Lectures 5 & 6: Bread subsidies, Fortification

(Review) what are the 3 key issues of food security?

1. Availability: food is physically available for purchase on the market

2. Access: people have enough income to buy food at those prices

3. Utilization: food is used effectively in the household

(Review) What’s a key distinction between Food Assistance Programs and Food aid?

Food aid involves the international sourcing of concessional resources tied to the provision of food, whether by a donor or to a recipient

(Review) Food Assistance Program def

Any intervention targeted towards hunger or under nutrition

(Review) Food aid def

International concessional flows in the form of food or cash to purchase food in support of food assistance programs

(Review) should you engage in food aid if local markets are functioning well?

No! Provide cash transfers or jobs

(Review) If there local markets aren’t functioning well, but there’s food available in nearby countries to fill the gap, what should you do?

Local purchases or triangular transactions!

If there’s no food available locally, you can provide food aid based on intercontinental shipments

What are 3 types food policies that affect the markets?

1. Changing supply of food (with food aid or new technologies)

2. Subsidized (artificially low) prices

3. Using income elasticities to target under nutrition

Why are European food programs usually cheaper than US ones?

The Europeans source their food from neighboring nations (example of local purchasing)

What are 2 ways to change food supply?

1. Increase market price so farmers want to produce more (could be due to an increase in world prices, or an artificially high price)

2. Increase the quantity of food available for the same price (New technology, food aid, or subsidized imports)

What change would happen to the supply curve if farmers are able to produce more food at the same price?

The supply curve would shift out!

What is the problem, though, with supplying food (for example through aid), which has an in elastic demand?

Supply curve will shift right- a LARGE drop is price will occur only with a SMALL increase in quantity demanded. Bad targeting

Why is it better to supply more food when the demand is elastic?

A relatively SMALL drop in price will occur, accompanied by a LARGE increase in quantity demanded. Better targeting.

What is one reason the French Revolution was fought?

The price of bread was too high or there wasn’t enough bread! They chopped off Louis the XVIs head!!

In the 1900’s, what did the French government do to the price of bread to stave off revolution?

Sets a maximum price for the bread so that it’s more accessible to everyone.

What did the EU mandate in 1987 regarding the bread subsidy?

Mandated and end to the bread subsidy

How are the French handling the bread subsidy now? Why did they do this?

Even though the EU ordered an end to the subsidy, France still finds ways to subsidize bread for everyone, just not as much. They did this because bread comprises a large portion of a French persons diet, so raising the price of bread would be detrimental!

How is demand affected when you set an artificially low price for bread?

Demand INCREASES! Demand » supply. People now have access to MORE calories!

How might supply and demand equilibrium be distorted by setting an artificially low price of bread?

Farmers may be deincentivized to produce if they aren’t accounted for. The same goes for the flour milling sector.

How does the French government account for the deincentive to work due to the artificially low price of bread?

They provide subsidies to the bakeries and flour milling sector! They account for the money they’d be losing as a result of selling bread at such a low price. They do this for farmers too.

What could happen if the government didn’t provide subsidies to the bakeries/ flour milling sector/ farmers after they set the artificially low price for bread?

There could be a shortage, as producers such as those listed don’t want to sell their products for such low prices since they’ll lose money.

What are the consequences for a government setting an artificially low price?

It is VERY expensive, since they have to provide subsidies to producers to prevent shortages!

What is the targeting strategy for the bread subsidy in France?

There really isn’t one, since EVERYONE now has more access to cheaper bread

What’s another example of a country that has bread subsides?

Egypt!

Explain the history of bread subsidies in Egypt.

Bread subsidizes have been a heavily politicized issue. In 1977, Anwar Sadat cut the subsidies which triggered protests known as the “Bread intifada,” so he reverted back. Bread protests came back in 2011, with the slogan “bread,freedom, and social Justice.”

Due to the high consumption of _____ bread in Egypt and other Middle Eastern and North African countries, wheat is an ___ crop. ___% of Egyptians total daily calories come from wheat.

Baladi, essential, 35%

Why did Egypt’s government have to raise the price of bread (quadruple the amount!) in 2024?

1. Egypt heavily relies on wheat imports due to limited arable land and a growing population

2. The Russia-Ukraine war led to a spike in global wheat prices, combined with the Egyptian pound being weakened

3. The government was aiming to reduce spending

Define inferior goods, normal goods, and luxury goods in terms of income elasticity

1. Inferior goods: income elasticity < 0, you buy LESS when your income increases

2. Normal good: income elasticity > 0, you buy a little more when your income increases

3. Luxury goods: income elasticity >1, you buy a LOT more when your income increases

What does Engel’s law state?

As income increases, the proportion of that income spent on food decreases, but the TOTAL dollar amount increases.

(Absolute amount spent increased at a decreasing rate)

OVERALL, food is income inelastic (<1)

Why is using an inferior good in food aid an effective targeting strategy for only targeting poor people? What is an example of this?

Since it’s an inferior good, wealthier people won’t want to abuse the food aid and eat it, and the poor people will actually eat it. An example of this is the US providing red sorghum as food aid to Mai the 1980’s- Malians prefer white sorghum, but the hungry people ate red when necessary, and the famine ended! Good targeting!

What is the term to describe the red sorghum example in Mali?

Self targeting! Poor people will eat the subsidized food but rich people won’t- targeting takes care of itself!

When might giving cash be a good option versus giving food?

Perhaps when people don’t have enough money to buy food.

If you give poor people money, they are much more likely to spend that money on food than rich people.

If a poor person spends 50% of their income on food, there could only be up to 50% leakage. If you give cash to a rich person that only spends 10% of their income on food, there could be up to 90% leakage!

What foods does Malaysia subsidize?

Rice, sugar, oil, chicken and eggs

What are the consequences of these subsidies for the Malaysian government?

It is VERY VERY expensive!

Which crop is a major part of the Malaysian diet?

Rice!

What might be a benefit of subsidizing eggs and chicken in Malaysia?

Adds protein to the diet!

Subsidizing things like baguettes helps improve ___nutrition, but not ____nutrition.

Macro, micro

With fortification we want to target missing micronutrients in the diet that are… 1 … 2

1. Hard to get otherwise

2. Expensive to get otherwise

What are the common foods fortified in the US?

• Salt (with iodine)

• Milk and other dairy products (with Vitamin D, sometimes A)

• Breakfast cereals

• Bread

• Fruit juices

• Eggs

What is the difference between enrichment and fortification?

Enrichments puts nutrients back into foods that were there to begin with, but lost due to processing. Fortifications puts nutrients into foods that are not normally there.

Fortification in the US is ____: companies decide whether or not they want to do it

Voluntary. In other countries, it’s mandatory

(Think, McDonald’s doesn’t use iodized salt!)

What are the 6 rules to decide what foods to fortify from the 1968 AMA guidelines?

1. The level of intake of the nutrient is below the desirable level in the diets of a lot of people

2. The food is consumed in large quantities such that adding the nutrient will actually be beneficial

3. The addition of the nutrient is unlikely to create an imbalance of essential nutrients

4. The nutrient added is stable under proper conditions of storage

5. The nutrient is physiologically available from the food

6. The intake of the nutrient won’t be excessive to the point where it can cause harm

What are other considerations when deciding what good to fortify?

1. Want to fortify normal goods that have an inelastic demand, so that if price rises a bit, people won’t switch over to substitutes

2. There should be little substitutes, and if there are, just fortify the substitutes too

What nutrient is milk in the US fortified with?

Vitamin D

What is rickets?

A condition that results in weak or soft bones in children and is either caused by dietary inefficiencies (lack of Vitamin D) or genetics

In the 1920’s, vitamin d deficiency was widespread among what population of people in the US?

Urban black people. Rickets disproportionately affected urban black children in a northern cities

Who discovered Vitamin D in 1921 (UW MAD ALUMNNN)

Elmer McCollum

Henry Steenbock contributed what to the journey of fortifying milk with Vitamin D?

Found that you could biofortify food with Vitamin D by exposing it to UV light

Why was Steenbock’s idea to fortify milk with Vitamin D received warmly by the milk industry?

It differentiated their products and was esteemed

How did Steenbock’s method (WARF, irritation) differ in who it appealed to as compared to the rival process, Vitex?

• WARF appealed to larger operations since you needed a fancy irradiation machine. But, it had large benefits since the installation was the only investment

• Vitex appealed to smaller operations since it was more accessible

When did the roll out of fortified milk begin?

1930’s

What were the effects of Vitamin D fortification in milk?

• Rickets was almost completely eliminated by WWII

• Children were healthier and lives fuller lives

• Led to better schooling outcomes (estimated a 5% increase in attendance for urban black children)

• Inspired the bread industry to engage in fortification and enrichment (with thiamin, niacin, iron and riboflavin). During WWII, the US Army bought fortified flour

What made milk fortification so successful?

1. A large percentage of the target population drinks milk (children and pregnant women)

2. Not many legal mandates holding it back initially, so it took off

3. It was supported by the medical and public health community

4. High demand for healthy milk and low cost of the process (after installation)

Why don’t you just add all the vitamins to one food?

Leads to over targeting and excessive intake!! Not everyone needs ALL the vitamins

What are the FAO guidelines for fortification?

To provide 97.5% of individuals in the population at greatest risk of deficient with an adequate intake of specific micronutrients, without causing excessive intake

What’s the problem with getting fortified goods to people in poor countries though?

They don’t eat a lot of processed foods, and in order for something to be fortified, it has to be processed.