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Consumer-Driven Agriculture |
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Changing U.S. Demographics Influence Eating
Habits More Mature Consumers A Mature Market A More Diverse Population More People To Feed A Different Consumer, a Different
Agriculture?
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Changing U.S. Demographics
Influence Eating Habits |
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Beyond our bustling
cities, America's farmlands are ostensibly a Norman Rockwell picture
of calm and stability. Red barns, majestic silos, rustic farmhouses,
and pastures of grazing livestock are reassuring images that recall
a seemingly simpler age. Yet just beyond the old-fashioned barn door
are the products of a telecommunications age that have transformed
farming into a modern and global business. We find tractors equipped
with global positioning systems for precision preparation and
management of fields, Internet access to keep farmers abreast of
current events and minute-by-minute changes in commodity prices, and
sophisticated systems to manage risk, finances, and decision making
in a dynamic global marketplace. Today's commercial farmer can be as
connected to the modern world as the urban entrepreneur.
Technology brings the varied needs and evolving wants of modern
consumers living thousands of miles away to the attention of
farmers. Successful producers know that consumers are key to
economic viability and growth and that consumers' preferences drive
the evolution of the industry. Closer business ties and stricter
quality controls throughout the food supply chain are hallmarks of
consumer-driven agriculture.
Photo: EyeWire Recent Economic Research
Service (ERS) research has identified three broad demographic trends
that will shape future U.S. food markets: more mature consumers,
more diversity, and more people to feed. These trends were
translated into projections of growth in food expenditures and in
demand for specific commodities between 2000 and 2020. The ERS
models do not capture some of the subtler changes in our food
system; they do, however, allow us to compare the importance of the
different demographic trends to specific food and commodity market
segments. Moreover, we may posit whether the character of America's
farmlands and farm businesses will change as much as the profile of
our population 20 years from
now.
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More Mature
Consumers |
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The aging of the baby boom generation, born between 1946 and
1964, will accelerate growth in the number of Americans older than
65, who will number 54 million by 2020. Although the U.S. population
under age 18 will increase by 7 million by 2020, it will decline as
a share of the total population. Consequently, catering to the food
preferences and eating habits of older Americans—who are likely to
be more health conscious than younger Americans—will be an important
marketing strategy for food suppliers.
Consumers with rising incomes are willing to pay more
for convenience. Photo by Ken Hammond,
USDA The growth of America's older population is
likely to carry mixed messages for U.S. agriculture. Older Americans
typically eat less food than younger ones due to lower activity
levels and energy needs, and dine out less frequently. Hence, the
aging trend may reduce the Nation's appetite for some foods and
dampen the popularity of eating out. On the other hand, the demand
for foods preferred by seniors will benefit from the age
distribution shift. According to ERS projections, small declines in
per capita consumption of fried potatoes, cheese, sugar, beef, and
poultry are expected, while the increase in older consumers could
signal an increase in per capita consumption of "other potatoes"
(such as baked), eggs, fish, fruits, and vegetables.
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A Mature Market |
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American consumers
participate in a food system that is characterized by the
fulfillment, if not satiation, of basic needs—what is termed a
mature market. Consumers of all ages and recent immigrants have
higher standards of living now than in earlier times, and benefit
from a highly productive agricultural sector. Consequently, most
people are generally very well-fed and not apt to need or want
larger quantities of food. However, rising incomes allow Americans
to continue to upgrade their food choices to include, for example,
more expensive cuts of meats, exotic vegetables, luxury food items,
ready-to-eat meals, and higher priced restaurants.
Real per capita
income grew 1.8 percent per year during 1978-88 and 1.2 percent per
year during 1988-98. A conservative forecast of real per capita
income growth is that it will continue to grow about 1 percent
annually between 2000 and 2020. Of concern to suppliers of mature
U.S. food markets is how much of their higher disposable incomes
American consumers will spend on food and what food products will be
demanded.
Over the past few decades, Americans have dedicated a declining
share of their household budgets to food. Consumers with rising
incomes are, however, quite willing to increase food spending if it
means acquiring more convenience, better quality, or more of other
valued food attributes. In a sense, higher incomes allow food
choices to become expressions of personal preferences, values, and
lifestyles rather than necessities. Moreover, higher incomes allow
Americans to spend more on meals away from home, whether for fast
food or a candlelit dinner in an elegant restaurant. With per capita
income growth projected at 1 percent annually between 2000 and 2020,
per capita food expenditures in 2020 are expected to be about 6
percent above those in 2000 as a result of higher incomes.
According to ERS researchers, higher incomes drive up per capita
food expenditures more rapidly than per capita quantities consumed
for virtually all foods. Hence, more of the extra consumer dollar
will go to "quality" than to quantity. More prosperous consumers
prefer select cuts of meat, value-added products like lamb chops
trimmed and dressed and ready to pop in the oven, premarinated fish,
single-serving lunchbox snacks, and prewashed and bagged salad
greens. Previous studies have found that as U.S. incomes rise,
consumers spend more on expensive fresh foods, prepared foods, and
dining out.
Americans are spending more on meals away from
home. PhotoDisc® According to ERS
projections, rising incomes will spur faster growth in per capita
spending for dining out than for at-home food purchases.
Food-away-from-home spending is expected to increase by almost 10
percent per capita, due to per capita income growth alone, while
food-at-home spending is expected to increase by only 3 percent due
to income growth. An aging population and increasing ethnic
diversity may dampen the food-away-from-home trend. Americans in
their thirties and early forties tended to spend the most on food
away from home over the last two decades—more than both younger,
less wealthy adults and those over age 50.
Higher consumer incomes are likely to engender small shifts in
demand for particular foods and commodities due to different
consumption patterns observed among those with different income
levels. Higher income groups are likely to favor greater consumption
of fruits, cheese, yogurt, fish, and vegetables (except potatoes),
and slightly less consumption of pork, beef, other meats, and eggs.
Interestingly, similar consumption preferences are seen among better
educated consumers. According to ERS projections, the per capita
consumption shifts due to higher incomes are on the order of 0.5 to
2 percent. |
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A More Diverse Population |
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Over the next two
decades, the Hispanic population is expected to grow by 1.2 million
annually, compared with annual increases of 500,000 among
non-Hispanic Whites and 400,000 each among Blacks and Asians. Growth
among the Hispanic and Asian populations is due to both natural
increase and immigration, while growth among Whites, Blacks, and
Native Americans results mainly from natural increase (births minus
deaths). Hispanics are expected to increase from 12.6 percent of the
population in 2000 to 18 percent in 2020, and Asians are expected to
increase from 3.9 percent to 5 percent.
Growing ethnic diversity has contributed to shifts in food
preferences as well as a notable expansion of the American food
repertoire. To profit from this diversity, U.S. food suppliers must
be both cognizant of the differing preferences of population
subgroups and able to creatively tap into Americans' love of novel
taste experiences.
Reflecting ethnic and racial dietary preferences, a more diverse
population is likely to eat more fruit, nuts and seeds, eggs, and
fish. Citrus fruits may see the largest per capita gain (about 2.5
percent), driven by taste preferences of today's Hispanic
population. However, a greater proportion of Hispanics and Asians in
the population may reduce per capita consumption of dairy products
(by a little over 1 percent) unless these groups embrace dairy
products as a more integral component of their diet. A preference
for rice over potatoes among the recent immigrant-based population
groups may dampen demand for potatoes.
ERS researchers
project that the expanding ethnic population base will increase per
capita beef consumption very slightly and poultry and fish
consumption somewhat more. The ethnic influence on beef consumption
contrasts directly with the preferences of an aging population and
may moderate the downward pressure on per capita beef demand.
Greater fish consumption is linked to Asian dietary preferences, and
greater poultry consumption is linked to preferences of Blacks and
Hispanics. Underlying these expectations is the strong assumption
that ethnic populations in 2020 will have eating preferences similar
to those of today's ethnic and immigrant-based populations. |
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More People To
Feed |
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The United States is
indeed growing, as seen in the 2000 census count of 281 million
people, 54 million more than in 1980. A large share of U.S.
population growth results from a high tide of immigration initiated
in the 1960s and continuing at least into the near future. By 2020,
the U.S. population will likely grow another 18-28 percent, implying
another 50-80 million people to feed just here at home.
Conservatively assuming that in 2020 there will be 50 million
more people to feed, we project that total household food spending
will increase by over 26 percent between 2000 and 2020. Fueled by
growth in per capita income, we project that food-away-from-home
spending will increase 27.5 percent, compared with 24.3 percent for
food-at-home spending.
Supermarket sushi counters help
satisfy Americans' demand for variety. Photo by Ken Hammond, USDA In a mature
market, population growth is the main source of increased demand for
commodities that go into food production. However, population
expansion will benefit some commodities more than others because of
the changing population composition and related shifts in food
preferences. For example, total quantities of beef and pork consumed
are projected to increase by 14-15 percent, while quantities of fish
and citrus fruit consumed would increase by 26-27 percent. These
projections resemble the actual growth in food supplies to the U.S.
market between 1980 and 2000, when beef supplies increased 11
percent, pork supplies increased 14 percent, and total fruit
supplies increased about 28
percent.
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A Different Consumer, a Different Agriculture? |
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How important are
these trends—older, wealthier, ethnically diverse consumers and more
of them—to American agriculture?
First, because the U.S. market is a mature market, demand for
farm products will grow at just about the same pace as the Nation's
population. Fortunately for U.S. producers, the prospect of a
growing population sets the United States apart from most other
high-income countries where population growth rates are considerably
lower. For those food producers who see this projected growth in
U.S.-based demand as too slow, they will need to continue to secure
new markets in middle-income countries (for example, Thailand and
Mexico) where both populations and incomes are expanding more
rapidly than in the U.S. Other Americans both on and off the farm
may view the growing demand from the U.S. market as putting more
pressure on environmentally sensitive agricultural areas.
Second, the demographic changes that are altering the composition
of the American population imply at least moderate shifts in
consumer preferences among food categories and individual products.
Entrepreneurial growers will watch and attempt to tap into these
shifts. For example, the growth in demand for chili peppers
illustrates the growing influence of the Hispanic population as well
as America's search for low-fat flavorings. We do not anticipate
shifts in food preferences sufficient to transform agricultural
composition of production or the profile of the American farm
landscape by 2020.
Third, and most salient, the anticipation that increasing income
will have a larger impact on demand for quality and variety of foods
than on quantity will continue to transform agriculture into a
sophisticated business venture along the lines of other American
businesses. Growth in demand for value-added food products at the
supermarket and in restaurants is likely to increase the share of
food dollars that go to processors and retailers, and further
diminish the share to providers of basic commodity inputs. However,
growers are also positioning themselves to capture a larger share of
the value added. Some strategies include diversifying into
high-quality or specialty crops that may carry price premiums, such
as tofu-grade soybeans and vine-ripened tomatoes, and developing
branded products that are more readily linked by the consumer with a
particular food company, production region, or even individual
farm.
Food suppliers also know that catering to the modern consumer
means adopting new ways of doing business, such as accepting closer
business links through contractual relationships with others in the
supply chain, and using information technology systems that help
monitor and control quality from the farm to retail level. Such
business and technology links, though far from visible as landmarks
in America's farmlands, are the new hallmarks of consumer-driven
agriculture. |
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Adapted from
Ballenger, Nicole (nicole@ers.usda.gov) and
Blaylock, James (jblayloc@ers.usda.gov),
USDA/ERS, April 2003, Consumer-Driven
Agriculture: Amber Waves, Vol. 1, Issue 2. |
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