel Blisard, Jay Variyam, Carlos Arnade, and

Kuo Huang of ERS; Sara Schwartz, Ralph Dutrow, Steve Neff, Stan Phillips,

Christine Strossman, Bobbie Ritchie, Elizabeth Jones, and Michael Riedel of FAS;

Ron DeHaven and Mary L. Madell of APHIS; Karen Stuck, Virginia Olson and

Mary Stanley of FSIS; Carol Goodloe of the Chief Economist’s Office; and David

Stallings, Joel Greene, and Gerald Rector of the World Agricultural Outlook Board

for their valuable review comments. Special thanks are extended to Martha R.

Evans, for editorial assistance, and Wynnice Pointer-Napper for design assistance. 

Cover Photo: FAO, Market in Uganda, by K. Dunn.

1800 M Street, NW

Washington, DC 20036-5831 May 2001
ii  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Contents

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

Changing Structure of Global Food Consumption and Trade:

Introduction—(Anita Regmi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Chapter 1. Global Food Consumption and Impacts on Trade Patterns . . . . .4

(Mark Gehlhar and William Coyle)

Chapter 2. Cross-Country Analysis of Food Consumption Patterns . . . . . .14

(Anita Regmi, M.S. Deepak, James L. Seale Jr., and 

Jason Bernstein)

Chapter 3. Effects of Urbanization on Global Food Demand . . . . . . . . . . . .23

(Anita Regmi and John Dyck)

Chapter 4. Transportation Technology and the Rising Share of U.S.

Perishable Food Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

(William Coyle, William Hall, and Nicole Ballenger)

Chapter 5. Changing Consumer Demand for Meat:

The U.S. Example, 1970-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .41

(Mildred M. Haley)

Chapter 6. Consumer Demand for Fruit and Vegetables:

The U.S. Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

(Susan L. Pollack)

Chapter 7. Effects of Food-Safety Perceptions on Food Demand and 

Global Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

(Jean C. Buzby)

Chapter 8. Factors Affecting International Demand and Trade in 

Organic Food Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67

(Luanne Lohr)

Chapter 9. Impact of Consumer Demand for Animal Welfare on 

Global Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80

(Lorraine Mitchell)

Chapter 10. Consumer Demand Sparks the Growth of Quality Assurance 

Schemes in the European Food Sector . . . . . . . . . . . . . . . . . . . .90

(Maury E. Bredahl, James Northen, Andreas Boecker,

and Mary Anne Normile)

List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103

List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104

List of Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  iii

Summary

Income, Demographic Shifts, and Consumer Perceptions Are Changing

Global Food Consumption Patterns and Trade

Higher income, urbanization, other demographic shifts, improved transportation,

and consumer perceptions regarding quality and safety are changing global food

consumption patterns. Shifts in food consumption have led to increased trade and

changes in the composition of world agricultural trade. Grain trade, which once

accounted for most of world agricultural trade, represents less than 30 percent of

current agricultural trade. 

Among the determinants affecting trade patterns, income growth and its impact on

food consumption are one of the most important in explaining changes over time.

The effect of income growth in changing trade patterns differs among developed

and developing countries. Diet diversification and increasing demand for better

quality and labor-saving products have increased imports of high-value and

processed food products in developed countries. In developing countries, higher

income results in increased demand for meat products, often leading to the expansion of livestock production. This in turn may result in increased imports of intermediate products such as animal feed.

Given different diets, food expenditure and food budget responses to income and price

changes vary between developing and developed countries. Low-income countries

spend a greater portion of their budget on staple food products such as cereals and are

generally more responsive to food price and income changes. The magnitude of a

country’s response to income and price change also differs across food items. For

example, in poorer countries, greater budget adjustments are made to higher value

food items such as dairy and meat, and staple food budgets undergo little change.

Middle-income countries are the most responsive to staple food price changes. 

Urbanization has played a significant role in changing global food consumption

patterns. Given different lifestyles of urban and rural residents, greater demand for

urban residents’ time, increased food availability, and higher purchasing power in

urban areas, urban and rural diets tend to differ significantly. Since the urban population in developing countries is expected to double to nearly 4 billion by 2020,

urbanization is a phenomenon that will in the future primarily affect developing

countries. With increased urbanization and higher disposable income among urban

residents, the demand for meat, horticultural, and processed products is expected to

increase among developing countries. Increased demand for meat is expected to

result in increased demand for feed grains and protein meals as well, resulting in

greater trade in these products.

Demand for quality and convenience and increased awareness regarding safety and

health have significantly changed food consumption patterns among developed

countries. In the United States, the red meat share of total meat consumption

declined from 79 percent in 1970 to 62 percent 30 years later, while the poultry

share increased from 21 to 38 percent during the same period. Similarly, per capita

fruit and vegetable consumption in the United States increased 25 percent between

1977 and 1999. Facilitated by improvements in shipping technology, trade in horticultural and high value processed products has grown to meet the rising global

demand, mainly driven by developed countries. 
iv  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

As consumers become wealthier and the basic demand for a well-balanced meal

are met, consumers tend to demand other ‘quality attributes’ in their food. 

Accordingly, during the last 20 years, mainly in developed countries, consumer

groups have increasingly brought attention to organic production of food and the

topic of animal welfare. Most studies characterize these consumers as affluent,

well-educated, and concerned about health and product quality. Reasons for

purchasing organic and humanely raised animal products are similar across countries. The perception that organic foods are healthier is widespread among buyers,

even though some countries prohibit advertising that suggests this. Along with

food safety, taste, freshness, and overall quality are often indicated as important

attributes determining consumer preference for organic products. Another factor

influencing consumer choice, although not directly affecting product quality, is

consumer concern for environmental protection and animal welfare.

Consumer demand for special quality attributes and safety varies across countries.

Countries also vary in how they perceive and handle risks from disease-causing

organisms, generally based on access to and use of advances in science, detection

technology, and mitigation methods. Accordingly, wealthier countries with more

information about food safety risks tend to demand more stringent food safety

standards on both domestically produced and imported food. They are also generally willing to pay more for these higher levels of food safety. Major food safety

incidents have greatly increased consumer concerns in recent years, leading 

to changes in consumer perceptions and food purchasing patterns in certain 

developed countries. 

One way in which the public and private sectors have responded to consumer

demand for ‘quality’ has been by developing and implementing mandatory and

voluntary quality control, management, and assurance schemes. These schemes are

causing changes in the way food products are produced, marketed, and traded in

Europe and to some extent in the United States. Quality assurance schemes

develop standards for producing, processing, and transporting, and may include

standards for environmental management practices. 

Differences in what food products countries want and what they will accept in

imported food affect patterns of food demand and global trade, and complicate 

the development of workable trade rules that are acceptable to different trading

partners. Adhering to set standards, whether voluntary or nationally mandated, may

increase production costs. In general, any policy that imposes costs on a domestic

firm that foreign firms do not face can potentially put domestic firms at a disadvantage. Domestic firms understand this consequence of differences in regulation.

Thus, when a country passes legislation that increases costs for domestic 

producers, the producers sometimes apply political pressure to offset these costs 

or to block imports from countries that do not have similar regulations. Consumer

demand for quality attributes can therefore impact trade flows and lead to disputes

between trading partners.

Countries are responding to arbitrage pressures and other trade-related tensions by

adopting multilateral coordination mechanisms such as mutual recognition, coordination, and harmonization of standards and rules. In general, the greater the coordination of multilateral mechanisms and private approaches among firms and

nations, the more they will be able to provide verifiable and valuable information

to trading partners and facilitate global agricultural trade.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  1

Introduction

Global food consumption patterns have changed

over time. Our diets on a daily basis are very

different from what our parents or grandparents

consumed. In winter, instead of living on canned fruits

and vegetables, we can now purchase at our neighborhood grocery store fresh grapes from Chile, oranges

from Australia, snow peas from Guatemala, and just

about any produce all year long. Similarly, the time

spent on food preparation has changed dramatically;

we can buy pre-cut vegetables, frozen dinners, and

sometimes order different ethnic carry-out meals on

almost a daily basis. These changes in food consumption patterns have resulted in large changes over time

in per capita food consumption in the United States

(fig. 1). Per capita consumption of coffee, milk, eggs,

and red meat has declined significantly during the past

30 years, while the consumption of cheese, soft drinks,

and poultry have increased. Food consumption in the

United States can no longer be categorized by food

eaten by a few major ethnic groups. It ranges from

fast-food burgers and fries to home-cooked meat and

potatoes, tacos and fajitas, Chinese noodles and rice,

pasta and pizza, Middle Eastern pita sandwiches, and

many other types of food. These changes in the

American diet have occurred gradually over time,

resulting in part from increased ethnic diversity in the

population, greater disposable household income,

increased trade and improved transportation, greater

numbers of women in the labor force, and increased

awareness and consumer preference for improved

quality and more healthful products.

Just as the American diet is constantly changing, globalization and increased per capita income is changing

the eating habits of individuals all around the world.

What are the forces driving these changes in global

food consumption? How do these forces differ across

developed and developing countries? How does this

affect global food trade? In the following 10 chapters,

this publication attempts to answer the above questions. Trade is one of the important factors that

increase the array and the availability of food to

consumers. Trade, in turn, is affected by supply side

factors such as relative growth in factors of production,

and demand-driven factors like growth in disposable

income and changing consumer preferences. The first

chapter in this publication discusses how these and

other factors, including improved transportation, have

Changing Structure of Global Food 

Consumption and Trade: 

An Introduction

Anita Regmi1

-40 -20 0 20 40 60 80 100 120 140 160

148

101

92

44

27

27

25

21

18

-12

-20

-21

-30

Caloric sweeteners

Carbonated soft drinks

Cheese

Poultry

Grains and cereals

Fish

Fats and oils

Fruits & vegetables

Alcoholic beverages

Red meat

Eggs

Milk

Coffee

Figure 1

Changes in U.S. per capita consumption, 1970-98

Percent change 1970-98

Source: Economic Research Service, USDA.

1 Agricultural economist with the Market and Trade Economics

Division, Economic Research Service, USDA.
2  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

changed the composition of global food trade. Our

discussion of the topic is not exhaustive. For example,

the effect of trade liberalization and political changes

that have occurred in many countries around the

world, which in turn may have affected food availability, is not addressed in this publication. 

One of the primary factors affecting food consumption

patterns, is of course, the ability to purchase food. The

last two decades have witnessed major increases in per

capita income levels of households all over the world.

The first two chapters of this publication analyze the

impact of income changes across countries. Chapter 2

specifically analyzes how income and food price

changes affect consumer behavior in low-, middle-,

and high-income countries. As illustrated in figure 2,

consumers in high-income countries such as the

United States spend a large share of their food budget

on meat, while cereal is the predominant component of

the food budget for consumers in poorer countries

such as Kenya and the Philippines. Generally, as the

population grows wealthier, the consumption of meat

and fresh produce increases2. At very high-income

levels, such as in the United States, changes in income

and food prices may not translate to perceptible

changes in food expenditure patterns at a national

level. However, changes may occur within the composition of sub-categories of food, such as substituting

grocery store brands with ‘quality-assured’ organic

brands, or replacing store brand meat and cheese with

imported products perceived to be of better quality.

Additionally, as illustrated in figure 1, the composition

of U.S. meat consumption changed significantly

during the last two decades, with increases in poultry

replacing declining red meat consumption. Similarly,

at very low-income levels, changes in income and food

price may not result in changes in consumption of

certain food groups. This is due to consumption shifts

within a food sub-category. For example, when the

price of rice increases, individuals may consume more

wheat or coarse grains, and not change their overall

expenditure on cereals. As income levels increase

beyond a certain threshold and consumers migrate to

the ‘middle-income’ category, they appear most likely

to change their food basket by consuming a more

diverse and higher valued diet.

While increases in income have enhanced food

purchasing power, better trade and transportation have

improved its selection and availability. The role of

improved transportation and infrastructure facilities in

changing the composition of global food trade is

discussed in Chapter 4. Besides income and improved

transportation, lifestyle changes related to urbanization

also determine the composition of the food we eat. Just

as our diets are very different from the food our parents

and grandparents consumed, diets of an average

consumer in New York City or San Francisco may be

different from that of an average consumer in rural

Georgia or Montana. The effect of urbanization in

influencing the composition of food consumed by individuals is examined in Chapter 3. This chapter focuses

on a global analysis, examining how the impact differs

among low-, middle-, and high-income countries.

Alternative demands on time in fast-paced, more

affluent, dual-income urban households may result in

urban consumers preferring higher valued and more

processed food that requires less time for preparation.

With food-retail and restaurant chains operating

nationwide, mass-media advertisements, prevailing

popular culture, and instantaneous transfer of information with modern technologies, food consumption is

undergoing changes in all areas of the country, as well

as beyond its borders. Along with the export of

popular American culture, the United States also

exports its food and eating habits to various urban

centers around the world. Therefore, the United States

plays a very important role in shaping the diets of individuals in many countries. Both bulk and prepared

U.S. agricultural products are exported worldwide, and

U.S. fast food chains dot the urban landscapes in cities

all over the world. An examination of current U.S.

food consumption patterns can therefore provide some

insights to potential changes in future food consumption patterns in developing countries as income levels

increase. Given that meat and fresh produce consumption will likely increase with income, Chapters 5 and 6

examine the factors shaping current U.S. demand for

these products.

Finally, when the basic demand for a well-balanced

meal are met, further increases in income result in

demand for other ‘quality attributes’ in the food we

consume. The demand for ‘quality attributes’ in developed countries has escalated in recent years due to

increased media attention and public awareness

resulting from various incidences of large-scale food

contamination. Consumers in developed countries are

2 Fruit and vegetable budget shares in figure 2 include expenditures on roots and tubers, which are generally cereal substitutes in

poorer countries. This may have contributed to relatively high fruit

and vegetable budget shares in Kenya and the Philippines.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  3

increasingly demanding food products perceived to be

safer, specifically products that are free from diseasecausing organisms, chemical residues, and that are 

not produced using any chemical inputs or genetic

modifications. Some American and a large number of

European consumers are additionally demanding food

from animals that are raised in a humane environment.

These domestic demands have led to policy changes at

the national and some at the international level. What

implications do such policy changes have for future

trade and the supply and demand of food? These

issues are presented in Chapters 7 through 9. 

In response to consumer demand for quality, food

industries in Europe and to a smaller extent the United

States have designed quality assurance systems that

guarantee quality attributes in food products. Issues

concerning such schemes and examples of quality

assurance schemes are presented in the final chapter of

this publication.

16%

27%

2% 12%

2%

21%

20%

38%

6% 1% 18%

3%

21%

13%

29%

10%

22%

6%

1%

17%

15%

34%

16% 16%

8%

2%

13%

11%

United States

Kenya

Japan

Philippines

Cereals

Meat

Fish

Dairy

Oils & fats

Fruit &

vegetables

Other food

Figure 2

Global food consumption patterns

Food item share of total food budget

Source: 1996 International Comparison Project Data. The World Bank.
4  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Introduction

Changes in food consumption in one region have

implications for production and trade in other

countries. In each country, trade acts to balance the

difference between production and consumption while

at the same time trade links countries in a global

economy. With growing interdependency, shifts in

consumption can have major impacts on food markets

throughout the world. In the last two decades the

composition of world agricultural trade has undergone

a dramatic shift. Today, grain trade no longer serves as

a proxy for agricultural trade as it once did. Bulk

commodities (grains, oilseeds, cotton, and tobacco)

have become less important in the world trade, representing less than 30 percent of world agricultural

trade. Shifts in global food consumption have affected

U.S. agricultural trade, which traditionally was

comprised largely of bulk commodities. Countries

exporting a higher content of non-bulk commodities

have generally increased their share in the world

market, as bulk commodities become less important in

total trade. 

What are the major determinants of changes in the

structure of global food trade? This question was

addressed by Coyle, Gehlhar, Hertel, and Wang (1998)

by analyzing historical patterns of world agricultural

trade from 1980 to 1995. In that study, different

economic factors were identified and used to explain

shifts in trade patterns. These included income growth

and food expenditures, factors of production, transport

costs, and trade policy changes. Of these determinants,

income growth and its impact on food consumption

was most important in explaining changes in trade

patterns over this period. The study employed a global

model with a demand system capable of capturing the

effect of income on changes in food expenditures over

a wide range of income levels. Since the study focused

on the composition of world agricultural trade in

aggregate, a natural follow-on contained in this chapter

is an examination of structural shifts in specific

regions. Of interest are differences between developed

and developing countries and how they affect the

changing structure of global agricultural trade. 

It is commonly thought that dietary upgrading, stemming from income growth in developing countries, has

contributed to changes in global trade patterns. The

linkage between changes in food consumption patterns

and changes in world agricultural trade is a complex

story involving more than income growth and dietary

change. To begin with, a background section on historical trade patterns is provided. This is followed by a

discussion of the major determinants of structural

change. A final section provides results from a formal

modeling exercise focusing on income growth and its

effect on consumption and trade. 

Background

The composition of world agricultural trade can be

described in terms of changes in its major component

parts. Total agricultural trade consists of food and nonGlobal Food Consumption and 

Impacts on Trade Patterns 

Mark Gehlhar and William Coyle1

Abstract: Driven primarily by per capita income growth, the composition of world

agricultural trade has substantially changed in the past two decades. For developing

countries, consumption and trade are shifting from basic staples towards higher value

livestock products. In high-income countries, demand for foreign brands are expanding intra-industry trade in processed consumer-ready products.

1 Agricultural economists with the Market and Trade Economics

Division, Economic Research Service, USDA.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  5

food commodities in both raw and processed forms. A

useful classification of agricultural trade is a breakdown of agricultural trade into four components: bulk

commodities, processed intermediate products, fresh

horticultural products, and processed consumer goods.2

From 1980 to 1997 the share of bulk has steadily

dropped (fig. A-1) while the shares of non-bulk categories have remained steady or increased. Bulk

commodities are no longer a valid indicator for measuring world agricultural trade growth. The share of

intermediate processed commodities in total agricultural trade has not decreased as bulk commodities have.

Slower trade growth for bulk does not by itself mean

global demand for bulk commodities has slowed.

Import demand for bulk commodities is partly satisfied

with growth in intermediate processed products, which

are essentially processed bulk commodities. Oilseeds

processed into vegetable oil and meal can be subsequently traded, reducing demand for imported oilseeds.

Grains fed to livestock ultimately produce a variety of

meat and animal products sold in foreign markets,

thereby curbing foreign import demand for grains. 

Fresh horticultural trade, consisting of products

consumed without further processing, has kept pace

with total agricultural trade, leaving its share nearly

constant over this time period. Improvements in shipping technology have played a role in expanding trade

of fresh produce. The fastest growing category has

been processed consumer goods. Factors driving trade

growth in this product category are more complex than

for other categories.

Only a few commodities account for a large share of

total agricultural trade. Among major commodities

there are dramatic differences in the rates of growth in

trade (shown in table A-1 and ordered by growth

rates). One recent phenomenon involves certain products entering international trade which previously were

thought of as “non-tradeable.” This takes place as

consumer preferences for foreign goods evolve and

shipping technology improves. Pet food is an example,

and is now one of the fastest growing products in

world trade, reaching $3.5 billion in global trade in

1998.3 Over the past 15 years many of the faster

growing categories in trade are non-bulk packaged

products, where consumers differentiate products

carrying unique brands and labels. Pastry, prepared

foods, and chocolates have grown in world trade by

nearly 10 percent per year over the past 15 years.

These alone account for more than $15 billion in

world trade, a value exceeding the value of world

wheat trade. Wine, a highly differentiated product, has

grown at a rate of 6 percent a year and is now $7.4

billion and likely will surpass trade in corn in value of

trade.4

Growth in many of the processed intermediate products

such as soybean oil, flour, and soybean meal has also

exceeded growth rates for total agricultural trade 

(3.5 percent per annum). Import demand for these

commodities originates (or is derived) from consumer’s

demand for finished processed food and livestock products. Trade in intermediate processed products depends

on exporters having a comparative advantage over

importers in performing milling/crushing activity

required for bulk commodities. Exporting countries

1980 82 84 86 88 90 92 94 96

0

20

40

60

80

100

Figure A-1

Composition of world agricultural trade

Share of total

Bulk

Intermediate processed

Fresh horticultural

Processed consumer

Source: U.N. COMTRADE, ERS, classification.

2 Bulk commodities consist of raw grains, oilseeds, tobacco, and

cotton. Intermediate processed commodities consist of semiprocessed goods such as flours, meals, and oils. Fresh horticultural

products consist of unprocessed fruits and vegetables such as

bananas and tomatoes, and nursery products including cut flowers.

Consumer-processed products include processed products at or

near where a substantial degree of processing has taken place.

Items in this category include beverages, bakery products, ready to

eat cereals and snack food, fresh and frozen meat, and preserved

fruit and vegetables. 

3 Pet food remained a non-traded product for the United States

until 1983. U.S export sales doubled between 1993 and 1998,

reaching $830 million in 1998.

4 World trade used here excludes trade between the 15-member

European Union.
6  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

with larger home markets can take greater advantage of

economies of scale, if they exist, as well as state-ofthe-art processing and shipping technology. 

Wheat, corn, coffee, and cocoa beans account for most

trade in bulk commodities. Bulk commodities are the

slowest growing component of agricultural trade.

Growth of these commodities has been less than 1

percent per year. 

An important factor in the changing structure of world

agricultural trade is the dominant role developed countries have played. Most of the growth in consumer

processed trade is attributable to developed country

imports. Developed countries import a much greater

share of processed consumer goods (consumer-ready

goods) than developing countries, while the opposite is

true for bulk commodities (fig. A-2). In most cases, the

developed countries’ share of total imports of

consumer goods increased, indicating faster import

growth than developing countries. For example, in

1980, developed countries imported 70 percent of

global meat trade. Since then the share has increased

to 75 percent in 1998 (table A-2). 

As income grows, meat typically becomes a more

important source of calories in the human diet (shown

in fig. A-3). While the relationship between income

and livestock product consumption is well known, the

link between economic growth and meat trade is less

clear. Regions with faster growth in meat consumption

do not necessarily become larger importers of meat.

Expansion of domestic meat production plays an

important role in determining import growth. Imports

will depend on how competitive domestic producers

are in producing for the home market. Input costs,

technology, and levels of productivity of livestock

sectors vary by region. Some production technologies

are easily replicated in different regions while others

are less transferable. 

World imports of red meats are concentrated in a few

developed countries. Japan’s meat imports alone

account for nearly as much as all developing countries’ imports combined (fig. A-4). Despite rapid

economic growth in most of Asia, only Japan stands

out as a major market for meat exporters. Newly

industrialized countries of Korea and Hong Kong have

been the fastest growing markets for meat in recent

years. While consumption of meat has increased in

low- and middle-income countries, there has not been

a noticeable shift in exports toward these markets. One

reason is that there has been a shift in world meat

production, with rapid growth in meat production

occurring in developing Asia and the Near East (table

Table A-1—Major commodities in world agricultural trade

1980 1998 Annual growth

Billions $U.S. Percentage

Pet food 0.01 2.0 23.3

Pastry 0.5 3.0 10.6

Chocolate products 0.6 3.2 10.1

Food prepared 1.7 9.2 9.5

Grapes 0.4 1.9 8.8

Cigarettes 1.8 7.9 8.7

Oil of palm 1.8 6.2 7.5

Wine 2.4 7.4 6.0

Beef and veal 2.7 7.3 5.7

Bananas 2.1 5.2 5.5

Cheese and curd 1.5 3.6 4.9

Oil of soya beans 1.8 4.5 4.6

Cake of soya beans 3.8 7.8 3.9

Tobacco leaves 4.0 6.8 3.1

Rice 5.0 9.3 2.7

Hides and skins 3.3 4.6 2.5

Soybeans 7.8 9.7 1.6

Cotton lint 8.5 8.9 1.5

Flour of wheat 2.0 2.4 1.4

Wheat 16.2 14.8 0.6

Corn 9.8 8.7 0.5

Coffee, green 13.3 12.5 0.3

Cocoa beans 3.0 3.3 0.1

Total agricultural products 187.6 323.5 3.5

Source: FAOSTAT: excludes intra-EU Trade.

Total agriculture

Total bulk

Wheat

Corn

Soybean meal

Meat

Grapes

Wine

0 20 40 60 80 100

Figure A-2

Shares of world imports by developed

and developing countries

Percent

Developed countries Developing countries

Source: FAOSTAT.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  7

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Figure A-3

Income level and source of calories

Calories per capita

United States

Bangladesh

Philippines

Japan

Brazil

Grain

Other crops

Meat

Other animal products

Source: FAOSTAT.

Bovine meat Pig meat Poultry meat

0

2

4

6

8

10

12

Figure A-4

World meat imports

$ billion

Japan

Other developed countries

Developing countries

Source: FAOSTAT.

Table A-2—Developed countries' import share of world imports, by leading commodities

1980 1985 1990 1995 1998

Shares of world total

Consumer Processed

Chocolate products 0.69 0.75 0.74 0.71 0.73

Meat 0.70 0.68 0.76 0.74 0.75

Pastry 0.47 0.62 0.66 0.69 0.70

Pet food 0.91 0.97 0.93 0.89 0.86

Food prepared nes 0.47 0.52 0.51 0.57 0.57

Wine 0.88 0.92 0.89 0.87 0.90

Horticultural

Bananas 0.89 0.95 0.95 0.91 0.88

Grapes 0.81 0.82 0.84 0.76 0.76

Tomatoes 0.95 0.92 0.94 0.95 0.95

Intermediate 

Cake of soya beans 0.84 0.77 0.75 0.64 0.49

Hides and skins 0.86 0.74 0.54 0.42 0.42

Oil of palm 0.32 0.27 0.27 0.25 0.29

Oil of soya beans 0.10 0.18 0.11 0.07 0.08

Bulk 

Cotton lint 0.56 0.67 0.48 0.35 0.34

Corn 0.59 0.64 0.56 0.36 0.37

Rice 0.16 0.19 0.22 0.16 0.17

Tobacco 0.82 0.80 0.80 0.76 0.77

Soybeans 0.86 0.79 0.78 0.68 0.59

Wheat 0.37 0.38 0.32 0.22 0.24

Source: FAOSTAT: excludes intra-EU Trade.
8  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

A-3). As livestock sectors expand in these regions,

import demand for meat lessens. Domestic meat

production in Asia has kept pace with economic

growth and consumption in the region. In 1980, highincome Organization for Economic Co-operation and

Development (OECD) countries produced 45 percent

of the world meat while Asia and the Near East

produced less than 20 percent. But by 1998, highincome OECD produced just 36 percent of world meat

while Asia’s share increased to 38 percent. Much of

this growth has been in non-ruminant animal production where production takes place without major 

land requirements. 

Imports of animal feeds have shifted away from developed countries to developing countries. For example,

the share of soybean meal imported by developed

countries was 84 percent in 1980, but fell to less than

50 percent in 1998. An important use of soybean cake

is in livestock production, and this has been a major

factor driving import growth in developing countries.

China’s livestock growth has kept pace with its overall

economic growth, dampening its import demand for

meat. An abundant labor force has facilitated livestock

production, with low wages keeping production costs

low. Overall, the increase in domestic consumption has

been matched by increases in domestic production.

Meat provides a good example of why there is not

always a direct link between consumption growth and

trade growth. 

Determinants of Structural Changes in

World Food Trade

Determinants affecting trade structure can be basically

broken into factor growth on the supply side, income

growth on the demand side, and barriers to trade. This

section summarizes these factors and their linkage to

trade. Together, these economic forces alter the structure of world agricultural trade. Measuring their individual impact requires a method capable of isolating

the effects of each.5

Growth in Factors of Production

On the supply side, changes in the relative abundance

of primary factors (labor, capital, and land) determine

changes in production costs. Differences in production

costs across countries are influenced by relative differences in wages, cost of capital, and land. The relative

abundance of arable land is the most important determinant of agricultural production. Land, however, is a

fixed resource for most regions. Long-run changes in

agricultural production must be accompanied by

changes in other variable factors such as capital, labor,

or productivity growth. Factor intensities (relative

input use of factors) can vary for different commodities and countries. Some countries rely more heavily

on capital inputs, while labor-abundant countries use

labor more intensively. In theory, sectors intensively

using the more abundant factor expand more than

those sectors requiring greater input use of a more

scarce resource.6 Countries with higher rates of capital

accumulation but slow population growth become relaTable A-3—World meat production 1980-1998

1980 1985 1990 1995 1998 1980-98

Share of world total Growth per annum

North America 0.20 0.19 0.18 0.18 0.18 2.13

Western Europe 0.22 0.21 0.19 0.17 0.16 1.14

Oceania 0.03 0.03 0.02 0.02 0.02 1.44

 Total high income OECD 0.45 0.42 0.39 0.37 0.36 1.61

East and S. East Asia 0.04 0.04 0.04 0.05 0.05 4.97

South Asia 0.03 0.03 0.03 0.03 0.03 4.07

China 0.11 0.13 0.17 0.23 0.26 8.09

Near East 0.02 0.03 0.03 0.03 0.03 3.99

 Asia and Near East 0.19 0.23 0.27 0.35 0.38 8.00

South America 0.09 0.08 0.09 0.10 0.10 3.28

Rest of World 0.27 0.27 0.25 0.18 0.16 -0.29

World 1.00 1.00 1.00 1.00 1.00 2.76

Source: FAOSTAT.

5 These factors were taken into account in the modeling framework employed in the study conducted by Coyle et al. The Global

Trade Analysis Project (GTAP) is employed in this study to simulate the historical changes in world trade.

6 The Rybczynski theorem in trade theory predicts that when the

endowment of one factor increases faster than others, the sectors

that use this resource most intensively increase their output faster

than other sectors (Bowen 1994).
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  9

tively more capital intensive, which in turn favors

sectors using capital more intensively. 

As growth occurs, the supply of factors used in

production changes, with different sectors in the

economy competing for resources. This affects production costs differently in each sector. For example, rapid

economic growth driven by industrial production in

East and Southeast Asia bids up wages for workers in

this region. As a greater share of the labor force is

employed in manufacturing and service sectors, agricultural labor costs rise. As an example, the cost of

producing rice in Thailand increased when wages rose

from rapid expansion in light manufacturing and services activity during the mid-1990s.

In each country, growth rates of the labor force and

physical capital stock differ. In many developing

countries, capital is often relatively more scarce than

other inputs. This has implications for production and

trade. As an example, the processing of oilseeds for

vegetable oils and protein meal is capital-intensive,

requiring plant and equipment investments. In regions

where capital is scarce it may be more economical to

support a livestock sector by importing processed

feed ingredients. 

Skill, Technology, and Productivity 

A higher rate of educational attainment generally

results in an expansion in the supply of skilled 

labor. Skill requirements can vary with technologies

employed in the production process. For example,

in many developing countries, lower skilled production technology is employed in primary agriculture

and processing. 

The relative abundance of lower waged labor has

helped support growth of poultry and pork sectors in

many low-income and middle-income countries.

However, modern poultry production and processing

requires high capital investments. In higher income

countries, meat production and meat processing

sectors have had to adopt labor saving technology.

This is particularly true for Europe, Japan, Canada,

and the United States where it has become imperative to employ more capital-intensive technology to

remain profitable. 

Productivity growth through technological progress has

played an important role in agricultural growth. It is a

well-documented source of growth for most developed

countries. Measuring the effect of productivity on 

the composition of trade requires commodity-specific

productivity rates by region.7 This could be an 

important factor driving production and trade 

composition change. 

Have supply-side effects had an impact on the shift in

agricultural trade away from bulk to non-bulk

commodities? In the study conducted by Coyle et al,

supply-side effects did not contribute to major changes

in the structure of world agricultural trade. One reason

is that there have not been substantial factor price

changes or significant differences in factor intensities.

The supply-side effects have had more to do with

shifts in economy-wide structure rather than compositional changes within agriculture.8 Rapid capital accumulation has fostered faster growth in industrial

production, particularly in the East Asian region. 

Income Growth

The specific food sectors that account for the largest

changes are largely demand driven. Demand-side

effects come about as household income rises. Food in

general is a ‘normal’ good where an increase in income

brings about an increase in food expenditures. But the

share of a household’s budget devoted to food generally

falls as incomes rise, while expenditure share for services rises.9 However, not all shares within the food

sector fall proportionately due to the household’s preference for diet upgrading. This behavior can be empirically measured and represented in a demand system

used for formal modeling applications. As incomedriven shifts in consumption take place in a country, it

can lead to changes in the structure of imports.

Consumption patterns are a function of many factors

and not always directly related to income changes.

They can coincide with lifestyle changes where greater

emphasis is placed on convenience. This can lead

towards greater food purchases away from home,

reducing preparation costs at the same time the mix of

commodities consumed may change. As this occurs

some food commodities may experience not only a

decrease in the share of food expenditure, but an

absolute decline in per capita consumption. In East

7 This type of detail was not available in the study conducted by

Coyle et al. 8 As economic growth occurs, agricultural output generally

declines as a share of total GDP.

9 This is known as the Engel effect.
10  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Asia, for example, per capita rice consumption has

actually dropped in Japan, Taiwan, and South Korea as

per capita incomes rose. Since these countries were

previously not major rice importers due to import

controls, the impact on world rice trade from income

effects is unnoticeable.10 The impact on trade comes

about as consumption of different types of foods such

as dairy, meat, beverages, and prepared food increases. 

Another interesting aspect concerning the consumption

and trade link is that changes in total food intake may

not occur when the composition of food consumption

and trade changes. This is important for high-income

countries and can account for large changes in global

food trade. 

As income rises, preferences for foreign brands or

varieties may increase as per capita consumption of

that item remains relatively flat. A small change in

foreign share of total domestic consumption in a

country can bring about changes in the composition of

total food imports.11 The demand for foreign varieties

of products contributes to simultaneous exporting and

importing of similar products between the same

trading partners. This results in intra-industry trade. 

Trade Barriers

Other factors can affect trade structure besides supply

and demand-side factors. These are barriers to trade,

which exist in the form of policies and transportation

costs. There are substantial differences in tariff rates

for different commodities. In temperate countries,

tropical products such as bananas and coffee beans

tend to have very low levels of protection, whereas

commodities that compete directly with domestic

production in those countries may have much higher

barriers such as rice, wheat, meat, and dairy products.

In some cases reductions in trade barriers affect trade

but may not alter consumption. This occurs as barriers

are reduced and consumers directly substitute domestically produced goods for imported goods, leaving

consumption unchanged. In other cases, lowering tariff

barriers can greatly expand consumption. This is

particularly true for developing countries where certain

commodities are deemed luxury items and governments can raise revenues with heavy taxes at the

border. For many years, fresh apples in Southeast Asia

carried very high import tariffs, severely limiting their

consumption since domestic production was small or

non-existent. 

A commodity-specific policy can affect the composition of trade. Subsidization of soybean meal production creates a bias in favor of exporting processed

products over soybeans, a bulk commodity. On the

other hand, an import policy of tariff escalation over

processed products creates a bias in favor of bulk

trade. Overall, the combined effect of trade policy has

an indeterminate effect on the composition of trade.

Reduction in barriers can expand total agricultural

trade while leaving the composition (bulk and nonbulk shares) unaffected. This is because trade barriers

are applied to both bulk and non-bulk commodities,

leaving the change in composition unnoticeable.

Under simulated conditions, reductions in trade

barriers from 1980 to 1995 showed little change in the

composition of agricultural trade. A further complication is that non-tariff barriers (NTB), such as quotas,

were replaced by tariffs, creating measurement problems for change in actual rates of protection. As a

result, tariff protection in the OECD countries has

generally increased while the share of imports

covered by NTBs declined over this time period. It

was found in the Coyle et al. study that policy reform

over the 15 years before 1995 were not a significant

factor affecting the change in the composition of 

agricultural trade.

Transport costs can act as a formidable barrier to trade

just as tariffs and, like tariffs, these costs vary by

commodity. Higher transport costs are generally associated with non-bulk perishable commodities. Thus, it

would seem more likely that a reduction in overall

transport costs would benefit trade in non-bulk

commodities, thereby affecting the composition of

trade. Furthermore, technological innovation has been

greater for perishable products. A problem in measuring transportation’s effect on trade is that technological innovation is not easily captured by changes in

shipping costs alone. It was found that even while

technological change took place in shipping it does not

necessarily lead to lower freight rates but to better and

faster service. 

10 Rice imports of these countries represent less than 3 percent of

world rice trade. 

11 For example, trade in beer has grown faster because of increased

consumption of foreign brands rather than in increased total beer

consumption. Canada and the United States concurrently export

and import beer and grain-based food products. In high-income

countries, import demand for new varieties is an area that deserves

greater attention (see Feenstra 1994).
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  11

Modeling Income Effects

This study employs a modified version of the GTAP model.

For our purpose here it is used to simulate the effects of

historical growth on world trade. Specifically we are interested in the changes in the historical trade patterns attributed

to income growth. 

Income effects in the model are driven principally by income

elasticities. The income elasticities used in our modified

version of the GTAP model are reported in table A-4. These

are based on estimates provided by Cranfield et al. and

mapped to the GTAP regions. The 1995 parameters are calibrated to the model's base period whereas the 1980 elasticities are derived in a backcasting exercise where prices are

held constant and real expenditure is reduced in each region

to the 1980 income level (shown in table A-4). The differences across regions reflect variations in the level of income

in each region. The change from 1995 back to 1980 depends

on the changes in income growth on a per capita basis.

Clearly the most dramatic changes are in those regions where

there has been greater changes in per capita income. In the

Asian NICs region for example, the expenditure elasticity of

demand for grains fell from 0.44 to 0.08. This would suggest

that the effect of income growth on the demand for grains

would be far greater in 1980 than in 1995. According to these

estimates, in 1980 livestock products in China are considered

a luxury good given that the income elasticity exceeds 1,

however, this parameter is reduced to 0.96 in 1995 as per

capita incomes have risen in China. In the high-income

regions of Australia, Canada, Japan and the United States, the

income elasticity of demand for livestock products was only

marginally higher in 1995.

The general approach in performing the demand-side experiment is a form of "backcasting" where observed changes in

population and economic growth are the exogenous variables

in the model. Prices and quantities are endogenous for all

other domestic and trade variables. In this type of experiment

the model produces change in trade composition attributable

to income effects alone. In most regions of the world

economic growth exceeds population growth (table A-5). In

China, per capita incomes grew the fastest in the world. In

some regions per capita income was negative, including

Mexico, the Middle East and North Africa and the

Economies in Transition. Of primary interest is how the

composition of trade changes as a result of changes arising

from per capita income growth in individual regions. 

Table A-4—Income elasticities estimated from AIDADS by region, 1980 and 1995

Grains Livestock Horticulture Other food

1980 1995 1980 1995 1980 1995 1980 1995

Elasticities

Australia 0.103 0.057 0.696 0.760 0.419 0.478 0.524 0.594

Japan 0.082 0.032 0.652 0.727 0.368 0.428 0.474 0.550

Asian Newly Industrialized Countries 0.439 0.084 0.685 0.663 0.538 0.376 0.589 0.486

ASEAN countries 0.597 0.307 0.769 0.677 0.661 0.468 0.702 0.545

China 0.938 0.757 1.079 0.959 0.985 0.826 1.074 0.925

Canada 0.048 0.025 0.716 0.776 0.425 0.493 0.540 0.613

United States 0.022 0.010 0.754 0.814 0.465 0.547 0.583 0.665

Mexico 0.184 0.142 0.662 0.680 0.409 0.408 0.504 0.513

MERCOSUR 0.190 0.122 0.663 0.651 0.390 0.377 0.478 0.481

Western Europe 0.098 0.065 0.694 0.738 0.419 0.452 0.522 0.568

Economies in Transition 0.337 0.335 0.686 0.685 0.479 0.478 0.561 0.560

Mideast and North Africa 0.439 0.404 0.714 0.704 0.550 0.528 0.613 0.595

Rest of the World 0.812 0.739 0.982 0.936 0.871 0.808 0.958 0.899

Estimated by Cranfield, Hertel, Eales, and Preckel 1998.

Table A-5—Population and economic growth by region, 

 1980-1995

Regions GDP Population

Percent

Australia 2.9 1.3

Japan 3.2 0.5

E.Asian NICs 7.7 1.2

ASEAN 6.2 1.9

China 10.1 1.3

Canada 2.4 1.2

United States 2.5 1.0

Mexico 1.3 2.0

Mercosur 1.8 1.7

Western Europe 2.0 0.3

Economies in Transition 0.0 0.6

Mideast and North Africa 0.7 2.9

Rest of the World 2.5 2.3

World 2.6 1.7

Source: World Development Indicator, The World Bank.
12  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Evidence of Income Growth Effects on

Agricultural Trade Patterns

This section reports results from a formal modeling

exercise (see box “Modeling Income Effects”). Results

for the income growth experiment (shown in tables 

A-6-A-9) are reported for four aggregate commodities,

including processed commodities, livestock products,

bulk commodities, and horticultural products. Import

value shares are calculated for each of the 13 regions

and for the world for each of the four time periods. 

Overall, the direction of share changes is consistent with

historical changes over this period. This confirms that

income effects on food consumption have contributed to

the changing structure of world trade. However, there

are wide differences across individual regions. A large

proportion of the shift occurs in higher income countries. Generally, the regions that have experienced the

greatest per capita income change generally have the

largest change in their trade structure. 

High-income countries exhibited the greatest shift

toward processed products. For example, Japan’s

processed share expanded from 0.26 in 1980 to 0.32 in

1995, reflecting the relative importance of expenditure

growth for these products. Similarly for Asia’s Newly

Industrialized Countries (NICs), the processed

commodity share increased from 0.23 to .30. While

China experienced the fastest growth of all regions, this

did not lead to dramatic changes in its trade structure.

Much of the adjustment from income effects takes

Table A-6—Simulated import shares for processed

 commodities

Regions 1980 1985 1990 1995

Percent

Australia 0.47 0.49 0.50 0.52

Japan 0.26 0.28 0.31 0.32

E. Asian NICs 0.23 0.24 0.27 0.30

ASEAN 0.25 0.25 0.26 0.28

China 0.14 0.15 0.15 0.16

Canada 0.37 0.39 0.42 0.42

USA 0.31 0.33 0.36 0.37

Mexico 0.20 0.20 0.20 0.19

Mercosur 0.30 0.30 0.30 0.31

Western Europe 0.30 0.31 0.34 0.34

Economies in Transition 0.43 0.44 0.50 0.42

Mideast & North Africa 0.23 0.22 0.20 0.20

Rest of world 0.31 0.31 0.31 0.31

World 0.30 0.31 0.33 0.33

Source: Simulated from Modified GTAP Model.

Table A-7—Simulated import shares for livestock 

 commodities

Regions 1980 1985 1990 1995

Percent

Australia 0.10 0.10 0.10 0.10

Japan 0.25 0.26 0.27 0.28

E. Asian NICs 0.23 0.23 0.23 0.23

ASEAN 0.14 0.14 0.14 0.14

China 0.08 0.08 0.08 0.09

Canada 0.12 0.13 0.13 0.14

USA 0.14 0.14 0.15 0.15

Mexico 0.20 0.20 0.20 0.20

Mercosur 0.15 0.15 0.15 0.15

Western Europe 0.22 0.23 0.24 0.24

Economies in Transition 0.19 0.19 0.20 0.19

Mideast & North Africa 0.19 0.18 0.18 0.18

Rest of world 0.13 0.13 0.13 0.13

World 0.20 0.20 0.21 0.21

Source: Simulated from Modified GTAP Model.

Table A-8—Simulated import shares for bulk

 commodities

Regions 1980 1985 1990 1995

Percent

Australia 0.30 0.30 0.30 0.29

Japan 0.35 0.31 0.26 0.24

E. Asian NICs 0.38 0.36 0.32 0.29

ASEAN 0.41 0.40 0.39 0.37

China 0.50 0.50 0.49 0.47

Canada 0.23 0.23 0.22 0.22

USA 0.35 0.34 0.33 0.32

Mexico 0.38 0.38 0.38 0.39

Mercosur 0.27 0.27 0.27 0.27

Western Europe 0.25 0.25 0.24 0.24

Economies in Transition 0.24 0.23 0.17 0.25

Mideast & North Africa 0.33 0.33 0.33 0.33

Rest of world 0.33 0.33 0.33 0.33

World 0.29 0.28 0.27 0.28

Source: Simulated from Modified GTAP Model.

Table A-9—Simulated import shares for horticultural

 products

Regions 1980 1985 1990 1995

Percent

Australia 0.07 0.06 0.06 0.06

Japan 0.06 0.06 0.07 0.07

E. Asian NICs 0.05 0.05 0.06 0.06

ASEAN 0.06 0.06 0.06 0.06

China 0.02 0.02 0.02 0.02

Canada 0.19 0.19 0.19 0.20

USA 0.15 0.15 0.14 0.14

Mexico 0.04 0.04 0.04 0.03

Mercosur 0.08 0.08 0.08 0.08

Western Europe 0.13 0.13 0.13 0.13

Economies in Transition 0.09 0.09 0.09 0.09

Mideast & North Africa 0.06 0.06 0.06 0.06

Rest of world 0.06 0.06 0.06 0.06

World 0.11 0.11 0.10 0.10

Source: Simulated from Modified GTAP Model.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  13

place domestically rather than in China’s external

trade.12 Among some of the lower income regions, the

share of processed commodities actually fell. This was

the case for Economies in Transition, Mexico and the

Middle East and North African region. 

The growth in imports of livestock products was

roughly proportional to agricultural trade growth,

keeping the share nearly the same for most countries.

Based on our simulation exercise, the largest change in

the livestock import shares are found in the high-income

countries of Japan, Canada, and Western Europe. For

these regions the income elasticity increased marginally

from 1980 according to simulated estimates. The opposite occurs for developing countries where the income

elasticity has fallen. In those cases, import shares for

livestock have remained the same over this period.13

In nearly all regions of the world the import share of

bulk commodities declined. Much of the shift away

from this aggregate category took place in higher

income regions, particularly in the higher income

Asian regions. For Japan, the share dropped the most,

from 0.35 to 0.24. For the Asian NICs, the drop in the

bulk share was nearly as large. 

Of these aggregate commodities, horticultural products

represent the smallest share of agricultural imports. Like

livestock products, this category grows roughly proportional to total agricultural trade. The direction of change

for the horticultural product share differs by region. This

is partly due to the fact that, across this time period,

expenditure elasticities also vary by region. 

Conclusions

Several factors can contribute to the changing composition of world agricultural trade. An earlier study indicated per capita income levels to be the most important

factor affecting food consumption patterns. Developed

countries have played a major role in the aggregate shift

of world agricultural trade towards imports of non-bulk

commodities. Income growth effects on import demand

differ between developed and developing countries. The

growth in imports of processed food products by developed countries is not necessarily a reflection of increased

per capita consumption or diet upgrading but rather

diversification of consumption towards foreign varieties.

For an individual commodity there is not always a

direct link between consumption and trade growth. In

developing countries, diet upgrading and increased

consumption of livestock products do not necessarily

translate into higher import shares of these products

over grains and other bulk commodities. Imports of

animal feed help expand domestic livestock production

while reducing the need for direct imports of livestock

products. The most noteworthy example is China,

where rapid economic growth has not yet created a

major import demand for meat and livestock products.

Rather, domestic livestock production has accelerated

in China in the past two decades. 

There are likely many complex factors driving changes

in world food trade besides the standard economic

determinants discussed here. Future research challenges will be to examine other factors besides income

such as the role of urbanization in developing countries. It is likely that not only are income effects

important, but the stage of development, distribution of

income, and the geography and culture of a country

are important factors affecting the changing content of

a country’s food imports. 

References 

Bowen, Harry P. “Factor Accumulation and Developing Country Trade” working paper, Graduate School

of Management, University of California, Irvine,

September 1994.

Coyle, W., M. Gehlhar, T. Hertel, and Z. Wang.

“Understanding the Determinants of Structural 

Change in World Food Markets” American Journal

of Agricultural Economics, Number 5, Vol. 80,

1998, pp. 1051-1061.

Cranfield, J. T. Hertel, J. Eales, and P. Preckel.

“Changes in the Structure of Global Food Demand”

American Journal of Agricultural Economics, Number 5, Vol. 80, 1998, pp. 1042-1050.

Feenstra, Robert C. “New Product Varieties and 

Measurement of International Prices” American

Economic Review Vol. 84, No. 1, 1994.

.

12 China has a low import share of total domestic consumption. In

the model, substitution between foreign and domestic sources

(Armington specification) governs the degree to which imports can

compete with domestic production. 

13 Part of the problem is with the use of an aggregate livestock category containing a large non-food component (hides and skins).

Industrial uses of livestock products are not directly related to

income-induced dietary changes in developing countries. Furthermore, demand for hides and skins imports is a derived demand for

footwear. This is complicated by the fact that hides and skins are

used for leather in shoe-making where demand in footwear (the final

good) is derived from the export demand in developed countries.
14  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Introduction

The world population is expected to increase by

more than 1.2 billion people between 1998 and

2018, almost all of whom will reside in low and

middle-income countries (The World Bank, 2000). The

expected increase in population, combined with rising

income levels in developing countries, is expected to

account for most of the anticipated increases in global

food demand over the next couple of decades. Crosscountry food demand analysis can improve understanding of global food trends by quantifying the

relationship between food demand, composition of

food, and income levels. This knowledge in turn 

can provide crucial input in assessing future global

food needs.

While the previous chapter described the factors that

affect food consumption and trade patterns across time,

focusing on region-specific income effects, this chapter

will examine how changing incomes and prices affect

changes in food expenditure for a cross-section of

countries ranging from low, to middle, to high income.

The results discussed in Chapter 1 were derived from a

simulation study based on demand elasticity estimates

from 1985 data. Our paper in turn will estimate

demand elasticities using 1996 data, which could

potentially be used in future simulation studies. In

addition to examining the effect on aggregate food

demand, this chapter will also examine the effect of

income and price changes on food subgroups such as:

bread and cereals, meat, fish, dairy products, oils and

fats, fruit and vegetables, and other food products. 

Background

As described in the previous chapter, rising income

and improved access to a greater variety of food

results in changes in food consumption patterns. This

chapter further indicated that developed countries

exhibit greater preference for high-value processed

products as income increases. Other studies indicate

that with an expected large growth in population and

income levels, developing countries will mainly

account for overall future increases in global food

demand. For example, a recent publication suggests

that about 85 percent of the increase in the global

demand for cereals and meat between 1995 and 2020

will occur in developing countries (Andersen, PandyaLorch, and Rosegrant 1999). The same study also indicates that the demand for meat in the developing world

could potentially double during this 25-year period. 

While global food demand, especially in developing

countries, is expected to increase with income, the food

share of total budget is expected to decline as income

increases. An Economic Research Service (ERS)

analysis of 51 countries indicated that on average, highCross-Country Analysis of Food 

Consumption Patterns

Anita Regmi, M.S. Deepak, James L. Seale Jr., Jason Bernstein1

Abstract: Low-income countries spend a greater portion of their budget on food

and are more responsive to income and food price changes than middle- and highincome countries. Higher value food products undergo greater budget adjustments to

price and income shocks, while budgets for staple food products like cereal change

the least.

1 Anita Regmi and Jason Bernstein are agricultural economists,

and M.S. Deepak was a visiting scholar with the Market and 

Trade Economics Division, Economic Research Service, USDA.

James L. Seale Jr. is professor, Department of Food & Resource

Economics, University of Florida. 

The authors wish to thank Yonas Biru and the Technical Assistance

and Statistics Division of the World Bank for the research data and

their cooperation.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  15

income countries spend 16 percent of their expenditures on food, while low-income countries spend 55

percent (ERS 1997). Similarly, the cross-country

demand analysis conducted by Theil, Chung, and Seale

(1989) using the first four phases (1970-1980) of the

International Comparison Project (ICP) further

confirms that the proportion of budget spent on food

decreases with income, and that wealthier countries are

less responsive to changes in income and food prices.

Results from the study by Cranfield, et al. (1998),

using the 1985 ICP data, indicates that poorer countries

are expected to experience larger growth in total food

demand during the next two decades.

Rising income is also expected to change the composition of food demand, especially in developing countries. This is illustrated both by the ERS study (July

1997), which indicates that rising income levels

generally result in a more diverse diet, as well as by

Cranfield, et al.’s analysis which concludes that the

composition of food demand will undergo a greater

change in developing countries compared with developed countries. In low per capita income countries,

cereal consumption accounts for a large share of the

total food budget. As per capita income rises,

consumers in these countries will shift some

consumption away from lower value cereals to higher

value livestock products. In developed countries,

where incomes and livestock product consumption are

already high, consumers are expected to make relatively small adjustments between food consumption

groups with changes in income levels. As indicated in

Chapter 1, the substitutions made by consumers in

developed countries may lead to greater consumption

of processed high-value products, or consumers may

upgrade food consumption to newer and foreign varieties that are perceived to be of better quality. These

shifts in food consumption may be within the same

food subgroups and therefore may not be evident by

demand analyses of broad food subgroups. 

International Evidence on Food 

Consumption Patterns

The 1995 International Comparison Project data are

used to analyze the demand for food in 99 countries

ranging from low- and middle- to high-income (see

box). Consumer response to changes in factors

affecting demand is measured by elasticities. For

example, an income elasticity measures the responsiveness of the quantity demanded to a unit change in

income, while price elasticity measures the responsiveness of the quantity demanded to a unit change in

price. When an income elasticity for a product is

greater than one, the product is considered to be a

luxury good and accounts for an increasing proportion

of total expenditures with increases in income. When

an income elasticity of demand is less than one, the

product is considered to be a necessary good and

accounts for a smaller proportion of total expenditure

as income increases.

To examine the effect of income on consumption,

countries are grouped together according to per capita

income (as calculated from the expenditure data).

Low-income countries represent those with real per

capita income less than 15 percent of the U.S. level,

middle-income with real per capita income between 15

and 50 percent of the U.S. level, and high-income with

per capita income greater than 50 percent of the U.S.

level. This criterion for grouping places the majority of

Sub-Saharan African countries, poor transition

economies such as Mongolia and Turkmenistan, and

low-income Middle Eastern countries such as Yemen

within the first group. High income countries include

most Western European countries, Australia, New

Zealand, Canada, Japan, and the United States; while

the middle income countries include better-off transition economies such as Estonia, Hungary and the

Czech Republic, North African countries, and many

Latin American countries. 

Poorer Countries Spend a Higher Proportion 

Of Their Budget on Food

Consistent with past findings, our results indicate that

low-income countries spend a greater portion (47

percent) of their total expenditures on food compared

with richer countries, which on average spend 13

percent of their total budget on food (table B-1). In

general, lower income countries spend a greater

proportion of their budget on necessities such as food,

while richer countries spend a greater proportion on

luxuries. With income elasticity below one, food,

beverages and tobacco, and clothing and footwear

appear to be necessities in all countries, while education, gross rent, fuel and power, house operations,

medical care, recreation, transport and other groups are

all luxuries. 

Food Demand in Poorer Countries is More

Responsive to Income Changes

To compare our estimates with those of Theil, Chung,

and Seale from the earlier phases of ICP, we observe
16  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

the income levels and elasticities for the 39 countries

present in both datasets. As earlier mentioned, Theil,

Chung, and Seale used the first four phases of ICP,

which included data collected between 1970 and 1980,

to estimate the demand for the same aggregate

consumption groups as estimated in this study. The

horizontal axes in figures B-1 and B-2 represent countries arranged in ascending order of 1996 per capita

income, with Tanzania near the origin and the United

States at the extreme end. As shown in figure B-1,

between 1980 and 1996, real per capita income grew

faster for wealthier countries than for the poorer countries. Figure B-2 compares the income elasticity for

food from the two studies, which appear to be relatively similar. These results indicate that poorer countries are more willing to change their expenditures on

food in response to changes in income, as measured by

the income elasticity. As income level rises, the

income elasticity declines. 

Between 1980 and 1996, there is very little change in

income elasticity among the poorer countries, which

experienced slower growth in per capita real income

compared with developed countries (fig. B-1). During

this time, developing countries experienced rapid

urbanization, which increased the availability and the

selection of food in these markets. Urbanization, as will

be discussed in greater detail in the next chapter, may

have contributed to maintaining or even increasing the

income elasticity for food in low-income and many

middle-income countries in 1996 compared with 1980

(fig. B-2). The large increase in the estimated income

elasticity for Brazil (the lone peak in the graph) can be

attributed to the prevailing currency crises during this

period. Except for several European countries, among

the wealthier middle-income and higher income countries, the income elasticity for food in 1996 is lower

than in 1980. The adoption of the Common

Agricultural Policy (CAP) by several countries between

1980 and 1996 and the subsequent modification of the

CAP in 1992 may have influenced income elasticities

in European countries. The CAP maintained agricultural prices at artificially high levels in European countries, thereby increasing expenditures for food as per

capita incomes rose. In addition, European countries

that adopted the CAP were forced to maintain the same

trade barriers as the rest of the European Union (EU),

thereby diverting trade away from lower cost imports

from countries outside the EU.

Food Demand in Poorer Countries is More

Responsive to Food Price Changes 

Figure B-3 compares the price elasticities for aggregate food groups between 1980 and 1996, reflecting

the consumer response to price changes with no

compensation in income levels. For both years, poorer

countries are highly responsive to changes in food

prices compared with wealthier countries. As incomes

increased between 1980 and 1996, the price elasticity

for food for many middle-income and all low-income

countries also increased contrary to expectations. This

is because income levels did not grow much for most

low-income and many middle-income countries during

1980-1996, and real per capita income in 1996,

although higher than in 1980, continued to remain at

very low levels compared with wealthier countries.

Additionally, as discussed earlier, developing countries

experienced rapid urbanization, which has increased

the availability and choices of food in these countries.

This in turn has enhanced consumer ability to select

lower value substitutes within a food group as prices

increase for certain food items within the same group.

Food price elasticities for many higher income counTable B-1—Budget shares and income elasticities of aggregate consumption categories

Consumption

--- Budget shares --- --- Income elasticity ---

categories

Low income Middle income High income Low income Middle income High income

<15% of U.S. 15-50% of U.S. >50% of U.S. <15% of U.S. 15-50% of U.S. >50% of U.S.

Food 0.47 0.29 0.13 0.73 0.58 0.29

Beverages & tobacco 0.04 0.05 0.04 0.97 0.97 0.97

Clothing & footwear 0.08 0.07 0.05 0.90 0.88 0.86

Education 0.06 0.07 0.08 1.06 1.05 1.05

Gross rent, fuel & power 0.09 0.14 0.18 1.24 1.18 1.16

House operations 0.05 0.07 0.07 1.17 1.14 1.12

Medical care 0.04 0.08 0.11 1.74 1.35 1.26

Other 0.07 0.09 0.15 1.59 1.32 1.24

Recreation 0.02 0.04 0.07 1.76 1.42 1.29

Transport 0.08 0.11 0.13 1.24 1.18 1.15

Number of countries 32 41 26 32 41 26
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  17

tries were about the same or less in 1996 than in 1980.

The exception to this category is again several

European countries, which as already mentioned, may

have been affected by the adoption and modification of

the Common Agricultural Policy.

Composition of Food Moves from Low-Value 

To High-Value as Income Increases

As indicated in table B-2, cereals, fats and oils, and

fruit and vegetables (including tubers) account for a

larger share of the total food budget in low-income

countries compared with high-income countries. On

the other hand, meat and dairy budget shares are

greater for high-income countries compared with both

low- and middle-income countries. Excepting dairy

products among the extremely poor countries and fish

for all low-income and many middle-income countries,

all other food groups are necessary goods as indicated

by elasticity levels that are less than one. 

0

0.5

1.0

1.5

2.0

2.5

3.0

0

0.5

1.0

1.5

2.0

2.5

3.0

Figure B-1

Per capital real income

Index, 1980 US$=1.0

Low-income countries Middle-income countries High-income countries

Tanzania

United States

1980

1996

Source: 1996 data are ERS/USDA estimates based on International Comparison Project data. 1980 data are from 

Theil, Henri, Ching-Fan Chung, and James L. Seale, Jr., International Evidence on Consumption Patterns (1989).

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Figure B-2

Income elasticity for food

Elasticity

Low-income countries Middle-income countries High-income countries

1980

1996

Source: 1996 data are ERS/USDA estimates based on International Comparison Project data. 1980 data are from 

Theil, Henri, Ching-Fan Chung, and James L. Seale, Jr., International Evidence on Consumption Patterns (1989).
18  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Analysis of Cross-Country Food Demand Model

Analytical Framework

Our analysis employs a two-stage budgeting process

(Deaton Muellbauer, pp. 122, Theil, Chung, and Seale,

pp. 129-138) which assumes that consumers first allocate their budget to broad consumption groups. Given

the budget for the broad groups, consumers then make

budget decisions for items within each group.

Accordingly, we first estimate an aggregate demand

system across 10 broad consumption categories (food

being one of them), followed by a second demand

system comprising seven food sub-categories. The first

stage assumes preference independence between the 10

broad consumption categories: food, beverages and

tobacco, clothing and footwear, gross rent, fuel and

power, house furnishings and operations, medical care,

transport and communications, recreation, education,

and other consumption expenditures. This implies that

the preference ordering among items within one broad

consumption group is not dependent on the quantities

of items consumed in other groups. Using the

maximum likelihood estimation process, parameters for

the Working’s Preference Independence model (Theil,

Chung, and Seale 1989) are estimated from the first

stage of the analysis, which in turn yield income and

price elasticities for the 10 broad consumption groups. 

The second stage of the analysis involves the estimation of parameters for the seven food sub-categories,

bread and cereals, meat, fish, dairy products, fats and

oils, fruit and vegetables, and other food products. In

this analysis, preference independence cannot be

assumed since the demand for a particular food group

may be dependent on consumption of items in other

food groups. For example, demand for meat products

may be dependent on consumption of fish. Therefore,

the more suitable Working Slutsky model (Theil,

Chung, and Seale, 1989) is used in this estimation.

Based on the parameters estimated from the second

model, we can calculate the conditional income and

price elasticities for each food group. The unconditional demand elasticities can then be obtained by

multiplying the conditional elasticities by the corresponding elasticity for food as an aggregate group

obtained from the first step of the analysis. 

The analytical framework used in this study follows

the methodology developed and described in detail by

Theil, Chung, and Seale (1989). They estimated the

demand for 10 broad consumption categories, namely,

food, beverages and tobacco, clothing and footwear,

gross rent, fuel and power, house furnishings and operations, medical care, transport and communications,

recreation, education, and other consumption expenditures. All data are normalized with reference to the

United States, and all domestic prices are converted

into U.S. dollars to facilitate comparison.

Data

The International Comparison Project (ICP), initiated

by researchers at the University of Pennsylvania, is

currently maintained by the Statistical Advisory

Services of the World Bank. Over the years, data

collected by the ICP has increased from 10 countries

in Phase I (1970) to 115 countries in 1996. The study

conducted by Theil et al. (1989) used the Phase IV

data from 60 countries, while the study by Cranfield

et al. (1998) used the 1985 data covering 64 countries. The current study uses the 1996 ICP data,

which covers expenditure and price data for 115

countries, over 10 broad consumption categories, and

22 sub-categories.

To conduct cross-country analysis, consumption expenditures and prices expressed in different currencies

must be expressed in terms of a base country currency

comparable across countries. One solution to convert

expenditures into a single currency would be to use the

exchange rates. However, exchange rates do not

account for the fact that services are cheaper in less

developed countries. Therefore, exchange rates tend to

overstate the poverty of poorer countries. To obtain

more accurate estimates for individual countries, ICP

uses the Geary-Khamis (The World Bank, 1993)

method of aggregation to arrive at prices that are in

terms of purchasing power parities (PPPs) relative to a

base country. Similarly, expenditures are aggregated

using the Geary Khamis method to arrive at total per

capita real expenditures relative to a base country,

which is used as a proxy for per capita real income.

Our analysis uses the United States as the base country

for calculating PPP and per capita real income.1

1 The program ICP ToolPak developed by Yuri Dikhanov, Statistical Advisory Service, the World Bank, was used.

Continued on page 19
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  19

Food Sub-Group Demand in Poorer Countries 

Is More Responsive to Income Changes 

For all food subgroups, poorer countries exhibit a

greater responsiveness, as given by the income elasticity (table B-2), to changes in income levels

compared with wealthier countries. For example, when

income falls, poorer countries make bigger cutbacks in

consumption expenditure of different food groups than

wealthier countries do. However, these cutbacks are

not implemented evenly across the different food

groups. Larger cuts are made on higher value items

such as fish, dairy, and meat, while the consumption of

cereal, the main staple, is cut the least. Conversely,

when income increases, poorer countries increase their

expenditure on different food items to a greater extent

than wealthier countries, with the greatest increase in

expenditure on higher value food items such as dairy

and meat. 

Staple Food Demand is Less Responsive to

Income Changes

For all income levels, countries indicate comparatively

lower income elasticities for staple products such as

cereals, fats and oils, and fruits and vegetables

(includes tubers), than for meat and dairy products.

However, the difference between the elasticities for the

The 1996 ICP data was collected between 1993 and

1996 by six different agencies contracted by the

United Nations for countries in Asia, Africa, the

Middle East, the Caribbean, Latin America, OECD,

and the Commonwealth of Independent States (CIS).

Each of the agencies was responsible for collecting

data for a particular region for which the data was

collected at a very disaggregate level and then aggregated upward using the PPP methodology to express

it in terms of base country currency, which in most

cases was 1996 U.S. dollars. However, not all PPPs

were expressed relative to the United States. Data for

Asia were expressed relative to Hong Kong and data

for Latin America were expressed relative to Mexico.

Since Mexico was also represented in the OECD

data, merging Latin America with the rest of the data

was relatively easy. Merging Asia has proven to be

more challenging. Japan is represented in both the

Asian and OECD data, but matching the two datasets

indicated scaling problems within the Asian data.

Therefore, the current analysis is conducted for 99

countries, excluding 13 countries from Asia, two

from the Caribbean, and Herzegovina, for which

population data were unavailable. Food expenditure

data for the two Caribbean countries, Bermuda and

Belize, appeared to include a large amount of expenditures by tourists and were therefore unrepresentative of the indigenous population. 

Results

The results from the estimation of our demand

systems confirm Engel’s Law and appear to be

consistent with previous studies closely matching

those obtained by Deepak, Shapouri, and Seale for

Brazil (June 2000). Similarly, the estimated elasticities for cereal and horticultural products presented in

table A-4 are similar to those obtained in our study.

The elasticity of demand for meat estimated from our

study cannot be compared with the elasticity of

demand for livestock in Chapter 1, since Gehlhar and

Coyle include dairy in their estimation of demand for

livestock products, while our study separates dairy

and meat into two food categories. Furthermore, in

comparing the elasticity from the two studies, one

has to bear in mind that the elasticities presented by

Gehlhar and Coyle are computed based on parameters estimated using the 1985 data (Cranfield et al.

1998) and are not derived from direct estimation of

1980 or 1995 data. A detailed list of the estimated

elasticities together with the respective countries will

be presented in a forthcoming ERS technical bulletin. 

Most of the parameters estimated for food sub-categories, except for fish and fruit and vegetables, were

statistically significant at the 1-percent level, but all

parameters were significant at the 5-percent level.

These results could be explained by the data. Fish

consumed in poor developing countries may not enter

the retail market, while fish consumption in developing land-locked countries may be very low.

Similarly, this fruit and vegetables group also

includes data on roots and tubers and may explain

why the parameters estimated for this sub-group are

not very robust. As income increases in poor countries, consumers tend to move away from consuming

cassava, sweet potatoes and other tubers, to

consuming staples such as rice and wheat. On the

contrary, as income increases, consumption of fresh

fruits and vegetables is expected to increase. 

Continued from page 18
20  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

lower value staples and the higher valued items are

dramatically larger for poorer countries than for the

wealthier countries. For example, the difference

between the estimated elasticity for cereal and dairy

ranged from a low of .03 for the United States to .42

for Tanzania, while the difference between the elasticity for cereal and fish for the two countries are .042

and 4.04, respectively. This again illustrates that

consumers in poorer countries are more willing to

change their consumption patterns as income changes.

Food Subgroup Price Change Responsiveness 

Is Dependent on Income Level

Figure B-4 presents own-price elasticities for the five

food subgroups. As shown in the figures, poorer countries are more responsive to food-price changes than

wealthier countries. Low- and middle-income countries exhibit similar responses to price changes for

staples such as cereals and fats and oils. It is possible

that for the lowest income group of countries, price

changes may result in substitutions among food within

a particular group. For example, when the price of rice

increases, poorer consumers may choose to consume

corn or sorghum rather than move to a different group

such as meat and dairy. Consumers with greater

disposable income, on the other hand, may choose to

substitute products outside the cereal group. However,

for higher value food sub-categories such as meat,

dairy, and fruit and vegetables, price change responsiveness directly increases as countries get poorer.

Cereal Price Changes Inversely Affect the

Demand for Fruit and Vegetables

Cross-price effects within food consumption

subgroups are explored considering the case of cereal

price changes. Figure B-5 provides the changes in

-0.9

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0

-0.9

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0

Figure B-3

Own-price elasticity for food

Elasticity

Low-income countries Middle-income countries High-income countries

1980

1996

Source: 1996 data are ERS/USDA estimates based on International Comparison Project data. 1980 data are from 

Theil, Henri, Ching-Fan Chung, and James L. Seale, Jr., International Evidence on Consumption Patterns (1989).

Table B-2—Budget shares and income elasticities of food sub-categories

Consumption

--- Budget shares --- --- Income elasticity ---

categories

Low income Middle income High income Low income Middle income High income

<15% of U.S. 15-50% of U.S. >50% of U.S. <15% of U.S. 15-50% of U.S. >50% of U.S.

Cereals 0.28 0.20 0.16 0.56 0.41 0.19

Meat 0.18 0.22 0.25 0.82 0.65 0.33

Fish 0.05 0.05 0.06 2.77 0.92 0.43

Dairy 0.09 0.13 0.14 0.93 0.71 0.35

Oils & fats 0.07 0.05 0.04 0.58 0.43 0.21

Fruit & vegetables 0.23 0.21 0.20 0.66 0.53 0.27

Other food 0.11 0.13 0.15 0.80 0.63 0.32

Number of countries 32 41 26 32 41 26
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  21

demand for meat, dairy, fats and oils, and fruit and

vegetables for changes in cereal prices. Fruit and

vegetables are substitutes for cereals in all countries,

while meat, dairy, and fats and oils are generally

complements. As with other elasticities, poorer countries are more price-responsive than wealthier countries, and the dispersion of cross-price elasticities

between the food sub-groups greatly increases as the

per capita income of a country declines. Cereal crossprice elasticities for the United States range from

.0017 for fruit and vegetables to -.008 for meat, while

for Tanzania, the range is from .087 for fruit and

vegetables to -.26 for dairy. 

Conclusion

This paper provides further evidence that both the

budget share allocated to food, as well as the income

elasticity of food decline as income increases. Lowincome countries spend a greater portion of their

budget on necessities such as food, while richer countries spend a greater proportion of their income on

luxuries, such as recreation. Low-value staples, such as

cereals, account for a larger share of the food budget

in poorer countries, while high-value food items such

as dairy and meat are a larger share of the food budget

in richer countries. 

-1.4

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

 0

-1.4

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

Figure B-4

Own-price elasticity for food groups

Elasticity

Source: ERS/USDA estimates based on 1996 International Comparison Project data. 

Low-income countries Middle-income countries High-income countries

Cereals Meat Dairy Oils & fats Fruit & vegetables

-0.3

-0.2

-0.1

0

0.1

0.2

-0.3

-0.2

-0.1

0

0.1

0.2

Figure B-5

Cross-price elasticities for cereal

Elasticity

Source: ERS/USDA estimates based on 1996 International Comparison Project data. 

Low-income countries Middle-income countries High-income countries

Meat Dairy Oils & fats Fruit & vegetables
22  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Low-income countries are also more responsive to

income and food price changes, and therefore, make

larger adjustments to their food consumption pattern

with changes in incomes and prices. However, our

study illustrates that adjustments to price and income

changes are not made uniformly across all food categories. Staple food consumption changes the least,

while greater changes are made to higher value food

items such as dairy and meat. In fact, our results indicate that price changes of staple food such as cereals

lead to similar responses in low- and middle-income

countries, indicating that consumers in poorer countries may resort to greater substitutions within a food

sub-category. 

This paper also suggests that per capita income

changes in developing countries are often correlated

with urbanization, which in turn affects food consumption patterns. The effect of urbanization on food

consumption will be discussed in more detail in the

following chapter. 

References

Cranfield, John A.L., Thomas W. Hertel, James E.

Eales, and Paul V. Preckel. “Changes in the Structure of Global Food Demand,” American Journal of

Agricultural Economics, Vol. 80, Number 5, 1998,

pp. 1042-1050. 

Deaton, Angus, and John Muellbauer. “Economics and

Consumer Behavior,” Cambridge University Press,

1984.

Deepak, M.S., Shahla Shapouri, and James L. Seale,

Jr. “Food Access and Differential Demand for Food

in Brazil,” Paper presented at the Annual Meeting of

the Northeastern Agricultural Resource Economics

Association, Rhode Island, June 11-13, 2000.

Meade, Birgit and Stacy Rosen. “The Influence of

Income on Global Food Spending,” Agricultural

Outlook, USDA/ERS, July 1997.

Pinstrup-Andersen, Per, Rajul Pandya-Lorch, and

Mark W. Rosegrant. “World Food Prospects: Critical Issues for the Early Twenty-First Century,” Food

Policy Report, International Food Policy Research

Institute, Washington, D.C., October 1999.

The World Bank. “World Development Indicators,”

CD-ROM data, 2000.

The World Bank. “Purchasing Power of Currencies:

Comparing National Incomes Using ICP Data,”

Socio-Economic Data Division, International Economics Department, 1993.

Theil, Henri, Ching-Fan, Chung and James L. Seale, Jr.

International Evidence on Consumption Patterns,

Greenwich, CT: JAI Press Inc., 1989.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  23

Introduction

The four decades since 1960 have witnessed rapid

growth of the global economy and a doubling of

the world population. At the same time, global food

consumption has kept pace with income and population growth, leading to increased demand for most

food commodities. Will this food consumption growth

continue? Studies of the world’s population have

consistently shown that the rate of growth in population is slowing, and that global population may even

cease growth sometime in the 21st century. Projections

of global food demand have already taken into consideration this slowing of the rate of population growth.

In most projections, the other main determinants of

food consumption have been income and prices. 

Recent research has suggested that other demographic

variables also determine the rate and composition of

changes in food consumption. Among the most important is the shift of much of the world’s population from

a rural existence, centered around farming, to urban

life centered around non-agricultural occupations.

Urbanization, defined as the proportion of urban residents in the total population, has been closely related

to economic growth. While economic growth can

continue indefinitely and go in cycles, urbanization has

so far been a one-way process, and, as in developed

countries, eventually the rural share of the population

becomes so low that urbanization is no longer an

important factor in projecting food balances. In

considering what food consumption will be like in the

first half of the 21st century, the extent of urbanization

and its interaction with income changes are important. 

Reasons Why Rural and Urban Food 

Consumption May Differ

Urbanization can lead to structural changes in food

consumption patterns for several reasons. First, given

different lifestyles, calorie requirements of urban and

rural residents differ, with sedentary urban lifestyles

requiring fewer calories to maintain a given body

weight. The decrease in calorie consumption per

person related to urbanization has been well illustrated

by Clark, Huberman, and Lindert (1995), who examined Britain’s food consumption pattern between 1770

and 1850, a period of rapid urbanization. Given a

dramatic 65 percent increase in income per person

during this period, food demand should have significantly increased, assuming even a modest income elasticity of demand for food. However, data indicate that

food consumption per person may have stagnated or

even declined in Great Britain during this period. The

authors point out that different calorie requirements for

urban and rural residents may be one of the factors

leading to lower calorie consumption in urban areas

which is reflected in the overall lower average per

capita consumption. 

In modern times, urbanization appears to have a

greater impact on composition rather than the overall

Effects of Urbanization on 

Global Food Demand

Anita Regmi and John Dyck1

Abstract: Urbanization, by affecting caloric requirements, food availability, and

female labor status, impacts the structure of food consumption. Urbanization, associated with economic development and income growth, has already largely occurred

in developed countries, while continuing strongly in developing countries. Food

demand projections may differ if they account for urbanization.

1 Agricultural economists with Market and Trade Economics 

Division, Economic Research Service, USDA.
24  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

level of per capita food consumption. For example, an

empirical study using 1960-1988 data illustrates that

urbanization leads to significantly reduced urban

demand for cereals in higher income Asian countries

(Huang & David, 1993). Other data, that will be

discussed later, indicate greater meat, fruit, and

vegetable consumption in urban areas.

Second, food availability and an individual’s ability to

purchase food differ in urban and rural areas. Given the

subsistence nature of agriculture in many developing

countries, the composition of food consumption in rural

areas is generally constrained by residents’ ability to

sell their produce as well as purchase other food. For

example, Wu (1999) indicates that on average, rural

households in China still produce 50 percent of their

own food. Urban residents on the other hand, generally

do not grow their own food and are exposed to a wider

array of food from which to choose. 

Finally, urban areas are centers of economic opportunity and have a greater percentage of women working

outside the home. Studies have indicated that increased

opportunity cost of women’s time increases the

demand for non-traditional ‘fast food’ in many countries. For example, the demand for rice, a non-traditional imported product, has increased significantly in

the urban areas in West Africa (Reardon, 1993;

Kennedy & Reardon, 1994). The processing and

cooking costs of rice in West African cities are lower

than for the traditional coarse grain cereals. Rice,

particularly “fast-food” or street-vendor rice has

become very attractive, even to poor urban consumers.

Similarly, the increased value of women’s time appears

to be an important factor raising demand for bread in

quasi-urban households in Kenya (Kennedy and

Reardon, 1994) and urban households in Sri Lanka

(Senauer, Sahn, and Alderman 1986).

The Interaction of Urbanization and 

The Level of Economic Development

The influence of urbanization in determining future

food demand is dependent on the degree to which

urbanization has occurred. If urbanization is largely

over, and the country has reached a stable level of

economic development, the effect of further urbanization on future dietary patterns will be small. If the

rural population is still a large share of the total,

urbanization’s effects on consumption differ depending

on economic conditions. For poorer countries, urbanization may initially lead to the substitution of

marketed staple cereals and processed foods for basic

rural staples such as rice and cassava. With further

increases in income levels, food consumption expenditures may increase as more and more expensive

sources of nutrients such as meat, fruit, and vegetables

are increasingly consumed, while the consumption of

staples, such as cereals prepared at home, may

decrease. Specific impacts of urbanization, however,

may still differ from one region to the other based on

inherent socio-economic factors present in the region.

For example, increased urbanization may lead to

reduced rice consumption in Asia, while it may actually increase rice consumption in Sub-Saharan Africa.

Urban areas typically offer residents a wider choice of

dietary patterns from foreign cultures than do rural

areas. Some argue that as countries become more

developed, given the current trend towards globalization, there is a tendency for dietary structure to

become increasingly similar across similarly developed countries. This is facilitated by multinational

food processing and distribution industries that operate

globally as well as changing demographics within the

countries. The presence of U.S.-style fast food restaurants in other countries has greatly affected food

consumption in these countries. 

Blandford (1984) points out that the dietary patterns

across the majority of the Organization for Economic

Co-operation and Development (OECD) countries had

become increasingly similar by 1984. As income levels

increase in developing countries, exposure to the

global ‘urban’ eating pattern increases, resulting in the

consumption of many Western-style foods. 

In addition to urbanization, the relative size of different

age cohorts in the world population may also affect

future food consumption (see box). At present, this

factor appears to be somewhat correlated with urbanization since a large proportion of the population in the

less-urbanized developing world is young, while that in

the more-urbanized developed world is aging. As the

younger and rapidly urbanizing population in developing

countries increasingly embraces Western food habits, the

growth and composition of global food consumption and

trade will continue to undergo changes.

Urbanization and changes in dietary pattern do not

necessarily indicate improved nutritional patterns.

Clark, Huberman, and Lindert (1995) note that poor

eating habits of urban dwellers were evident in Great

Britain 150 years ago. Despite corrections for income
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  25

and family composition, rural workers were found to

consume more calories and proteins from grains and

dairy products and vitamins from green vegetables,

while urban residents consumed more tea, coffee,

sugar, and treacle2. According to the authors, the diet

differences were reflected in the general health of the

population, with data indicating the rural population to

be consistently taller than the urban dwellers. In

modern times, urbanization and the associated greater

component of animal protein in the diet of urban residents may actually lead to a taller urban population.

However, research indicates that the sedentary lifestyle

and high consumption of fats and sugar associated

with modern urban society are damaging to human

health (Grundy 1998).

Trends in Urbanization and 

Food Consumption

During the past three decades, the urban population

increased from 34 percent of total world population in

1960 to 46 percent in 1998 (World Bank, 2000). In

1960, developed countries accounted for about a third

of all urban population in the world (fig. C-1).

However, in 1998, developed countries accounted for

only about one fifth of the 3.4 billion global urban

population. Urban population growth in low- and

middle-income developing countries has outpaced both

the urban population growth in high-income developed

countries, as well as the rate of growth of the rural

population in developing countries. While the urban

population in developing countries totaled about 574

million in 1960, it exceeded 2 billion in 1998, growing

at the annual rate of about 3 percent in the 1990s. By

contrast, the rural population in these countries grew

less than 1 percent per year during the 1990s.

Assuming the 1990’s rates of growth for urban and

rural areas continue, the urban population in developing countries can be expected to double to nearly 4

billion by 2020.

Urbanization in developing countries has generally

been associated with increasing per capita income and

changing lifestyles and consumption patterns. As illustrated in Figure C-2, during 1961-1998, when the

urban population in developing countries quadrupled,

the average income in the region measured by per

capita gross national product (GNP) in constant U.S.

dollars doubled. Although per capita income levels

greatly increased for countries at all income levels,

major differences in per capita income exist between

the low- and middle-income countries. The average

per capita income level (in 1995 US$) for low-income

countries grew from about $145 in 1961 to $530 in

1998, while that for middle-income countries ranged

from about $1,400 in 1961 to over $3,000 in 1998

(World Bank, 2000).

Urbanization in many developing countries accompanied rapid industrialization and economic development. For example, based on the World Bank’s

development indicators, between 1985 and 1998,

productivity, foreign direct investment, and transport

and infrastructure services increased considerably in

1960 65 70 75 80 85 90 95 2000 05 10 15 20

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Figure C-1

Projected urban population

Millions

Source: The World Development Indicators, The World Bank, 2000.

Developed countries Developing countries

2 A sweet syrup often made from a blend of molasses, invert sugar,

and corn syrup.
26  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Food Consumption in an Aging World

by Hiroshi Mori and John Dyck

In studies of food consumption over time, it is important to include age-related variables, or at least to

control for age-related effects. If this is not done,

estimates of price and income effects may be biased.

In the coming decades, demographic studies project

an older age profile for most regions of the world.

Data indicate (World Bank, 2000) that during the last

four decades, the number of individuals below 14

years of age declined in countries across all income

levels. Nevertheless, on an average, this age group

still accounts for over 30 percent of the population in

developing countries compared with 19 percent in

developed countries. Both to properly explain past

changes in food habits and to project future levels of

food consumption, economists need to think through

and empirically test linkages from the demographic

shifts to the observed changes in food consumption.

This is particularly important in countries in which

the population is not evenly distributed by age and

where the age distribution may have changed rapidly

over a given period. Japan, in particular during the

period 1960-1998, is a major example of such a shift

in the age structure of the population. Because of a

very low birth rate, Japan has moved from a relatively youthful population distribution in 1960, with

30 percent below 14 years and less than 6 percent

above 65 years, to a population with over 16 percent

65 years or older and 15 percent 14 years old or

younger in 1998 (World Bank, 2000). Factors related

to age and age distribution could have affected food

consumption patterns in the country. 

Age-related variables include the chronological age

of an individual. Food consumption by an individual

can change as he or she ages over a lifetime. Blisard

and Blaylock found important differences in food

consumption according to ages in the United States

(1988-89 data), with older people consuming higher

levels of fruits, vegetables, and other foods at home.

As the U.S. population ages, this suggests higher athome consumption of such foods in the future.

Another age-related variable to consider is the birth

cohort, or generation, to which individuals belong. A

cohort of people of the same age may adopt a dietary

pattern that differs from the cohorts above and below

them, and they may keep this eating pattern through

their lives. For instance, U.S. consumption of coffee

may be greater in some older cohorts, and now again

in the new cohorts, with cohorts in the middle more

attached to soft drinks. A cohort born in 1940 may

show above-average coffee consumption throughout

the life span of its members.

Recent research by Mori and others (1997 and 1999)

found large age-related differences in food consumption among consumers in Japan. Using a time series

of cross-section data on household food consumption, they examined the differences in at-home

consumption of particular foods among consumers

according to the 5-year birth cohort to which they

belonged. In addition, variables for the age of the

individuals and for the year of the annual survey

were included. The study found that consumption of

rice, sake, fresh fish, and fresh fruit varied according

to cohort: the older cohorts consumed greater

amounts of these foods, and newer cohorts less. For

beef and beer, the opposite case was true: newer

cohorts consumed more. Much of the overall change

in at-home food consumption could be explained by

the replacement of older cohorts by newer ones.

Further research is needed to investigate the role of

economic variables (income and price) in models that

include age-related variables. 

Reference

Blisard, Noel, and James R. Blaylock. “U.S. Demand

for Food: Household Expenditures, Demographics,

and Projections for 1990-2010”, ERS-USDA,

Technical Bulletin 1818, December 1993.

Mori, Hiroshi, and William D. Gorman. “A Cohort

Analysis of Japanese Food Consumption—Old

and New Generations,” Senshu Economic Bulletin,

Vol. 34, No. 2, 1999, pp. 71-111 (in Japanese). 

Mori, Hiroshi, and T. Inaba. “Estimating Individual

Fresh Fruits Consumption by Age, 1979 to 1994,

Journal of Rural Economics (Japan), Vol. 69,

No. 2, 1997, pp. 195-203.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  27

low- and middle-income countries. In developing

countries, this period witnessed a growth of 50 percent

in passenger air travel, telephone mainlines per 1,000

people grew by almost 70 percent and, on an average,

the use of international telecommunications services

grew by about 40 percent. As in the case of per capita

income growth, although low-income countries

witnessed tremendous growth in various economic

indicators, they lag far behind developed and middleincome countries when comparing actual indicators.

Increased urban economic activity and income during

the last two decades have led to changes in global food

consumption patterns. Often the best available measure

of food consumption is the supply or availability of

food in a market. Global food availability has undergone structural changes as evident from changes in the

composition of food availability between 1961 and

1998 (table C-1). At the highest income levels, per

capita consumption (as indicated by food availability)

of cereals and roots and tubers decreased, while that of

meat and fruit and vegetables increased substantially.

In low-income countries, where food security remains

a concern despite recent economic gains, decreases in

root and tuber availability were more than offset by

dramatic increases in per capita supply of all other

food types. Despite these gains, per capita availability

of meat and fruit and vegetables in low-income countries continues to remain far below that of middle- and

high-income countries. With the exception of roots and

tubers, food supply also substantially increased in

middle-income countries. 

Structural changes in food consumption associated

with urbanization are visible in developing countries.

Individual country food consumption data illustrate the

fact that the trends observed in food consumption at

the national level can be attributed in part to urbanization and associated changes in lifestyles and incomes.

Urban dwellers consume more meat compared with

the rural population in China, Indonesia, and Pakistan,

1961 65 70 75 80 85 90 95 98

0

200

400

600

800

1,000

1,200

1,400

Figure C-2

Developing country GNP per capita

1995US$

Source: The World Development Indicators, The World Bank, 2000.

Table C-1—Global food availability

1961 1965 1970 1975 1980 1985 1990 1995 1998 1961-98

Kgs/capita/year % change

Cereals

Low-income countries 138.7 141.2 145.7 136.4 136.2 141.5 148.7 153.9 156.2 12.6

Middle-income countries 125.0 129.4 131.0 136.0 139.9 142.0 142.2 140.4 139.8 11.8

High-income countries 122.3 118.1 111.7 109.0 107.3 107.4 108.1 109.9 112.9 -7.7

Roots & tubers

Low-income countries 46.6 48.8 53.3 54.1 51.1 51.7 54.6 58.8 59.3 27.3

Middle-income countries 14.6 14.5 14.1 13.0 12.4 12.3 11.7 13.0 13.1 -10.3

High-income countries 17.4 16.0 15.4 14.4 14.6 14.6 14.6 14.7 14.8 -14.9

Fruit & vegetables

Low-income countries 101.8 106.9 112.5 114.4 121.4 121.0 127.8 121.9 124.2 22.0

Middle-income countries 117.5 124.8 128.3 137.0 150.8 152.2 156.9 156.2 161.9 37.8

High-income countries 152.7 160.9 176.9 184.8 186.8 194.6 216.2 221.7 223.7 46.5

Meat

Low-income countries 7.6 7.6 7.7 7.4 8.1 8.4 8.7 9.3 9.6 26.3

Middle-income countries 22.7 24.0 26.9 30.0 33.6 35.3 37.7 40.3 39.8 75.3

High-income countries 54.2 58.2 64.8 71.1 76.1 77.9 80.7 83.7 85.8 58.3

Source: FAO Food Suppy data. Note countries are grouped according to the World Bank definition.
28  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

and more fresh fruits and vegetables in China and

Indonesia (table C-2). Additionally, consumption per

person of meat and fruits and vegetables has grown at

a faster rate in most urban centers of the developing

world than in rural areas. 

As mentioned earlier, individuals in rural areas tend to

consume more energy-rich carbohydrates, such as

cereals, starchy roots, and tubers than individuals in

urban areas. However, data indicate that within the

rural sector, increased availability and greater

purchasing power have led to definite shifts in

consumption among these energy-rich staple foods.

For example, root consumption declined significantly

in rural Indonesia between 1978 and 1987 (table C-2).

Similarly, with changes in availability and greater

disposable income, individuals tend to shift cereal

consumption away from less expensive coarse grains

and other less preferred grains to increased consumption of rice and wheat. Although between 1980 and

1998 per capita cereal consumption in urban China

declined, cereal consumption in rural China remained

fairly stable (fig. C-3). Rice consumption per person

remained somewhat stable, while per capita consumption of wheat increased and use of other cereals such

as corn, sorghum, barley, and millet declined. Data

from India indicate similar results (fig. C-4). Rice

consumption was fairly stable in both urban and rural

areas between 1972/73 and 1986/87, while wheat

consumption per person increased in India, replacing

consumption of coarse grains and millets.

Food Demand Forecasts and 

The Impact of Urbanization 

Food demand analysis conducted without taking into

consideration the underlying structural shifts resulting

from urbanization can sometimes lead to misleading

results and erroneous food demand forecasts. The

analysis of food expenditure data from 14 Asian countries between 1961 and 1985 indicated that rice

consumption in Asia declined with increases in income

(Ito, Peterson, and Grant, 1989). This may be a plauTable C-2—Food consumption patterns in selected countries

Urban Rural

Roots & Fruits & Meats & Roots & Fruits & Meats &

Cereals tubers vegetables offals Cereals tubers vegetables offals

Kg/capita/year

China 1/

1988 199 NA 195 29 208 NA 135 12

1998 140 NA 166 30 200 NA 128 16

Grams/capita/week

Indonesia 2/

1978 2,165 275 1,005 64 2,560 810 975 36

1987 2,182 279 1,275 108 2,579 612 1,364 16

Kg/capita/month

Pakistan 2/

1979 10.59 0.73 NA 0.85 13.66 0.72 NA 0.46

1987/88 9.75 0.68 NA 0.76 12.69 0.68 NA 0.51

1/ Economic Research Service, USDA.

2/ FAO 1993.

1980 1998 1980 1998

0

50

100

150

200

250

300

Figure C-3

Per capita cereal consumption in China

Kgs/capita/year

Rice Wheat Other cereals

Urban Rural

Source: Economic Research Service, USDA, unpublished data.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  29

sible finding for a high-income country such as Japan,

but seems improbable for a poor country like

Bangladesh where Ito et al. also estimated a negative

response to rice consumption with income increases.

When urbanization was included in the analysis (Huang

and David, 1993), rice consumption in Bangladesh was

shown to increase with income increases, and rice

consumption in Japan was expected to decline by a

smaller proportion than indicated in the first study. Thus

the factor associated with declining consumption in

Bangladesh was the shift to urban living; income

increases, either in rural or urban settings, were associated with rising rice use. Huang and David found urbanization to have a negative effect on rice, but a positive

effect on wheat consumption in Asia. 

The above studies illustrate how as developing countries become increasingly urbanized, the effects of

urbanization may need to be taken into consideration

in forecasting future food demand. Generally, incomes

and urbanization tend to rise together, and the exclusion of urbanization in the estimation process may not

be problematic as long as the two variables continue to

move together. When analyzing aggregate demand

systems that include broad food categories at national

levels (as described in Chapter 2), the inclusion of

urbanization in the estimation process may not significantly improve the projecting ability of the estimated

parameters. However, when food demand is analyzed

at a more local level and includes fairly disaggregated

commodities, it may be critical to account for urbanization and other demographic variables. Also, once

most of a population is urban, further changes in food

consumption associated with urbanization become less

important, while income changes continue to affect

consumption. If urbanization is not included as a variable, food consumption response to income changes

may appear to decrease as urbanization becomes

complete. In this case, a declining shift in consumption

patterns may actually reflect the declining impact of an

omitted variable, the rural-urban shift, while the effect

of income by itself may not change much.

Conclusions

Urbanization over the next century will chiefly be a

phenomenon in the developing countries. In these

countries, rural and urban consumption patterns tend

to differ. Among basic food groups, rural residents eat

more cereals and tubers and roots, and urban residents

eat more meat, and fruits and vegetables. As urbanization progresses, it will tend to increase overall meat,

fruit, and vegetable consumption/person, and to reduce

overall cereal, root, and tuber consumption. The level

and rate of urbanization will have important

commodity impacts. Since diets rich in meats require

feedgrains and meals, they actually demand more

cereal than diets based on direct cereal consumption.

This and other changes in consumption patterns

brought about by urbanization can significantly affect

global food supply, markets, and trade.

References

Blandford, David. “Changes in Food Consumption

Patterns in the OECD Area,” European Review of

Agricultural Economics Vol. 11, 1984, pp. 43-65.

Clark, Gregory, Michael Huberman, and Peter H. 

Lindert. “A British Food Puzzle, 1770-1850,” Economic History Review Vol. 48, No. 2, May 1995,

pp. 215-37.

FAO, “Compendium of Food Consumption Statistics

from Household Surveys in Developing Countries

Volume 1: Asia,” FAO Economic and Social 

Development Paper 116/1, 1993.

Grundy, Scott M. “Multifactorial Causation of 

Obesity: Implications for Prevention,” American

Journal of Clinical Nutrition Vol. 67, # 3S, 1998,

pp. 563S-572S.

1972/73 1986/87 1972/73 1986/87

0

5

10

15

20

Figure C-4

Per capita cereal consumption in India

Kgs/capita/month

Rice Wheat Other cereals

Urban Rural

Source: FAO, 1993.
30  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Huang, Jikun, and Cristina C. David. “Demand for

Cereal Grains in Asia: The Effect of Urbanization,”

Agricultural Economics Vol. 8, 1993, pp.107-124.

Ito, Shoichi, E. Wesley, F. Peterson, and Warren R.

Grant. “Rice in Asia: Is It Becoming an Inferior

Good,” American Journal of Agricultural Economics Vol. 71, 1989, pp. 32-42.

Kennedy, Eileen and Thomas Reardon. “Shift to Nontraditional Grains in the Diets of East and West

Africa: Role of Women’s Opportunity Cost of

Time,” Food Policy Vol. 1, 1994, pp. 45-56.

Reardon, Thomas. “Cereals Demand in the Sahel and

Potential Impacts of Regional Cereals Protection,

World Developments Vol. 21, No.1, 1993, pp.17-35.

Senauer, Ben, David Sahn, and Harold Alderman.

“The Effect of the Value of Time on Food Consumption Patterns in Developing Countries: Evidence from Sri Lanka,” American Journal of Agricultural Economics Vol. 68, 1986, pp. 920-927.

The World Bank. World Development Indicators,

2000.

Wu, Yanrui. China’s Consumer Revolution: The

Emerging Patterns of Wealth and Expenditure,

Edward Elgar Publishing, Inc., Massachusetts,

USA, 1999.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  31

Introduction

The more-than-decade-long shift in the composition

of U.S. agricultural exports from bulk commodities (e.g., wheat and soybeans) to nonbulk items,

including perishable products (e.g., meats and fruit)

(fig. D-1) is primarily explained by income growth and

trade liberalizing measures in the high- and middleincome markets of East Asia, North America, and the

European Union (EU). Advances in transportation

technology also help to explain this shift, particularly

in the rise of perishable product exports. Perishable

products now account for about 20 percent of total

U.S. food and agricultural exports, and an even larger

share of imports. 

Advances in transportation technology have made it

possible for shippers to deliver perishable products to

purchasers thousands of miles away with no substantial

loss in freshness and quality and at lower and lower

costs. These lower transportation costs have a similar

effect on trade as a tariff cut: reducing transaction costs

or the wedge between the product price in the exporting

and importing countries, thus stimulating trade (see box

“Adoption of Transportation Technologies Has Similar

Impact on Trade as a Tariff Cut”).

For many producers, marketing perishable products

abroad was largely infeasible or prohibitively expensive until new technologies were developed in the past

30 years. Packaging innovations, fruit and vegetable

coatings, bioengineering2, and other techniques that

reduce deterioration of food products have helped

shippers extend the marketing reach of U.S. perishable

products. In addition, new technologies in transport are

gradually opening the ocean and overland trades to a

host of perishable products. As a result, U.S. exports

of horticultural and livestock products now can travel

greater distances than before (fig. D-2).

Markets for U.S. perishable products are concentrated

in high- and middle-income East Asian countries,

North America, and to a lesser extent in Europe. Today,

beef and pork produced in the U.S. Midwest are chilled

or frozen in regional packinghouses, moved overland to

Mexico or to West Coast ports, and shipped by sea to

Japan and South Korea. Fresh broccoli goes by ship

from California to Japan, and fresh cherries travel the

ocean from Washington State. Perishable products, as

fragile as avocados, lettuce, mangoes, and nectarines,

are increasingly transported by sea to Asia and Europe

from the United States and to the United States from

suppliers like Mexico and Chile.

Transportation Technology and 

The Rising Share of U.S. 

Perishable Food Trade

William Coyle, William Hall, and Nicole Ballenger1

Abstract: By reducing delivery times, maintaining product quality, and reducing

shipping costs, advances in transportation technology have greatly facilitated trade

of perishable food products. Advances in transportation technology are partly

responsible for shifts in the composition of U.S. agricultural trade from bulk commodities to non-bulk items, including perishable products.

1 William Coyle is an agricultural economist in the Market and

Trade Economics Division and Nicole Ballenger is the Assistant

Administrator, Economic Research Service, USDA. William Hall

is a partner in the Seaport Group, a consulting firm specializing in

port planning and logistics analysis. 

2 Some products are engineered to have a longer shelf life such as

the 10 to 14 day shelf life of the FreshWorld Farms Endless Summer tomato.
32  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Trans-ocean transportation costs are still higher for

many perishable products than for raw agricultural

products like cotton or nonperishable products like

nuts and raisins (fig.D- 3). However, new developments in ocean shipping have made it possible to

preserve the quality of perishables during transport and

still bring down transportation costs. 

In addition, satellite technologies, particularly global

positioning systems (GPS), which are becoming

increasingly available and less expensive, enable shippers to track their cargo around the world electronically. Other electronic technologies enable shippers

and carriers to monitor quality, reduce risk (and costs)

of liability claims, and shorten cargo delivery time.

Profitability in perishable product trade will likely

increase further as ocean shipping technologies

continue to adapt to the special requirements of

different horticultural and livestock products. 

U.S. exports of perishable products increased from

$3.5 billion in FY 1989 to $10.3 billion in FY 1999.

Meats accounted for about half of these exports in FY

1999 and fresh fruit and vegetables about one-fourth.

Consumers in the United States and U.S. trading partners have benefited from improving transportation

technology, as the United States imported $13.1 billion

of perishable products in FY 1999, with horticultural

products (including fresh vegetables, fruit and juice,

bananas, cut flowers, and nursery stock) accounting

for about 60 percent (fig. D-4). 

Reducing Shipping Costs 

Loading and unloading have always accounted for a

relatively large share of total transportation costs (fig.

D-5); thus the longer the journey, the lower the permileage transportation costs, other variables remaining

constant (fig. D-6). The use of containers has radically

reduced these front and back end costs. Port workers

1989 91 93 95 97 99

0

5

10

15

20

25

30

35

Perishables (21.0%)

Other non-bulk (43.1%)

Bulk (35.9%)

Figure D-1

U.S. non-bulks surpass bulk exports since 1991

Billion $US

Fiscal 1999

Bulk

Non-bulk

Perishables

Source: FATUS, fiscal years.

1970 73 76 79 82 85 88 91 94

0

2,000

4,000

6,000

8,000

10,000

12,000

Figure D-2

Weighted mean distance for U.S. beef,

horticultural products, and corn exports

Kilometers

Beef

Corn

Horticultural products

Note: Data excludes the nearby markets of Canada and Mexico.

Source: Wang, Zhi, Bill Coyle, Mark Gehlhar, and Tom Vollrath.

"The Impact of Distance on U.S. Agricultural Exports: An Econometric

Analysis," in Technological Changes in the Transportation Sector--

Effect on U.S. Food and Agricultural Trade, A Proceedings. 

Economic Research Service, USDA. Misc. Pub. 1566, Sep. 2000.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  33

Pistachios

Raw cotton (Kobe)

Almonds

Raisins

Frozen poultry

Frozen beef primals

Fresh grapes

Lettuce

Apples (Hong Kong)

Fresh oranges

Frozen potatoes

0 100 200 300 400 500 600 0 5 10 15 20 25 30

Figure D-3

Shipping margins higher for horticultural products

Rate: $Mt Rate (Sep. '99)/fob value (Sep. '99)

$US per ton Margin (percent)

Source: Shipping rates for selected commodities from L.A./L.B./Oakland to

Tokyo, Japan; Agricultural Marketing Service, Ocean Rate Bulletins, Sep. 1999.

Note: Apples are for Hong Kong; container and per ton

shipping rates are for June 1999; shipping as a share of

the commodity's fob value is based on export unit values

for Sep. 1999.

Beef and veal

Pork

Poultry

Eggs

Other**

Fresh fruit

Fruit Juice

Frz. fruit

Wine Frz. veg.

Fresh vegetables

Nursery and cut flowers

Beef and veal

Pork

Other

Cheese

Bananas

Fruit, fresh and frz.

Fruit juice

Wine

Cut flowers

Vegetables

Nursery stock

Figure D-4

U.S. trade of perishable products

Exports = $10.3 billion in FY 1999 Imports = $13.1 billion in FY 1999

**--dairy products and bull semen.

Source: FATUS.
34  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

now handle standardized containers filled with cargo,

rather than handling the cargo itself (see box

“Inventing the Container”). Containerization has also

led to a significant change in global shipping practices

known as intermodalism, moving goods by linking

together two or more modes of transportation (e.g. rail,

truck, air, and ocean).

Containerization is recognized as a major contributor

to the steady reduction in world transportation costs

since the 1950s. For perishable products, however, the

increased speed of handling and reduced transport

costs with containerization were not sufficient. Ocean

transport of cooled and frozen cargo received a

substantial boost with the development of mobile

refrigerated containers called “reefers” in the 1960s.

Reefers, like regular containers, are 20-foot or 40-foot

boxes with their own refrigeration units. Reefer

containers use ship-generated power for climate

control and can be carried alongside standard

containers on general-purpose containerships. This

allows for perishables to be integrated into larger flows

Sequence Time (Hrs) Cost (US$)

Moving container from loading ramp to storage 1 80

Container waiting for pick up after stuffing 48 12

Loading container on road trailer 1 62

Road transport to port terminal 33 360

Waiting for admission to port terminal 2

Transfer from road trailer to stack 80

Waiting in stack 146 40

Unstacking and transfer to terminal trailer 88

Transfer/loading onto ship 240 Loading and unloading 

Containership travel time (New York-Rotterdam) 154 1,840 costs are relatively large 

Transfer/unloading off ship 1 192 and fixed regardless of 

Transfer to stack 60 the length of the journey

Waiting in stack 106 30

Transfer from stack to road trailer 60

Clearance and inspection 2 10

Road transport, port terminal to inland depot 14 220

Unloading container at inland depot 40

Storage in inland depot 30

Moving container to consignee 2 40

Total 540 3,454

Figure D-5

Shipping costs and times

Source: Cost of operations and time for shipping a 40' container; in APEC's 

Congestion Points Study, Phase III, Best Practices Manual and Technical Report,

Volume 2 Sea Transport, Feb. 1997, p 105.

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0 2,000 4,000 6,000 8,000 10,000 12,000

Moscow

Vladivostok

St. Petersburg

Gdynia Greece

Tokyo

Tokyo

Tokyo

Pusan

Hong Kong Hong Kong

Hong Kong

Singapore

Singapore

Figure D-6

Shipping rates for container loads of 

frozen poultry

Shipping rate ($/mile/container)

Miles

Atlantic/Gulf Ports L.A./L.B./Oakland  Seattle/Tacoma

Source: Agricultural Marketing Service, Ocean Rate Bulletin

for Frozen Poultry, October 30, 1998.






Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  35

of general cargo and to benefit from the scale

economies inherent in container transport. It is an

advantage that has challenged the competitiveness of

conventional, dedicated refrigerated cargo ships that

lack this flexibility. 

The reefer share of refrigerated cargo is about 44

percent and accounts for about 22 million tons of

cargo annually. Deep-freeze and dedicated refrigerated

vessels—accounting for 28 million tons, or 56

percent—are important for palletized chilled fruit,

particularly bananas, apples, peaches, pears, grapes,

kiwifruit, and citrus, but the reefer container trade is

growing more rapidly and is considered better suited

for carrying these fruit as well as produce needing

more careful handling, like asparagus.

Increasingly efficient and accurate cooling systems for

some time have allowed refrigerated carriers to maintain temperatures with great accuracy (plus or minus a

quarter degree Celsius). More recently, however,

controlled atmosphere (CA) technologies added refinements that have extended the shelf life of perishable

products and thus expanded the types of perishables

that can be shipped in reefers without spoilage.

CA technologies allow operators to lower the respiration rate of produce by monitoring and adjusting

oxygen, carbon dioxide, and nitrogen levels within a

refrigerated container. In this way, CA can slow

ripening, retard discoloration, and maintain freshness of

perishables like lettuce, asparagus, peaches, mangoes,

and avocados that would not have survived well during

ordinary refrigerated ocean transport. Not all CA

systems are the same: some especially sophisticated

ones are combined with systems to maintain relative

humidity, a crucial factor for some produce such as

grapes, stone fruit, and broccoli; and controlling levels

of ethylene, a naturally occurring gas that accelerates

the ripening process in fresh fruits and vegetables. 

In addition, remote reefer monitoring systems can

transmit and collect performance information electronically so that physical checks are not required while

the reefer is stacked in the hold or by the dock. The

remote system may also activate an alarm, helping

minimize losses when problems arise at sea or in the

container yard.

Developments in Vessel Technology 

Accompanying advances in containerization have been

changes in container ship technology and in the abilities of world ports to serve those ships. Container

vessels are being built larger and larger, making them

more competitive with traditional refrigerated vessels. 

In the 1970s, container ships on the world’s major

trade routes were built to carry an average of about

2,500 TEU’s (twenty-foot equivalent unit—standard

containers with exterior dimensions measuring 20

feet by 8 feet by 8 feet). New vessels deployed on

major routes are often 5,000-6,000 TEU’s, too wide

to fit through the Panama Canal (about 4,800 TEU’s

maximum). Per-container vessel operating costs are

about 50 percent lower for a 5,000-TEU ship when

compared with a 2,500-TEU-vessel (Bill Hall,

Seaport Consultants; input into Ballenger/Coyle

article in AO, 1999).

The largest container ships now in service, such as the

Sovereign Maersk, are estimated by industry analysts to

have a capacity upwards of 6,600 TEU’s, which

includes space for over 800 refrigerated TEU’s. The

refrigerated capacity alone makes the gigantic

Sovereign Maersk equivalent to a medium-sized

conventional refrigerated carrier. A number of vessels of

this size are on order and are expected to become more

common. Ships with capacities of 15,000 TEU’s or

more are said to be technically feasible (JOC, 6-5-00).

The challenge of facing radically larger ships,

however, is to increase capacity while maintaining

stability and safety, particularly important for ships

carrying tall stacks of containers. New hull shapes and

ballasting systems promise to improve stability at sea,

while bow thrusters will make these large vessels more

maneuverable in port than their smaller predecessors.

Very large containerships may also require advances in

propulsion and propeller technology that remain to be

fully developed and tested. 

These larger and larger ships, while lowering the cost

of transportation, would be limited by the capacity of

ports that service them. They would be constrained by

harbor depths and the capacity of loading and

unloading equipment. They—like the largest container

ships of today—would be too large to pass through the

Panama Canal. A new service pattern could emerge

with these giant ships traveling along an east-west

route between large transhipment ports, which would

be fed by smaller north-south feeder lines. 

Container ships are dominating the perishable trade

between North America, East Asia, and Europe,

though conventional refrigerated vessels can serve
36  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

smaller ports, especially in the developing world, that

are still unable to handle large container vessels and

lack the specialized cranes and storage yards needed to

support them. Conventional refrigerated ships may

have a brighter future in these smaller trades, especially where competition from container vessels has

not increased. Ports in some producing areas

throughout the developing world have been developing

perishable-oriented container terminals. Fruit

exporting companies have been among the leaders in

Adoption of Transportation Technologies Has Similar 

Impact on Trade as a Tariff Cut

Overcoming distance has always been an important

issue in marketing agricultural products, but agricultural economists have examined the role of distance

only occasionally (Thompson, 1981). International

trade economists have long ignored distance until

recently as described by Paul Krugman:

The analysis of international trade makes virtually no use of insights from economic geography

or location theory. We normally model countries

as dimensionless points within which factors of

production can be instantly and costlessly moved

from one activity to another, and even trade

among countries is usually given a sort of spaceless representation in which transport costs 

are zero for all goods that can be traded. (Paul

Krugman, Geography of Trade, 1996)

Transportation costs represent a wedge between the

exporter’s fob price and the importer’s cif price and

act as a tariff; when taken into account, it lowers the

exporter’s price, raises the importer’s price, and

reduces the quantity traded (fig. D-7). The darkened

areas represent the new equilibrium with the inclusion

of transportation costs. When transportation costs are

included, one can see how the quantity traded on

world markets contracts from Qo to Qt. Alternatively,

Qt = traded quantity with transport costs

Qo = traded quantity without transport costs

Pfob = exporter's fob price

Pcif = importer's cif price 

Source: Gehlhar, Mark. "Incorporating Transportation Costs into International Trade Models: Theory and 

Application" in Technological Changes in the Transportation Sector--Effect on U.S. Food and Agricultural Trade, 

A Proceedings. Misc. Pub. No. 1566. Economic Research Service, USDA. Sep. 2000.

Pcif

Pfob

Qt Qo

Sa

Da

Sb

Db

ES

ED

Figure D-7

Spatial equilibrium model with and without transport costs

Region A (Exporter) World market Region B (Importer)

Continued on page 37
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  37

this process. For example, in late 1999 Dole took

delivery of two 2,000 TEU refrigerated containerships

for operations between Chile, the Caribbean and the

eastern United States. These vessels are as large as the

containerships active in the trans-Atlantic and transPacific trades of two decades ago.

At the same time, the conventional refrigerated shipping

industry is not standing still. New ship designs allow

more rapid loading and discharge, with forklifts moving

throughout the holds. Onboard cooling plants have

become highly efficient. The industry is concentrating

into fewer and larger firms to increase efficiency, and

vessel pooling arrangements help companies utilize

capacity more effectively. Some refrigerated carriers can

now carry loads of containers on deck, and operators are

increasingly using their refrigerated vessels to carry

other cargoes, such as autos and palletized machinery,

on a seasonal basis, which helps even out earnings for

carriers. Conventional refrigerated ships can still be

effective, especially at smaller ports, although competition from container ships is increasing. 

one can also see how the reduction of the transportation margin, the difference between Pcif and Pfob,

would expand the quantity traded. The top graph in

figure D-8 is the same as the middle graph in figure

D-7. The level of transportation services (Qs) is

derived from the level of trade (Qt) (fig. D-8).

Technological change as well as other factors shift out

the supply of transport services, reducing transportation costs, and thus expanding trade (fig. D-9). 

A key distinguishing characteristic of many food and

agricultural products is perishability, which requires

refrigeration and prompt delivery to consumers to

assure quality. The adoption of modern technologies

has facilitated trade of many high-value agricultural

products in recent years by shifting out the supply of

transport services and lowering costs. 

There are also constraints, such as environmental

restrictions on refrigerants and inadequate infrastructure that can lead to an inward shift in the supply, or

a rise in the cost of transport services. 

Figure D-8

Link between world trade and market 

for shipping services

Pcif

Pfob

Qt 

ES

ED

Sss

Dss

Tc

Qs 

Tc = Pcif - Pfob

Source: Gehlhar, Mark. "Incorporating Transportation Costs 

into International Trade Models: Theory and Application" in 

Technological Changes in the Transportation Sector--Effect on 

U.S. Food and Agricultural Trade, A Proceedings. Misc. Pub. 

No. 1566. Economic Research Service, USDA. Sep. 2000.

Figure D-9

Impact of technological change on shipping 

rates and trade

Source: Gehlhar, Mark. "Incorporating Transportation Costs 

into International Trade Models: Theory and Application" in 

Technological Changes in the Transportation Sector--Effect on 

U.S. Food and Agricultural Trade, A Proceedings. Misc. Pub. 

No. 1566. Economic Research Service, USDA. Sep. 2000.

Pcif1

Pcif2

Pfob2

Pfob1

Qt1 Qt2

ES

ED

Sss1

Dss

Sss2

Tc1

Tc2

Qs1 Qs2

Technological change shifts 

out the supply of transport 

services (Sss2), transport 

costs fall (Tc2), world trade 

expands (Qt2).

Continued from page 36
38  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Significantly faster ships may also be on the horizon.

Ships are being developed that will travel as fast as 40

knots, about twice the speed of standard vessels. There

are significant problems to be overcome, but if solved

these ships would perform a North Atlantic transit in

about 3-and-a-half days and door-to-door delivery from

the U.S. Midwest to Central Europe in 7 days,

compared with the typical 14-28 days (Journal of

Commerce, 6-29-00). They would occupy a market

niche between ocean and air shipping for long-distance

movements. These “fast ships”, once perfected, would

probably target perishables as an ideal market segment. 

In summary, it now appears that container ships will

continue to take market share from conventional

refrigerated ships, although these will likely persist in

certain trades and niche markets. We can expect

containerships to continue to grow in size, which

should decrease unit costs further. More distantly, a

new type of fast ship may appear that could significantly impact shipment of high unit-value commodities—such as perishables.

How many ports worldwide have the necessary infrastructure and links to international markets to handle

large volumes of reefer container trade? Although

there are many “containerports,” container traffic and

traffic growth are clearly concentrated around the

largest few. Of the top 100 containerports in 1999, 15

accounted for about 50 percent of all container

throughput (www.cargosystems.net).

By far the largest throughput is handled at ports in

Singapore and Hong Kong (each with 10 percent of

1999 container throughput), followed by Kaoshiung in

Taiwan and Rotterdam in the Netherlands, each with

less than half the volume of the largest two ports. In

the United States, the five leading container ports

(Long Beach, Los Angles, New York/New Jersey, San

Juan, and Oakland) together accounted for about 9

percent of world container throughput (www.cargosystems.net). Although these figures mean little in terms

of the ability of other ports to respond to growing

consumer demand for perishable products, they do

suggest a challenge to the diversification of perishable

product trade beyond major, high-income markets. 

Environmental Challenges 

Despite tremendous progress in adapting shipping

technology to the marketing of perishables, there

remain significant constraints to the expansion of 

perishable product trade. Some constraints derive 

from economic and environmental issues associated

with the technologies.

First, controlled atmosphere (CA) technologies,

particularly some of the more complex systems, are

expensive for carriers to adopt and install. Although

continued technological refinements and developments and increasing competition among manufacturers of CA systems are bringing investment costs

down, much of the CA reefer trade is seasonal (timed,

for example, to the fruit harvest) and therefore particularly vulnerable to income swings. The reefer business can be very profitable because of the high value

of the cargo, but some industry analysts believe that

the CA reefer trade, while continuing to grow, will

remain a niche market. 

Some questions also remain as to how international

environmental agreements and national environmental

regulations will affect the availability of economical

Inventing the Container

Malcolm McLean, founder of Sea-Land, the largest

U.S.-based ocean carrier, made a major contribution

to the technology of perishable product shipping

(Allen 1994). In 1937, he waited on a dock in

Hoboken, New Jersey with a ship-bound truckload

of North Carolina cotton. For hours he observed the

complicated, labor-intensive process of goods being

unloaded from trucks, moved onto the ship, and

juggled into their proper places in the hold. As the

story goes, he wondered why his truck trailer could

not simply be lifted up and placed on the deck of

the ship without its contents being touched.

McLean made his idea a reality in 1956 when he

purchased a small tanker company, adapted the

ships to carry trailers, and launched the Ideal X

from Port Newark in the New York harbor. When he

later converted from conventional truck trailers to

specially engineered steel boxes that could be

stacked several layers deep inside the hold, he had

launched the era of the cargo container. In 1966,

one of his new container ships crossed the Atlantic

to Rotterdam, launching the first trans-Atlantic and

later trans-Pacific containerized shipping service.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  39

and environmentally friendly refrigerants for reefer

systems. Chlorofluorocarbon compounds (CFC’s), the

predominant refrigerants used in reefer containers, are

being phased out under the terms of the 1990 Montreal

Protocol international treaty because of their damaging

effect on the ozone layer.

The most popular replacements for CFC’s are

hydrochlorofluorocarbon compounds (HCFC’s) which

have limited ozone depletion potential. However,

HCFC’s are expected to be phased out in favor of

hydrofluorocarbons (HFC’s) which have zero ozone

depletion potential but some global warming potential.

The Kyoto Agreement on climate change, while not

presently ratified, suggests the possibility of bans or

caps on these “greenhouse” gases. If the proposed

restrictions on HFC’s become a reality, refrigerated

shipping will face serious challenges in finding acceptable substitutes.

Hydrocarbons, such as propane or butane, are a possibility, but have come under scrutiny due to their flammability; they have been banned by the Environmental

Protection Agency (EPA) for nearly all refrigeration

uses. Ammonia systems using cooled brine, which were

common before the adoption of Freon (a CFC) in the

late 1970s, may be adapted to address environmental

concerns. Although new ammonia-brine systems are

attractive, ammonia is hazardous and brine is quite

corrosive and difficult to pump. Liquid nitrogen systems

have also been developed. These new systems are still

in the development stages and it is agreed that more

work is needed in order completely to replace existing

refrigeration systems.

Future Challenges

Perhaps most critical to expansion of perishable trade

are infrastructure, institutional and information linkages to make ocean shipping of perishable products

not only technologically feasible but also efficient and

profitable for all players along the supply chain.

Reefer container trade requires that ports on both ends

provide sufficient crane capacity, adequate storage

space, and ready access to highway and rail systems

designed for container traffic. Efficient inspection and

customs services by government agencies, as well as

port-to-market distribution systems, are critical since

most fresh produce must arrive on store shelves within

24 hours of unloading.

Advances in information technologies have been critical in spurring the growth of perishable traffic. This

ranges from on-ship remote container monitoring to

precise inventory management systems linking

producers, shipping companies, and the major supermarket chains and other large customers. Many

industry observers maintain that since container shipping is now a mature technology, the greatest future

challenges are in the areas of alternative refrigeration

systems and in discovering ways to more efficiently

manage the supply and inventory chain from production sources to supermarket. 

What lies behind the rapid growth in U.S. exports of

perishable products over the past 10 years? The

general decline in trade barriers, such as tariffs and

import quotas, and worldwide income growth play

major roles. But the contribution made by advances in

transportation technology, particularly in ocean shipping, tends to be ignored. These advances have

extended the marketing reach of U.S. perishable

high-value products to distant markets by reducing

delivery times, maintaining product quality, and

reducing costs.

References

This article is based on an updated version of 

Ballenger, Nicole, Bill Coyle, William Hall (Seaport

Consultants), Brian McGregor (AMS), and Roy

Hawkins. “Transportation Technology Eases the

Journey for Perishables Going Abroad,” Agricultural Outlook, January-February 1999.

Cargosystems, 2001. www.cargosystems.net

Coyle, William T. and Nicole Ballenger. Technological

Changes in the Transportation Sector—Effect on

U.S. Food and Agricultural Trade, A Proceedings.

Misc. Pub. No. 1566. ERS-USDA. September 2000.

Gehlhar, Mark. “Incorporating Transportation Costs

into International Trade Models: Theory and Application” in Technological Changes in the Transportation Sector—Effect on U.S. Food and Agricultural

Trade, A Proceedings. Misc. Pub. No. 1566. ERSUSDA. September 2000.

Hall, William. “Innovations in Shipping Food Products, Past and Future,” in Technological Changes in

the Transportation Sector—Effect on U.S. Food and

Agricultural Trade, A Proceedings. Misc. Pub. No.

1566. ERS-USDA. September 2000.

Journal of Commerce. various issues.
40  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Krugman, Paul. Geography and Trade. The MIT Press,

Cambridge, Mass., 1996, pp. 2.

Oliver E. Allen. “The Man Who Put Boxes on Ships,”

Audacity: The Magazine of Business Experience,

Spring, 1994, pp. 13-23. 

Thompson, Robert L. “A Survey of Recent U.S.

Developments in International Agricultural Trade

Models.” Bibliographies and Literature of Agriculture No. 21. ERS-USDA, 1981.

Wang, Zhi, Bill Coyle, Mark Gehlhar, and Tom Vollrath. “The Impact of Distance on U.S. Agricultural

Exports: An Econometric Analysis,” in Technological Changes in the Transportation Sector-Effect on

U.S. Food and Agricultural Trade, A Proceedings.

Misc. Pub. No. 1566. ERS-USDA. September 2000.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  41

Introduction

The positive correspondence between income levels

and meat consumption is an accepted theoretical

result that appears to hold empirically, both within and

between countries. Between-country comparisons of

food budget shares allocated to meat consumption

using the World Bank consumption data indicate that

consumers in high-income countries tend to allocate

larger shares of their food budget to meat expenditures

compared with consumers in low-income countries

(Chapter 2). The intuition underlying this observation

is straightforward: consumers in high-income countries

face less restrictive budget constraints, and (typically)

lower relative meat prices than consumers in lowincome countries. Figure 2 in the introduction section

of this report shows a comparison of 1996 budget

share allocations between food items made by

consumers in the United States and Kenya. American

consumers spent 27 percent of their food budgets on

meat products, while Kenyan consumers allocated just

6 percent of food expenditures to meats. 

The income level/meat consumption correspondence

appears to hold within countries as well. Recent U.S.

Consumer Expenditure Studies suggest that in the

United States, high-income consumers allocate greater

proportions of their food budgets to meat products

than lower income consumers (USDA, 2001). At the

next level of disaggregation, however—consumers

allocating budget shares between meat varieties—

income levels don’t tell the whole story. Such factors

as preference changes, relative prices, and available

leisure time may drive consumers’ allocation of their

meat budgets between beef, chicken, and pork.

What follows is a brief presentation of how U.S. meat

consumption patterns have changed over the past 30

years. Clearly, the substitution of poultry meat in place

of beef by U.S. consumers is the most significant

change that has occurred since 1970. While the

changed dynamics of U.S. meat demand are not 

themselves at issue, identification of factors that 

cause American consumers to eat less beef now than 

in the past continues to be a source of controversy

among economists. 

The ongoing analysis of U.S. consumer demand for

meat products is a constructive exercise, for several

reasons. Foremost among them are the important

implications that changed U.S. meat consumption

patterns hold for the dynamics of international meat

trade. Moreover, the economic and cultural changes

that drive meat consumption in the United States are

likely to be more or less duplicated by what are now,

low- and middle-income countries. Study of U.S. meat

consumption patterns therefore, may provide useful

insight into how consumer choices are likely to change

as economies expand, consumer incomes grow, and

meat budgets increase.

Background

American meals have traditionally centered around the

consumption of meat. Today it is common to observe

Changing Consumer Demand for Meat:

The U.S Example, 1970 - 2000

Mildred M. Haley1

Abstract: U.S. beef consumption has declined, while poultry consumption has

increased significantly over the past three decades. Preference changes, relative

prices, and available leisure time are important determinants shaping U.S. consumer

demand for meat products.

1 Agricultural economist with the Market and Trade Economics

Division, Economic Research Service, USDA.
42  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

meat and meat products being served at each daily

meal: ham, bacon, and sausage at breakfast, a meat

sandwich at lunch, and a cut of red meat or poultry at

dinner. Fortuitously, American consumers’ revealed

tastes and preferences for meat are well accommodated by the ample resource base of the United States.

The extensive U.S. landbase supports production of

feedgrains and protein crops necessary for the manufacture of livestock/poultry feed, as well as pastures

and rangelands to graze cattle and sheep. 

At the beginning of the 21st century, Americans are

consuming greater quantities of meat products than in

the past. United States Department of Agriculture

statistics indicate that U.S. per capita meat consumption increased more than 11 percent from 1970-2000

(fig. E-1). However, data also show that significant

within-category changes have occurred since the mid1970s (fig. E-2). U.S. per capita consumption of

poultry products has increased dramatically, while per

capita beef and veal consumption have declined.

Economists have proposed numerous hypotheses to

explain changes in U.S. consumer substitution of

poultry in place of beef. Applied analysis has focused

on such factors as lower relative poultry prices and

consumer preference structures altered by health

concerns. But, binding time constraints of increased

numbers of women in the workforce may also direct

meat consumption toward categories in which poultry

products predominate—those that favor quick preparation and fast food choices.

Per Capita U.S. Meat 

Consumption, 1970 - 2000

On a per capita basis, Americans consumed 19 more

pounds (lb) of red meat (beef, veal, pork, lamb and

mutton) and poultry (chicken and turkey) in 2000, than

in 1970. Poultry consumption accounts for almost all

of the increase (+34 lb), while beef and veal consumption declined by 15 lb. Slight increases in pork

consumption (+1 lb) balanced small declines in lamb

and mutton (-1 lb). Figure E-3 shows how Americans

re-allocated their meat consumption-set over the 30-

year period. Comparison of the consumption percentages in the graph indicates an unambiguous shift from

red meats to poultry. In 1970, red meat constituted 79

percent of total meat consumption and poultry 21

percent. Thirty years later, red meat accounts for 64

percent of meat consumption and poultry 37 percent,

on a pound per capita basis.2

Less Beef, More Chicken: Why?

Numerous hypotheses exist to explain why Americans

are currently eating more poultry and less beef than 30

years ago. Most explanations approach the problem

from either a demand or a supply perspective.

Demand-side arguments fall into one of two categories: (1) American consumers’ preference structures

have changed, or (2) relative price changes explain

substitution between beef and poultry. Supply-side

1970 75 80 85 90 95 2000

140

145

150

155

160

165

170

175

180

185

190

Figure E-1

Total U.S. per capita consumption of red meat

and poultry

Mil. lb, boneless retail equivalent

Source: Economic Research Service, USDA.

1970 75 80 85 90 95 2000

0

10

20

30

40

50

60

70

80

90

100

Figure E-2

U.S. per capita consumption of red meats

and poultry

Mil. lb, boneless retail equivalent

Lamb

Pork

Beef and veal

Poultry

Source: Economic Research Service, USDA.

2 The shares of red meat and poultry do not add up to 100 due 

to rounding.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  43

arguments are less direct, focusing on either (1) the

supply factors that may have caused relative poultry

prices to fall; or (2) explicit inclusion of supply factors

in demand analysis models. It has been shown that

models excluding supply factors can yield results

falsely indicating changed consumer preferences.

One demand-side explanation of changing U.S. meat

consumption patterns focuses on consumer preference

structures.3 Many economists argue that the long-term

secular decline in beef consumption reflects a fundamental change in American consumers’ preference

structures. That is, preferences today reflect a different

set of likes and dislikes than in the past. Increased

consumption of poultry in place of beef is an expression of consumers’ (new) preference for meat products

possessing desirable health characteristics, such as

low(er) saturated animal fats, and low(er) cholesterol

levels (Moschini and Meilke, 1989). 

Greater poultry consumption caused by changed

consumer preferences can be illustrated with simple

demand and supply analysis. In figure E-4, aggregate

U.S. demand and supply for poultry are depicted in

price-quantity space, with linear functions labeled D0

and S0, respectively. Changed consumer preference

structures for meat, in favor of poultry, causes the

aggregate demand curve to shift outward to D1, where

consumers consume a greater quantity, 0Q1, than

previously, when 0Q0 was consumed.

Another demand-side argument favored by some economists assumes that consumer preferences exhibit

stable properties over time, and that in fact, changes in

relative meat prices explain consumption substitution

dynamics (Chalfant and Alston, 1993). This argument

essentially claims for example, that Americans

consume more poultry than in the past because its

price in terms of beef has declined. Figure E-5 illustrates this view, in part. The graph depicts the relationship between the price of whole chickens in terms of

round roast beef. In 2000, fewer units of beef were

necessary to exchange for a unit of whole chicken,

than in 1970. In this context, increased consumption of

poultry and lower beef consumption is simply an

application of the microeconomic axiom, which states

that when (poultry) prices decrease, quantity

demanded increases. Consumer response to lower

poultry prices is depicted in figure E-6, as a movement

along a curve, D0, that represents aggregate U.S.

consumer demand for poultry. At the lower poultry

price P1, consumers are willing and able to consume

0Q1. This quantity is greater than 0Q0, the quantity

demanded at the higher poultry price P0.

Poultry Beef and veal Pork Lamb and mutton

0

10

20

30

40

50

60

Figure E-3

U.S. per capita meat consumption

Mil. lb, boneless retail equivalent

1970

2000

Source: Economic Research Service, USDA.

21%

37%

49%

36%

29% 27%

1% 0.5%

P

P1

P0

0 Q0 Q1 Q

D0

D1

S0

Figure E-4

Greater poultry consumption caused by changed

consumer preferences

Source: Economic Research Service, USDA.

3 Economists hypothesize that consumers possess unique preference structures, which are sets of prioritized “likes” and “dislikes”.

Consumers base consumption/expenditure decisions on their preference structures.
44  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Related to the relative price argument, is an extension

of Becker’s (1976) time value model to explain

American’s increased consumption of poultry. The

substance of this view focuses on the movement of

women into the U.S. workforce, which reduces the

typical family’s supply of leisure time (typically, by

more than 40 hours per week), thus increasing its

value. With almost 60 percent of American women

working outside the home—up from 40 percent in

1970—the value of reduced family leisure time

increases (U.S. Department of Commerce, 2001).

Consequently many families allocate their (more) valuable leisure time by substituting away from time-intensive meal ingredients, and toward consumption of

products that require less time to prepare. Because

many traditional American beef dishes require significant preparation time, it is reasonable to conclude that

families are substituting away from beef, whose relative price has increased when the value of preparation

time is factored in, toward the many recently developed

poultry products, which require less time to prepare. 

Indeed, the U.S. poultry industry has been highly proactive in development of products requiring less preparation time. Examples include skinless, boneless chicken

breasts, pre-marinated cuts, and micro-waveable chicken

dishes. Another related innovation is the chicken nugget,

which was first available in fast-food restaurants.

Nuggets, together with chicken-based sandwiches, are an

acknowledgment by the poultry industry of the importance of away-from-home meal consumption.

Supply-side Factors May Also Be 

Important in Understanding Changing

Meat Consumption Patterns

The results of some research that focuses on supply

variables as explanatory factors of increased U.S.

poultry consumption provides support for the relative

price argument, over the changed preference structure

hypothesis. Fulginiti (1976) identifies higher adoption

rates of new technology by the U.S. poultry industry,

relative to the U.S. red meat industry, as the cause of

lower poultry prices. In figure E-7, new poultry

production technology shifts the aggregate U.S.

poultry supply curve outward to S1. She thus argues

that greater poultry consumption (0Q1) is the outcome

of lower equilibrium prices ( P1) generated by greater

supplies of poultry, rather than changed consumer

preferences as depicted in figure E-4. 

Unlike many demand studies, Eales and Unnevehr

(1993) take explicit account of supply-side variables in

their model of U.S. meat demand. They found that

inclusion of factors such as livestock production costs

and technical change indicators eliminate evidence of

preference structure changes in U.S. beef demand. At

the same time they note that evidence of changed

consumer attitudes toward meat consumption exists,

and that the “answer” to the problem of changing U.S.

patterns of meat consumption likely lies in the

dynamics of simultaneous shifts of aggregate supply

and demand curves for meat.

1980 82 84 86 88 90 92 94 96 98 2000

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

3.40

3.50

3.60

3.70

3.80

Figure E-5

Relative U.S. retail price of whole chicken in terms

of round roast beef

$/lb round roast beef / $/lb whole chicken

Source: Bureau of Labor Statistics, USDC.

P

P1

P0

0

Q0 Q1

Q

D

Figure E-6

Change in quantity of poultry demanded by U.S.

consumers in response to lower poultry prices

Source: Economic Research Service, USDA.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  45

Beef Industry Response to Lower 

Consumption Levels

Lower beef consumption levels in the early 1970s

induced the cattle industry to accede to consumer

advocate group claims that heavy marbling in U.S.

beef cuts (i.e., relatively high levels of intra-muscular

fat, and/or large amounts of external carcass fat trim)

was causing health-conscious consumers to reduce

beef consumption. The cattle industry supported

changes to U.S. beef grade standards, whose purpose

was to better meet perceived consumer demands, at

prices acceptable to beef producers. The new set of

U.S. grade standards for beef essentially made it easier

for carcasses with less marbling to qualify for higher

grade categories. That is, some carcasses that would

grade “Select” (at that time, termed “Good”) on the

basis of marbling (or, fat content) under the old grade

standard, would grade “Choice” or above, under the

new set of grade standards instituted in 1976. 

Research suggests that the availability of leaner beef,

in general, had no effect on consumer demand. Nelson

(1977) found that, “overall demand for beef has not

been affected” by the revised set of U.S. grade standards. In fact, 24 years later, industry perceptions of

consumer preferences appear to have rotated 180

degrees. The industry, together with beef retailers, now

perceive that U.S. consumers want consistently

flavorful, tender, and juicy beef—characteristics associated with a relatively high degree of marbling. To

meet consumer demands for a specific set of beef

characteristics, an increasing number of U.S. beef

producers and retailers have instituted their own

“branded products” line of beef. Branded product lines

of beef involve some degree of identity preservation of

animals bearing specified attributes, from the producer

level of the marketing chain, through to the retailer.

Branded beef product lines are rapidly supplanting

U.S. grade standards.

In a further effort to lure consumers back to beef,

processors are attempting to duplicate the success of

the poultry industry by developing and marketing beef

products that economize on preparation time.

Marinated, spiced, partially cooked cuts of beef are

becoming more readily available at retail outlets. The

beef industry has also recently engaged in generic

advertising campaigns (“Beef: It’s What’s For

Dinner”), in parallel with the pork industry’s “Pork:

The Other White Meat” campaign. The returns to

generic advertising are difficult to assess, however.4

Trade Implications of Increased U.S.

Poultry Consumption

The pronounced preference of American consumers

for poultry parts that yield white meat—as expressed

by the ongoing popularity of the skinless, boneless

chicken breast—is a key component in the development of the U.S. poultry export industry. In 2000, the

United States exported poultry parts valued at almost

$2 billion. In 1975, the value of poultry exports was

less than $50 million.

Prior to the 1970s, poultry was largely retailed on a

“whole bird” basis. Chicken meat sold as parts was a

small component of the domestic U.S. market.

Chicken meat retailed as parts came about largely as a

consequence of the inspection process at the slaughterhouse level; that is, the carcass of a whole chicken that

failed inspection, would undergo a cutting process for

removal of the part of the whole bird that caused

inspection failure. The remainder of the bird was then

further broken down and marketed as chicken parts. 

Price signals and disappearance rates began to indicate

to processors that consumers preferred particular

P

P1

P0

0 Q0 Q1 Q

D0

S0

S1

Figure E-7

New poultry production technology shifts 

aggregate U.S. poultry supply outward 

Source: Economic Research Service, USDA.

4 Special Symposium on Commodity Promotion Research, 1999.
46  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

chicken parts rather than whole birds. To satisfy

consumers, processors began to break whole chickens

into parts for retail sales. Trays of whole birds broken

into constituent parts evolved into packages/bags of

drumsticks, wings, breasts, etc. Technology and

consumer research yielded the skinless, boneless

breast product in the early 1990s (Fulginiti, 1996). The

popularity of this particular cut represents a clear

industry success in developing and marketing a

product bearing a set of desirable characteristics—fast

cooking white meat with perceived health benefits—at

a price that consumers are willing and able to pay. 

The popularity of skinless, boneless chicken breast

meat in the United States gave rise to enormous quantities of poultry parts less desirable to U.S. consumersdark meat, primarily leg-quarters. Large supplies of

low-cost, dark U.S. chicken meat coincided however,

with the relaxation of selected policy constraints to

international meat trade, and, to growing incomes in a

part of the world where consumers prefer dark poultry

meat: Asia and Russia. The preference of Asian

consumers for dark poultry meat is captured in figure

E-8, which contrasts the relative price of (dark) leg

meat in terms of (white) breast meat, in Japan and in

the United States. In the Russian case, import demand

for U.S. leg-quarters is the result of the breakdown of

trade restrictions previously imposed by the

Communist government, and of the ability of the

highly efficient U.S. poultry industry to significantly

under-price other animal protein produced in Russia.

U.S. trade statistics graphed over time in figure E-9

indicate that Asia and Russia together provide an

important outlet for U.S. dark meat parts, which might

otherwise be rendered or used as an ingredient in

lower valued food products. Breast-meat driven

poultry production, and limited U.S. consumer demand

for dark meat parts imply that Asian and Russian

buyers effectively face an elastic (excess) supply of

U.S. dark meat poultry parts.5 Domestic prices for

dark meat parts would likely be lower in the absence

of Asian and Russian excess demand. 

White Meat and Dark Meat Prices:

What Comes First, the Chicken 

Or the Egg?6

Identifying the relationship between dark and white

meat prices is difficult because leg-quarters and breasts

are joint products. That is, white and dark meats are

produced in relatively fixed proportions from the

whole bird: for every chicken slaughtered there are

always two leg-quarters and two breasts. As demand

expands in one market, the meat price in that market

rises and more birds are slaughtered. Thus, outputs of

both white and dark meat are higher, implying that the

1992 93 94 95 96 97 98 99

0

1

2

3

4

5

6

7

Figure E-8

Ratio of Japan / U.S. broiler part prices

Ratio

Source: Dyck and Nelson, 2000.

Wholesale: Japan/US breast

Wholesale: Japan/US leg

1989 91 93 95 97 99

0

500

1,000

1,500

2,000

2,500

3,000

Figure E-9

Country shares of U.S. chicken exports

1,000 mt

Source: Economic Research Service, USDA.

Asia

Russia

ROW

5 1994-1995 price series for domestic leg-quarters indicate that

strong U.S. exports of dark meat products to Russia increased the

leg-quarter prices, and induced higher U.S. poultry production.

Increased production in turn increased the quantity of breast-meat

products supplied to the domestic U.S. market, and lowered equilibrium prices of U.S. breast-meat products. Lower priced breastmeat products likely intensified competition between poultry and

beef for U.S. consumers’ food dollar during this period.

6 This section based on extensive comments from Philip L. Paarlberg, Professor of Agricultural Economics, Purdue University,

West Lafayette, Indiana 47907.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  47

price of the meat not experiencing a demand expansion would decline. 

In the case of poultry meat, demand for both white

and dark meat have expanded at roughly the same

time. As discussed above, the demand for white meat

in the United States expanded rapidly in the late

1980s and throughout the 1990s. Over the same

period, export demand expanded due to income

growth overseas and reduced import barriers in key

Asian nations and in Russia. The U.S. demand expansion for white meat increases breast prices, and exerts

downward pressure on the dark meat price. Lower

dark meat prices help to boost U.S. leg-quarter

exports. In domestic U.S. markets, the export demand

expansion raises the dark meat price and puts downward pressure on the price of breast meat. Lower

white meat prices benefit U.S. consumers. 

Conclusions

Most Americans continue to center meals around meat

consumption. U.S. consumption data indicate that per

capita consumption of red meat and poultry has

increased since 1970. Most of the increase is

accounted for by poultry consumption, while

consumption of beef has decreased. Economists have

posited a number of hypotheses to explain the substitution of poultry in place of beef consumption. Changes

in consumers’ preference structure based on health

concerns could explain part of the substitution.

Moreover, increased numbers of women in the U.S.

workforce may cause many families to switch to more

timesaving poultry dishes in place of more time/labor

intensive preparation often necessary with beef.

Another explanation for increased poultry consumption focuses on higher beef prices relative to poultry,

and the simple tendency for consumers to choose

greater quantities of lower priced goods.

The beef industry has responded to lower consumer

demand by attempting to re-align beef more closely

with the characteristics desired by consumers. Changes

supported by the industry in 1976 U.S. grade standards

made leaner beef more available. More recently, the

industry has reversed its course, turning back toward

more highly marbled products marketed under private

labels. The U.S. beef industry has also taken steps

recently to emulate the poultry industry in its efforts to

develop more timesaving products to accommodate

changed U.S. lifestyles.

Given the complexity of the dynamic changes that

currently characterize the U.S. meat industry, it is very

difficult to attach a single explanation for recent

changes in U.S. consumers’ demand for meat. It is

more likely that some combination of such changing

factors as tastes, time preferences, and relative prices

together explain why U.S. consumers will likely

consume 97 lb of poultry meat and 67 lb of beef in

2001, rather than 34 and 80 lb, as they did in 1970. 

The evolved preference of U.S. consumers to consume

chicken as white meat yielding parts, instead of as

whole birds, has had dramatic implications for U.S.

poultry exports to regions of the world where

consumers prefer dark chicken meat. U.S. consumer

demand for larger quantities of white chicken meat

generates huge quantities of chicken parts yielding

dark meat. Changes in trade policies, and growing

incomes—particularly in Asia and Russia, have created

excess demand for dark chicken meat. The United

States is expected to export nearly 3 million metric

tons of poultry products—mostly dark meat parts—in

2001, thus remaining the world’s largest exporter of

poultry products.

References

Becker, Gary. The Economic Approach to Human

Behavior. The University of Chicago Press,

Chicago. 1976.

Chalfant, James A., and Julian M. Alston. “Accounting

for Changes in Tastes.” Journal of Political Economy

Vol. 96, 1988, pp. 391-410.

Dyck, John and Kenneth Nelson. “The Structure of the

Global Markets for Meat”. Paper presented at the

Conference “Globalization, Production Siting and

Competitiveness of Livestock Production” at the Federal Agricultural Research Centre, Braunschweig,

Germany, September 25, 2000.

Eales, James S., and Laurian J. Unnevehr. “Simultaneity and Structural Change in U.S. Meat Demand”.

American Journal Agricultural Economics Vol. 75,

1993, pp. 259-268.

Fulginiti, Lilyan E. “The Change from Red to White

Meat: The Role of Technology.” Selected Paper,

AAEA, 1996.

Moschini, G., and K.D. Meilke. “Modeling the Pattern

of Structural Change in U.S. Meat Demand.” American Journal Agricultural Economics Vol. 71, 1989,

pp. 253-61.
48  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Nelson, Kenneth E. “Economic Effects of the 1976

Beef Grade Changes.” ERS/USDA, Technical 

Bulletin No. 1570, June 1977, Washington, D.C.

Special Symposium on Commodity Promotion

Research. Agribusiness, Vol.15, No. 4,

Autumn 1999.

U.S. Department of Agriculture, Economic Research

Service, Food and Rural Economics Division.

Ongoing Analysis of Consumer Expenditure Survey,

1998. Publication, forthcoming. 2001.

U.S. Department of Commerce, Economics and 

Statistics Administration, U.S. Census Bureau.

Washington, D.C., 1999.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  49

Introduction

Fruit and vegetables consumption increases and the

composition of products consumed changes as

nations become wealthier. For example, fruit and

vegetables consumption in the United States has

increased over the past two decades along with the

Nation’s prosperity. Higher incomes provide

consumers with freedom to make purchasing decisions

based on factors other than meeting basic caloric

needs. Increased consumption in the United States has

been influenced by several factors, including increased

domestic production, product convenience, technological improvements that maintain the quality of fruit for

greater periods of time and modify produce to meet

consumers preferences, and greater availability and

diversity of products through trade. Americans have

also increased their consumption of fruit and vegetables as they try to maintain healthier lifestyles.

Background

Fruit and vegetables consumption has been shown to

be an important part of any diet leading towards good

health. In low-income countries, where meeting caloric

requirements is the priority, vegetables, especially

starches such as tubers, roots, and legumes make up

the bulk of the diet. Consumption is based on locally

and seasonally available foods, since people cannot

afford expensive imports or the necessary storage

facilities for perishable products. Food consumption

patterns change, however, as incomes rise. As

discussed in earlier chapters, with higher incomes, it is

common for people to include more meats and animal

products in their diets, and change the types of

produce they consume to include more perishable fruit

and vegetables. As illustrated in table F-1, between

1961 and 1998, per capita fruit and vegetables availability increased in countries across all income levels.

However, per capita availability for low-income countries is about half the amount of middle-income countries, and less than half of high-income countries.

Fruit and vegetables consumption is positively correlated with income levels, with per capita supply

(which can be considered as a measure of consumption) being the highest in high-income countries (table

F-1). In high-income countries, a wider selection of

products is available as a result of increased variety

produced domestically and through trade. In this

report, U.S. demand for fruits and vegetables is used to

illustrate the impact of income and other factors on

produce demand. 

In the United States, fruit and vegetables consumption

has grown over the past two decades as Americans

respond to diverse factors. New fruit and vegetable

items are available in the markets today that many

Americans did not even know existed 20 years ago.

Some fruit and vegetables, such as peaches, grapes,

asparagus, and melons, have become available in the

market during seasons that they are not domestically

produced, thanks to improvements in transportation

and imports from other countries. Americans have also

Consumer Demand for Fruit 

and Vegetables: The U.S. Example

Susan L. Pollack1

Abstract: Fruit and vegetable consumption has been shown to be an important part

of any diet leading towards good health. Factors such as income, aging of a population, market promotion, and consumer awareness of the importance of produce,

contribute to increased fruit and vegetable consumption. 

1 Agricultural economist with the Market and Trade Economics

Division, Economic Research Service, USDA.
50  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

increased their demand for fruit and vegetables as they

have become interested in healthier lifestyles. When

purchasing fruit and vegetables, many consumers are

looking for convenience in the products they choose.

Trends in Fruit and 

Vegetable Consumption

Fruit and vegetables (including melon) consumption in

the United States averaged 741 pounds per person

annually during 1997-99, 25 percent above 1977-79.

Much of the increase is a result of higher vegetable

and melon consumption, mostly fresh vegetables and

processed potatoes in the form of french fries (fig. 

F-1). Vegetable consumption increased more rapidly

than fruit, rising 24 percent over this period, compared

with 8 percent for fruit. Per capita consumption is

calculated as the residual of domestic production

adjusted for trade and stocks. 

Since the mid-seventies, Americans have changed their

consumption preferences. Consumers are eating more

fresh and frozen vegetables and fruit and less canned

produce (figs. F-2 and F-3). Since the seventies, fresh

selections and quality in produce aisles of grocery

stores have increased, improving consumers’ choices.

As a result, fresh vegetable and melon consumption

increased 33 percent and fresh fruit consumption

increased 26 percent.

Fresh potatoes accounted for the largest share of fresh

vegetable consumption. While the consumption of

fresh potatoes has remained stable between 1977-79

and 1997-99, their share of total fresh vegetable

consumption has declined as other vegetables’ share of

the total rose. Consumers are varying their diet of

fresh vegetables, increasing their demand for

asparagus, broccoli, cauliflower, carrots, onions, and

lettuces other than iceberg, among others. 

Bananas were the number one fresh fruit consumed in

1997-99, with consumption increasing over the 20

years since 1977-79. Unlike most other fresh produce

that is popularly consumed in the United States,

bananas are not grown domestically, and Americans

(excluding Hawaiians) must rely exclusively on

imports. The other leading fresh fruits, apples and

oranges, are domestically produced. While fresh apple

consumption has been on the rise, fresh orange

consumption has declined. Americans are turning to

other fresh fruit, such as grapes, pears, and strawberTable F-1—Global fruit and vegetable supply

1961 1965 1970 1975 1980 1985 1990 1995 1998

Kg/Capita/Year

Low-income countries 78 78 79 81 80 81 81 86 86

Middle-income countries 120 127 132 140 154 155 161 164 170

High-income countries 147 156 178 184 193 204 214 222 223

Source: FAO.

1977 80 83 86 89 92 95 98

0

100

200

300

400

500

Vegetables and melon

(ex. potatoes)

All vegetables

Fruit

Figure F-1

Per capita U.S. fruit and vegetable consumption

Pound (farm weight)

Source: Economic Research Service, USDA.

 Fresh Canning Freezing Dried

0

10

20

30

40

50

60

Figure F-2

U.S. vegetable and melon consumption

Percent

1977-79

1997-99

Source: Economic Research Service, USDA.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  51

ries, partially because they are now available in the

market for longer periods of time than in the past.

Although fruit and vegetables consumption has been

growing over the past two decades, the average

American is still not consuming the recommended

daily servings, as suggested by USDA’s food pyramid

or the ‘5 A Day for Better Health2’ program. The

USDA food pyramid, designed as a guideline for

healthy eating, suggests individuals should consume at

least 2 servings of fruit and 3 servings of vegetables

every day. (A serving of fruit is equivalent to 1

medium size fresh fruit, one-half cup of chopped,

cooked, or canned fruit, or three-quarter cup juice; a

serving of vegetables is equivalent to 1 cup raw leafy

vegetables, one-half cup other vegetables cooked or

raw, or three-quarter cup juice. These serving guidelines vary, depending on recommended caloric intake

based on sex and age, USDA/ARS.)

According to the 1994-96 Continuing Survey of Food

Intake of Individuals, conducted by USDA’s

Agricultural Research Service (ARS), only 23 percent

of Americans consumed the recommended servings3 of

fruit and 41 percent the recommended servings of

vegetables. The survey also showed that higher income

people were more likely to meet the recommended

servings of fruit and vegetables, with the proportion of

those meeting the recommended requirements

declining as income declines. Interestingly, a greater

percentage of men than women, 20 years old and over,

met the guidelines set for vegetables; the reverse was

observed for fruit. 

Factors Affecting the Demand for Fruit

And Vegetables in the United States

Much of the yearly fluctuation in consumption data

can be attributed to yearly changes in the level of

production due to weather or the quantity of acres

planted to a crop. International trade has been

successful in leveling out consumption fluctuations.

During serious domestic production shortages,

however, higher prices as a result of reduced domestic

supply can drive down consumer demand for a product

despite the availability of comparable or substitutable

imported produce. An example of the effect of production on consumption data is shown in figure F-1. The

decline in fruit consumption in 1998 and 1999 reflects

reduced production and higher prices due to poor

growing conditions in major production regions of the

United States. 

Consumers Increasingly Demanding 

Convenient Fruit and Vegetables

Convenience is an increasingly important factor for

consumers when selecting fruit and vegetables. As a

result, most Americans consume produce in processed

forms. In 1997-99, 52 percent of vegetable consumption was canned, frozen, or dried products; 43 percent

of fruit was consumed as juice. While there are many

vegetables processed, tomatoes accounted for about 70

percent of canned consumption, and potatoes accounted

for about 70 percent of frozen consumption. Orange

juice accounted for 63 percent of juice consumption.

Processed forms of consumption often utilize a greater

quantity of a commodity to get an equal serving size to

fresh. Since more of a product is needed to produce a

processed product, it results in higher per capita utilization of a good. This is not necessarily equivalent to

higher servings of the commodity. 

Because convenience is such an important factor to

Americans, the most popular fresh fruit are often the

most convenient to eat. Americans consume more

bananas than any other fresh fruit. Bananas are

popular because they are inexpensive and they are easy

to eat. Apples are also easy to eat fresh, and grapes are

 Fresh Canning Freezing Juice Dried

0

10

20

30

40

50

60

Figure F-3

U.S. fruit consumption

Percent

1977-79

1997-99

Source: Economic Research Service, USDA.

2 The 5 A Day program is sponsored by The Produce for Better

Health Foundation and the National Cancer Institute to promote

increased consumption of fruit and vegetables by educating consumers about their health benefits.

3 Recommended servings are based on the food pyramid. Dry

beans and peas are classified as vegetables in the survey, while in

the food pyramid they are also classified under the meat group as

are nuts, because they provide a source of protein. Melons are

grouped with fruit.
52  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

easy to eat fresh or as raisins. Some fruit are

consumed more in processed form than as fresh.

Oranges are the number one fruit consumed by

Americans, and the most convenient way of

consuming oranges is as juice, accounting for 86

percent of orange consumption in 1997-99 (fig. F-4).

Other fruit are also increasingly being consumed in the

juice form. The fastest growing variety is apple juice,

with juice consumption exceeding fresh as the number

one use of apples in the late nineties. 

The most popular vegetables are also consumed in

their most convenient forms, which often includes

some processing. Potatoes are consumed mostly as

french fries and tomatoes are consumed in their

canned form (fig. F-5). The introduction of fresh-cut

vegetables has increased consumption of several

different products. The consumption of two major

fresh-cut products, baby-cut carrots and bagged salads,

has grown tremendously. These products were new to

the markets in the late eighties and have since become

a mainstay on the produce shelves in the grocery

stores. They provide a more convenient way for

consumers to eat fresh produce than the traditional

way lettuce and carrots are marketed.

Consumption of frozen produce has also increased

over the past two decades, mostly because they appeal

to consumers since they are easy to cook and the

frozen form of a commodity is available out of season.

Frozen product consumption has risen rapidly,

increasing 44 percent for vegetables and 36 percent for

fruit. Fruit and vegetables are pre-cut and peeled and

ready for cooking, reducing the time needed to prepare

a meal. Frozen vegetables are a much larger market

than frozen fruit because they are used as side dishes

to meals or increasingly as the main course. Frozen

vegetables, packaged with seasonings and sometimes

meat, offer attractive and quick meal alternatives to

busy consumers. Frozen fruit items consist mostly of

berries, apples, peaches, and cherries, and mostly are

used for making desserts. Frozen fruit still comprise

the smallest portion of fruit consumption.

Technology Makes Fresh Products 

More Appealing

The demand for fresh products has increased as

packing and shipping technology has improved. With

improvements in shipping, handling, and plant

breeding, fruit and vegetables can now be shipped long

distances and over greater lengths of time and still

maintain appearance and quality. Plant breeding has

also produced new varieties of traditional fruit, such as

seedless grape and tangerine varieties favored by

consumers, increasing demand for these products.

Improved storage facilities provide for year round

availability of various commodities. For example,

controlled atmosphere storage for apples has resulted

in maintaining the fruit crisp until the next crop is

harvested. As a result, high quality fresh apples are

available year round, increasing fresh apple consumption beyond the fall and early winter seasons. 

All others

Onions

Sweet corn

Lettuce

Carrots

Melons

Tomatoes

Potatoes

0 20 40 60 80 100 120 140 160 180

Figure F-5

Major vegetables and melon consumed in 

the United States

Pounds per person

1977-79

1997-99

Source: Economic Research Service, USDA.

All others

Pineapples

Peaches

Oranges

Grapes

Grapefruit

Bananas

Apples

0 10 20 30 40 50 60 70 80 90 100

Figure F-4

Major fruits consumed in the United States

Pounds per person

1977-79

1997-99

Source: Economic Research Service, USDA.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  53

Concern for Health Increases 

Consumption 

Health issues have also become an increasingly important factor in consumer preferences for produce in

recent years. Publicity surrounding scientific studies

showing the beneficial values of various fruit and

vegetables has been a boom to certain commodities.

The growth in broccoli, grape, and berry consumption

demonstrates the effect of such publicity on an

industry. Health issues alone, however, may not be

sufficient to increase consumer demand, especially as

the number of studies covering more produce

increases. For example, while the grapefruit industry

succeeded in receiving endorsements from the

American Heart Association, the American Cancer

Society, and the March of Dimes to include in their

promotions, demand for grapefruit, both fresh and as

juice, has declined since 1976-78. Similarly, the cranberry industry grew rapidly after the fruit was found to

reduce urinary tract infections. Consumption of cranberry juice, the major use of cranberries, appears to

have leveled off in the past 2 years. It appears that

while health claims can initially increase demand for a

product, they alone may not be sufficient to further

expand consumer demand.

The aging of the baby boom population and the

increase in the life expectancy of Americans has

boosted demand for fresh produce. Studies have

demonstrated that spending on fresh fruit and vegetables is higher for households with middle-age and

older members (Cook, 1990; Nayga, 1995; Reynolds

1990). Individuals in these age groups tend to increase

their consumption of fresh fruit and vegetables

because of the reported health benefits of these

commodities, and because they have more income to

spend on the often more expensive fresh products.

Imported Produce Expands 

Consumers’ Selection

International trade has played a major role in changing

consumer demand for fruit and vegetables. Fresh fruit

consumption has grown partly as a result of the greater

availability of out of season imports. Traditionally,

during the winter months, only citrus, bananas, and

apples were available in the supermarkets. Since the

mid-eighties, however, improved transportation and

increased production in Southern Hemisphere countries has made certain fruit, previously unavailable in

the United States, now common. Summer fruit such as

grapes, peaches, and plums, mostly from Chile, are

being sold in U.S. markets, providing alternatives for

consumers. As a result, consumers have substituted

imports, especially grapes and pears, for traditional

winter fruit such as oranges and grapefruit. 

Also through trade, new varieties of tropical produce

not grown in the United States have become popular.

With an increasingly diverse population in the United

States, many people desire the fruit and vegetables

they consumed in their native countries. As a result,

tropical fruit imports, such as mangoes and papayas,

have increased, especially in the nineties. As the

general population becomes familiar with these products, demand continues to grow and the product

becomes a regular item in the market. A recent

example of this is mangoes. The increased popularity

of mangoes over the last decade has resulted in

imports increasing 184 percent between 1990-91 and

1998-99. Although there are some places in the United

States that can produce tropical fruit, imports will be

necessary to meet the growing demand.

Imports have also increased for commodities already

produced in the United States, creating a more stable

supply for consumers. For example, Mexican tomato

imports have become an important source of winter

tomatoes in the domestic market. In recent years, the

fresh tomato market has received a new source of

competition, this time from Canada. Canadian greenhouse tomatoes are in the market largely during the

spring and fall and compete with Florida and

Mexican tomatoes. 

A similar situation has occurred in the citrus market

with the import of the tangerine variety, clementines.

The increase in clementine imports, mostly from

Spain, takes place at the same time that the U.S. citrus

market is at its peak. Even though clementines are

often higher priced than domestic tangerines and

oranges, the popularity of the clementine continues to

rise. U.S. consumers like clementines because they are

easy to peel and especially because they are seedless.

Imported fruit and vegetables are becoming an increasingly important component of the U.S. diet. Vegetable

imports as a share of domestic consumption averaged

14 percent in 1997-99 (fig. F-6). Fruit imports averaged 40 percent of consumption. Fruit consumption,

however, is heavily dependent on banana imports.

Excluding bananas, the import share of domestic fruit

consumption dropped to 14 percent. Fresh fruit
54  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

imports (excluding bananas) as a share of domestic

production grew about 8 percent a year between 1977

and 1999. The rising importance of nonseasonal and

tropical fruit in the American diet is largely responsible for the growth. 

Conclusion

U.S. demand for fruits and vegetables has been influenced by income growth, and other supply-side and

demand-driven factors. Not only has the domestic

supply benefited from advances in production technology, but also from access to a wider range of

sources around the world. Consumers can expect a

wider array of produce on the grocery store shelves

and lower to stable prices for traditionally consumed

commodities as shipping and handling techniques

improve, reducing loss. The continued research findings about the health benefits of fruit and vegetables

have kept produce consumption in the limelight,

encouraging more consumption. The aging of the

affluent baby boomers, with their desire to maintain

health, has also resulted in higher consumption of fruit

and vegetables. 

As incomes continue to grow in developing countries,

demand for fruit and vegetables are expected to

increase. With increased globalization and the associated changes in lifestyles, demand for produce in

developing countries will likely be shaped by the same

factors that have affected U.S. demand for these products. As in the United States, availability, affordability,

convenience, and health concerns will probably influence future consumption of fruit and vegetables across

the world.

References

Cook, Roberta. “Challenges and Opportunities in the

U.S. Fresh Produce Industry.” Journal of Food Distribution Research. February 1990, pp. 67-74.

Nayga, Rodolfo M. Jr. “Determinants of U.S. Household Expenditures on Fruit and Vegetables: A Note

and Update.” Journal of Agriculture and Applied

Economics. Vol. 27, 1995, pp. 588-594.

Reynolds, Anderson. “Analyzing Fresh Vegetable Consumption From Household Survey Data.” Southern

Journal of Agricultural Economics. December 1990,

pp. 31-38.

U.S. Dept. of Agriculture, Agricultural Research 

Service. Continuing Survey of Food Intake of 

Individuals, 1994-96.

http://www.usda.gov/cnpp/DietGd.pdf

1977 80 83 86 89 92 95 98

0

5

10

15

20

25

30

35

40

45

Figure F-6

Imports as a share of fresh fruit and 

vegetable consumption

Percent

All fruit

Fruit, ex. bananas

All vegetables

Source: Economic Research Service, USDA.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  55

Introduction

Global food trade will likely increase due to

expected increases in global income levels,

improved transportation networks, and growing populations requiring greater quantities of nutritious and

safe food. Although, for the United States at least,

there is no evidence that imported food, as a whole,

poses higher food safety risks than domestically

produced food (Zepp, Kuchler, and Lucier, 1998),

globalization of food supply means that new food

safety risks can be introduced into countries (e.g.,

emerging bacteria), previously controlled risks can be

re-introduced into countries (e.g., cholera), and

contaminated food can be spread across greater

geographical areas and cause illness worldwide. 

Food safety risks include risks from veterinary drug

and pesticide residues, food additives, pathogens (i.e.,

illness-causing bacteria, viruses, parasites, fungi, and

their toxins), environmental toxins such as heavy

metals (e.g., lead and mercury) and persistent organic

pollutants (e.g., dioxin), and unconventional agents

such as prions associated with bovine spongiform

encephalopathy (BSE) in cattle. Scientists generally

agree that food safety risks are low, though highest for

foodborne pathogens such as E. coli O157:H7. 

The U.S. Surgeon General states that food safety has

emerged in the last decade as a significant global issue

with international trade and public health implications

(Satcher, 2000). Worldwide, foodborne pathogens have

been estimated to cause 70 percent of the roughly 1.5

billion annual episodes of diarrhea and 3 million

deaths of children under the age of 5 (WHO, 2000).2

Countries are not equally at risk from foodborne

disease—persons in developing countries with inadequate supplies of safe water and poor waste disposal

are particularly susceptible. Food safety risk levels

also vary greatly among countries because of differences in available technology (e.g., refrigeration), plant

and livestock host factors (e.g., herds exhibit varying

infection rates), food production practices (e.g., access

to and use of veterinary drugs), cultural differences

(e.g., routine consumption of raw seafood) and

geographic or climatic differences (e.g., colder

climates may kill some pathogens) (Buzby and

Roberts, 1999). 

Currently in the United States, the bulk of all sporadic

and outbreak cases of microbial foodborne illnesses

are likely from domestically produced foods because

food imports tend to make up only a small proportion

of all foods consumed. For example, the average

import share of U.S. food consumption was 9.2

percent for 1995-98, though import shares are higher

for particular food categories that are often linked to

Effects of Food-Safety Perceptions on

Food Demand and Global Trade

Jean C. Buzby1

Abstract: Food safety has emerged as an important global issue with international

trade and public health implications. How countries perceive and handle food safety

risks is complicated and partly based on their access to and use of science, detection

technology, and mitigation methods. Highly publicized food safety incidents affect

consumer perceptions, leading to changes in food purchasing patterns.

1 Agricultural economist with the Food and Rural Economics Division, Economic Research Service, USDA. The author wishes to

thank Linda Calvin, Steve Crutchfield, Elise Golan, and Donna

Roberts for their assistance.

2 Waterborne pathogens also play a large role in causing diarrheal

illness and death.
56  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

foodborne illness such as fish and shellfish (58.6

percent), fruit (fruits, juices, and nuts, 14.6 percent),

and vegetables (10.3 percent). The potential for

increased food-related illnesses from continued

increases in internationally traded food will challenge

government food safety systems and private firms to

develop and implement improvements in prevention,

inspection, and control systems.

As we shall see, consumer concerns about food safety

risks vary across countries and change over time. Food

Marketing Institute 1989-97 data indicate that over

time, U.S. consumers have become increasingly

concerned that foodborne bacteria pose a “serious

health risk” while they have become less concerned

about other food safety risks such as those from chemical residues, irradiation, and food additives (Food

Marketing Institute, 1997). 

Countries Vary in Their Perceptions and 

Acceptance of Food Safety Risks 

Each country has its own unique set of health

concerns and priorities (Patterson, 1990), though 

data measuring these concerns are limited. Consumer

concerns may include foodborne bacteria, hormones,

and irradiated foods for example. The level of

consumer food safety concerns, and perhaps

consumers’ relative ranking of the different concerns

and priorities, vary among countries and stem largely

from country-wide differences in consumer perceptions about food safety. Figure G-1 presents a

schematic to help clarify the relationships between

consumer perceptions, concerns, and acceptance. 

Consumer perceptions are the result of a complex

function of factors such as differences in each

country’s: baseline food safety risks levels; food

safety risks from internationally imported food; access

to and extent and nature of information about food

safety, risk levels, and related topics; trust in the

different sources of information; and experience with

major food safety incidents. There may even be basic

differences in how people view symptoms of foodborne diseases. Some societies consider diarrheal

diseases as a natural/normal occurrence due to factors

such as teething, eating hot/spicy foods, indigestion,

and even superstition, instead of perceiving diarrhea

as a symptom of disease that can be transmitted

through food and food handling (Motarjemi and

Käferstein, 1997). 

Even if the food safety risks are the same across countries, countries may perceive and handle these risks

differently. Assessments of similar risks may vary due

to differences in access to and use of advances in basic

science, detection technology, and mitigation methods

(Buzby and Roberts, 1999). For example, countries

vary in how they perceive and handle the risks from

Listeria monocytogenes in foods that are not intended

for further heat treatment (i.e., ready-to-eat foods such

as luncheon meats). The United States has a zerotolerance policy for this organism in all ready-to-eat

foods, a tolerance so strict, that some countries have

raised questions about this policy and claim it is a

trade barrier that the United States is using to keep

their perfectly safe products out of U.S. markets

(Madden, 1994).3

Worldwide, consumers’ knowledge and perceptions

about risk-reducing technologies vary, and as a result

not all countries are equally accepting of the different

technologies. Consumer acceptance about innovative

food technologies such as irradiation is the result of a

complex decision-making process involving their

assessments of the perceived benefits and risks of the

new technology and its alternatives (Henson, 1995).

Even within a country, acceptance of and willingness

to pay for a new technology that reduces food safety

risks varies. For example, only about half of U.S.

adults are willing to buy irradiated meat and poultry,

according to 1998-99 FoodNet survey data (Frenzen et

al., 2000).

Reading up from the bottom of figure G-1, what countries accept, in terms of food safety risks in food

imports, depends on what countries want—which in

turn depends on both their tastes and preferences for

foods with different bundles of attributes, and on what

they are willing and able to pay to avoid food safety

risks. Accordingly, wealthier countries with more

information about food safety risks (even if it may be

sensationalized) not only demand increased year-round

access to a wider variety of internationally traded

foods but they also tend to demand more stringent

food safety standards on both domestically produced

and imported food and are generally willing to pay

more for these higher levels of food safety. For

example, Denmark has gone to extraordinary efforts to

minimize Salmonella contamination in pork and, as a

3 The U.S. Department of Agriculture is in the process of issuing a

new rule on Listeria.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  57

	







 

 	

	
	



	



 

	
	



	



 

		


	

	



 		

		



 

	

	
	



 !
"

 #

	

 $


%

			

	
 
"

 &
'
		



' 

'
"



 

!
  " #$$! !%




&"'
$%( 
	

		



 # 



	

	


 

( 	


)"

 




	



'

 
*	

"

 #	

	


 +


 
	"

##


 
'*	

 	

	 !%$,-

 






#%)*

 	



	




 	
	


 !

 

	

	




58  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

society, is willing to pay for strong control measures.

Trade patterns with neighboring countries have been

affected because Denmark does not want to import

pork from countries whose pork poses higher levels of

risk from Salmonella. 

Differences in tastes and preferences among countries

have an effect on which foods are imported. Tastes and

preferences for different foods are based on how

consumers view the bundle of attributes that each food

possesses when consumers are making their food

purchase decisions (fig. G-1). For example, consumers

clearly consider price, quality, and sensory-based

attributes such as flavor and color, but may also

consider if the food was produced using certain food

technologies such as irradiation. This attribute bundle

may also include food safety risk levels, as perceived

by consumers, or by government oversight in the case

of some internationally traded food. For example,

some consumers in some countries such as France

prefer cheese made from unpasteurized milk and are

willing to accept the associated higher health risks

from Listeria contamination. Other countries, such as

the United States, ban the sale of most unpasteurized

cheese, even though it constrains consumer choice. 

Tastes and preferences for certain foods are influenced

by issues other than food safety concerns and sensorybased attributes. One example is consumer reluctance,

particularly in European countries, to buy food

produced using biotechnology such as genetic engineering. For example, some biotech foods or crops

have been genetically engineered to resist pests. In

addition to food safety concerns, some consumers have

expressed concerns about the uncertain long-term

impact of biotech foods on the environment, particularly the consequences of cross pollination, the impact

on ecosystems, and the development of pesticide

resistance by certain pests from using some of the bioengineered plant pesticides (Vogt and Parish, 1999). A

second example is that in addition to food safety

concerns, some consumers consider farm worker

safety concerns and environmental concerns (e.g.,

pesticide use) when deciding whether to buy organic

or conventionally grown products. 

Differences in what food products countries want and

what they will accept in imported food ultimately

affect patterns of food demand and global trade, and

complicate the development of workable trade rules

that are acceptable to different trading partners.

Countries also vary in how consumer behavior, firm

behavior, and policies/regulations change with new

information on food safety risks (such as from

outbreaks) and the development and acceptance of new

risk management technologies.4

Food Safety Incidents and Publicity 

Affect Food Demand and Trade

Highly publicized international food safety incidents

may lead to lasting changes in consumer perceptions

about food safety and their food purchasing patterns.

In some instances where the public outcry has been

particularly strong, there have been changes in government regulations affecting domestic and/or imported

food products. Here, the hypothesis is that following

the resolution of the problem that caused a major international food safety incident, consumer perceptions

about the implicated food product and about the

exporting country’s ability to produce safe food may

be slow to change, and these perceptions have a lasting

influence on food demand and global trade. 

To explore this hypothesis, three international food

safety incidents are presented: (1) the 1996 outbreaks

from the pathogen, Cyclospora, on Guatemalan raspberries in the United States and Canada, (2) the

ongoing bovine spongiform encephalopathy (BSE)

crisis in the United Kingdom (UK), and (3) the 1999

contamination of feed in Belgium by cancer-causing

dioxin. Each case study begins with a brief description

of the incident and with supporting economic impact

data. Each case study concludes with a discussion of

consumer perceptions and reactions, and how they

relate to the hypothesis that these changes in consumer

behavior affect trade. The economic impact data illustrate how severe international food safety incidents can

be on the exporting country and the implicated

industry, particularly during periods where the implicated exports were reduced, suspended, or denied

entry. And as we shall see, it can often be difficult for

the exporting market to recover from an outbreak or

illness linked by fact or by rumor to an exported food

(Satcher, 2000). 

Cyclospora in Guatemalan Raspberry Exports to

The United States and Canada

In 1996, Cyclospora outbreaks in the United States

and Canada caused 1,465 illnesses (Herwaldt and

4 Food industry’s response to consumer food safety concerns is

discussed in Chapter 10.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  59

Ackers, 1997). At first, California strawberries were

erroneously implicated, and this caused $20 to $40

million in lost strawberry sales (Powell, 1998). By

July 1996, the U.S. Centers for Disease Control and

Prevention declared Guatemalan raspberries as the

likely source of these illnesses. After additional

outbreaks in 1997, Guatemalan raspberry exporters

temporarily suspended exports to the United States,

resulting in an estimated income loss of $10 million to

Guatemalan producers and workers (Powell, 1998). In

response to the outbreaks, the U.S. Government issued

an import alert for Guatemalan raspberries for the

spring 1998 season. Although Canada faced similar

risks, it did not institute a similar ban at this time.

Canada later banned Guatemalan raspberry imports

after another outbreak in Toronto caused 305 illnesses

in 1998—a ban that remains in place today. In

contrast, the U.S. opened its doors in 1999 to

Guatemalan raspberries from approved farms using a

new food safety program.

Prior to these outbreaks, in 1995/96, Guatemala was a

major player in raspberry exports to the United States.

Although the problem appears to have been resolved

to the satisfaction of the U.S. Food and Drug

Administration (FDA), the demand for Guatemalan

raspberries has only been restored to about one-third

of the pre-outbreak levels (Calvin et al., 2000). The

trade restrictions coupled with the time needed to

implement the complex system of production controls

gave other countries, particularly Mexico, the opportunity to take over much of Guatemala’s role as a raspberry supplier (fig. G-2). Only six Guatemalan

raspberry farms remain in business, down from the

1996 estimate of 85 farms before the first outbreak

(Calvin et al., 2000).

During the early days of this incident, there was a

temporary reduction in demand for all berries from all

sources, with strawberries particularly hard hit (Calvin

et al., 2000). Retail and commercial buyers eager to

protect their business and the health of their

customers, and consumers knowledgeable about the

outbreak, switched to other types of produce. Later

when Guatemalan raspberries were identified as the

source of the outbreak, consumer demand dropped for

Guatemalan blackberries as well, and the demand for

raspberries as a whole declined regardless of the

country of origin (Calvin et al., 2000). Although this

problem has been resolved, lingering changes in

consumer demand and trade continue to persist today.

Consumer confidence about Guatemalan raspberries

(and other Guatemalan products) is changing slowly

though it has not yet been completely restored (Calvin

et al., 2000), and some buyers continue to avoid it. 

The highly publicized Guatemalan raspberry crisis

raised consumer awareness about the potential for

imported produce to bear foodborne pathogens (Zepp,

Kuchler, and Lucier, 1998).5 This resulted in the interests and concerns of consumers being intertwined with

the marketing actions of retail and other commercial

buyers. At the top of figure G-1, this experience with

Cycolospora in imported raspberries can be considered

as a shock to the food safety risk perceptions in the

United States. This in turn alters the tastes and preferences for raspberries if buyers and consumers now see

the bundle of attributes possessed by raspberries, and

perhaps by other berries, as containing higher food

safety risk levels. These updated tastes and preferences

are reflected in what the United States wants in these

products (Cyclospora-free raspberries), and in what

the United States will accept in imports (e.g., raspberry imports from countries where Cyclospora is not

a problem).

1991/92 93/94 95/96 97/98

0

500

1,000

1,500

2,000

2,500

Figure G-2

U.S. fresh raspberry imports

Metric tons

Other1

Chile

Mexico

Guatemala

1 Not including Canadian imports of fresh berries which are often

technically still fresh berries but destined immediately for processing

facilities.

2 Season defined from September through August of the following

year.

Source: U.S. Department of Commerce data published in 

Calvin et al., 2000.

Season 2

5 In October 1997, following media attention on these outbreaks,

the President announced a food safety initiative on the safety of

imported and domestic fruits and vegetables to upgrade standards

for fresh produce and to ensure that imported produce is as safe as

domestic produce (Vogt, 1998).
60  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

This incident illustrates that consumer perceptions

about the implicated food product and about the

exporting country’s ability to produce safe food are

slow to recover after an international food safety incident, and that these perceptions have a lasting influence on food demand and global trade. This case study

also illustrates that after a food safety incident, industries implicated by rumor, fact, or association can be

economically vulnerable, countries can respond to

similar risks differently, and consumption and trade

patterns can adapt and change, potentially involving

substitution away from the implicated product or away

from a country’s exports of that product.

Bovine Spongiform Encephalopathy (BSE) 

In The United Kingdom

In 1996, Britain announced that there was a possible

link between bovine spongiform encephalopathy

(BSE), known as “mad cow disease” in cattle and a

new strain of Creutzfeldt Jakob Disease (vCJD) in

humans. This rare but invariably fatal human strain

causes progressive deterioration of brain tissue and has

caused 87 deaths as of December 2000 in the United

Kingdom (U.K. Dept. of Health, 2000), two in France

(and one probable), and one in the Republic of Ireland.

Science has not provided a definitive understanding of

how BSE is linked to this human strain. However,

many scientists now believe that humans become ill by

eating bovine products contaminated with some kind

of causative agent of BSE.

Immediately after the 1996 announcement, domestic

sales of beef products in the United Kingdom fell by

40 percent and within a month, household consumption of beef fell 26 percent from the previous year’s

level (Atkinson, 1999).6 Table G-1 shows that the

significant export trade in live cattle and beef developed by the United Kingdom during the early 1990s

was hard hit by the European Union’s (EU) March

1996 ban of U.K. live cattle and bovine products

(Atkinson, 2000). Other export markets followed the

EU’s ban on British live cattle and products, lowering

real producer cattle prices in the United Kingdom.

In the first year of the crisis (1996), the total economic

loss from BSE to the United Kingdom was estimated

to range between £740 million and £980 million

(Atkinson, 1999) (US$1.2 to US$1.6 billion).7

Although this figure has not been updated, the cumulative gross budgetary cost of BSE to the United

Kingdom between March 1996 and March 31, 2000,

was roughly £3.5 billion (US$5.6 billion) and is

expected to total £4 billion (US$6.4 billion) by March

31, 2001 (Watson, 2000). The number of newly

confirmed BSE cases in animals peaked in 1992 and

has since been decreasing due to prevention and

control efforts.8 As of August 1, 1999, exports of U.K.

beef to the EU are permitted. However, sales are

expected to be slow, and any short-run benefits will

probably come from increased consumer confidence

about beef in the United Kingdom (Atkinson, 1999). 

In addition to the financial toll, the emotional toll of this

crisis was particularly high. Incidences of human illness

caused enormous concern worldwide and left a lasting

impact on food safety risk perceptions. The media

emphasized the unusually high severity of the human

illness that is relentlessly progressive, untreatable, and

invariably leads to a traumatic decline and death.

Consumer concerns were fueled higher when the media

told human stories where families of victims essentially

saw loved ones waste away and when the media emphasized that because of a lack of scientific knowledge

about the incubation period and how to prevent and

control the disease, no one knew for certain how high

the human health toll would reach. Recently discovered

cases of BSE in other EU countries have continued to

fuel consumer concerns worldwide and have caused

economic disruptions in these countries. For example,

between November 2000-February 2001, 29 BSE cases

were discovered in Germany, and beef consumption in

Germany fell by more than 75 percent during the same

period (Reuters, 2001).

However, until the recent foot and mouth disease

outbreak in Europe, in the United Kingdom at least,

there were several signs that consumer confidence in

the safety of beef was beginning to return. During the

four-week period ending May 28, 2000, total beef

consumption in Great Britain increased 4 percent,

compared with consumption a year earlier (though

still 9 percent below the 1995 level) and the percent

of homes that purchased beef increased 1 percent

6 A detailed chronology of events can be found on

<http://www.maff.gov.uk/animalh/bse/default.htm> as accessed on

June 5, 2000.

7 Assuming an exchange rate of 1 pound sterling is equal to

US$1.60.

8 Although BSE cases in animals existed during the 1980s, the

‘BSE crisis’ followed the British Government’s announcement of a

possible link to vCJD in humans in 1996.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  61

compared with purchases a year earlier (though still 4

percent below the 1995 level) (MAFF, 2000). Beef’s

share of total meats consumed recovered in 1997 and

was stable in 1998 (Atkinson, 1999). Part of the

increase in beef consumption is due to lower real

beef prices (Atkinson, 1999) and part is likely to be

explained by increased confidence by some U.K.

consumers in the safety of beef. Following the BSE

crisis, the U.K. Government undertook policy

changes aimed at eradicating BSE, preventing its

transmission to other animal species, and protecting

consumers of beef products in the United Kingdom

and worldwide (Atkinson, 1999). For example, all

cattle over 30 months of age were banned from

entering the animal or human food chain by the U.K.

Government. Other measures were undertaken to

cushion U.K. beef producers and the rendering

industry from the full economic impacts of the crisis

and to restore public confidence.

Figure G-1 can also be used to understand how food

safety risk perceptions by U.K. consumers are

changing following improvement in government

control over the BSE crisis. Confidence in the beef

supply by U.K. consumers is beginning to return due

to changes in food safety risk perceptions which are in

turn influenced by improvements in access to and

extent of information about the disease, greater trust in

the different sources of information, and belief that the

current ability to avoid this risk has been improved by

the U.K. Government’s control and prevention actions.

1999 Contamination of Feed in Belgium

Another significant food safety issue that quickly

spread across national borders and caused serious trade

impacts occurred when fat used in animal feed in

Belgium was inadvertently contaminated with polychlorinated biphenyls (PCBs) and/or cancer-causing

dioxin in January 1999. The feed was later fed to

chicken, swine, and other food animals, potentially

resulting in contaminated food products. To date,

human illnesses have not been linked to this incident

though long-term surveillance may find otherwise. 

Although dioxin can be found throughout the natural

world (soil, water, and air for example), 90 percent of

human exposure is through the food supply (WHO,

1999). Dioxins are persistent organic pollutants that

accumulate in body tissue and pose cancer and other

human health risks—in general, the higher up the food

chain, the greater the accumulation (WHO, 1999).

Consumers have only a limited ability to restrict their

exposure to foodborne dioxins (e.g., consuming lowfat dairy products and trimming fat from meat) and

therefore national governments have essential roles in

monitoring food safety and acting to protect public

health (WHO, 1999).

The European Commission (EC), the executive body

of the EU, and the rest of the world were not notified

of the dioxin crisis until late May 1999. On June 11,

the U.S. Food and Drug Administration (FDA) issued

a precautionary import alert that recommended detention of products at ports of entry until importers

provided lab test results showing that shipments were

free of detectable levels of PCBs and/or dioxins (FDA,

1999). Products in this initial import alert included

eggs, products containing eggs, game meats from

Belgium, France, and the Netherlands, all animal feeds

and feed ingredients, and pet foods from all European

countries (FDA, 1999). This list was later expanded to

include milk-containing products such as soups and

cheese.9 Countries around the world also issued

different combinations of temporary consumer advisories, import bans, and import alerts of potentially

contaminated foods and animals from Belgium, select

Table G-1—United Kingdom exports of beef and veal and cattle, 1990-1999 1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Beef and Veal:

 Quantity (metric tons) 81,837 80,252 74,419 117,771 141,706 148,304 31,893 269 995 322

 Value (1,000$) 298,232 270,043 288,535 353,597 486,241 531,066 105,084 832 2,799 1,400

Cattle:

 Quantity (head) 351,501 399,990 429,129 424,589 468,715 392,157 57,067 36 126 17

 Value (1,000$) 77,861 88,748 110,444 126,217 133,119 103,027 13,276 5 36 4

1

 In 1996, the European Union banned imports of U.K. bovine products and live cattle.

Source: FAOSTAT Agricultural Data, http://apps.fao.org/page/collections?subset=agriculture, accessed Feb. 26, 2001.

9 The import alerts from this crisis were later canceled in early

2000 (personal communication with FDA on September 21, 2000).
62  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

EU countries, or the EU as a whole.10 Many foreign

buyers demanded price concessions or refused to buy

select Belgian products. Belgium also banned

domestic sales of many products. 

According to a report from the Belgium Ministry of

Economic Affairs on the impact of the dioxin crisis on

meat production, there was a sharp decline in Belgian

meat production in June 1999, some recovery in JulyAugust, and a September production level at 5-15

percent below normally expected levels (FAS, 2000).11

Production of other food products such as milk and

eggs also faced a more subtle but marked decline in

June, though these dioxin effects had largely disappeared by September (FAS, 2000). Overall, when

considering the relative importance of the different

subsectors, the dioxin crisis caused an estimated food

industry production decrease of 10 percent in June

1999, 2.5 percent in July and August, and 1.5 percent

in September (FAS, 2000). Interestingly, there was a

production increase in July for animal feeds which was

likely due to a temporary slaughter ban that initially

kept many animals on the farms (FAS, 2000). 

The combination of slaughter bans, large price

concessions, and reduced markets posed an economic

burden on food producers. In particular, the Belgian

swine industry suffered when test results in June 1999

confirmed dioxin contamination of swine on some

farms (FAS, 1999). Contaminated swine farms were

depopulated and the swine were destroyed. On other

farms, stables of piglets and slaughter hogs became

overpopulated because of reduced demand, adding

unnecessary feed costs, limiting stable space, and

prohibiting fatteners from buying piglets and starting

new fattening cycles. A higher amount of pork was

put into storage because of reduced markets. The

Belgian pork sector received limited financial aid

from the Belgian Government for this crisis and did

not receive any financial aid from the EU

Commission (FAS, 1999). 

It is difficult to gauge the international trade and other

economic impacts of this crisis. As of yet, 1999 data

on Belgium exports are only available for quantities of

beef, veal, pork, live cattle, and swine traded (table G2). Although exports in 1999 decreased by 16 percent

for beef and veal and by 5 percent for pork, exports of

live cattle increased by 20 percent and 71 percent for

swine. It is unclear what percent of any trade adjustments are due to the crisis or due to other factors and

how prices affected net farm returns.

The estimated cost of this food safety incident to the

Belgian economy exceeds $750 million (Ekperigin,

2000). And as other EU countries were also affected

by export bans, the cost of this incident worldwide is

likely to be higher. These costs are, however, offset to

some extent by gains obtained by industries and countries that provided substitute products. In response to

this scare and the temporary removal of some food

products from Belgian supermarkets, Belgian

consumers became more concerned about food safety

and many began consuming more produce, organic

eggs, and other organic products. The dioxin crisis also

prompted increased consumption of mutton, lamb, and

horsemeat (FAS, 2000). The clearest example of a

Belgian food industry that profited from the dioxin

crisis is that the production of fish products increased

appreciably in June and July 1999 (FAS, 2000). And,

in the German market, there appears to have been a

temporary extra demand for pork and slaughter hogs

(FAS, 1999).

As with the BSE crisis, the dioxin scare illustrates that

a food safety crisis can pose high financial costs on

industries and countries. Reverberations from the

dioxin scare contributed to the Belgian Government’s

collapse later that year (Orden, Josling and Roberts,

2000). The dioxin scare also illustrates that delays in

identification and mitigation actions can increase the

extent and impact of the incident as trade and

consumption of contaminated products continues

unhindered. On the other hand, the financial stakes in

the dioxin crisis were so high that Belgian regulators

had some reason to be cautious about alerting the

public and trading partners about the potential crisis

until there was sufficient information on the source,

extent, and risk posed by the crisis.

The dioxin crisis caused a high awareness and anxiety

about food safety in Belgium that served as background stress for consumer reaction to another scare,

this time over Coca-Cola (Nemery et al.,1999). Within

a month of the announcement about the dioxin crisis,

school children and other individuals across Belgium

began complaining about nausea, headaches, and other

symptoms that they believed were caused by drinking

bottled Coca-Cola. There were never any significant

10 For example, countries that took action included Australia, Bulgaria, Canada, Cyprus, Germany, Portugal, Saudi Arabia, Singapore, South Africa, and Thailand.

11 Data are based on an index of production per working day

(1995=100).
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  63

lab or physical findings to support these claims and

some people believed that features of this outbreak

pointed to mass hysteria or mass sociogenic illness

(MSI) (Nemery et al., 1999).12 There was intense

media coverage about the Coca-Cola crisis on the tails

of intense media coverage about the dioxin incident. 

The point here is that major food safety incidents can

greatly increase consumer concerns about food safety.

Even though this incident of dioxin-contaminated feed

was identified and resolved at its source and there

have been no apparent human illnesses, perceptions

about food safety by the Belgian public and perceptions about the safety of Belgian agricultural products

by foreign buyers may be slow to recover. This may

be particularly true because so many different kinds

of products were implicated and perhaps because it

does not appear that accurate and sufficient information was supplied to the public and importing nations

early in the crisis to assure people that the crisis was

under control. 

Looking Ahead...

Currently, the two most prominent conflicts with the

potential to jeopardize trans-Atlantic food trade are the

beef-hormone dispute and the EU’s approval procedure for introducing genetically engineered products

into the food chain (Josling, 1998). The issue about

growth-promoting hormones in cattle is one example

where risk perceptions vary internationally. These

hormones are widely accepted as safe and are used on

most farms throughout the United States and Canada,

whereas the EU believes they pose human health risks

and has banned their use in domestic and imported

beef. The U.S./Canadian complaint that this ban is a

protectionist measure is the only outcome of a food

safety dispute that has advanced to the World Trade

Organization (WTO) Appellate Body (Buzby and

Roberts, 1999). As of May 2000, recent scientific

reviews presented to the European Commission (EC)

Table G-2—Belgian-Luxembourg exports, 1989-19991

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Change

2

Metric tons Percent

Bovine meat, fr, ch, w.bn 95,803 110,098 123,608 117,085 111,447 94,805 86,958 80,303 83,850 74,097 59,686 -19

Bovine meat, fr, ch, bnless 8,753 16,012 14,065 11,228 13,418 11,718 12,894 12,778 14,988 14,735 18,413 25

Bovine meat, frz, w.bone 4,680 1,089 1,566 5,831 3,461 981 988 3,344 4,519 2,291 2,141 -7

Bovine meat, frz, boneless 7,579 10,197 23,548 28,303 35,441 33,395 39,983 42,082 36,044 21,651 13,528 -38

Meat of swine, fr, chlld 163,253 164,759 225,308 255,158 303,100 312,721 380,216 389,984 375,100 422,131 400,652 -5

Meat of swine, frz 127,924 113,315 122,308 111,642 108,060 120,409 100,011 103,040 100,301 102,969 94,898 -8

Poultry, whole, fr, ch 4,692 9,086 11,311 13,651 18,734 18,372 17,128 21,617 25,405 27,868 28,598 3

Poultry, whole, frz 24,076 23,878 26,379 29,396 29,821 23,792 21,305 19,559 26,313 27,625 19,577 -29

Edible offal, bov. fr, ch 1,843 2,364 2,028 2,583 6,051 5,797 9,666 10,126 10,929 15,554 3,621 -77

Edible offal, bov., frz 4,791 5,461 7,950 9,441 10,175 10,050 9,999 12,281 10,802 7,126 23,699 233

Edible offal, swine, fh, ch 3,740 3,555 4,724 6,007 14,476 12,928 13,596 19,036 24,564 27,200 20,494 -25

Edible offal, swine, frz 17,546 17,336 17,872 20,894 20,695 25,518 23,130 24,449 29,002 31,743 218 -99

Sausage of meat, offl. etc 10,315 11,057 15,661 16,490 31,142 34,360 35,611 48,548 90,626 87,611 31,676 -64

Milk, fat cont. 1% or less 112,910 108,801 136,778 117,727 109,296 109,303 117,855 89,192 102,680 93,358 68,845 -26

Milk, cream fat cont.1-6% 513,589 478,418 564,070 693,685 683,570 801,064 823,817 779,161 682,509 690,327 693,046 0

Cream, fat content 6%+ 23,402 18,186 21,645 33,628 21,850 34,248 30,397 45,477 45,926 91,210 93,388 2

Milk, solid, to 1.5% fat 84,832 63,038 83,660 90,003 102,217 76,406 150,836 88,946 65,808 62,361 90,491 45

Milk, crm solid 1.5%+ fat 36,126 34,430 69,614 72,173 99,578 119,699 176,401 115,213 92,427 90,237 71,961 -20

Milk, cream unsweetened 20,370 30,875 41,327 62,800 24,765 25,477 28,560 18,271 34,342 78,552 54,366 -31

Milk, cream, sweetened 12,576 16,626 20,423 20,940 20,057 11,936 20,329 16,185 12,239 12,854 15,663 22

Whey 102,768 103,497 106,480 122,462 94,220 66,948 76,097 78,660 94,564 88,949 56,171 -37

Milk products nes3 452 1,355 734 11,914 24,546 53,470 29,264 40,833 31,349 30,670 15,159 -51

Butter, other fat of milk 116,658 107,278 132,469 119,244 133,541 127,367 125,094 105,345 111,332 116,825 107,338 -8

Egg, unshelld; yolks, dried 664 893 1,175 1,117 1,728 2,177 1,343 1,848 3,477 3,488 4,295 23

Egg, unshelld; ylk, not dry 32,690 37,022 36,015 34,552 29,876 24,476 30,142 22,358 27,624 25,872 19,340 -25

1

 Select exports to the rest of the world in metric tons. 2 Percent change between 1998 and 1999. 3 nes = Not elsewhere specified.

Source: United Nations COMTRADE database, 2000.

12 “MSI can be defined as a constellation of symptoms of an

organic illness, but without identifiable cause, which occurs among

two or more persons who share beliefs related to those symptoms”

(Philen et al., 1989).
64  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

led the EC to conclude that the evidence that the

hormone 17ß oestradiol could cause cancer in humans

is sufficiently strong to justify permanently banning all

of its uses for farm animals, and that the provisional

ban on five other hormones should be continued

because they need further study. The debate continues

and some retaliatory tariffs on European products

remain in place.

Similarly, European consumers are less likely than

U.S. consumers to view biotech foods as safe. These

differences are largely due to two main factors. First,

European consumers are generally less trusting of food

safety regulatory systems than are U.S. consumers

because of recent incidents where European agencies

initially failed to detect the extent of food safety problems and downplayed the likely consequences

(Feldmann, Morris, and Hoisington, 2000). Second,

European consumers are more aware than are U.S.

consumers about the extent to which foods contain

biotech ingredients (Feldmann, Morris, and

Hoisington, 2000). 

Labeling, in general, is a prominent issue relevant to

domestic and internationally traded food. In addition

to process-based biotech labeling to provide information to consumers concerned about genetically engineered foods, some of the proposed and new food

labeling regulations include eco-labeling to promote

environmental quality, mandatory country-of-origin

labeling to promote domestic agriculture, and health

and nutrition labeling to encourage healthier diets.

Country-of-origin labeling can also provide consumers

with information if they are seeking to avoid certain

food imports from certain countries associated with

previous or current food safety scares or lapses. To

date, most countries do not use labeling as a regulatory

tool for food safety (Caswell, 1998). Labeling may

help consumers make informed purchase decisions,

thereby increasing market efficiency and consumer

welfare (Golan, Kuchler, and Mitchell, 2000).

However, labeling raises costs of producing and

marketing the products and will rarely be sufficient in

correcting production externality problems (Golan,

Kuchler, and Mitchell, 2000). And, some consumers

and governments believe that labeling is an unfair

trade barrier and will restrict trade.

As the three case studies have illustrated, an international food safety crisis can have profound impacts on

the implicated industry, the exporting country, and

international trade in general. For example, the relatively minor outbreak from Guatemalan raspberries

had a tremendous impact on the industry, and other

Guatemalan exports suffered as well. The BSE crisis

virtually stopped international trade of U.K. live cattle

and bovine products, and the dioxin crisis affected a

large array of agricultural industries in Belgium.

The three case studies also illustrate that even after

major international food safety incidents have 

been resolved or largely controlled, consumer perceptions about the implicated foods and the exporting

country’s ability to produce safe food may be slow to

recover. However, a timely and appropriate response

to a food safety crisis by the government and by the

implicated industry can help minimize damage from

the crisis to food markets and consumer confidence.

The extent of scientific uncertainty about a food

safety issue clearly plays a role in shaping food safety

perceptions, and these perceptions affect what countries will accept in terms of food safety risks in

domestic and imported food. 

The mix of private and public strategies to control

food safety risks is changing both in the United States

and abroad, and in turn, the patterns of international

food trade are also changing. Private control strategies

include self-regulation, vertical integration (to ensure

quality/safety of inputs, for example), Hazard Analysis

and Critical Control Point (HACCP) systems, and third

party certification such as the International

Organization for Standardization (such as, the ISO

9000 series or “EN 29000” in Europe) (Buzby and

Roberts, 1999).13 Public control strategies range

widely and include regulatory reorganization efforts

for food safety as well as regulations for domestic and

internationally traded food. 

In general, countries are responding to arbitrage pressures and other trade-related tensions by adopting multilateral coordination mechanisms such as mutual

recognition, coordination, and harmonization (Sykes,

1995). Mutual recognition means a country explicitly

accepts the standards, certification procedures, and

regulations of other countries (for example, U.S. inspection of meat is accepted for their imports). Coordination

takes convergence one step further by jointly designing

adjustments to each country’s policies (using, for

example, World Health Organization (WHO) control

procedures for communicable diseases). Harmonization

13 See Caswell and Henson (1997) for a discussion on the interaction of private and public systems to control food quality.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  65

entails even higher levels of convergence such as

regional or world standards or agreements.

Private-sector approaches are often intertwined with

each other (ISO standards often use HACCP, for

example) and with multilateral coordination mechanisms (such as Codex HACCP standards). Countries

and firms within countries may use private system

approaches differently, and this difference influences

the marketing of food safety internationally. In

general, the greater the coordination of multilateral

mechanisms and private approaches among firms and

nations, the more they will be able to provide verifiable and valuable information to trading partners and

facilitate trade.

References

Atkinson, Nigel. Head of Economics (International)

Division, Ministry of Agriculture, Fisheries and Food,

London. “The Impact of BSE on the U.K. Economy.”

Paper presented to the 1st Symposium on Animal 

and Human TSEs, Buenos Aires, August 11, 1999,

under the auspices of the Instituto Interamericano de

Cooperacion Para La Agricultura.

http://www.iica.org.ar/Bse/14-percent20Atkinson.html,

accessed 6/1/2000.

Buzby, Jean C. and Donna Roberts. “Food Safety and

International Trade in the Twenty-first Century.”

Choices. Fourth Quarter, 1999, pp. 23-27.

Calvin, Linda, William Foster, Luis Solorzano, J.

Daniel Mooney, Luis Flores, and Veronica Barrios.

“Response to a Food Safety Problem in Produce: A

Case Study of Cyclosporiasis Outbreak.” Paper presented at the International Agricultural Trade

Research Consortium Conference on Global Food

Trade and Consumer Demand for Quality, Montreal,

Canada, June 26-27, 2000.

Caswell, Julie A. “How Labeling of Safety and

Process Attributes Affects Markets for Food.” Agricultural and Resource Economics Review. Vol. 27,

No. 2, October 1998, pp. 151-158.

Caswell, J. A. and S. J. Henson. “Interaction of Private

and Public Food Quality Control Systems in Global

Markets.” in proceedings of “Globilisation of the

Food Industry: Policy Implications”, Eds. R. J.

Loader, S. J. Henson, and W. B. Traill, 1997,

pp. 217-234.

Ekperigin, H. E. “Use of Poultry Litter or Manure as a

Fertilizer for Croplands: Impact on Animal and

Public Health.” FDA Veterinarian. Vol. 15, No. 3,

May/June 2000. 

http://www.fda.gov/cvm/fda/infores/fdavet/2000/may

.html#update, accessed June 2, 2000.

Feldmann, M. P., M. L. Morris, and D. Hoisington.

“Genetically Modified Organisms: Why All the Controversy?” Choices. First Quarter, 2000, pp. 8-12.

Food Marketing Institute. Trends in the United States:

Consumer Attitudes and the Supermarket, 1997.

Washington, D.C. 1997.

Foreign Agricultural Service. “Belgium-Luxembourg

Livestock and Products: Update on the Impact of

the Dioxin Crisis in Belgian Production, 2000.”

Global Agriculture Information Network Report

#BE0007, April 17, 2000.

http://www.fas.usda.gov/scriptsw/attacherep/attache

_lout.asp as accessed on August 9, 2000.

Foreign Agricultural Service. “Belgium-Luxembourg

and The Netherlands Livestock, Livestock and Products Annual Report 1999.” Global Agriculture Information Network Report #BE9021, August 1, 1999.

http://www.fas.usda.gov/scriptsw/attacherep/attache_

lout.asp as accessed on August 9, 2000.

Frenzen, P. D., A. Majchrowicz, J. C. Buzby, B.

Imhoff, and the FoodNet Working Group. “Consumer Acceptance of Irradiated Meat and Poultry

Products.” ERS, USDA, AIB-757, August 2000.

Golan, G., F. Kuchler, and L. Mitchell (with contributions from C. Green and A. Jessup). “Economics of

Food Labeling,” Agricultural Economic Report

Number 793, ERS, USDA, December 2000.

Henson, Spencer. “Demand-side Constraints on the

Introduction of New Food Technologies: The Case

of Food Irradiation.” Food Policy. Vol. 20, No. 2,

1995, pp. 111-127.

Herwaldt, B. L., M. L. Ackers, and the Cyclospora

Working Group. “An Outbreak in 1996 of

Cyclosporiasis Associated with Imported Raspberries.” New England Journal of Medicine. Vol. 366,

No. 22, 1997, pp. 1548-1556.

Josling, T. “EU-US Trade Conflicts Over Food Safety

Legislation: An Economist’s Viewpoint on Legal

Stress Points that Will Concern the Industry.” Paper
66  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

for the Forum for US-EU Legal-Economic Affairs,

House of Estates, Helsinki, September 16-19, 1998.

Madden, J. M. “Concerns Regarding the Occurrence

of Listeria monocytogenes, Campylobacter jejuni,

and Escherichia coli O157:H7 in Foods Regulated

by the U.S. Food and Drug Administration.” Dairy,

Food, and Environmental Sanitation. Vol. 14, No. 5,

May 1994, pp. 262-267.

MAFF, Ministry of Agriculture, Fisheries, and Food,

United Kingdom. “MAFF BSE Information: Beef

Industry.” http://www/maff.gov/uk/animalh/bse/market-support/market-support-index.html, as accessed

on July 20, 2000.

Motarjemi, Y. and F. K. Käferstein. “Global Estimation

of Foodborne Diseases.” World Health Statistics

Quarterly. Vol. 50, No 1⁄2 1997, pp. 5-11.

Nemery, B., B. Fischler, M. Boogaerts, and D. Lison.

“Dioxins, Coca-Cola, and Mass Sociogenic Illness

in Belgium.” Correspondence in The Lancet. Vol.

354, 1999, p. 77.

Orden, D., T. Josling, and D. Roberts. “Product Differentation, Sanitary Barriers, and Arbitrage in World

Poultry Markets.” Chapter in the proceedings of the

symposium titled “Global Food Trade and Consumer

Demand for Quality” sponsored by the International

Agricultural Trade Research Consortium and NE165, Montreal, Canada, June 26-27, 2000.

Patterson, Eliza. “International Efforts to Minimize the

Adverse Trade Effects of National Sanitary and

Phytosanitary Regulations.” Journal of World Trade.

Vol. 24, No. 2, April 1990, pp. 93-102.

Philen, R. M., E. M. Kilbourne, T. W. McKinley, and

R. G. Parrish. “Mass Sociogenic Illness by Proxy:

Parentally Reported Epidemic in an Elementary

School.” The Lancet. ii, December 9, 1989,

pp. 1372-1377.

Powell, D. “Risk-Based Regulatory Responses in

Global Food Trade: Guatemalan Raspberry Imports

into the U.S. and Canada, 1996-1998.” A Paper Prepared for the Conference on Science, Government

and Global Markets: The State of Canada’s ScienceBased Regulatory Institutions, Carleton Research

Unit on Innovation, Science and Environment

(CRUISE), Ottawa, October 1-2, 1998.

Reuters. Agence France Presse English/Reuters. “Germany Ready to Negotiate Sending Cattle to North

Korea,” February 19, 2001, as printed on FSNet,

http://www.plant.uoguelph.ca/safefood/

February 23, 2001.

Satcher, D. “Food Safety: A Growing Global Health

Problem.” JAMA. Vol. 283, No. 14, April 12, 2000,

p. 1817. <http://jama.ama-assn.org/issues/v283n14/

full/jsg00000-1.html>, accessed June 6, 2000.

Sykes, Alan. O. Product Standards for Internationally

Integrated Goods Markets. Washington D.C.: The

Brookings Institution, 1995.

U.K. Department of Health. “Monthly CreutzfeldtJakob Disease Statistics.” December 1, 2000.

<http://www.doh.gov.uk/cjd/stats/may00.htm>, as

accessed January 2, 2000.

U.S. Food and Drug Administration (FDA). “All Milk

and Milk-Containing Food Products from Belgium

to be Detained at Ports of Entry.” Talk Paper T99-

30, June 23, 1999. 

Vogt, Donna U. and Mickey Parish. “Food Biotechnology in the United States: Science, Regulation, and

Issues.” Washington, D.C.: Congressional Research

Service, CRS Report for Congress RL30198,

June 2, 1999.

Vogt, Donna U. “Food Safety Issues in the 105th.”

Washington, D.C.: Congressional Research Service,

CRS Issue Brief, Order Code IB98009, Updated

January 30, 1998.

Watson, John. Personal correspondence on June 8,

2000. Economics (International) Division Ministry

of Agriculture, Fisheries and Food, London.

World Health Organization (WHO). “Food Safety—A

Worldwide Public Health Issue.”

<http://www.who.int/fsf/fctshtfs.htm#Recognition of

food safety at international level>, accessed June 1,

2000.

World Health Organization (WHO). (1999) “Dioxins

and their Effects on Human Health.” Fact Sheet No.

225, June 1999. < http://www.who.int/inffs/en/fact225.html> accessed June 21, 2000.

Zepp, G., F. Kuchler, and G. Lucier. “Food Safety and

Fresh Fruits and Vegetables: Is There a Difference

Between Imported and Domestically Produced

Products?” Vegetables and Specialties, VGS-274,

April 1998, pp. 23-28.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  67

Introduction

The organic foods market is supported by

consumers in nearly every developed country in

the world, with International Trade Centre (ITC) data

indicating 1997 sales of nearly $10.5 billion in Europe,

the United States, and Japan (ITC 1999). Many of the

conclusions previously presented regarding consumer

behavior also apply in the organic market. Preferences

change in response to income changes (Chapters 1 and

2) and lifestyle decisions (Chapter 3), and are

dependent on the age of consumers (Chapter 3). Food

safety concerns are also shaping consumer demand

(Chapter 7) and spurring interest in organic foods.

Organic foods are distinguished from non-organic foods

by the methods used in their production and processing,

rather than by observable or testable characteristics.

Although there is no single international organic

production regulation, all generally accepted organic

rules prohibit use of synthetic fertilizers, pesticides,

growth regulators, and livestock feed additives, and

require long-term soil management, emphasis on animal

welfare, and extensive record keeping and planning.

Certain activities such as use of genetically modified

stock, application of sewage sludge to organic acreage,

and food irradiation are also prohibited. 

To be certified organic, a farm or processing facility

must be inspected by a credible third party state or

private organization to verify that all requirements of

the certifying body are met. Conventional or nonorganic foods would not meet organic standards, if

subjected to certification criteria. Intermediate categories of eco-labeled foods, such as certified

Integrated Pest Management (IPM) in the United

States, Low-Chemical foods in Japan, and some

classes of Green Food in China, fall short of the strict

requirements of organic certification. 

Most studies characterize organic consumers as

affluent, well-educated, and concerned about health

and product quality (Richter et al., 2000; ITC, 1999;

Thompson, 1998; The Hartman Group, 1996;

HealthFocus, Inc., 1999; The Packer, 2000a and

2000b, 1998; FAS 2000b). Many are parents of young

children or infants. Most regular consumers favor

locally grown organic products, when available, in an

effort to support local farmers and ensure freshness. 

There is some variation in age and gender of purchasers

across countries. In the United States, younger aged 

(18 to 29 years) and middle-aged (40 to 49 years)

consumers are more likely to buy organics, but men and

women are equally likely to buy organics (Thompson,

1998; Lohr and Semali, 2000). The typical Japanese

organic buyer is female and in her 30s or 40s (FAS,

2000b). In the Netherlands, typical purchasers are

between 25 and 50 years old and either living alone or

in a dual-income household with children (ITC, 1999).

Factors Affecting International Demand

And Trade in Organic Food Products

Luanne Lohr1

Abstract: With increasing presence in supermarkets and a broader base of consumer support among both occasional and regular buyers, organic food markets are

expanding worldwide. Taste, freshness, quality, and food safety concerns drive consumer demand for organic foods. Price premiums, the price-quality trade-offs, as

well as country of origin, GE content, and other social concerns will likely determine

future market expansion.

1Associate professor with the Agricultural and Applied Economics

Department, University of Georgia. Research for this paper was

supported by Cooperative Agreement 43-3AEK-7-80060 with the

ERS-USDA.
68  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

This cross-country variation is most likely related to

cultural differences regarding household shopping

responsibilities as well as respondents’ level of commitment to the environment and personal health.

Reasons for purchasing organics are similar across

countries. In Europe and the United States, taste, freshness, and quality rank among the top reasons for

organic purchases, especially for produce (ITC, 1999;

The Packer, 2000 & 1998). The perception that organic

foods are healthier is widespread among buyers, even

though some countries prohibit advertising that suggests

this. Food safety is the top reason driving Japanese

interest in organic food, and was listed as the main

concern by 80 percent of 1,000 consumers surveyed in

1995 (MAFF, 1996). Secondary factors for Japanese

consumers are healthfulness (nutrition) and taste. 

Food scares such as mad cow disease, E. coli contaminations, and pesticide poisonings, as well as concerns

over genetic engineering (GE) in foods, have stimulated interest in organic foods. Until recently,

consumer response to such incidents was localized or

at most affected a single country. With increased

trade, the impact of these events on consumer

behavior are more widespread as more sources are

utilized for imports.

European retailers have responded by advertising food

safety and health aspects of organic foods, with this

theme dominating retail messages in 12 countries

(Michelsen et al., 1999). Environmental protection is

the second most important argument presented by

retailers in Europe, although consumers do not consistently select food products according to the environmental impact of the production and processing

systems. The ITC (1999) noted inconsistencies in

several countries between political views of selfdescribed environmentalists and their shopping habits.

Taste and freshness are not important parts of retailer’s

message in Europe, although consumers rate organics

higher in this regard (Michelsen et al., 1999). 

Japanese retailers have focused store promotions on

food safety issues, touting perceived advantages of

organic foods, which corresponds to the greatest

concerns of their clientele (FAS, 2000b). Japanese

consumers also are very concerned about freshness,

which is believed to be linked to the nutritional

content and functional value of foods (MAFF, 1996).

This is also part of the message that Japanese retailers

deliver to promote organic foods. Overall, Japanese

retailers appear to be more attuned to their consumer

interests than European retailers.

In the United States, retail managers who demonstrate

personal interest in environmental and human health

are more likely to offer organics in their stores (Lohr

and Semali, 2000). Conflicting data on nutritional,

environmental, and human safety qualities of organic

foods, coupled with strict truth-in-advertising regulations in the United States, have limited the ability to

promote organics on these grounds. Some States even

prohibit comparisons that disparage conventional products by suggesting they are inferior in any way to

organics. Retailers can educate about production

methods, which may be interpreted by consumers as

safer, healthier, or better for the environment than

conventional production methods. 

The current organic market situation in major

consuming countries is described in this chapter.

Effect on organic food demand of price premiums,

price-quality trade-offs, GE content, country of

origin, and consumer social goals are explained.

Prospects for future market growth in the next decade

are also discussed.

Market Status

Worldwide markets for organic foods are expanding,

with annual growth rates of 15 to 30 percent in

Europe, the United States, and Japan for the past 5

years. Using 1997 sales data and annual growth rates

from the ITC (1999), and assuming a linear trend,

projected market size in 2010 will be at least $46

billion in the European Union, $45 billion in the

United States, and $11 billion in Japan. As many as 20

to 30 percent of consumers surveyed in Europe, North

America, and Japan claim to purchase organic foods

regularly (Lohr, 1998). 

While there is interest in organic foods among higher

income, better-educated population segments in nearly

every country, consumers in the United States, Europe,

and Japan drive demand expansion. The current value

of the European organic market is estimated at $5.255

billion, of which U.S. imports contribute $200 million

to $300 million, or about 4 to 6 percent (ITC, 1999;

FAS, 1999c). The current value of the Japanese

organic market is estimated at $3 billion, of which

U.S. imports constitute $100 million, or about 3

percent (FAS, 2000b).
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  69

Few governments keep statistics on sales of organic

foods, necessitating reliance on industry estimates

collected by the United States Department of

Agriculture’s (USDA) Foreign Agricultural Service

(FAS), the International Trade Centre (ITC, under

UNCTAD), and various consultant reports. Estimates

of retail value and market shares of organic foods vary

considerably depending on the source of information.

This lack of consensus is reflected in the data

presented in this chapter.

Retail value, market share, import share, and projected

market growth rates are typically used to assess a

country’s organic market. The retail value is the estimated total sales of organics in the country, including

both domestically produced and imported foods. The

retail share, also referred to as the market share, is the

percentage of all food sales composed of organic,

again both imported and domestically produced. The

import share is the percentage of organic sales that is

attributed to imported foods. Market growth is the

expected annual percentage change in organic retail

sales over the next 5 years. These statistics are related

to each other, but are not equivalent measures due to

the way they are constructed. 

Total retail value indicates the absolute size of the

organic market and is the product of price and quantity

sold. The retail share is this value divided by the retail

value of all food, and suggests how well organic foods

sell compared with conventional foods. Import share is

the value of imports divided by the total retail value,

and is a function of domestic production as well as

demand for organics. The annual market growth is a

compounding factor over 5 years, based on each

previous year’s retail sales. From these descriptions, it

can be seen that macro- and microeconomic factors do

not necessarily result in a uniform change across these

statistics. For example, population growth in a market

might not result in all organic statistics improving,

even if total retail sales are higher.

Growth will occur if organic food demand, whether in

terms of volume or variety, is not being currently met,

and if there is a means of supplying this demand,

whether from domestic or imported sources.

Historically, organic foods were first available in raw or

lightly processed form—fresh produce, unmilled grains,

meats, eggs, dairy, coffee and tea, and spices and herbs.

Domestically produced or processed versions of these

commodities were most consumers’ first exposure to

organic foods. Organic production, with its reliance on

local ecology, emphasizes the comparative advantages

due to climatic and soil factors that are observed in

conventional production. Thus, most countries best

produce organically what they best produce conventionally. For example, Western European countries are

major producers of milk and dairy products, while

Canada, Australia, and the United States are significant

producers of grain (ITC, 1999). However, as the sophistication of the market has increased, consumers have

demanded more variety, mimicking what is available in

conventional form. This demand has greatly expanded

organic trade, while further segmenting market share

into product categories.

The European Market

Table H-1 shows the extent of European, Pacific, and

North American organic markets for which data are

available. Many developed and developing countries

that produce and consume organic foods were

excluded from table H-1 due to their small size, low

income, or emphasis on value-added export and

tourism markets. 

Four countries in Europe account for 63 percent of its

total retail value, yet have relatively small shares of

organic as a percentage of retail sales. These countries

are Germany ($1.6 billion in sales, 1.2 percent share),

Italy ($750 million, 0.5 percent), France ($508

million, 0.4 percent), and the United Kingdom ($445

million, 0.4 percent). The highest organic market

shares are in Austria ($225 million in sales, 2 percent

share), Denmark ($190 million, 2.5 percent), Sweden

($110 million, 1.8 percent), and Switzerland ($350

million, 2 percent). Total population has a significant

impact on these figures, with higher population countries tending to have larger organic retail value but

lower market share. 

There is substantial variation in market share across

product categories, as documented by Michelsen et al.,

(1999) and the ITC (1999). Cereals and baked goods,

fresh produce, especially vegetables, and milk and

dairy products hold the largest organic market shares

by product category in Europe, topping 10 percent in

some categories. For example, in Denmark, 6 to 10

percent of vegetables, 3.5 percent of cereal and 14.2

percent of milk product sales were organic in 1997

(Michelsen et al., 1999). Rapidly growing sectors

include organic meats and seafood, frozen foods,

beverages, and home replacement meals (PSC, 1998). 
70  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

To the extent that domestic production can meet

demand, there is little reason to import foods.

Currently, organic acreage accounts for 10 percent of

farmland in Austria (30 percent import share), 4

percent in Denmark (25 percent import share), 7

percent in Sweden (30 percent import share), and 8

percent in Switzerland, compared with an average of 2

percent in the European Union (ITC, 1999; FAS,

1999c). These countries are self-sufficient in many

staple commodities, but are facing short-term market

growth rates of 10 to 40 percent per year. This could

place greater pressure on imports in product categories

not domestically supplied.

Countries that have a significant presence in the food

processing industry, such as Germany, Italy, Sweden,

and France, also face greater demand for organic

ingredients. European Union regulations require that

70 to 95 percent of a certified organic processed item

be composed of organic ingredients. Spices and

herbs, nuts, dried and powdered fruits, sugar, cocoa,

and sauces are growth categories (PSC, 1998; ITC,

1999). For many countries, this will mean greater

reliance on imports to meet demand. For example,

Germany and Italy have two of the largest organic

food processing sectors in Europe (ITC, 1999), each

importing raw and lightly processed ingredients for

use in food processing.

In addition to excess domestic demand, institutional

factors affect market growth and import shares.

National-level demand promotion campaigns initiated

and financed by retailers, wholesalers, or processors

continually remind consumers of claimed benefits of

organic foods. Austria, Denmark, Sweden, and

Switzerland have benefited from such campaigns, as

have Germany and Italy (Michelsen et al., 1999). Both

European Union and national government subsidy

programs have aided supply more than demand, especially assisting market development in Belgium and to

a lesser extent, France, Germany, Italy, and Sweden

(Michelsen et al., 1999). Denmark additionally has

aggressively supported market development, and

research and development. Except for Germany, all

these countries are expected to see short term market

growth of 20 to 40 percent. 

The unified minimum organic production standard for

the European Union established by the EC Council

Regulation 2092/91 is perceived to have had the

strongest influence on market development (Michelsen

et al., 1999). However, despite attempts to harmonize

organic regulations internationally, there is substantial

variability in ease of import entry. Trade may be

impeded across national boundaries within the

European Union. Even with a common minimum standard, stricter rules are permitted in individual countries

and may give rise to protectionism to ensure integrity

Table H-1—Organic retail sales and import share in world markets 1

Market Retail value Retail share Import share Annual market growth

(US$) (% of sales) (% of organic) (% of retail value)

Austria $225 – $270 million 2.0 – 2.5 30 10 – 15

Belgium $75 – $94 million 0.3 – 1.0 50 n.a.

Denmark $190 – $300 million 2.5 – 3.0 25 30 – 40

France $508 – $720 million 0.4 – 0.5 10 20

Germany $1.6 – $1.8 billion 1.2 – 1.5 40 5 – 10

Italy $750 – $900 million 0.5 – 3.0 40 20

Netherlands $230 – $350 million 1.0 – 1.5 60 10 – 15

Spain $32 – $35.5 million 1.0 50 n.a.

Sweden $110 – $200 million 0.6 – 3.0 30 30 – 40

Switzerland $350 million 2.0 n.a. 20 – 30

United Kingdom $445 – $450 million 0.4 – 2.0 70 25 – 35

Japan $3 billion 1.0 10 15

China $6 million n.a. 0 n.a.

Taiwan $9.7 million n.a 100 200

Australia $123 – $130 million 0.2 10 400

United States $6.6 billion 1.0 n.a. 20

Canada $200 – $500 million 1.0 80 15

Mexico $12 million n.a. 0 n.a.

1

 1997 estimates for European markets, except 1999 estimate for Italy. 1999 estimates for Pacific and North American markets, except 1997 

estimate for China. Annual growth rates are projected for the next 5 years, except 3 years for Taiwan and historical for Canada.

Sources: ITC 1999, PSC 1998, FAS GAIN reports 1999 and 2000, US DOC reports 1999, US DOS reports 1999, Masuda 2000.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  71

of domestic standards (Michelsen et al., 1999).

Organic certification equivalency required for most

countries exporting to the European Union is granted

by the competent authority in the importing country,

and transactions costs vary by country. 

Based on an unpublished telephone interview of

importers and exporters, Belgium, Denmark, the

Netherlands, Sweden, and the United Kingdom were

considered to be relatively easy markets to enter.2 Of

these, several have limited domestic organic production shares of total agricultural land and large import

shares - Belgium (0.48 percent acreage share, 50

percent import share) and the United Kingdom (0.34

percent acreage share, 70 percent import share). The

Netherlands’ 60 percent import share is driven by its

role as Europe’s major re-exporter, rather than by its

relatively low projected annual market growth of 10 to

15 percent (ITC, 1999).

France (10 percent import share) is considered very

difficult to enter, reflecting significant cultural differences, particularly strong nationalism, language

barriers, and regulatory approaches. However, France’s

projected growth of 20 percent is unlikely to be

supplied by domestic production, which was only 0.4

percent of agricultural land in 1997 (ITC, 1999).

Germany’s consumers are considered the most

discriminating in the world with respect to organic

credentials, and apply several “green” political criteria

beyond certification to their purchase decisions, which

has resulted in a relatively small base of committed

consumers. Combined with excess domestic supply for

many commodities, this has resulted in projected

growth of 5 to 10 percent (ITC, 1999). Yet, as a major

food processor, certain organic ingredients that cannot

be domestically produced must be purchased abroad to

satisfy manufacturing needs. 

This discussion illustrates that there is no simple way

to characterize the European organic market. It is

certain that demand is growing and that a greater

variety of organic products is desired. Also, both

domestic production and trade in Europe should

increase over time to meet consumer demand.

The Pacific and North American Markets

The Pacific (Japan, China, Taiwan, and Australia) and

North American (United States, Canada, and Mexico)

markets are even more difficult to describe than the

European market. As mentioned, there has been little

attempt by government agencies to record statistics

for these markets, so private sector organizations

provide most of the data. These are less mature

markets, where national standards have not yet been

fully implemented in many countries. Consumer

awareness of organics is also lower in these countries

than in Europe. 

The lower portion of table H-1 reveals that Japan ($3

billion, 1 percent retail share) and the United States

($6.6 billion, 1 percent retail share) dominate markets

in the Pacific and North American markets. The

Japanese market value includes eco-labeled product

classes such as “low chemical” as well as organic. The

organic portion of total value may be as low as $1

billion (ITC, 1999), which can be more accurately

measured when products are classified according to

strict national organic definitions to be implemented in

2001 (FAS, 2000b). 

Seki (1997) estimated that 60 percent of the Japanese

organic market is fresh produce and 40 percent

processed foods. Japanese organic consumers buy

mostly frozen vegetables, dried fruits, vegetable juice,

soybeans, and fresh produce (FAS, 2000b). Domestic

production in Japan includes acreage devoted to fresh

produce, which is primarily sold directly to consumers

via a subscription service called tei-kei or by home

delivery distributors, and rice and soybeans for

processing (ITC, 1999). Only 1 percent of vegetable

acreage is in organic production (Sidiropoulos and

Putland, 1997). The amount in organic rice and

soybeans is not known. Japan imports 10 percent of 

its organic market value in the limited range of 

products mentioned.

U.S. statistics are collected by retailers and wholesalers, and so are delineated by sales category rather

than by commodity, as is done in Europe. In the

United States, fresh produce, packaged grocery items

(cereal, sauces, etc.) and bulk/packaged items (pasta,

grains, beans, etc.) were the top three categories in

natural products stores in 1999, accounting for 49

percent of retail sales (Natural Foods Merchandiser,

2000). The Organic Trade Association (1998) projects

average annual growth from 1997 through 2002 will

be highest for grain snacks and candy (60 percent),

cereals (54 percent), dairy (44 percent), and frozen

foods (40 percent). 

2 Lohr and Graf, unpublished survey, 1999.
72  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

The United States is a net exporter of many organic

commodities, although certified organic acreage and

pasture make up less than 0.2 percent of total U.S.

farmland (Greene, 2000). By acreage and category, 0.2

percent of grains, 0.1 percent of oilseeds and dry beans

(including soybeans), 0.3 percent of hay and silage, 38

percent of herbs, 1.3 percent of vegetables, 0.9 percent

of fruits and tree nuts, 0.2 percent of peanuts, and 0.3

percent of potatoes are certified organic. Livestock

production is increasing, with the largest gains in milk,

egg, and poultry production between 1992 and 1997

(FAS, 2000a), although the organic share of total

production is even lower than for crops.

While quantity produced is sufficient to meet U.S.

demand for most major organic food items, except for

some tropicals such as coffee and bananas, the United

States nevertheless imports organic food items. Imports

are needed to satisfy food processing needs (flavorings,

nuts, fruit concentrates and purees, dried fruits, cocoa,

sugar, etc.) as well as to meet off-season demand for

fresh fruit and vegetables, and to replace production allocated to foreign contract sales. American tastes for

foreign foods also drive demand for imported processed

items such as cheeses and wines. No estimate of the

import share of the U.S. organic market is available, but

it is probably not above 10 percent. 

Growth in the U.S. and Japanese markets is anticipated

to be strong, at 20 percent and 15 percent, respectively.

However, regulatory changes may alter these expectations. Japan’s national organic standards will be implemented in April 2001. The United States published its

Final Rule for public comment in late December 2000.

The rule became effective on February 21, 2001, and

will be fully implemented in August 2001. The Japanese

rule is expected to impose stricter standards and reduce

imports (FAS, 2000b). This could slow Japanese market

expansion since organic production in Japan is not

anticipated to increase at the same rate as demand. In

the United States, final rules are expected to harmonize

trade with other countries, and should ease import entry

by introducing a simplified certification equivalency

process through accreditation of foreign certifiers.3 U.S.

standards are not stricter than many of the individual

State regulations that importers had to meet prior to the

implementation of national regulation.

Other markets in the region are smaller. China and

Mexico both are net exporters, with export values of

$600 million and $70 million, respectively (ITC, 1999;

FAS, 2000c). Depending on development of food

processing in these countries, which is currently

heavily constrained by lack of capital and infrastructure, their import needs could grow. The China

Council for International Cooperation on Environment

and Development (CCICED, 1996) suggested that the

Chinese retail market could reach $1.2 billion due to

increasing education and affluence of its middle class,

but Chinese production capacity should easily meet

this growth.

The $9.7 million retail value of the Taiwanese market

is expected to quadruple in the next 3 years (FAS,

2000d), but still represents only a niche for exporters

who can recover transportation costs on small shipments. Growth in Australia ($123 million retail value)

and Canada ($200 million to $500 million) will be

supplied domestically as production capacity is realized. Australia and Canada are both net exporters of

organic grains and specialty commodities such as

maple syrup, beer (Canada), and fruit juices

(Australia). Europe, Japan, and the United States

should remain the primary import markets for at least

the next 5 to 10 years.

Factors Affecting Demand

Market expansion for organic foods depends on the

outcome of a number of evolving issues, which are

discussed in this section. Key issues are organic price

premiums, the price-quality trade off, country of

product origin, GE content, and the integration of

social goals into the production process.

Price Premiums

The percentage of consumers who purchase organic

foods affects the relationship among the market statistics. Widespread acceptance among consumers stabilizes demand and generates economies of scale,

lowering costs. Table H-2 describes demand conditions

in Europe, Japan, and the United States in terms of

consumer share and price premiums. Consumer share

is defined as the percentage of consumers who buy

organic food items at least once a week, and price

premium is expressed as the percentage by which the

3 As of this writing in February 2001, the Japanese organic standards may be found online at http://www.maff.go.jp/soshiki/

syokuhin/hinshitu/organic/eng_yuki_top.htm. The European

Union’s EC Council Regulation 2092/91 may be found online at

http://europa.eu.int/comm/sg/consolid/en/391r2092/artm.htm. The

Final Rule for the U.S. National Organic Standards may be found

at http://www.ams.usda.gov/nop/nop2000/Final%20Rule/

nopfinal.pdf.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  73

price of the organic product is above the price of a

similar conventional product. The percentage of

consumers who claim to buy organic foods regularly

ranges from lows of 4 percent in Italy and 5 percent in

the Netherlands to 32 percent in Denmark and

Germany and 40 percent in Switzerland. In Japan and

the United States, consumer studies have identified

regular buyers by product category, resulting in the

ranges of values in table H-2. In Japan, the greatest

percentage of regular buyers is for fresh produce. In

the United States, the largest percentage in 1998 was

for naturally raised meat and poultry products

(HealthFocus, Inc., 1999). 

More consumers claim to “occasionally” purchase

organic foods, where this time period may be “once a

month” to “at least once in the last 6 months,”

depending on the definition applied by the particular

consumer survey. About the same percentage of

consumers are occasional buyers as are regular buyers

in Denmark (38 percent buy occasionally) and

Germany (32 percent) (ITC, 1999). There is a greater

percentage of occasional buyers in France (38

percent), the Netherlands (34 percent), Sweden (40

percent), Japan (38 percent), and the United States (50

percent) (ITC, 1999; The Packer, 2000a). No data were

available on occasional purchasers in Italy,

Switzerland, and the United Kingdom.

These data suggest a slight positive correlation

between percentage buying regularly (table H-2) and

retail market share for organics (table H-1). A stronger

correlation might be observed if the retail and

consumer shares were decomposed into product categories, so that a weighting between higher priced, less

frequently purchased items and lower priced, more

frequently bought foods could be constructed. If a

significant portion of occasional users were to become

regular buyers, the retail share and retail values

presented in table H-1 would increase dramatically.

The market growth predictions in table H-1 assume

recruitment of regular users from among current occasional buyers and non-buyers.

Richter et al. (2000) surveyed 2,600 consumers in the

border region of Switzerland, Germany, and France to

determine why frequency of purchase is not higher

among occasional buyers. They found that these

buyers are more price conscious and mistrust organic

labels and enforcement more than regular purchasers.

Both regular and occasional buyers use labels and

retail sales personnel for information, but regular

buyers are more informed about production methods

and more concerned about local origin of foods

purchased. Nonbuyers are most influenced by price

considerations of the three groups. 

In the United States, surveys of 1,000 households

revealed that 19 percent of organic produce buyers in

2000 rated themselves as very or extremely likely to

buy again in the subsequent 6 months, down from 62

percent in 1998 (The Packer, 2000b and 1998).

Analysts speculated that an influx of occasional buyers

related to greater product availability and consumer

awareness made the total number of produce buyers

much higher. Without increasing the number of subsequent purchasers, the reported re-purchase rate is

much lower. In 2000, 49 percent of nonbuyers in the

United States named price as a barrier to purchase

compared with 33 percent in 1998. 

Retailers in the United States also cite price as a

barrier to offering organic foods. In 1999, 13 percent

of 90 retailers surveyed in Atlanta, Georgia believed

they could not sell organic foods if they charged a

price premium and only 17 percent believed they could

charge more than 20 percent over conventional prices

(Lohr and Semali, 2000). Consumer price observations

in 14 conventional groceries in Europe documented

price premiums averaging 35 percent in Denmark, 43

percent in Austria, 53 percent in France, 54 percent in

the United Kingdom, 64 percent in Italy, and 67

percent in Germany (Schmid and Richter, 2000). 

Table H-2—Consumer share and price premiums in 

 key demand centers

Market Consumer share Price premium

Percent buying Percent above 

regularly 1 conventional

Austria 20 25 - 30

Denmark 32 20 - 30

France 10 25 - 35

Italy 4 35 - 100

Germany 32 20 - 50

Netherlands 5 15 - 20

Sweden 15 20 - 40

Switzerland 40 10 - 40

United Kingdom 25 30 - 50

Japan 4 - 362,3 10 - 20

United States 9 - 19 3 10 - 30

1 “Buying regularly” is defined as at least once a week. 2

 “Occasional” purchasers; percentage of regular buyers not available. 3

 Percentage varies by product category.

Sources: ITC, 1999; FAS GAIN reports, 1999 and 2000;

 HealthFocus, Inc. 1999.
74  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Differences in premiums across product categories

reflect both availability and frequency of purchase. In

the European example, Schmid and Richter (2000)

documented average category price premiums of 20

percent for cheese, 31 percent for cereals, 42 percent

for milk, 52 percent for meat, 61 percent for vegetables, and 70 percent for fruits in the 14 retail chains

they surveyed. In observations at 75 of the stores

surveyed by Lohr and Semali (2000), the price

premiums for specific processed goods varied even

more widely. Average premiums were 32 percent for

coffee, 24 percent for rice cakes, 20 percent for

spaghetti sauce, 17 percent for milk, 5 percent for

baby food, and -0.5 percent for breakfast cereal. The

range could be accounted for by factors such as relative availability, product placement, and branding. For

example, 44 of the stores offered organic cereal, but

only 5 offered organic coffee. Organic cereal is often

offered side-by-side with conventional cereal, so that

price-dependent sales are more competitive.

Michelsen et al., (1999) documented that consumer

price premiums are lowest in countries with large

organic market shares and a high percentage of distribution through supermarkets. The combination of

market size and supermarket involvement is thought to

reduce distribution costs, exerting downward pressure

on consumer price premiums. Due to their large

customer base, supermarkets can generate turnover

more quickly, thus saving money and maintaining

product appearance and quality (Lohr and Semali,

2000; ITC, 1999).

In general, supermarkets are more resistant to charging

high premiums than specialty stores. Occasional

buyers of organics are more price-conscious and likely

to seek organics in supermarkets (HealthFocus, Inc.,

1999; FAS, 2000b; ITC, 1999). Ensuring that organics

are available in supermarkets has been argued to be the

fastest way to convert occasional to regular users of

organic products in major markets (Lohr and Semali,

2000; ITC, 1999). 

Table H-3 shows the distribution of sales by market

outlet. Comparing these data with information in

tables H-1 and H-2 reveals some interesting findings.

Those countries with the highest share distributed

through supermarkets (Austria, Denmark, Sweden,

Switzerland, and the United Kingdom) have the

highest retail shares and percentages of regular buyers

(except Sweden) but not necessarily the lowest average

price premiums. The United States and the

Netherlands have the lowest average premiums, but the

highest percentage of sales in specialty stores and

among the lowest percentage of regular buyers of

organics. This supports the hypothesis that supermarket availability, rather than lower price premiums,

stimulates consumers to become regular buyers. 

Price-Quality Trade Off

Consumers look for the highest affordable quality,

given their household budgets and perceptions of

product quality. Labels are used as quality cues, to the

extent they are understood by consumers. Universal

labels, such as national organic certifications, would

reduce search costs. Easy identification of quality

makes price comparison and choice easier. 

Table H-3—Percentage shares of retail market by distribution channel

Market Supermarkets1 Specialty stores2 Producer direct3

Austria 77 13 10

Denmark 70 15 15

France 45 45 10

Italy 25 - 33 33 33 - 42

Germany 25 45 20

Netherlands 20 75 5

Sweden 90 5 5

Switzerland 60 30 10

United Kingdom 65 17.5 17.5

Japan4 high-end stores widely available widely available

United States 31 62 7

1

 Includes supermarkets and hypermarkets that offer conventionally grown foods.

2

 Includes organic supermarkets, natural products and health food stores, cooperatives, and other.

3

 Includes on-farm sales, farmer markets, box schemes, CSAs, teikei, and other.

4

 Share data are not available for Japan, but qualitative information suggests the relative availability of product in each category.

Sources: ITC, 1999; FAS GAIN reports, 1999 and 2000.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  75

Organic labels can be confusing to consumers, especially if different labels signify different production

standards. Establishment of minimum standards

through national or international accreditation of certifiers is expected to clarify the meaning of “organic” in

the marketplace. However, most accrediting organizations permit certifiers to affix their own labels in addition to the accreditation label. This may not

necessarily improve clarity for the consumer. 

Examples of multiple standards and labels are found in

some of the largest organic markets. Until 2000, Japan

had six grades of reduced chemical foods, including

organic, all carrying the same label. China recognizes

several classes of “green food” including organic. In

Germany and the United States, there are so many

regional and local certification agencies that learning

about each is burdensome, so consumers choose the

most familiar label. This is typically the first one that

appeared in their regular shopping place or the one

promoted by the most aggressive advertising efforts.

Internationally recognized accreditation logos (Japan,

U.S., EU, or IFOAM4) may reduce this confusion.

Even when a label is well understood, it may lack

credibility. Japanese consumers are particularly skeptical of imported products, in part due to an administrative scandal associated with the key exporting

certifier in the United States (FAS, 2000b; Mergentime

1997). Michelsen et al., (1999) reported cases of

rejected shipments or refusal of traders to handle

foreign product, even when both the exporting and

importing countries were in the European Union.

Many consumers will still view their country’s standards as stricter and “more organic.”

The implications of label recognition and acceptance

for international trade are explored by Lohr and

Krissoff (2000). They note that consumer perceptions

of product homogeneity are critical to product acceptance. Even with harmonization of accreditation standards at the country or market level, consumers may

still reject imported organic products. Reassuring

foreign consumers of import certification quality and

maintaining cost-competitiveness are as important as

legal considerations in international marketing. 

Not all consumers view the price-quality trade offs in

food choices the same way, and not everyone wants

organic foods. Surveys show 10 to 20 percent of

consumers in Germany are not willing to pay any

premium for organic foods (ITC, 1999). As many as

18 to 35 percent of U.S. consumers would not

purchase organics even if there were no price difference between organic and conventional foods (The

Hartman Group, 1996). For these consumers, organic

foods do not represent a superior product. 

Country of Product Origin

Where and how food is produced matters to a significant portion of organic consumers. This local preference incorporates ethical views toward farming and

local growers. Interest in supporting regional

producers is strong among regular buyers of organic

foods (Richter et al., 2000). Many consumers are also

troubled by the long distances that food has to travel

from farm to table.

Organic fruits and vegetables are in demand partly

because they are perceived as fresher than conventionally grown foods. With longer distances between

producer and consumer, this advantage declines.

Consumers surveyed in the United States and Sweden

preferred local conventionally grown products over

organic products brought in from outside the region

(Burress et al., 2000; Ekelund and Fröman, 1991). In

Japan, organic imported soybeans sell for 14 percent

less than domestically produced conventional (nonGE) soybeans (FAS, 2000b).

At the national level, fears of food safety problems have

prompted country-of-origin labeling requirements. This

issue is shaping consumer acceptance of imports in 

the Japanese and some European markets (FAS, 2000b;

ITC 1999). Although a domestic certifier approves an

imported product, if country of origin is known to the

consumer and is not acceptable, the product may not be

marketable (Lohr and Krissoff, 2000). 

Programs that support domestic or regional production

systems in developed countries have promoted supply

of organic products and may have depressed imports

(Michelsen et al., 1999). These programs were typically implemented for environmental or for extensification reasons, expanding acreage while reducing

input intensity. Direct subsidies have been widely used

in the European Union and by individual countries in

Europe. In the United States, cost-sharing to assist in

transition has been used in Iowa in the State-administered Federally-funded environmental protection 4 The IFOAM Basic Standards (updated in 2000) may be found at

http://www.ifoam.org/standard/index_neu.html.
76  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

program known as EQIP (Iowa Natural Resource

Conservation Service, 1997). 

Consumers have also taken direct action to support

local organic farming by enrolling in subscription

programs in which they pay a preseason fee for

delivery of fresh produce through the growing season.

These programs are known by various names -

Community Supported Agriculture (CSA), available in

41 States and the District of Columbia in the United

States, tei-kei farming in Japan, and vegetable boxes in

Great Britain. 

GE Content

GE labeling is foremost in many consumers’ choice of

organic products. Prohibition of GE in organic food

production standards is nearly universal. GE is

perceived as unacceptable by a vocal segment of

consumers in almost every developed country. Market

effects are sometimes exhibited in price differentials. In

Japan, imported organic soybeans sell for 500 percent

more than imported GE-soybeans (FAS, 2000b).

Through low-cost protein testing, most GE modifications can be detected in raw commodities, making it

possible to detect organic foods that have been modified

through cross-pollination or product mixing. Regardless

of whether such commingling occurs, importers may

require organic products to be tested and certified as

“GE-free” if they are from countries where this is

possible. The definition of “GE-free” is currently being

debated in the conventional agriculture sector, which

could prove instructive to the organic sector.

Social Goals 

Consumers who want to advance social goals such as

equitable income distribution and sustainable development have the option of supporting Fair Trade labels.

The Fair Trade certification is different from organic

certification, although 65 percent to 85 percent of Fair

Trade imports also carry organic certification (ITC,

1999). One difficulty with Fair Trade certification is that

it is process-based, according to local standards for

sustainability, and thus all labels do not certify the same

production system. Documenting that the principles of

sustainability are followed is sufficient to earn a Fair

Trade label, without necessarily using the same practices as another certified producer in the same region.

The Fair Trade model operates by direct purchase and

import of crafts and tropical food items from small,

democratically organized producers in the Southern

Hemisphere (EFTA, 1995). The Northern Hemisphere

importer pays producers the cost of production plus a

locally competitive wage, typically higher than world

commodity prices. The importer is not permitted to

cancel its contract with the grower and must pay part

of the contract price up front. Usually the importer

also contributes to local causes in the producing

region, such as a school or health clinic or for cultural

preservation. Through the higher wages offered by Fair

Trade importers, the producer group is able to reduce

reliance on natural resource extractive activities and to

ensure fair labor practices and an acceptable standard

of living. 

Although overhead is minimized by direct importerproducer contacts, the higher wages translate into

retail markups that are about the same as for organic

foods. The Fair Trade Federation (2000), an umbrella

organization for coalitions and foundations that certify

products, listed Fair Trade food and nonfood sales

totaling $400 million annually, with $35 to $40 million

in North America. The Food and Agriculture

Organization (FAO, 1999) cited estimates for the

European Fair Trade market of $140 million in food

annually, with participation by 70 import organizations, 3,000 world shops dedicated mostly to craft

items, and 50 supermarket chains in 14 countries. The

primary food product exchanged under this system is

coffee. In Germany and the United Kingdom, 4

percent of the coffee market is certified Fair Trade,

and in the Netherlands, 3 percent is so designated

(ITC, 1999). In 2001, Starbucks Coffee, one of the

largest U.S. retail outlets, introduced certified Fair

Trade coffee, giving this certification a major presence

in North American markets. Among food items

currently eligible for Fair Trade labels are tea,

bananas, cocoa, and chocolate. 

With expansion of Fair Trade certification to other

products and increasing awareness for the labels,

which should increase dramatically after the Starbucks

Coffee adoption, the United States appears to be a

prime opportunity for Fair Trade products. With a

growing number of eco-labels on the market that are

separate from organic labels, the expense of education

programs to distinguish the various products will fall

on the organic industry (Lohr, 1999). Eco-labeled

products benefit by organic advertising, but crowd the

market with more labels that are difficult for the

consumer to interpret and, hence, costly for the

consumer to sort out. Dual certifications could resolve
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  77

this problem, but American consumers have not

demonstrated a readiness to pay an additional premium

for such products.

Projected Market Growth

Many European countries are experiencing a deceleration in growth of organic markets from the last decade,

compared with the United States, which projects

continued 20 percent growth for the short term.

Japan’s rate of organic market growth has been

projected at only 15 percent due to product availability

and wariness about imports’ conformity with the new

national regulation. The next 5 years should see

expanded trade as well as domestic production in an

effort to meet rising demand.

The exchange of organic products internationally is

increasing dramatically. Import and export figures by

product category are provided by the ITC (1999),

Michelsen et al., (1999), and FAS (various reports

1999, 2000). The implementation of national standards

in the United States and Japan, developed with deliberate consideration of existing standards in Europe,

should realign trade flows so that more exchange

occurs among Japan, the United States, and Europe, as

harmonization among the major markets takes place.

Markets are evolving to demand highly processed

organic products as well as raw commodities. In

Europe, markets are increasing for ready-to-eat meals,

frozen foods, baby food, snacks, and beverages.

Ingredients needed for organic food processing include

juices, fruit powders, dried fruit, meat, flavorings,

essential oils, herbs and spices, and nuts. Sample trade

flows into Europe are from Israel (fresh produce),

Brazil-Chile-Argentina (fresh produce, soy, wheat),

other European countries (baby food, processed foods,

cereals, meat), Canada (wheat, soy, canola), MexicoCentral America (bananas, citrus, coffee, cocoa), Sri

Lanka-India (tea), and the United States (processed

foods of all types, wheat).

In Japan, organic consumer goods in growing demand

include fresh produce, frozen foods, juice, baked

goods, baby food, chicken, sauces, and ready meals.

The organic ingredients market is less extensive, but is

growing for fresh vegetables for pickles, fresh fruits

and sweeteners for jam, oils and semi-finished

produce. Trade flows are not restricted to countries in

the Pacific region, but are dominated by them. For

example, products are imported from New Zealand

(frozen vegetables, fresh fruit), Australia (citrus juice),

China (tea, soybeans, rice), France (jams, coffee,

cereal, ice cream), Brazil (soybeans), Canada (beer),

Norway (seafood), and the United States (fresh

produce, soybeans, rice). 

Market options are expanding as well (ITC, 1999).

Retailers have more opportunities to introduce store

label or own-brand organic products as consumer

awareness and market penetration increase. The food

service and catering sectors are virtually untouched,

although they offer higher wholesale margins than

sales to brokers or wholesalers. Vegetarian restaurants,

school and institutional programs, and airline (Swiss

Air and Lufthansa) and hotel catering are experimenting with wider organic offerings. 

Markets for direct sales to consumers could be the best

option for opening developing country markets in

which volume is low, but a segment of highly educated

and high-income consumers are interested in organic

products. Subscription and box sales enable farmer

and consumer to have direct contact, although

consumer buying clubs and electronic or mail order

catalogs offer the opportunity to reach more

consumers at higher margins. International sales via

these outlets must meet all international trade regulations and importing country phytosanitary and organic

standards, but with smaller shipments and with time 

to develop individual reputations, these obstacles may

be overcome.

Supply competition is inevitable, particularly in market

segments that are widely observed to be growing, and

as such are attracting suppliers. Most raw commodities

are now available in organic form, as production is

widespread. The ITC (1999) reports commercial

production in 27 countries in Africa, 7 in the former

Soviet states, 20 in Europe, 3 in Australia, 15 in Asia,

25 in Latin America and the Caribbean, and 3 in North

America. At the same time, with rising per capita

income, increasing awareness of organic benefits as

domestic commercial production increases, and greater

government and private sector commitment, it is likely

that global organic market demand will continue to

keep pace with production for the next few decades.

References

FAS GAIN reports cited here are available online at

www.fas.usda.gov. Search under Attache Reports

and keyword “organic” or by report number.
78  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Burress, D., B. Harris, and P. Oslund. “Kaw Valley

Demands for Local and Organic Produce: Surveys

and Models.” In T. Alfödi, W. Lockeretz, U. Niggli

(eds.) Proceedings: 13th IFOAM Scientific Conference, Zurich: vdf Hochschulverlag AG and der ETH

Zürich. 2000, pp. 537-540.

China Council for International Cooperation on Environment and Development (CCICED). “China’s

Green Food Development and Environmental Protection.” Beijing: National Environmental Protection

Agency. 1996.

Ekelund, L., and E. Fröman. “Consumer Attitudes

Toward Vegetables - A Study of Conventional and

Organic Products,” (In Swedish) Report 60.

Swedish University of Agricultural Sciences, Dept.

of Horticultural Science, Alnarp, Sweden. 1991.

Escudero, M. “Spain’s Organic Product Market,”

USDA FAS GAIN Report #SP9031, 1999.

European Fair Trade Association. “Facts and figures

on the fair trade sector in 14 European countries,”

1995. Obtained online at

www.web.net/fairtrade/fair632.html.

FAS, AGR Report #AU6055, USDA 1996.

FAS, “Japanese Consumers Rank Product Labeling,”

June 1998. Obtained online at

www.fintrac.com/rap/news/briefs/9a.htm.

FAS, “U.S. & Global Organic Dairy, Livestock and

Poultry Production: Implications for International

Trade.” 2000a. Obtained online at www.

fas.usda.gov/dlp/highlights/2000/organics/intro.html.

FAS, GAIN Report #AU9046, USDA 1999a.

FAS, GAIN Report #FR9070, USDA 1999b.

FAS, GAIN Report #GM9071, USDA 1999c.

FAS, GAIN Report #IT9719, USDA 1999d.

FAS, GAIN Report #JA0712, USDA 2000b.

FAS, GAIN Report #MX0016, USDA 2000c.

FAS, GAIN Report #TW0008, USDA 2000d.

Fair Trade Federation. “Fair Trade Facts,” 2000.

Obtained online at

www.fairtradefederation.com/ab_facts.html.

Food and Agriculture Organization. “The Market for

‘Organic’ and ‘Fair-Trade’ Bananas,” Committee on

Commodity Problems, Intergovernmental Group on

Bananas and Tropical Fruits, 1999. Obtained online

at www.fao.org/docrep/meeting/XII49E.htm.

Greene, C. “U.S. Organic Agriculture,” Issues Center,

Economic Research Service, USDA, 2000.

Obtained online at http://www.ers.usda.gov/

whatsnew/issues/index.htm.

The Hartman Group. “Food and the Environment: A

Consumer’s Perspective,” Phase 1. Bellevue WA:

The Hartman Group, 1996.

HealthFocus, Inc. “What Do Consumers Want From

Organics?” Des Moines, IA: HealthFocus, Inc.,

1999.

International Trade Centre (ITC). “Organic Food and

Beverages: World Supply and Major European 

Markets,” ITC/UNCTAD/WTO, Geneva, 1999.

Iowa Natural Resources Conservation Service. “1997

Iowa EQIP Conservation Practices,” Obtained

online at

http://www.ia.nrcs.usda.gov/eqip/eqip.html.

Lohr, L. “Implications of Organic Certification for

Market Structure and Trade,” American Journal of

Agricultural Economics, Vol. 80, No. 5, 1998,

pp. 1125-1129.

Lohr, L. “Consumer Welfare Effects of Eco-label Proliferation: Too Much of a Good Thing?” Proceedings of the Food and Agricultural Marketing Consortium Annual Meeting, Alexandria, VA, 1999,

unpaged. 

Lohr, L. and B. Krissoff. “Consumer Effects of 

Harmonizing International Standards for Trade in

Organic Foods,” Faculty Series FS00-08. University

of Georgia, Dept. of Agricultural and Applied 

Economics, Athens, GA, 2000. 

Lohr, L. and A. Semali. “Retailer Decision Making in

Organic Produce Marketing,” in W. J. Florkowski,

S. E. Prussia, and R. L. Shewfelt eds. Integrated

View of Fruit and Vegetable Quality, Technomic

Pub. Co., Inc., Lancaster, PA, 2000, pp. 201-208.

Masuda, F. “The Domestic Organic Market and Development of National Standards in Asia,” in W. Lockeretz and B. Geier eds. Quality and Communication

for the Organic Market, Tholey-Theley,

Germany, IFOAM. 2000, pp. 34-38.

Mergentime, K. “Japan’s Blooming Organic Market,”

Natural Foods Merchandiser, September 1997.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  79

Obtained online at www.nfmonline.com/nfm_backs/Sep_97/japan.html.

Michelsen, J., U. Hamm, E. Wynen, and E. Roth. “The

European Market for Organic Products: Growth and

Development,” Organic Farming in Europe: 

Economics and Policy Vol. 7, 1999, Stuttgart,

University of Hohenheim.

Ministry of Agriculture, Forestry and Fisheries. MAFF

Update, No. 182, September 13, 1996. Obtained

online at www.maff.go.jp/mud/182.html.

Natural Products Stores 1999 Sales by Category. Natural Foods Merchandiser, Vol. 21, No. 6, p. 20.

Organic Trade Association. “Manufacturers’ Market

Survey,” 1998, Greenfield, MA.

The Packer. “Organic Produce Sales Gaining 10-12

Percent Annually,” Fresh Trends 2000, Lenaxa, KS,

Vance Publishing Corp. 2000a.

The Packer. “Repeat Organic Purchasers Declining,”

Fresh Trends 2000, Lenaxa, KS, Vance Publishing

Corp. 2000b.

The Packer. “Organic Produce Sales Gaining 10-12

Percent Annually,” Fresh Trends 1998, Lenaxa KS,

Vance Publishing Corp. 1998.

Produce Studies Consulting (PSC). “The European

Organic Food Market,” PSL 9367/JAG/KH. The

Hague: USDA, 1998.

Richter, T., O Schmid, B. Freyer, D. Halpin, and R.

Vetter. “Organic Consumer in Supermarkets – New

Consumer Group with Different Buying Behavior

and Demands!” In T. Alfödi, W. Lockeretz, U. Niggli eds. Proceedings 13th IFOAM Scientific Conference, Zurich, vdf Hochschulverlag AG and der ETH

Zürich, 2000, pp. 542-545.

Schmid, O., and T. Richter. “Marketing Measures for

Selling Organic Food in European Retail Chains –

Key Factors of Success,” in T. Alfödi, W. Lockeretz,

U. Niggli eds. Proceedings 13th IFOAM Scientific

Conference, Zurich: vdf Hochschulverlag AG and

der ETH Zürich, 2000, pp. 519-522.

Seki, T. “Study on Japanese Organic Food Market,”

Agriculture and Agri-Food Canada, 1997. Obtained

online at atn-riae.agr.ca/public/htmldocs/e1524.htm.

Sidiropoulos, L. and S. Putland. “Opportunities in

North Asia for Victoria’s Agricultural and Food

Industries,” Department of Natural Resources and

Environment, Victoria, Australia, 1997. Obtained

online at

www.dce.vic.gov.au/trade/pubs/oppnthas.htm.

Thompson, G. “Consumer Demand for Organic

Foods,” American Journal of Agricultural 

Economics Vol. 80, 1998, pp. 1113-1118.

USDOS. “Canada Germination Equipment Market,” by

J. Mathews, 1999. Obtained online at tradeport.org/ts/

countries/Canada/mrr/mark0024.html.

USDOC. “Australia-Organic Food Market”, Market

Research Reports, International Market Insights,

IMI990601, USDOC/ITA, 1999a. Obtained online

at www.stat_usa.gov. 

USDOC. “Australia-Food Industry News Update,”

International Market Insights, IM11/18,

USDOC/ITA, 1999b. Obtained online at

www.stat_usa.gov. 
80  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Introduction

Consumer concerns about animal welfare are not a

new phenomenon. Some of the ancient rules for

slaughtering animals for kosher meat were originally

intended to reduce pain to the animal. Many religions,

including Native American religions, Hinduism, and

Australian Aboriginal tradition, have held particular

animals to be sacred, and have devised particular rules

about whether and how such animals were to be used

for food or service. The Society for the Prevention of

Cruelty to Animals began in 1824 in Great Britain.

During the last 20 years, however, consumer groups,

mostly in industrialized countries, have brought much

more attention to the topic of animal welfare. As

consumers grow wealthier, their access to an adequate

quantity of food becomes assured. At this point,

consumers tend to turn their attention to the quality of

their foods. Such quality concerns can include food

safety and aesthetic attributes, but they also include

concerns about how food is made, and the impact that

food production techniques have on the environment,

on labor, and on animal welfare. These concerns can

result in consumer demand for foods made with

certain production techniques.

A number of different types of consumer movements

for animal welfare have sprung up. Some focus on

animal rights and attempt to stop any activities that

interfere with the ability of animals to live free from

human interference. These groups generally encourage

the complete cessation of the use of animals for

economic activity. Other groups have focused on

attempting to improve the treatment or welfare of

animals that are to be used for food production

purposes. In the European Union (EU), these groups

have received a great deal of attention from the public

and from legislators. A number of laws regulating how

farm animals are to be treated have been passed in the

EU. Additionally, a number of other countries have

animal welfare regulations, although these generally

do not specify production practices in as much detail

as those in the EU. These laws regulate domestic

production for the countries that pass them, but cannot

regulate production abroad. 

What does economic analysis have to say about the

effects of animal welfare laws? This article attempts to

answer that question in general, rather than countryspecific, terms by looking at the economic motivation

for passing regulations dealing with farm animal

welfare2, the potential effect on production costs, and

the potential effects on trade. 

Impact of Consumer Demand for 

Animal Welfare on Global Trade

Lorraine Mitchell1

Abstract: Animal welfare has received increasing attention among wealthy consumers, mainly in industrialized countries. The passage of animal welfare laws may

offer individual and social benefits to concerned consumers, while resulting in higher

prices for all consumers. Higher domestic prices may cause unconcerned consumers

to seek cheaper foreign alternatives, potentially leading to trade policy concerns.

1 Agricultural economist with the Market and Trade Economics

Division, Economic Research Service, USDA.

2 While animal welfare concerns usually encompass pets, animals

used for research, animals used in circuses, and hunting regulations, this paper will focus on the welfare of farm animals.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  81

Economic Reasons for the Passage of

Animal Welfare Regulations

Two types of economic motivation for the passage of

animal welfare laws exist. The first occurs when

consumers feel that they individually benefit from

improved animal welfare. The second occurs when 

a society as a whole can benefit from improved 

animal welfare.

Individual Benefits

Many consumers have expressed their preferences for

goods produced with higher levels of animal welfare.

Consumers care about how products are made and get

more satisfaction from consuming goods that are made

with methods they approve. The increased market for

“environmentally friendly goods” and the recent

boycotts of clothing companies that manufacture

goods in factories where workers are subjected to

conditions that don’t meet U.S. labor standards are

both demonstrations that consumers care about

production methods of the goods that they buy. 

Consumers are concerned about animal welfare in

food production, although how this concern compares

with other food concerns is not entirely clear. FAS

Online notes “Poultry production in the Netherlands

remains flat as future growth in this sector is tempered

by consumer concerns about animal welfare issues and

the impact of production on the environment.” (March

27, 2000). Blandford and Fulponi (2000) cite surveys

which indicate that 80 percent of EU consumers are

concerned about animal welfare when asked, but when

asked to list their greatest concerns about food, only 5

percent volunteer animal welfare as a concern.

There are indications that consumers in industrialized

nations are willing to pay more for products that

feature higher degrees of animal welfare. In a survey

taken in 1995, 67 percent of U.K. consumers surveyed

indicated that they had purchased free range eggs or

chickens in the previous year, which suggests that

given a choice, consumers are, in some instances,

willing to pay the extra expense of food produced with

techniques that are perceived to be more friendly to

animals (index to International Public Opinion,

1997/98). Bennett (1997), in a survey of British

consumers, finds that consumers would be willing to

pay 6-30 percent more for eggs, if such an increase

were the result of a ban on battery cages (towers of

small cages used to house individual hens) for hens.

Bennett and Larson, in a 1996 survey of U.S. college

students, find that students were willing to pay 18

percent over market price for free range eggs and

willing to pay taxes of about $8.00 per person to fund

practices that they believe will improve conditions for

veal calves and hens. 

However, consumers cannot tell by looking at a

product how it is made, so they might lack adequate

information to purchase the goods they prefer. Akerlof

(1970) finds that if consumers can’t determine the

characteristics of the goods that they purchase, then

goods with undesirable qualities will flood the market

and consumers will be discouraged from buying.

Firms have some incentives to provide consumers with

information about products they purchase. If people

value goods produced with perceived high standards of

animal welfare more than those produced with what

are perceived to be lower standards, then they will pay

more for the higher standards. If the extra amount that

people are willing to pay is greater than the cost of

providing the perceived higher standards, then

producers have an incentive to produce according to

such standards. Producers whose production technologies meet higher standards of animal welfare have an

incentive to reveal that to the consumer with a label or

advertisement, thus providing the information without

any need for government involvement (see Ippolito

and Matthias, 1990; Grossman, 1981). For example,

McDonald’s publicly states that it only purchases meat

that has been slaughtered in accordance with strict

standards designed to improve welfare, and some

studies indicate that humanely raised animals provide

more meat of higher quality (Bjerklie, 2000). Indeed

Browne et al. (2000) note that firms engage in

“socially responsible sourcing” because they fear

damaging their reputations. So why does the government need to regulate animal welfare?

Two potential problems could interfere with the firm’s

communication of information to consumers (Golan,

Kuchler and Mitchell, 2000). First, the higher price

that consumers are willing to pay for goods produced

with high standards creates incentives for firms to

commit fraud or to mislead consumers. If firms can

convince consumers that they have used production

methods that adhere more closely to animal welfare

standards, even when they have not, then the firms can

charge the higher price without paying the higher

production costs. While there are incentives for

consumers and rival firms to uncover fraud, and court

systems to enforce truth-in-advertising laws, cases of
82  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Animal Welfare Laws

Consumers that voice farm animal welfare concerns focus on

a number of issues. Many of these issues are summed up by

the Five Freedoms, a list outlined by a British Government

commission investigating animal welfare in the 1960s. These

include the freedom from thirst, hunger, and malnutrition;

freedom from discomfort; freedom from pain, injury, and

disease; freedom to express normal behavior (with adequate

space and company of the animal’s own kind); and the

freedom from fear and distress (Winter, Fry, and Carruthers,

1998). Consumer groups are concerned about animal welfare

on the farm, during transport, and during slaughter. 

Animal welfare laws regulating the treatment of farm

animals used for agricultural production have been in existence for some time, and are part of the legal code of a

number of nations. Some laws simply generally prohibit

cruelty to animals, including farm animals. Others specify

with great precision the methods to be used in handling

and housing animals.

In the United States, most animals used for food are

covered by the Humane Slaughter Act of 1958 (amended

1978), which specifies how animals must be treated during

the slaughtering process. Many U.S. States have additional

laws on general and farm animal welfare. Additionally,

many U.S. producer groups, like the American Meat

Institute and the United Egg Producers, issue voluntary

welfare guidelines for the handling of animals.

A number of nations, including Japan, Australia, and New

Zealand, have animal welfare laws. New Zealand has

recently revised its animal welfare laws to include the Five

Freedoms. During the 1980s, European countries signed a

small flurry of treaties specifying how animals were to be

treated. Most of the signatories to these treaties were

members of the Council of Europe, a regional organization

with a membership that extends beyond the EU, and some

of the more recent EU legislation is intended to put into

practice the requirements of those conventions. 

The following is not an exhaustive list of animal welfare

laws (table I-1), but will give the reader some idea of the

scope of such laws. (See Blandford and Fulponi, 2000, for

a lengthier discussion.)

Table I-1–Examples of animal welfare laws

Type of law Law or Country Requirement

Laws that define California Penal Requires that all animals be allowed adequate food,

and require general Code, Maine Statutes. exercise, and freedom from torture and overwork.

standards of treatment.

Japan’s Law Requires that animals not be treated cruelly or 

Concerning the Protection abandoned.

and Control of Animals, 1973.

Laws that regulate U.S. Humane Slaughter Specifies how animals must be treated during the 

slaughter. Act of 1958. slaughtering process.

European Convention for the Specifies rules for slaughterhouse conditions and 

Protection of Animals for Slaughter; the slaughtering process.

EU Directive 93/119/EC.

Laws that regulate Australia. Specifies minimum cage sizes for hens of 450-600

the area and methods square centimeters.

for confining animals.

Australia. Prohibits hog tethering.

European Convention Outlines general requirements for keeping animals 

for the Protection of on farms, including the provision of food, freedom 

Animals Kept for Farming of movement, inspections, lighting which is altered 

Purposes; EU Council Directive to resemble night and day, air circulation and pens

98/58/EC, 1998. that can be cleaned.

EU Council Directive Mandates hen cage sizes that allow laying hens a 

1999/74/EC, 1999. minimum of 550 square centimeters in which to

move around by the year 2003.

Laws that govern European Convention for the 1991 regulations for the treatment of animals during 

animals during Protection of Animals During transport, which specify the intervals during which 

transport. International Transport; EU animals were to be fed and the characteristics of the 

Council Directive 91/628/EEC. space in which they could be confined.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  83

fraud are costly to prove. Additionally, sometimes the

firm’s communication can be made deliberately vague.

If a retailer sells chickens labeled “free-range”, what

does “free-range” mean? Does it mean that the chicken

had 25 square feet in which to roam, or an enclosed

space of 5 cubic feet? 

Secondly, while firms have an incentive to tell

consumers about desirable qualities of the products they

sell, they don’t have an incentive to reveal undesirable

qualities (Golan, Kuchler and Mitchell, 2000). This

should mean that firms that sell products with good

qualities will tell consumers about these qualities via

ads and labels. Firms that sell products with undesirable

qualities just won’t say anything to the consumer. An

informed consumer might conclude that the firms that

don’t provide information about positive qualities are

providing lower quality goods. Ippolito and Matthias

(1990) find that in the market for cereals, the more

healthful cereals were labeled with health claims, and

the less healthful ones were unlabeled. Consumers, they

found, assumed that the unlabeled cereals had undesirable qualities. However, Zarkin and Anderson (1992)

suggest that if consumers believe a product to universally have a desirable quality, firms won’t bother to

label. A government might decide to regulate production

if it can’t rely on firms to communicate quality information to consumers. In order to determine whether there

are incentives for firms to reveal desired information

about animal welfare, one would have to consider

consumers’ initial beliefs about current production 

practices and whether there are adequate incentives or

institutions to safeguard against fraud.

Social Benefits

In addition to the private benefit that some consumers

receive by purchasing goods made with more stringent

animal welfare practices, there are associated social

benefits. If some consumers are concerned with the

welfare of animals, they are usually concerned with

the welfare of all animals, not just the ones used to

make goods that they themselves purchase. Bennett

and Larson (1996) find that if battery cages were

banned, about 10 percent of consumers surveyed felt

that they would get some additional benefit from the

fact that other people also wouldn’t be buying batteryproduced eggs. That is, if Consumer X cares about

chicken welfare and buys some of his eggs from farms

that raise free-range chickens, he gets the benefit of

what he perceives to be an increase in animal welfare

for those chickens. He also gets welfare from the freerange eggs purchased by everyone else, because in his

mind, all of those chickens experience increased

welfare as well as the ones that produced his eggs.

However, Consumer X also buys some eggs from

confined hens, because they are cheaper. At some

point, the extra cost of the free-range eggs becomes

greater than the benefit that Consumer X receives from

the perceived improvement in hen welfare. From the

point of view of people who care about chicken

welfare, though, Consumer X should weigh the cost of

free-range eggs against the sum of everyone’s benefits

from their perceptions of improved chicken welfare,

not just his own personal benefits from improved

chicken welfare. From the standpoint of the society as

a whole, Consumer X is consuming too few free-range

eggs and too many eggs from confined hens. Indeed,

even if Consumer X cares about chicken welfare, he

could decide to consume all conventional eggs, since

he will receive benefits from everyone else’s consumption of free-range eggs without paying any of the

costs. Because consumers don’t take the preferences of

other consumers for animal welfare into account, then

fewer free-range eggs will be purchased than society

would like. 

When consumption of goods by one person affects a

lot of other people, government action is sometimes

necessary. Consumers, if left to their own devices, will

only take their own welfare into account when

deciding what to consume. They won’t think about

damage that their consumption does to others in the

form of pollution, noise, reductions of perceived

animal welfare and other costs, so they consume more

than their fellow citizens would like. The government

may intervene to ensure that quantities produced and

consumed more closely match the preferences of the

society as a whole. The government sometimes does

this by taxing the costly behavior. In other cases, the

government might regulate the behavior, or subsidize

less costly behavior. 

Governments sometimes find these interventions to be

difficult, as they must balance the welfare of members

of society that want the regulations and the welfare of

those that don’t want such regulation. For instance, if

the government forces all firms to conform to certain

animal welfare standards, and these standards are very

costly, consumers that don’t care about animal welfare

might pay more for food, without feeling like they

received any real benefit for their extra expenditure. 
84  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

How do governments go about weighing these different

interests? Governments might attempt to measure costs

and benefits of alternative animal welfare regulations

with surveys or studies. A government can attempt to

quantify and measure benefits from animal welfare

changes, but this task is not easy. It is sometimes difficult to select criteria for animal welfare. Should one

measure improved health, reduced agitation, or food

intake? Research is required to determine which production practices satisfy the chosen criteria better. After the

magnitude of a change in animal welfare has been determined, the government must then determine how much

its citizens benefit from such changes. In other cases,

governments effectively rely on groups with different

preferences to communicate the strength of those preferences via lobbying. In the case of animal welfare,

governments generally hear from farm animal producer

groups, and animal rights groups, that is, consumers who

care about animal welfare. Although consumers who

have no preferences about animal welfare are also

affected by legislation, they generally do not band

together since the effect on each consumer has thus far

been too small to spur them into political activism.

Interest groups have indeed influenced animal welfare

legislation. The influence has been slightly different in

the EU compared with the United States. Meat packers

and the Livestock Conservation Institute in the United

States supported the Humane Slaughter Act in 1958

and in 1978, as did the American Humane Association

and several other animal protection groups; the

industry argued that the law was a reflection of best

practice for the industry (Francione, 1996). The

Economist notes that animal rights activist groups in

Britain have focused more on farming, while American

animal rights groups have focused on the welfare of

laboratory animals (1995). In 1994, animal rights

advocates convinced McDonald’s to require its

suppliers to adhere to animal welfare guidelines, after

having initially threatened to put the resolution before

the company’s shareholders (Francione, 1996).

Additionally, the animal welfare movement in the EU

includes a very broad base of support, with participation from people who have not been politically active

on other issues. It appears that groups in the EU are

more focused on encouraging the government to regulate, while in the United States, there is a more narrow

focus on non-regulatory measures. This is borne out by

the fact that voluntary guidelines are encountered more

frequently in the United States, while regulation is

more prevalent in the EU.

How Animal Welfare Laws Affect 

Production Costs

Animal welfare laws generally impose restrictions on

livestock and dairy producers and processors that tell

them under what conditions they may keep their

animals, how often the animals must be fed, and how

they may be slaughtered. Farmers, like most other firm

owners, generally use the lowest cost technology to

produce their products. Some animal-friendly technologies are already low-cost. Most livestock industry

representatives note that keeping animals healthy

improves production quantities. Some studies indicate

that better treatment means higher yields (Bjerklie,

2000). If producers aren’t already using the animal

friendly technology, it might be because the technique

was costlier, or delivered a lower quality good.

Mandating the switch in production methods usually

increases costs. In some cases, the cost increase is

insignificant, but in other cases, switching technology

can be quite expensive.

This increase in costs occurs through a number of

different channels. Keeping animals in larger spaces

means either that additional land must be purchased or

fewer animals may be kept. This increase in resources

per animal increases the costs of producing each

animal or unit of animal product, which can, in turn,

result in higher prices for the consumer.

How much does adherence to stricter animal welfare

standards cost, and do citizens consider the standards

to be worth the extra expenditure? The effect on costs

is probably dependent on the type of regulation, and

estimates of the size of the cost impact vary. Some

studies in the United Kingdom indicate that a ban on

battery farming can raise egg production costs by 8-30

percent; consumer willingness to pay might be high

enough to cover these costs (Bennett, 1997). Blandford

and Fulponi (1999, 2000) cite a study by McInerney

(1995), which finds that adding some practices that are

believed to be animal welfare enhancing would

increase a consumer’s food bill by only 0.25 percent,

but they also note that an array of studies in EU countries suggest that costs might rise by anywhere from 5-

17 percent. They also note that some analysis suggests

that feed needs per animal might rise, leading to

higher grain prices, which could even spill over into

world grain markets and require those in poor, foodimporting countries to pay more for grain.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  85

If private benefits to consumers are not enough to

outweigh animal welfare costs, the government must

decide whether the benefits to individual consumers,

plus the benefits to society of perceived improvements

in animal welfare, outweigh the costs of imposing the

regulations. An animal welfare regulation improves

social welfare if the sum of all of the benefits to

consumers of increased animal welfare is greater than

the sum of the increased costs to the consumer and

producer. This needs to be evaluated for each regulation. 

Additionally, a country might care about how those

costs are distributed. Food items considered as a

whole, and some individual food items, have an

inelastic demand; i.e., quantity demanded doesn’t

change very much with price. Bennett (1997) notes

that when demand is inelastic, the costs of a battery

cage ban would fall on the domestic consumer, who

would see an increase in price, rather than on the

domestic producer, who won’t see a large drop-off in

demand as prices rise. Since food is a much larger

share of a poor person’s budget and demand for some

higher priced food items is more elastic among lower

income consumers, industrialized nations passing

animal welfare regulations might need to look at the

impact of increased food prices on their poorest citizens. Indeed, willingness to pay for animal welfare is

correlated with income (Bennett, 1997; Blandford and

Fulponi, 2000).

Enforcement of animal welfare laws tends to vary

somewhat, and if enforcement is low, cost effects could

be smaller. Also, if cost impacts are high, producers

have the incentive to attempt to evade enforcement.

Most countries require that slaughter of animals be

carried out in licensed facilities, so that inspection is

facilitated. However, problems can still arise, especially

if small producers slaughter animals in unlicensed and

undocumented facilities. The EU Commission notes

that for journeys originating outside the EU, regulations

for animal welfare during transport are hard to enforce,

and violations may occur (Press Release, February 17,

2000). A survey done by the Food Safety Inspection

Service (FSIS) of a non-representative group of 61

slaughter plants in the United States found 48 had no

evidence of inhumane handling, and 13 had incidents

of inhumane handling (FSIS, 1998). McDonald’s U.S.

suppliers have increased their compliance with welfare

guidelines since McDonald’s began auditing firms

(Bjerklie, 2000).

Implications for Trade

Domestic Industries

In general, any policy that imposes costs on a domestic

firm that foreign firms do not face can potentially put

domestic firms at a disadvantage. Because the

domestic goods will be costlier, consumers are likely

to purchase less expensive foreign goods instead of

domestic goods (Blandford and Fulponi, 1999).

Domestic firms understand this consequence of differences in regulation. Thus, when a country passes legislation that increases costs for domestic producers, the

producers sometimes apply political pressure to block

imports or seek off-setting compensation from countries that don’t have similar regulations. When the

restrictive legislation has an objective that benefits

consumers, the domestic firms are frequently joined by

consumer groups in their lobbying efforts. Vogel

(1995) refers to this as a “Baptist-bootlegger coalition”, so named for joint efforts by Baptist temperance

activists and underground liquor producers to lobby to

keep Prohibition laws in place, because the restrictions

kept liquor illegal, which, in turn, kept prices of illegally produced alcohol high. Despite the different

objectives of the two groups, one piece of legislation

served them both. Farmers’ groups and animal welfare

groups have an incentive to lobby for a ban on imports

that don’t comply with animal welfare laws. In the

United States, for instance, the Humane Slaughter Act

requires imported meat to have been slaughtered in

accordance with certain standards. 

The EU included in its 1998 law governing farm

animals a provision to study the differences between

the EU’s laws and those of its trading partners, the

effect of the new laws on the competitiveness of EU

agricultural products, and the potential for “obtaining

wider international acceptance of the welfare principles” (Council Directive 98/58/EC). The EU’s

proposal to the World Trade Organization (WTO) on

animal welfare voices concerns about competitiveness

of countries with costly animal welfare standards and

suggests the formation of international animal welfare

agreements, among other policies, to deal with the

problem. The EU is therefore aware of the possibility

that its more stringent laws could have an effect on

whether it can compete with countries with different

standards. The EU’s only attempt thus far to restrict

imports on the basis of animal welfare has been the
86  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

banning of imports of furs produced by countries that

don’t ban leghold traps. Tentative agreements are in

place to allow trade among the EU and the United

States and the EU and Canada, as the United States

and Canada have signed an agreement defining

humane trapping standards. The EU’s legislation

seems to imply that it would like to try to work out

similar international standards with trading partners on

farm animal welfare.

Trading Partners of Countries with 

Stringent Regulations

If countries with stringent animal welfare laws require

their trading partners to adhere to those laws, such

requirements could have an impact on imports from

countries that can’t meet the animal welfare standards.

The reduced demand from the import-restricting

country could reduce the prices of animal products in

the exporting country. The domestic prices in the

country restricting trade could rise, since supply is

restricted to the more expensive domestic production.

How large the impact is depends on the volume of

trade that would occur in animal products in the

absence of such regulations. 

About 21 percent of the value of 1999 U.S. agricultural

exports came from animal products (USDA-ERS,

2000a). The United States exported (to all countries)

about 11 percent of its meat production (by volume) in

1999 and imported a quantity of beef and pork comparable with 8 percent of domestic production (USDAERS, 2000b). Current U.S. exports of animal products

are not large compared with total production, and animal

product exports do not come anywhere near constituting

a majority of U.S. agricultural exports by value. Thus,

importing nations’ animal welfare laws would affect a

fraction of current U.S. exports and production. 

The size of the effect that a change in these trade

volumes would have depends on the responsiveness of

price to a change in demand. If one considers the most

extreme example, where Country 1 bans the import of

Country 2’s animal products, the portion of Country

2’s production that it exports to Country 1 would have

no immediate buyer. In response, the world animal

product market would have extra goods on it, and

prices would fall outside of Country 1. This price

decrease would cause some of Country 2’s producers

to pull their goods off the market and some consumers,

attracted by the lower price, would buy more. If

suppliers are very responsive to price, and can pull

their goods off the market quickly, or if a small

decrease in price makes consumers buy a lot more,

price won’t fall too much. However, if Country 2’s

producers are stuck trying to unload the animal products as soon as they can, since livestock is costly to

store, or if the rest of the world has as many animal

products as it wants, price tends to fall more, and

Country 2’s producers bear more of the costs. 

Countries are beginning to discuss the effect of animal

welfare legislation on developing nations. Consumers in

developing countries don’t have the extra income to pay

for more expensive animal welfare standards. Thus,

their domestic standards might not meet the standards

of their trading partners. Some developing countries are

concerned about potentially having to meet the stringent

standards of wealthier nations. Additionally, some

developing countries have expressed skepticism about

the discussion of animal welfare in the WTO. The EU’s

position, outlined in their proposal to the WTO on

animal welfare, states that intensive agriculture used by

industrialized nations is much more likely to violate the

EU’s animal welfare laws. 

Alternatives to Regulation

A criterion that policymakers, and the WTO,

frequently apply to a trade-restricting regulation is

whether regulations are the least trade-distorting mechanisms to achieve desired animal welfare objectives. In

other words, is there a policy that informs consumers

about the animal welfare effects of the goods they buy,

and improves animal welfare by the socially desirable

amount, without restricting trade? Two policy alternatives that are sometimes proposed, and which are

included in the EU’s proposal on animal welfare to the

WTO, are labeling and targeted subsidies.

Labeling

Labeling is frequently suggested as a way of dealing

with differences in product or process standards

between trading partners. If the EU governments

demanded or even allowed disclosure about animal

welfare practices on food labels, would that provide

information and improve animal welfare? If firms

labeled their products with animal production techniques that they used, this would provide consumers

with information. Indeed, as noted above, producers

already have incentive to provide this information.

Additionally, however, steps would have to be taken to

prevent the misuse of labeling or confusion among

consumers. Vague terms like “free-range” and “cruelty-
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  87

free” would probably need to have standardized meanings for consumers to be able to understand them. 

Blandford and Fulponi (1999) suggest that third-party

accreditation could be used to ensure that labels mean

what consumers think they mean. Those meanings

would have to apply to goods coming from all countries, which could mean negotiating with other countries about meanings. Hobbs (1995) and Blandford and

Fulponi (1999) note that marketing meat that is

produced in accordance with animal welfare regulations can be more costly, as firms must separate their

meat from mass-produced meat, arrange for separate

shipping and packaging, and monitor production practices to make sure that they conform with standards of

animal welfare. 

While clear labels can provide information to

consumers, they don’t necessarily allow a society to

achieve the desired level of some social goal. Even if

consumers are well-informed and are able to purchase

goods with animal welfare standards that they prefer,

there is no guarantee that they will change their

purchasing behavior as much as society would want.

One consumer might be reluctant to buy a free-range

steak because it is more expensive, but the extra

expense might be small compared with the extra

benefit that all of those who value animal welfare

receive. Society might like the consumer to buy that

steak, but even though it is labeled and he knows that

it is free-range, he chooses not to buy it because the

extra costs outweighs his extra personal benefit from

consuming it. Labeling is sufficient in some cases to

deal with the consumer information problem, but not

with the problem of social goals (Golan, Kuchler and

Mitchell, 2000). 

Subsidization

Targeted subsidization to cover the costs of meeting

animal welfare standards, coupled with labeling, is

sometimes also suggested as a way of dealing with

different beliefs about proper production standards.

Under this policy, (Bennett, 1997; Blandford and

Fulponi, 1999) a government would underwrite the

producer’s added costs of switching to higher animal

welfare standards. If a chicken farmer needed to install

larger hen cages or must keep fewer animals on his

property, the government could subsidize all or part of

the cost. In this case, labels could provide consumers

with information about production practices. The

subsidy reduces the cost difference between products

The WTO and Animal Welfare

In deciding whether or not animal welfare standards

requirements for imports are legal, the World Trade

Organization (WTO) might apply a number of standards. One important standard is that of national

treatment. A country may not hold imports to standards that domestic firms do not have to meet. If

the rules for the production of imports were the

same as the rules for domestically produced goods,

animal welfare import regulations would not be in

violation of this standard. However, in practice,

foreign firms could be at a disadvantage if they do

not have access to the same inspection regimes that

domestic firms have. If firms must prove that they

are complying with the regulations, and domestic

firms are certified by government inspections,

foreign firms that don’t have access to the domestic

inspectors will be at a disadvantage. It might be

difficult for a country to provide evidence of animal

friendly production methods to a trading partner

halfway around the world.

Another potential area of conflict between the WTO

and animal welfare requirements for imports might

be the attempt to regulate processes. The WTO is

usually open to a country’s placing restrictions on

product quality, particularly when there is documented evidence of health and safety questions.

However, restrictions on the production processes

by which goods are manufactured are regarded

differently. Some argue that process restrictions are

never legal under the WTO, while other scholars

argue that there might be some cases where the

restrictions are consistent with WTO regulations.

There have been a number of high profile WTO

cases that dealt in some part with production

processes, some with animal welfare implications

like the Tuna-Dolphin case or the Shrimp-Turtle

case, both challenges to U.S. restrictions on imports

of seafood. 

The WTO considers national treatment and production process versus production quality to be important issues in evaluating the legality of a country’s

requirements for its trading partners. However, clear

standards for applying these principles to a given

trade regulation is still evolving as the body of

WTO case law grows.
88  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

that are produced with higher animal welfare standards

and those with lower standards. Consumers are therefore more likely to choose products produced with

high animal welfare standards, because there is less of

a price differential, and it is possible for society to

achieve a more socially desirable level of animal

welfare. The smaller price differences between the

imported goods and the domestic goods would reduce

the political incentives to try to keep the imported

goods out. The smaller price increases also make the

policy less costly to poorer members of a society.

Will subsidies result in trade distortions by encouraging production that might not have taken place

without subsidies? In a recent debate in the United

Kingdom, one Member of Parliament suggested that

general livestock subsidies be lowered to reduce incentives for farmers to overproduce, thereby reducing

intensity of farming, and increasing animal welfare.

Another countered that preserving animal welfare is a

more costly method of production, so that increased

aid to farmers is needed to compensate them for that

extra expense (Select Committee on Agriculture,

2000). Which argument is correct? 

It is true that animal welfare laws might raise production costs, and subsidies generally help farmers cover

costs. However, giving a farmer a general subsidy with

no restrictions does not necessarily lead to the implementation of animal welfare standards, as the farmer

can spend the subsidy on any production costs.

General subsidies, by encouraging farmers to produce

more, can also potentially distort trade by artificially

reducing production prices.

It is possible that a non-targeted agricultural subsidy

per unit of land or unit of output could even harm

animal welfare. Some argue that agricultural subsidies,

by encouraging farmers to increase output, encourage

intensive production and mechanization, or “factory

farming”, and that such practices reduce animal

welfare. To the extent that moving toward intensive

production cuts costs, farmers have an incentive to

make such changes anyway. However, subsidies might

be the cause of such structural change, if they

encourage intensification at the expense of other

methods of production. One mechanism for this occurs

when high agricultural subsidies make land more

expensive, so farmers are inclined to force more

animals into a given amount of space (Winter, Fry and

Carruthers, 1998). 

Targeted subsidies that require farmers to use the

money given to comply with animal welfare standards

are the only way to guarantee that farmers use subsidies in the manner intended. If the subsidies are given

per animal, they could potentially increase production

by lowering production costs per animal. However,

targeted payments come with a requirement of higher

cost production techniques, which can cancel out the

incentive to increase production, but only if the government estimates the size of the payment correctly.

Subsidies must be paid for, however, so this policy is

more likely to be more costly to the government budget

than simply setting standards that farmers must meet. It

is also difficult to determine the level of animal welfare

desired by society, and therefore difficult to figure out

how big the subsidy should be. Oversubsidization

means that the government is spending more money to

preserve animal welfare than the society would like,

and is therefore sacrificing the ability to spend on other

services that society desires more.

Conclusion

Concerns about animal welfare have prompted many

industrialized nations to pass laws concerning animal

welfare in research, commercial use, and farming.

These laws seek to satisfy the desire for increased

animal welfare on the part of individual consumers and

societies as a whole. The laws could potentially raise

production costs, thus making goods more expensive

for domestic consumers. If countries with stringent

animal welfare laws require trading partners to meet

animal welfare requirements, in order to protect their

domestic industries producing at a higher cost, world

trade flows may be affected. The extent of these effects

will depend on the relative sizes of trade in animal

products. Policy alternatives to animal welfare regulations include labeling and subsidization of animalfriendly production methods. Labeling can help meet

individual animal welfare goals, but not social goals.

Subsidization can help meet both goals, and its effects

on world trade depend on methods of implementation.

References

Akerlof, George A. “The Market for ‘Lemons’: Quality

Uncertainty and the Market Mechanism,” Quarterly

Journal of Economics, Vol. 84, 1970, pp. 488-500.

Bennett, R.M. “Farm Animal Welfare and Food Policy”,

Food Policy, Vol. 22, No. 4, 1997, pp. 281-288.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  89

Bennett, Richard, and Larson, Douglas. “Contingent

Valuation of the Perceived Benefits of Farm Animal

Welfare Legislation: An exploratory Survey”,

Journal of Agricultural Economics, Vol. 47, No. 2,

1996, pp. 224-235.

Bjerklie, Steve. “McDonald’s New Global Cause: Animal Welfare,” International Meat Secretariat (IMS)

Newsletter, June 30, 2000.

Blandford, David and Linda, Fulponi. “Emerging Public Concerns in Agriculture: Domestic Policies and

International Trade Commitments”, European

Review of Agricultural Economics, Vol 26, No. 3,

1999, pp. 409-424.

Blandford, David and Linda Fulponi. Conference Presentation, Symposium on Global Food Trade and

Consumer Demand for Quality, IATRC, June 26-27,

2000.

Browne, A.W., P.J.C. Harris, A.H. Hofny-Collins, N.

Pasiecznik, and R.R. Wallace. “Organic Production

and Ethical Trade: Definition, Practice and Links”,

Food Policy, Vol. 25, 2000, pp. 69-89.

The Economist. “Also a Part of Creation”, August

19th, 1995, pp. 19-21.

European Community, Council Directive 91/628/EEC

of 19 November 1991 on the protection of animals

during transport and amending Directives

90/425/EEC and 91/496/EEC.

European Community, Council Directive 98/58/EC of

20 July 1998 concerning the protection of animals

kept for farming purposes.

European Community, Council Directive 1999/74/EC

of 19 July 1999 laying down minimum standards

for the protection of laying hens.

European Community, Press Release, February 17,

2000.

FAS On Line, “Poultry Meat and Eggs”, March 27,

2000. http://www.fas.usda.gov/dlp/circular/2000/00%2D03lp/pltry1.html

Food Safety Inspection Service (FSIS), “Special 

Survey on Humane Slaughter and Ante-mortem

Inspection”, March 1998.

Francione, Gary L. Rain without Thunder: The Ideology of the Animal Rights Movement, Temple 

University Press, Philadelphia, 1996.

Golan Elise, Fred Kuchler, and Lorraine Mitchell.

“The Economics of Labeling,” Agricultural Economic Report # 793, ERS-USDA, 2000.

Grossman, Sanford J. “The Informational Role of Warranties and Private Disclosure About Product Quality,” Journal of Law and Economics, Vol. 24, No. 3,

1981, pp. 461-483.

Hobbs, Jill E. “Evolving Marketing Channels for Beef

and Lamb in the United Kingdom - A Transaction

Cost Approach,” Journal of International Agribusiness and Marketing, Vol. 7, No. 4, 1995, pp. 15-39.

House of Commons, Select Committee on Agriculture,

Minutes of Evidence, Questions 200-219, March

21, 2000.

Index to International Public Opinion. Greenwood

Press, Westport, 1997/1998.

Ippolito, Pauline M. and Alan D. Mathios. “Information and Advertising: The Case of Fat Consumption

in the United States”, American Economic Review,

Vol. 85, 1995, pp. 132-156. 

Law Concerning the Protection and Control of Animals. Law No. 105, Japan, October 1, 1973. 

http://hayato.med.osaka-u.ac.jp/index/

guide/inform/regulation/law1.html

McInerney, J.P. “The Cost of Welfare - the Food Consumer’s Viewpoint,” Proceedings of the Society for

Veterinary Epidemiology and Preventive Medicine,

Reading, 1995, pp. 141-151.

USDA-ERS. Foreign Agricultural Trade of the U.S.

database, 2000a.

USDA-ERS. Livestock, Dairy, and Poultry Situation

and Outlook, July 28, 2000b.

Vogel, David. Trading Up, Harvard University Press,

Cambridge, 1995.

Winter, M., C. Fry, and S.P. Carruthers. “European

Agricultural Policy and Farm Animal Welfare”,

Food Policy, Vol. 23, No. 3/4, 1998, pp. 305-323.

Zarkin, Gary A. and Donald W. Anderson. “Consumer

and Producer Responses to Nutrition Label

Changes”, American Journal of Agricultural Economics, December 1992, pp. 1202-1207. 
90  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Introduction

Developed countries are mature markets for food,

as illustrated in Chapter 2. Income growth has

less impact on expenditures for food and agricultural

products per se compared with less well-off countries.

However, higher incomes can drive increased demand

for food with certain characteristics: safer, higher

quality, more healthful, or produced in ways believed

to be more beneficial to the environment. 

The preceding chapters document the rise in consumer

demand for organically-produced food and discuss the

effects of consumers’ perceptions of food safety and

concerns about animal welfare on their demand for food

and agricultural products. The factors contributing to

these new demands are by now well-known: food

scares, outbreaks of food-borne illnesses, concerns over

food produced through biotechnology, concerns over

humane treatment of animals in food production, and

the environmental impacts of food production. 

In Western Europe, consumer demand for food products with known and documented characteristics and

with certified attributes has grown. This has been

fueled by the possible linkage of BSE (“mad-cow

disease”) to human illness, by the widespread incidence of illness from contaminated food sources, by

product recalls of processed foods, and by the growing

awareness of the impacts of farm production practices

on the environment and animal welfare. 

An example of industry response to this demand has

been the development and implementation of mandatory and voluntary quality control, management, and

assurance schemes. Such schemes include certification

systems for meat supply chains guaranteeing the

ability to trace fresh and processed meat back to the

originating animal and farm (commonly called “traceability”), certification schemes aimed at guaranteeing

both product quality and environmental management

of farms, and labeling and certification schemes

covering organic and natural production. These

schemes are an important part of the change in the

way that food products are produced, marketed, and

traded in Europe. 

Consumer Demand Sparks the 

Growth of Quality Assurance 

Schemes in the European 

Food Sector

Maury E. Bredahl, James R. Northen, Andreas Boecker, 

and Mary Anne Normile1

Abstract: Concerns over food quality and safety have led to the growth of quality

assurance schemes that provide technical requirements for production and processing and provide inspection and monitoring to assure compliance. The schemes,

increasingly prevalent in the U.K. livestock and meat industry, will impact market

structure, international competitiveness, and trade.

1 Maury Bredahl is professor of Agricultural Economics and

Director of the Center for International Trade Studies at the University of Missouri. James Northen is a research consultant at the

Meat and Livestock Commission, United Kingdom, and Andreas

Boecker is a lecturer at the University of Giessen, Germany. Mary

Anne Normile is an agricultural economist with the Market and

Trade Economics Division, Economic Research Service, USDA.

This research was conducted under a cooperative agreement with

the Economic Research Service while the first three authors were

at the University of Reading (U.K.).
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  91

This chapter reports on the emergence of food quality

assurance schemes in the United Kingdom as an illustration of the trend in Western Europe2. It explains the

reasons for the emergence of these schemes and

analyzes the characteristics of the schemes in terms of

the product attributes that the schemes’ provisions aim

to affect. Lastly, it discusses the potential economic

and market impacts of quality assurance schemes and

evaluates their potential trade impacts. The article

focuses on those schemes that have arisen in the livestock and fresh meat sector; however, the implications

may apply equally to schemes covering other sectors.

Characteristics of Quality 

Assurance Schemes 

Quality assurance schemes define a series of technical

requirements for producing, processing, or transporting food, and may include standards of environmental and other management practices. The schemes

also delineate an inspection system to verify that

members comply with these requirements. Labels or

quality marks of these programs provide an indicator

of an extrinsic product attribute, such as animal

welfare, organic production practices, or some aspects

of food safety, such as permitted uses of veterinary

medicine (see box “Quality Assurance Schemes and

Quality Attributes”). 

Quality assurance schemes have arisen in response to

several developments in the European food sector. 

  .

	




'	


 !"



/!






		

	*


'
'

')'*

	
!
	





	'




	
(

		

)0

*1222
	

	
	 !
*

!
''	






	)

 Food borne illnesses and food contaminants. Several food safety incidents in Europe have raised consumers’ concerns regarding the quality and safety of

their food supply. These have included outbreaks of

food borne illnesses, including an outbreak of salmonella in the early 1990s, and several outbreaks of

listeriosis during the 1990s. In 1999, the use of

dioxin-contaminated feed in Belgium was discovered, prompting the emergency removal of a wide

range of products from retail stores in Belgium, the

Netherlands, and France.

 Animal welfare and the environment. Growing

consumer awareness of and concern for the effects

of production practices on the well-being of animals

and the environment have led retailers to seek food

products that are produced in more humane or environmentally sound ways. 

 The Food Safety Act of 1990 (U.K.). This law

required retailers and other participants in the food

supply chain in the United Kingdom (U.K.) to exercise “due diligence” in ensuring that the food they

sold was safe. As a result, retailers were no longer

shielded from liability by a warranty or guarantee

from their suppliers. They were required, as are

other participants in the food chain, to proactively

ensure that the food they sell is safe. This change

raised concerns among food retailers, in particular,

regarding a number of animal rearing practices and

led them to seek documentation of their efforts to

ensure the safety of products (Fearne, 1998). In

effect, risk management (i.e., protecting themselves

against liability), as well as vertical coordination,

spurred the development of quality assurance

schemes and the growth in their membership.

These developments led to increased demand for

assurances regarding food production processes and

practices. In addition, food safety incidents have given

rise to calls for improvements in the ability to document the source of livestock and other food products,

including the feed used to produce them. Quality

assurance schemes meet this demand through identification and documentation requirements aimed at

tracing animals (and sometimes meat) from the farm

of origin to the slaughterhouse or market. Quality

assurance schemes may require animals to be bought

from farms certified by a recognized assurance scheme

or may limit geographic origin. Most have extensive

documentation requirements, including identification

of animals/carcasses, feedstuffs or treatments used,

2 A more in-depth treatment of quality assurance schemes, including those in Germany, and quality assurance systems for organic

products, will be the subject of a forthcoming ERS report, Agricultural Quality Assurance Schemes in the United Kingdom and Germany, by Bredahl, Northen, and Boecker.

3 Chapter 7 in this report discusses how consumer perceptions of

food safety have been affected by the BSE incident and its surrounding publicity.
92  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

and slaughter and grade, through if not all levels, a

large part of the supply chain.

A common aim of many quality assurance schemes is

to communicate to a customer (either a final consumer

or a customer in the supply chain) that the scheme has

affected particular product attributes in a desired way.

Quality assurance schemes play two main roles in the

supply chain. First, they provide documented assurance to customers that the supply of the assured

product contains all the attributes that the scheme

seeks to affect (for example, improved animal welfare,

improved trace-back capability, and elimination of

objectionable feedstuffs). This assurance is particularly

valuable for retailers who supply own-label meat and

must, therefore, be confident that the meat they buy

satisfies the requirement of a due diligence defense.

Second, they can act as a coordinating mechanism in

the supply chain where different levels of the chain are

under different ownership. The ability of quality assurance schemes to provide certain physical characteristics or consumer attributes is crucial when there is

limited control through the supply chain by consumers

or retailers. This coordinating role is especially useful

when farm level schemes tie in with other transport

and processor level schemes to provide integrated

supply chain coordination. For example, to be eligible

to go through the pork processing assurance scheme

(BQAP), pork must come from pigs that have met the

pig farm assurance scheme (FABPIGS) standards.

For successful operation of a quality assurance

scheme, an inspection system is required to assure

compliance with their production or processing

requirements. One way of assuring that an inspection

is independent is to have a competent third party

perform it, where the third party has no direct interest

in the results of inspections. In the U.K. livestock

sector, inspections are undertaken either by an independent inspection agency specifically set up for the

purpose or by veterinarians. An additional tier of

monitoring has developed for the U.K. fresh meat

sector, where Assured British Meat 4(ABM) and

Scottish Food Quality Certification Ltd. act as independent certification bodies for development of both

quality assurance technical requirements and for the

approval of competent third party inspection. In addition to an initial inspection to approve the producer or

processor for membership, schemes may carry out

routine audits, and the majority of schemes carry out

some form of random inspection. Finally, the majority

of schemes reserve the right to test carcasses for

banned substances. The ability to support livestock

production requirements with post mortem analysis is

an effective way of reducing the extent to which these

requirements are credence (not readily detectable or

observable by the consumer—see box “Quality

Assurance Schemes and Quality Attributes”) in nature.

Quality Assurance Schemes in 

The United Kingdom

Reflecting food safety and quality concerns of

consumers, producers, and other members of the food

value-added chain, quality assurance schemes have

proliferated in the United Kingdom over the last

decade, with the majority of schemes implemented in

the early 1990s. These programs now exist at many

stages of the food supply chain and cover many

different types of food. Quality assurance schemes are

particularly prevalent at the production stage of the

value-added chain: farm level production quality assurance schemes (commonly known as “farm assurance

schemes”) cover all major species of livestock, in

addition to arable crops, milk, potatoes, and fresh

produce. Further up the chain, processor level schemes

cover meat from the major livestock species, as well as

processed organic products.

Farm level quality assurance schemes include both

“generic” schemes, which have been developed with

broad public participation, and proprietary schemes

developed and operated by food retailing chains and

large processing firms. In the livestock sector, separate

generic farm-level schemes have been developed for

the major livestock species and for the different

regions of the United Kingdom (i.e. England, Wales,

Scotland, and Northern Ireland). Generic farm-level

schemes may extend beyond the farm level to specify

welfare and trace-back requirements when transporting

animals to slaughter. Standards have also been developed for trace-back capability through livestock

auctions. Process-level schemes often include animal

welfare practices and provisions for the slaughter and

processing of meat. Many farm-level schemes dovetail

with processor level quality assurance schemes to

4 ABM is now one of several umbrella quality assurance schemes

which come under the ‘British Farm Standard’. The logo for this

standard is the ‘Little Red Tractor’ logo, which is increasingly being

used in stores to advertise ‘British’ food. Other schemes include the

National Dairy Farm Assurance Scheme, Assured Chicken Production, Assured Combinable Crops, and Assured Produce.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  93

provide integrated quality assurance throughout the

supply chain. 

In addition, the major food retailers have implemented

“proprietary” quality assurance schemes used in the

production of own-label products. All proprietary

schemes require their members to be a member of one

of the generic farm-level schemes, but specify a

variety of additional requirements, such as carcass

specifications, age limits, breed, additional feed

constraints, and enhanced ability to document the

animal’s source and how it was produced. 

Generic Assurance Schemes

The United Kingdom has witnessed a rapid growth in

the number of farm level assurance schemes covering

the livestock sector. A generic quality assurance

scheme now exists for cattle, sheep, and pigs for each

major region of the United Kingdom (table J-1). The

majority of schemes were implemented in the early

1990s, largely in response to food retailers’ concerns

regarding the due diligence defense for product safety.

Membership in the programs jumped significantly

following the BSE crisis in March 1996, and has been

maintained at these higher levels since, as processors

and retailers increasingly required product from farms

adhering to these programs. For example, membership

in Farm Assured British Beef and Lamb (FABBL) and

other schemes became a de facto mandatory requirement of major processors, who were in turn

responding to pressure from major food retailers,

restaurants, and food service. 

In 2000, about half of English beef producers and

about a quarter of English lamb producers belonged to

Farm Assured British Lamb and Beef (FABBL). They

produced 76 percent of beef and 51 percent of lambs

slaughtered in England. About 30 percent of pig

producers belonged to Farm Assured British Pigs

(FABPIGS), but they produced about 85 percent of the

pigs slaughtered in England.

Generic processor-level assurance schemes in the fresh

meat supply chain have existed for a similar length of

time as the farm assurance schemes (table J-2). While

proprietary quality assurance schemes require participation in a farm-level assurance scheme, membership

in a processor-level scheme is not de facto mandatory.

Generic processor-level schemes are used more widely

when the processed meat is sold through other supply

channels such as specialist butchers or restaurants and

food service. However, ‘Specially Selected Scotch’

meat (through the SQBLA and GSQMS schemes) is

increasingly being seen in supermarkets.

Proprietary Farm Assurance Schemes

Many food retail chains demand livestock that has come

from farm assurance scheme members. In addition,

many chains also run their own (proprietary) farm-level

schemes, which go well beyond the requirements

Table J-1—Inventory of generic farm quality assurance schemes operating in the U.K. livestock sector

Scheme Regions Species Date started Members

Farm Assured British Beef England and Wales Cattle and Sheep 1992 18,000

and Lamb (FABBL)

Scotch Quality Beef Scotland Cattle and Sheep 1990 6,500

and Lamb Assurance (SQBLA)

Farm Assured Welsh Wales Cattle and Sheep 1992 6,700

Lamb (FAWL)

Northern Ireland Farm Northern Ireland Cattle and Sheep 1991 7,000

Quality Assurance (NIFQAS)

Farm Assured British England and Wales Pigs 1996 2,700

Pigs (FABPIGS)

Scottish Pig Industry Scotland Pigs 1990 200

Initiative (SPII)

Northern Ireland Pig Northern Ireland Pigs 1999 n.a.

Assurance Scheme (NIPAS)

Source: Northen (2000)
94  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

covered in the generic quality assurance schemes. There

are several reasons why this has occurred:

 generic schemes’ requirements do not fully meet the

due diligence requirements of food retailers;

 food retailers are able to gain competitive advantage

by developing additional quality requirements, such

as carcass classification and breed; and

 closer cooperation with both processor and farmer

guarantees the food retailer a more consistent and

stable supply of meat.

The benefits to the farmer of joining one of these

schemes appear to be either a premium for his stock, a

more stable price, and/or a more stable supply channel.

Table J-3 gives an overview of the requirements of

these schemes for beef for five British food retailers.

These five retailers account for over 60 percent of food

sales and over 70 percent of meat sales in the United

Kingdom (Meat and Livestock Commission 2000,

FAS 2000). 

Provisions of Quality 

Assurance Schemes

The main features of several U.K. quality assurance

schemes are analyzed with a conceptual framework

that identifies and categorizes desired product and

process attributes and how they are communicated to

consumers (see box “Quality Assurance Schemes and

Quality Attributes”). Using this conceptual framework,

the provisions of the quality assurance schemes can be

presented not in terms of production requirements

alone, but in terms of the product attributes that are

affected by those requirements. 

The U.K. Farm Assured British Beef and Lamb

(FABBL) scheme provides an example of the provisions of a typical generic farm-level assurance

program. Table J-5 demonstrates how farm assurance

scheme requirements affect quality attributes. The

FABBL scheme is a typical farm-level scheme in

terms of the attributes affected. FABBL scheme

requirements affect mainly process attributes such as

animal welfare and trace-back capability at the farm

level. In addition, technical requirements are laid down

regarding the environment and food safety, in particular pathogens, toxins, and drug residues. The majority

of quality attributes affected will be ‘credence’ in

nature, hence only extrinsic cues can be used to

communicate these attributes to the customer.

Extrinsic cues at this level of the supply chain will

generally take the form of a quality assurance scheme

certificate presented by the seller as proof that the

animals have been produced to scheme requirements.

Turning from farm level to the processing level, table

J-6 highlights the provisions of a typical processorlevel assurance scheme—the Guild of Scotch Quality

Meat Suppliers (GSQMS) scheme—and the product

attributes it affects. This scheme dovetails with the

Scotch Quality Beef and Lamb Assurance (SQBLA)

farm level assurance scheme to create an integrated

scheme for beef and lamb. Any meat passing through

both schemes can be labeled as “Specially Selected

Scotch” to consumers. Compared with the earlier

farm-level example, there are more requirements

regarding animal welfare at both the transport and

resting stages, and trace-back capability is covered

through a large part of the supply chain. In addition,

the food safety and quality attributes have several

requirements affecting them both pre and post

slaughter. Processor schemes additionally affect

sensory attributes, such as “taste” and “tenderness,”

Table J-2—Generic processor quality assurance schemes-U.K. livestock sector

Scheme Region Species Origin Members Eligible Volume 

Percent

Guild of Scottish Quality Scotland Beef and Lamb 1988 20 80

Meat Suppliers (GSQMS)

Scottish Pork Industry Scotland Pork 1991 8 80

Initiative (SPII)

British Quality Assured England and Wales Pork n.a. n.a. n.a.

Pork (BQAP)
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  95

Table J-3—Proprietary quality assurance programs in the U.K. beef sector, 1998

Scheme Criteria Tesco Sainsbury M&S Asda Waitrose

Producer Clubs Traditional Select Beef Bond Beef Scheme

Beef Scheme

Partnership

Carcass Specification 270-360 kg 280-380 kg 270-350 kg 240-350 kg 230-360 kg

Specified Specified Specified Specified Specified 

carcass carcass carcass carcass carcass

requirements. requirements. requirements. requirements. requirements.

Target Animals Steers, Steers, Suckler bred. Steers, heifers, Sucklers,

heifers, bulls. heifers. Steers only. bulls. Bulls <14 steers, heifers,

12-30 months. Under 30 18-26 months. only.

months. months. Steers, heifers 15-29 months.

<18 months.

Breeds Accepted All breeds. Sire: Sire: Three-quarter Sire:

recognized Charolais beef, single Aberdeenbeef breed; no Simmental, suckled. Angus

restriction on Limousin Dam: Any

dam. Scotch Angus breed.

Dam > 50% 

beef.

Members 1,500 registered. 1,200. 1,500 registered. 40. 400.

Target 2,000. 500 full Target 100-126

approval. to source 600

cattle per week.

Banned Feeds Growth promoters. Fishmeal; Fishmeal; Meat/bonemeal Fishmeal;

growth growth blood-based genetically

promoters; promoters; fertilizers on engineered

growth growth pasture; other. corn; growth

enhancers. enhancers. promoters; 

digestive 

enhancers.

Farm Assurance All national FABBL None FABBL and FABBL,

schemes recognized. (Farm Assured recognized. Asda approved. SQBLA, or

British Beef and FAWL 

Lamb) approved. members.

Traceability Farm of birth; Cattle born on Farm of birth; Farm of birth. Farm of 

producer database. finishing farms; producer birth; 

farm of birth. database. producer 

database.

Note: Tesco, Sainsbury, M&S, Asda, and Waitrose are British food retailing chains. The use of these firms' names does not imply any

endorsement of the firms or their practices by USDA.
96  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Quality Assurance Schemes and Quality Attributes

Consumers purchase food products to consume a

desired set of quality attributes. The two main

attribute categories are process attributes and product

attributes. Consumers purchase products to consume

physical product attributes, such as sensory and nutrition attributes. Depending on personal values and

cultural norms, consumers may also purchase products to consume process attributes, i.e. those which

form part of the production process but which cannot

be detected during consumption. Examples of

process attributes include country or region of origin,

animal welfare practices, or environmental impacts of

certain production practices. Consumers are willing

to pay a higher price for products that provide

desired attributes.

Quality attributes can be further divided into two

broad classes: those that are ascertained and evaluated by actually consuming the product, termed experience characteristics; and those that cannot be

directly determined by consumers, termed credence

characteristics. Experience attributes include sensory

attributes such as ‘taste’, whereas credence attributes

include many attributes within the process category

in addition to some product attribute categories like

nutrition and food safety. 

Consumers use cues and indicators to detect attributes that they want to consume. Cues, such as color,

odor, and size, are used to predict experience attributes, such as tenderness and taste. Extrinsic indicators (e.g. product labels and certificates) are used to

detect both process and product attributes. Customers

base the amount they are willing to pay for a product

on cues of intrinsic product attributes and indicators

of process or extrinsic product attributes. A label

certifying that a product was produced to the requirements of a quality assurance scheme is one indicator

guiding consumer purchases. 

Examples of process and product attributes according

to the types of cues used to detect them are presented

in table J-4. For example, the presence or absence of

many feed additives cannot be readily detected based

on consumers’ experience or perception (termed

“credence” attributes) of a product and hence can be

communicated only through an extrinsic indicator,

such as a label. Many process attributes, such as how

animals are treated in production and transport, can

only be communicated through an extrinsic indicator.

Quality assurance schemes provide a system for

assuring and certifying desired product attributes by

establishing production and processing standards that

relate to the provision of these attributes, inspecting

to ensure that standards are being observed, and

providing an indicator of these attributes through a

mark, label, or certification.

Table J-4—Elements of process and product attributes and relationship to extrinsic and intrinsic cues

Process Product Attributes

attributes Extrinsic cues Intrinsic cues

Food safety Nutrition Sensory Functional

Animal welfare Pathogens Fat content Taste Convenience

Biotechnology Residues Calories Texture Shelf life

Organic Growth Fiber Tenderness

 production promoters Sodium Juiciness

Traceability Additives Vitamins

Feed Feed Minerals

Toxins

Physical

 contaminants

Source: Based on Northen.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  97

Table J-5—Provisions of a farm-level generic quality assurance scheme—Farm Assured British Beef and Lamb (FABBL)

Attributes Examples of standards Supply level affected*

Process F T PTR

Animal welfare Animals must be treated and handled to avoid injury and

 minimize stress.

All animals must have access to sufficient clean water.

The use of electric prods is not permitted.

Naturally suckled animals should have regular contact with the mother.

All stock must have a well drained, dry lying area.

Traceability Store animals, breeding stock, and young animals must be bought 

from a farm certified by a recognized assurance scheme. Alternatively, 

animals must be kept on the farm for minimum periods before slaughter.

On-farm movement records, as required by legislation must be kept 

up-to-date and available for inspection and reconciliation with the 

relevant animals on request.

Environment There must be systems to prevent pollution of the environment and 

spread of infectious disease.

Animal waste and effluents must be stored and disposed of in such 

a way which avoids the danger of polluting the environment.

All chemicals (e.g. organophosphates and synthetic pyrethroids) must 

be disposed of safely at all times.

Food Safety

Pathogens/ All feed must be free from contamination. All purchased compound 

 Toxins feed must be obtained from a reputable source that manufactures to 

the relevant standard laid down by legislation.

Diets must not contain any product of mammalian or avian origin 

with the exception of dairy products.

Paints, preservatives, and other chemical compounds that may be toxic 

should not be used on surfaces accessible to cattle.

Residues Withdrawal periods for veterinary medicines must be strictly adhered to.

*Key: F=Farm level; T=Transport from one stage to next; P=processing level; R=retail sector.
98  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

Table J-6—Provisions of the Guild of Scottish Quality Meat Suppliers scheme

Attributes Examples of standards Supply level affected*

Process FTPTR

Animal welfare Unloading docks must be provided. Animals must be unloaded promptly.

Pens, gates, and walkways must be designed to minimize stress.

Animals must be penned in the groups they were transported in.

Animals must have access to adequate clean water and feed when 

necessary.

Slaughter: animals must be slaughtered humanely and with minimum 

of distress.

Traceability Animals must come from SQBLA farm assurance scheme members.

Animals must be penned in groups they were transported in up to

 stunning.

After slaughter, sides must be clearly identified and bear slaughter no., 

date, classification, and cold weight.

Precise and up-to-date records must be maintained to demonstrate the

 achievement of standards.

Food Safety

Pathogens/ Product labels of retail packs should carry full instructions for domestic

Toxins storage.

Processing: carcass must be dressed in accordance with official

 specifications. Brain, spinal cord, etc. must be removed.

Chilling procedure must ensure that first 10 hours of slaughter the 

muscle temperature remains above 10o

C.

Cutting must occur in clean, hygienic conditions and be quick enough

 to avoid contamination from microorganisms.

Sensory

Taste Packaging must not affect organoleptic characteristics of the meat. 

Specified carcass characteristics according to EU standards.

Tenderness If sides are to be aitch bone hung this must be done within 1 hour 

of stunning. Aitch bone suspended sides must remain on the hook 

for 48 hours.

Value/Functional

Size Specified carcass characteristics according to EU standards.

Convenience When deboning all major tendons must be removed and the joints 

trimmed to remove excess seam fat, exposed blood vessels, glands, 

and blood staining.

Cues

Color Fat must be firm and white; muscle must be good color; muscle and

fat must be free from bruising and blood splash.

*Key: F=Farm level; T=Transport from one stage to next; P=processing level; R=retail sector.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  99

and lay down specific requirements that affect intrinsic

cues (such as specifying the amount of visible fat on a

piece of meat). 

Detailed requirements for proprietary farm assurance

schemes such as those presented for farm-level and

processor-level generic schemes are not publicly available. Nevertheless, it is possible to take as an example

the additional requirements presented for one of the

proprietary schemes—Waitrose Beef Scheme—in table

J-3 and place them into quality attribute categories

(table J-7). The Waitrose scheme, like most proprietary

schemes, accepts membership of one or several of the

generic farm-level assurance schemes but covers additional areas, concentrating on those that mainly affect

sensory quality attributes. The food retailer’s name, or

brand, on the product label will indicate to consumers

the presence of attributes arising from producing to the

technical requirements of their proprietary scheme.

In addition to the schemes discussed above, there are

several organic assurance schemes operating in the

United Kingdom. The organic schemes, not covered in

detail here, cover a much broader range of quality

attributes within the “process” attribute category.

Organic schemes emphasize product requirements that

target consumer concerns regarding residues, the use

of hormones, and genetic engineering. Feed requirements are explicitly included as they form a mainstay

of organic processing. Animal welfare, documentation

through the supply chain, and environmental effects

are also covered. 

Market and Trade Effects of Quality 

Assurance Schemes

The quality assurance schemes considered here may

impact domestic firms and markets, as well as trade.

Market and economic impacts will depend on the

provisions and credibility of the scheme, the market

structure of the national food system, as well as

consumer demand for the attributes targeted by 

the schemes. 

Domestic Market Effects

Domestic firms—producers, processors, and

retailers—may be affected both by changes in the

direct costs of complying with and maintaining the

required scheme standards and in terms of the transaction cost.5 The effectiveness of the scheme’s requirements and inspections will determine likely production

cost changes for the supplier to and the customer of a

scheme. A credible quality assurance system may

reduce transaction costs, particularly the costs associated with searching and screening for suitable

customers or suppliers, in negotiating the terms of a

contract, and monitoring and in enforcing the terms of

the contract. Quality assurance schemes may also

provide a price from the provision of an extrinsic cue

Table J-7—Additional provisions of Waitrose quality beef scheme

Attributes Examples of standards Supply level affected*

Process FTPTR

Traceability Animals and products must be accompanied by documents indicating 

farm of birth. Producer required to be on database.

Food Safety Fishmeal, growth promoters, and digestive enhancers are banned.

Sensory Weight: 230-360 kg., EU conformation and fat specifications.

Acceptable breeds: Sire—Aberdeen Angus; Dam—any breed.

Animals: sucklers, steers, heifers.

Age: 15-29 months.

Value/ Weight: 230-360 kg, EU conformation and fat specifications.

Functional

*Key: F=Farm level; T=Transport from one stage to next; P=processing level; R=retail sector.

5 The effects of these schemes on costs are treated in detail in the

forthcoming ERS report, Agricultural Quality Assurance Schemes

in the United Kingdom and Germany (Bredahl, Northen, and

Boecker).
100  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

of production practices, as well as the intrinsic attributes of the product. 

The development, operation, and interaction of voluntary food quality assurance schemes will be an increasingly important determinant of the competitiveness of

agricultural and food industries through their effects

on production, transactions costs, and prices. Quality

assurance schemes may convey a competitive advantage to domestic producers covered by the program.

For example, all of the large retail food chains in the

United Kingdom require farm assured livestock.

Clearly, in order to source this primary market, quality

assurance scheme membership has become de facto

mandatory, conveying an advantage to suppliers participating in the schemes, and a disadvantage to those

who do not. These schemes may come to convey the

same advantage for their members as other national

systems that aim to create a competitive advantage for

some domestic producers based on the sensory attributes of food, or even on the location of production,

such as that used for wine and other products. 

Trade Effects

The quality assurance schemes could have important

impacts on trade in food products. Providing a product

attribute that closely matches intermediate customer or

final consumer demands may provide a competitive

advantage to domestic producers and processors. 

The trade impacts of food quality assurance schemes

will depend on a complex set of factors. Ultimately,

the impact depends on the value customers place on

particular quality attributes and companies’ relative

ability to deliver them. The trade impact will also

depend on whether the standards are mandatory or

voluntary, and whether they are adopted at the national

or European Union (EU) level.

Domestic customers’ specifications may act to reduce

the competitiveness of foreign suppliers, if not block

imports entirely. By requiring imports to contain the

same set of attributes as provided by products

produced through domestic quality assurance schemes,

trade could be blocked. Foreign suppliers may not

have easy access to required certification procedures,

imposing an enormous cost disadvantage relative to

domestic producers. Or, foreign suppliers may simply

be unable to produce products with the required set of

attributes. For example, a required attribute that

production take place in a particular region of a

country would absolutely disadvantage foreign

producers. This type of trade barrier is likely to

become more prevalent for importers into the United

Kingdom, as domestic customers increasingly insist

that technical requirements in schemes, and inspectors

of these requirements, are accredited to national or

EU-level standards (Henson and Northen, 1998).

Alternatively quality assurance schemes could have a

positive effect on trade by establishing a set of clearly

defined and readily available performance standards

(like ISO 9000 standards) that, by reducing transaction

costs, facilitate commerce between countries. For this

to occur, schemes would need to exist in each country,

and foreign customers would have to accept the technical requirements and inspections of foreign schemes. 

Taking the example of the FABPIGS farm-assurance

scheme, several trade effects are suggested for countries

exporting pork to the United Kingdom. The demand for

farm-assured pigs (and other livestock) with animal

welfare and trace-back attributes in the United Kingdom

is well developed. Many retail food chains (the likely

buyers of most imported meat) demand farm-assured

livestock, hence quality assurance schemes such as

FABPIGS have become de facto mandatory for

supplying the primary retail market. Although retail

food chains may be prepared to accept pork from

comparable schemes in other countries, the animal

welfare and trace-back elements of such schemes are

likely to have been developed for their own domestic

market and may therefore need significant revision to

satisfy the U.K. market. In addition, the mechanism by

which the foreign scheme is inspected may not be sufficiently rigorous. Any revision to their technical requirements or inspection procedures will result in additional

expense for foreign suppliers, which in turn may affect

their relative competitiveness. In the case of pork, the

costs of compliance with U.K. customers’ demands are

not likely to be prohibitive for all foreign suppliers.

More likely, discrimination between foreign suppliers

will occur, as those countries with welfare and traceback standards similar to those in the United Kingdom

will incur lower costs of meeting U.K. standards (for

example the Netherlands and Denmark).

On the positive side, however, where foreign schemes

are acceptable to U.K. buyers, the presence of the

quality label (an extrinsic cue) should be sufficient to

indicate the necessary quality and/or safety of the meat

and allow for reduced transaction costs of U.K. buyers.

This in turn may encourage a greater trade of meat

between countries.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  101

Quality Assurance Programs in the United States

Quality assurance programs have been in place for

some products for several years in the United States. In

the livestock sector, a number of quality assurance

programs aimed primarily at improving the quality and

safety of the final product have been developed by

producer organizations. Many programs establish guidelines for good practices. Some provide training to

producers in implementing these guidelines and offer

certification for producers who have completed the

training. Some programs may verify the certification

through on-farm inspections or other audits. 

Fewer incorporate strict production/process controls and

auditing to ensure that production standards are met. A

few, recognizing the importance many consumers place

on environmental issues, attempt to reduce adverse

environmental impacts of livestock production. Some

industry observers expect that more quality assurance

plans like these will arise in the United States, partly in

response to growing U.S. consumer demand for certain

product attributes, and partly to remain competitive in

export markets where these programs become more

widespread abroad (Miller 2000).

A few examples of quality assurance programs established by U.S. producer groups include the following:

 National Cattlemen’s Beef Association’s (NCBA)

Beef Quality Assurance (BQA) program was introduced in 1982 to address concerns of avoiding

residues in beef. Since then, quality assurance programs have been launched in all segments of the beef

industry to improve quality. 

 National Pork Producers Council Pork Quality Assurance (PQA) program has been in place since 1989.

Primarily a management education program, it

emphasizes good management practices in handling

and use of animal health products. 

 The Texas and Southwestern Cattle Raisers Association’s Beef Quality Assurance program, scheduled for

implementation in 2001, will provide certification to

those producers completing training aimed at raising

their awareness of practices that have negatively

affected meat safety or quality.

Quality assurance can also be provided by brand-name

programs, such as those operated by IBP, Certified Angus

Beef, Nebraska Corn-Fed Beef, and others. Brand-name

beef programs impose additional requirements beyond

those established by producer organizations.

U.S. quality assurance programs established to date

differ substantially from the comprehensive quality

assurance schemes in the United Kingdom. U.S.

programs tend to be limited in scope, focusing primarily

on health characteristics, and rarely on extrinsic product

characteristics such as animal welfare and environmentally benign production. They also tend to be limited to

on-farm quality assurance, rather than providing assurance throughout the supply chain.

Some processors and retailers are beginning to address

some of the concerns—like animal welfare—targeted

by quality assurance schemes in the U.K. For example:

 In 2000, McDonald’s announced that it would only

buy eggs from suppliers who follow animal welfare

guidelines—specifically, requirements regarding the

size of battery cages for laying hens and an end to

the practice of “forced molting,” withholding food

and water from the birds so they will lay more eggs

(McDonald’s 2001). 

 In September 2000, the American Humane Association (AHA) launched a voluntary labeling program—

“Free Farmed Certification Program”—to assure consumers that dairy, beef, and poultry products come

from animals raised under AHA guidelines established for humane care (AHA 2000). The program

sets forth standards for housing, feeding, and environmental conditions for the animals, as well as

training and education standards for farm management and staff. It provides certification that animals

were treated according to these standards, and allows

certified producers to use the “free farmed” label on

their products. Compliance with standards is determined by on-site inspections carried out by a nonprofit organization set up by AHA. 

These programs are too new (and too few) to determine

their impact on consumer demand, or whether they will

spur similar programs. The AHA, in developing its

program, pointed to research that found that consumers

would be willing to pay slightly more for meat and

poultry products that are humanely produced. If

consumers respond positively to these initiatives,

producers, processors, and retailers may follow suit. 
102  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

References

“AHA Unveils ‘Free Farmed’ Labels to Certify Animal

Care Standards,” Feedstuffs, Vol. 72, No. 39,

September 18, 2000.

Bredahl, M.E., J. R. Northen, and A. Boecker (forthcoming). Agricultural Quality Assurance Schemes

in the United Kingdom and Germany (ERS report).

Fearne, A. “The Evolution of Partnerships in the Meat

Supply Chain: Insights from the British Beef Industry,” Supply Chain Management, Vol. 3, No. 4,

1998, pp. 214-231.

Foreign Agricultural Service (FAS). GAIN Report

#UK0046, November 17, 2000.

Henson, S.J. and J.R. Northen. “Economic Determinants of Food Safety Controls in the Supply of

Retailer Own-branded Products in the U.K.,”

Agribusiness, Vol. 14, No. 2, 1998, pp. 113-126.

McDonald’s web site,

<http://www.mcdonalds.com/countries/usa/corporate/info/welfare/laying_hen.html>, accessed 

January 16, 2001. 

Meat and Livestock Commission (U.K.). A Pocketful

of Meat Facts 2000.

Miller, L.E. “Quality Assurance: Future Trends in 

Animal Health Certification and Auditing,” U.S.

Department of Agriculture, Animal and Plant Health

Inspection Service,

<http://marketingoutreach.usda.gov/info/99manual/health.html>, accessed December 2000.

Northen, J.R. “Quality Attributes and Quality Cues:

Effective Communication in the U.K. Meat Supply

Chain,” The British Food Journal, Vol. 102, No. 3,

2000, pp. 230-245.
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  103

List of Tables

*3)4



')))))))))))))))))))))))5

*1)-

6

	




'

 )))))))))))))))))))))))))))))))))))))))7

*0)/


3892*3889))))))))))))))))))))))))))))))))9

*:);
	
;-- 
'
3892388< )))33

*<)#



'

'
3892*388< )))))))))))))))33

*5) 
	



 )))))))))))))))))31

*7) 
	



 ))))))))))))))))))31

*9) 
	


))))))))))))))))))))))31

*8) 
	


 )))))))))))))))))))31

*3)'

	'''



'
 ))))))))))))))))))))))))))))))))))))))35

*1)'

		

*'
 )))))))))))12

$*3)=
	


 )))))))))))))))))))))))))))))))))))))))17

$*1)




 ))))))))))))))))))))19

*3)=
	'
 ))))))))))))))))))))))))))))))))<2

=*3)>&'


		3882*3888 ))))))))53

=*1)'*?
'
3898*3888 )))))))))))))))))))))))))50

@*3)+'

))))))))))))))))72

@*1)$

 )))))))))))70

@*0)#'
	

 )))))))))))))7:

;*3)!
		 ))))))))))))))))))))))))))))))))91

,*3);


	'	(

'

>)&)

 ))))))))))))))))))))))))))))))))))))))))80

,*1)=

(
*>)&)

 ))))))8:

,*0)#

(

'>)&)	
3889 )))))8<

,*:)!
	





 ))))))))))))))))))))))))))))))))))))85

,*<)#


		*'(
A

	??" ))))))))))))))))))))87

,*5)#


	=
	 
B
4 )))))))89

,*7)



	/
(
	 ))))))))))))))))88
104  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

List of Figures

3)$'>) )

3872*89 ))))))))))))))))))))))3

1)=
	



 ))))))))))))))))))))))))))))))))))0

*3)$



	
'))))))))))))))))))))))))))))<

*1) 
	




'
 )))))))))5

*0);


	
 )))))))))))))))))))))))))))))))7

*:)/

 )))))))))))))))))))))))))))))))))))))))))))7

*3)#
 ))))))))))))))))))))))))))))))))))))))))37

*1);

	
	

 )))))))))))))))))))))))))))))))))))))37

*0)+*
	
	

 )))))))))))))))))))))))))))))))))))12

*:)+*
	
	

'
 )))))))))))))))))))))))))))))13

*<)$
*	
 ))))))))))))))))))))))))))))))))13

$*3)#


)))))))))))))))))))))))))))))))))))))1<

$*1)-
'

=#))))))))))))))))))))))))))))))17

$*0)#

$)))))))))))))))))))))))))))19

$*:)#

;))))))))))))))))))))))))))))18

-*3)>) )
*
3883 )))))))))))))))))))))01

-*1)/'	
>) )	





))))))))))))))))))))))))))))))))))))))))))))01

-*0) '''	


)))))))))))))))))))00

-*:)>) )
	
 ))))))))))))))))))))))))))))))))00

-*<) '
 ))))))))))))))))))))))))))))))))))))))0:

-*5) '	



		
C

 ))))))))))))))))))0:

-*7) (



 ))))))))))))05

-*9)?
	
' ))))))))))))07

-*8);
	

''
' ))))))))))))07

!*3)
>) )


	

))))))))))))):1

!*1)>) )


	

 )))))))))))))))):1

!*0)>) )

 ))))))))))))))))))))))))))))))):0

!*:)=




'


	)))))))))))))))))))))))))))))))))))))))):0

!*<).>) )
	

	



	 )))))))))))))))))))))))))))))))))))))))))))))))))::

!*5)$'(

	


>) )







 )))))))))))))))))))))))))))))))))))))))::

!*7)





'
	'''>) )





))))))))))))))))))))))))))))))))))))))))))))):<
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  105

!*9).

	,%>) )
 )))))))))))))))))))))))))))):5

!*8)$


	>) )
 ))))))))))))))))))))))))))):5

*3)#>) )	'

 )))))))))))))))))))))<2

*1)>) )'


 )))))))))))))))))))))))))))<2

*0)>) )	

 ))))))))))))))))))))))))))))))))))))))))<3

*:)4
	
>  ))))))))))))))))))))))))<1

*<)4
'

>  ))))))))))))<1

*5);

			'

 ))))))))))))<:

=*3)

	
D$





 )))))))))))))))))))))))))))))))))))))))))))))<7

=*1)>) )	

 )))))))))))))))))))))))))))))))))))<8
106  Changing Structure of Global Food Consumption and Trade / WRS-01-1 Economic Research Service/USDA

List of Acronyms and Abbreviations

Assured British Meat (ABH)

American Humane Association (AHA)

Agricultural Research Service of USDA (ARS)

Beef Quality Assurance (BQA)

British Quality Assured Pork (BQAP)

Bovine spongiform encephalopathy (BSE)

Controlled atmosphere (CA)

Common Agricultural Policy of the European Union (CAP)

China Council for International Cooperation on Environment and Development

(CCICED)

Chlorofluorocarbon compounds (CFC)

Creutzfeldt Jakob Disease (CJD)

Community Supported Agriculture (CSA)

European Commission (EC)

European Fair Trade Association (EFTA)

Economic Research Service of USDA (ERS)

European Union (EU)

Farm Assured British Beef and Lamb (FABBL)

Farm Assured British Pigs (FABPIGS)

Food and Agriculture Organization of the United Nations (FAO)

Foreign Agricultural Service of USDA (FAS)

Foreign Agricultural Trade of the United States (FATUS)

Farm Assured Welsh Lamb (FAWL)

Food and Drug Administration of the United States (FDA)

Food Safety Inspection Service of USDA (FSIS)

Genetic engineering (GE)

Global positioning systems (GSP)

Guild of Scottish Quality Meat Suppliers (GSQMS)

Global Trade Analysis Project (GTAP)

Hazard Analysis and Critical Control Point (HACCP)

Hydrochlorofluorocarbon compounds (HCFC)

Hydrofluorocarbon compounds (HFC)
Economic Research Service/USDA Changing Structure of Global Food Consumption and Trade / WRS-01-1  107

International Comparison Project (ICP)

International Food Policy Research Institute (IFPRI)

International Federation of Organic Agriculture Movements (IFOAM)

Integrated Pest Management (IPM)

International Organization for Standardization (ISO)

International Trade Centre (ITC)

Journal of Commerce (JOC)

Ministry of Agriculture, Fisheries, and Food of the United Kingdom (MAFF)

Mass sociogenic illness (MSI)

National Cattlemen’s Beef Association (NCBA)

Newly industrialized countries (NIC)

Northern Ireland Farm Quality Assurance (NIFQAS)

Northern Ireland Pig Assurance Scheme (NIPAS)

Non-tariff barriers (NTB)

Organization for Economic Co-operation and Development (OECD)

Polychlorinated biphenyls (PCB)

Pork Quality Assurance (PQA)

Produce Studies Consulting (PSE)

Scottish Pig Industry Initiative (SPII)

Scottish Quality Beef and Lamb Assurance (SQBLA)

Twenty-foot equivalent (TEU)

United Kingdom (UK)

United Nations (UN)

United Nations Conference on Trade and Development (UNCTAD)

United States (US)

United States Department of Agriculture (USDA)

World Development Indicators, The World Bank (WDI)

World Health Organization of the United Nations (WHO)

World Trade Organization (UN)