America’s Sweet Tooth: Sugar, Obesity, and Government Policies
By Kalyn Neal
This paper was originally prepared to satisfy the thesis requirement of an Honors Degree at Oklahoma State University. Ms. Neal will graduate in May, 2010 with a degree in agribusiness. After graduation, Ms. Neal will begin graduate studies in the Department of Agricultural Economics at Oklahoma State University. Questions or comments can be emailed to: email@example.com or firstname.lastname@example.org.
Obesity rates among American adults have been steadily rising for the last 40 years.1 The potential cause of this increased obesity could be blamed on a myriad of factors; among the most criticized factor is government policy. Through various trade and domestic policies the U.S. government has influenced the volume and type of farm production, thereby influencing what Americans consume. The type and amount of sugar in particular is susceptible to policy changes. If these policies encourage excessive consumption of sugar and/or particular forms of sugar that encourage obesity, recent U.S. health problems might be an unintended consequence of farm policy. Indeed, this is exactly what some critics claim2 —is the criticism warranted? The purpose of this study is to resolve and articulate the degree to which food policy contributes to rising obesity rates in the U.S.
Understanding the relationship between obesity and agricultural policy is important for a variety of reasons. Obesity is now considered to be an epidemic in the U.S., for which the cause is uncertain.3 Obesity may be a state of health many individuals prefer. If individuals prefer the foods and lifestyles which contribute to obesity, and that is the sole cause of obesity, governmental policy to combat obesity is perhaps not warranted. However, much of the obesity problem resides with children, for whom responsibility lies with the parents and the community. Moreover, the rapid increase in obesity rates suggests obesity is not the result of private choices alone. To the extent that obesity is a negative consequence of agricultural policy, changes in policy to curb this consequence are paramount.4 First, to better understand the relationship between sugar and obesity, it is prudent to understand the various types of sugar that are consumed.
Sugar and Agricultural Policy
Sugarcane, before it can be processed into refined sugar, must first be processed into raw sugar. This is accomplished by extracting juice from the stalk of the sugarcane. The juice must then be clarified, boiled, and crystallized. The end product is then further refined to produce the finished product of refined sugar. Americans most commonly encounter sugar in its granulated form that can be bought in bulk at supermarkets.5
High fructose corn syrup (HFCS) is a by-product of the wet-milling of corn. HFCS is made by first converting corn starch into a syrup that is almost entirely comprised of dextrose. Enzymes are then introduced into the syrup which yields 42 percent fructose syrup known as HFCS-42. HFCS-42 can then be filtered through an ion-exchange column yielding 90-percent HFCS syrup. By mixing these two syrups, HFCS-55 can also be produced. High fructose corn syrup is not available for purchase by consumers; consumption occurs by eating foods that have been sweetened with the syrup.6
Based on the wide ranges of opinions available on the subject, it is difficult to determine whether or not the consumption of sugar or high fructose corn syrup has a positive or negative effect on one’s health. It is known that the amount of sweetener consumed, whether sugar or high fructose corn syrup, has risen since by 19 percent since the 1970s. The amount of corn sweetener has increased by 400 percent to 79 pounds annually in 2003.7 In a study observing the effects of fructose and glucose on a diet it was found that the increased consumption of sugar-sweetened beverages, and by association HFCS, is associated with weight gain. When fructose is metabolized it does not stimulate the production of insulin or leptin in the same way that glucose or natural sugar does. Insulin and leptin are major endocrine signals to the central nervous system which regulate the long-term energy balance of the body. An extended diet high in energy from fructose could lead to increased caloric—note the emphasis on could. Gaining the definitive evidence necessary to support this hypothesis would be difficult because it would require the subject group to consume a highly controlled diet for at least one year. The number of variables which would have to be controlled for in this experiment makes it very cost prohibitive.8
In the U.S. today there are two major food policy programs that affect American sugar consumption. Corn producers have been receiving governmental subsidies for decades. Past policies tied the amount of subsidy to the amount of corn the farmer produced, and this led to an increase in total corn production, lowering corn prices and encouraging food processors to utilize corn syrup as their primary sweetener instead of sugar. Current policy regarding subsidies has decoupled many payments from corn production. This means the amount of subsidy a farmer receives is no longer dependent on the amount of corn they produce each year. Corn production is now largely determined by market prices rather than by government subsidies. However, if decoupled subsidy payments still allow some farmers, who would otherwise cease farming, to continue their operations, corn subsidies may still be encouraging corn production at a higher quantity that free-market prices would dictate.
These events are depicted in Figure 1, where farm subsidies increase the supply of corn sugar. At any price, the U.S. corn sugar market will produce a greater volume. Because corn and cane sugar are substitutes, the lower corn sugar price would dampen demand for cane sugar (which would have a second-order effect of decreasing the corn sugar price further). The net impact is more total sugar, with corn sugar possessing a larger market share than cane sugar. Studies have indeed shown that the cost of producing corn is less than the market price, suggesting the subsidies comprise the difference between cost and price, encouraging corn production beyond its free-market level. The increase in sugar production and the substitution of corn syrup for cane sugar is referred to in this paper as the farm-subsidy effect.
The amount and type of sugar consumed domestically is also influenced by the U.S. sugar program. Through the use of tariffs, U.S. food policy forces the price of cane sugar to be artificially high. This is depicted in Figure 2, where the price of cane sugar rises when the tariff shifts the supply curve leftward. Through higher cane sugar prices, the tariff increases the price of corn sugar. The tariff thus leads to an increase in the price of all sugars – cane and corn syrup – which then discourages sugar consumption and thereby reducing the level of obesity. This effect is referred to as the cane-sugar-tariff-effect. Another effect of the tariffs, however, is to induce a substitution of corn sugar for cane sugar, and if sweeteners made from corn syrup have a larger impact on obesity than cane sugar, the tariffs could induce an increase in obesity.
The reader will note that the two linkages between agricultural policy and sugar consumption do not point unambiguously towards greater sugar consumption and subsequent obesity. The farm-subsidy effect certainly subsidizes sugar consumption, but the cane-sugar-tariff effect [essentially] taxes sugar consumption. Further, although both policies increase the percentage of sugar consumption comprised of corn sugar, there is no definitive study deeming corn sugar as an inferior sugar source. Thus, the critic who bemoans the supposed fact that U.S. policy encourages obesity is either privy to information this study is not, is making personal judgments about the relative magnitude of the farm-subsidy and cane-sugar-tariff effects, or acquires poor information. Of course, all policy recommendations require judgments of some sort. Rarely does science paint social issues as black-and-white.
Current food policy in the U.S. may be either contributing or helping to prevent rising obesity. The issue ultimately rests on whether or not the policies that encourage weight gain – farm subsidies and government-induced favoritism for corn sugar over cane sugar–overcome the policies that reduce weight gain. The soft drink industry serves as a fine example. Beginning in the 1970s, soft-drink manufacturers began to replace cane sugar with high fructose corn syrup.9 If corn syrup proves to have a greater effect on obesity than cane sugar, the change would make each ounce of soda consumed less healthy. Then, if agricultural policies make sodas cheaper than normal supply and demand conditions would suggest, increases in the ounces of sodas consumed would exacerbate obesity further. The relationship between U.S. food policy and obesity is fraught with ambiguity.
Recent increases in the rate of obesity among adults and children are commonly thought of as a problem, without giving careful consideration as to whether a problem actually exists. Surely, government does not view its role as targeting as specific weight for each individual. The weight of any individual is largely determined by the amount of food they choose to consume, the type of food they choose to consume, and the amount of exercise they choose to undertake. It may be the case that individuals view the price of food items, the opportunity cost of exercise, and make a deliberate decision to gain enough weight that they will be deemed obese by health professionals. The optimal weight is not the weight that maximizes health, but the weight the individual decides is best for themselves, given the price of food and exercise.
The government, and critics of certain governmental policies, are concerned that this personal weight decision is inappropriately influenced by subsidies that lower both the true cost of food and the true cost of producing cane sugar relative to corn sugar. If the government made vast amounts of food available for free to the public, and the public became grossly obese, this would surely constitute a problem warranting an adjustment of agricultural policy. There is something disturbing about the notion of subsidizing food to the point that obesity is referred to as endemic. Exploring whether this notion is reality thus seems a worthy endeavor.
In one sense, the issue is difficult because it seems impossible to untangle the effects of various policies in a manner that provides a clear answer as to the impact of food policy on obesity. In another sense, the issue is spectacularly simple when one asks: Why even have the subsidies in the first place? Agricultural economist Dan Sumner has asserted that the only valid reason we have agricultural subsidies is because we have always had them.10 Other agricultural economists contend that the sole purpose of farm subsidies is to redistribute wealth from the taxpayers at large to farmers and landowner.11 Farm subsidies do not seem a very worthy program. Even if farm subsidies have no effect on obesity, the fact that they are a tool for wealth redistribution suggests they should be abolished. The fact that these subsidies could very well encourage obesity simply provides further justification for abolishing farm subsidies, when no further justification from society’s perspective is even warranted.
 The Economics of Obesity: A Report on the Workshop Held at USDA’s Economic Research Service by Tomas Philipson, Carolanne Dai, and Lorens Helmchen, The University of Chicago, and Jayachandran N. Variyam, Economic Research Service
2 Farm subsidies and obesity in the United States: National evidence and international comparisons by Julain M. Alston, Daniel A. Sumner, and Stephen A. Vosti
3 Supra note 1
4 The Price is Right: Economics and the Rise in Obesity by Jayachandran N. Variyam
5 Sugar: Background for 1995 Farm Legislation by Ron Lord
6 Sugar and Sweeteners: Background by Stephen Haley, Economic Research Service
7 Going With the Grain: Consumers Responding to New Dietary Guidelines by Hodan Farah and Jean Buzby
8 Endocrine and metabolic effects of consuming beverages sweetened with fructose, glucose, sucrose, or high fructose corn syrup by Kimber L Stanhope and Peter J Havel
9 Going With the Grain: Consumers Responding to New Dietary Guidelines by Hodan Farah and Jean Buzby
10 Agricultural Subsidies: Corporate Welfare for Farmers by Dan Sumner
11 Supra note2
Appendix: Notes From Literature Review
The literature reviewed for this article fell into two categories, articles relating to food policy and those relating to diets and obesity. For the purposes of this review, these two categories are dealt with separately.
Diets and Obesity
“I welcome this chance to talk with you about a health crisis affecting every State, every city, every community, and every school across our great Nation. The crisis is obesity. It’s the fastest growing cause of death in America.” This is a quote made in 2003 by the former Surgeon General Richard Carmona and is one of the opening lines of the article, “The Price is Right: Economics and the Rise in Obesity”. This article along with another, “The Economics of Obesity: A Report on the Workshop Held at USDA’s Economic Research Service” seeks to explore the effect of the obesity boom on the American economy. Both testify to the fact that the obesity crisis did not just appear overnight but rather obesity rates have been steadily rising since this 1970’s and thus how we find ourselves facing a crisis today. The cause for the rise is currently unknown and is likely caused by a multitude of factors rather than by a single one. Hypothesized causes include genetics, physiological, psychological, sociological, and economical. At the most basic level however, obesity is a result of choices.
Another article reviewed dealt with consumption trends. “Dietary Assessment of Major Trends in U.S. Food Consumption, 1970 – 2005” investigated food trends over the last 35 years and their potential link to obesity. While the article covered a variety of food trends, those relating to sugar and sugar consumption were primarily focused on. As of 2005 the average American consumer consumed 142 pounds of sugar each year which is a 19 percent increase since 1970. No guidelines currently exist regarding the appropriate amount of sugar intake although it is suggested that food with little sugars or added caloric sweeteners be consumed. It is recommended that an average adult consume no more than eight teaspoons of sugar daily; the average American consumes 30 teaspoons of sugar each day.
Two articles reviewed focus on government payment and possible policy reform, “Government Payments and Farm Business Survival” and “Perspectives on Farm Policy Reform”. Together these articles indicate that subsidies are purely wealth driven and serve no other purpose than to redistribute wealth from tax payers to farmers. This practice allows corn production to be higher than the market would demand if no policy were in place. Most of these policies benefit larger farms and keep them from failing when they would otherwise cease production. Indeed, the authors of “Payment Limitations and Acreage Decisions Under Risk Aversion: A Simulation Approach” found numerical data to support such claims. The authors found total costs for growing corn in Indiana, a major corn producing state, were higher than the expected total revenues. The same relationship was found to exist in Iowa as well and the authors go on to state such an occurrence would not occur in a free market.
While some believe that such market distortions are unnatural, the authors of “Acreage Decisions Under Risk: The Case of Corn and Soybeans” provide a possible alternative. They believe that corn production may be higher than normal due to cross-commodity risk reduction between corn and soybeans. Farmers can reduce their soybean pest risk by rotating between corn and soybean production every year. This allows them to rid the soil of weeds and pests that commonly plague soybeans at a cost lower than the cost of soybean herbicide and pesticide.
While investigating corn policy it was also necessary to investigate the possible distortions in sugar policy as well in the article “Gains and Losses of Sugar Program Policy Options”. One of the key issues revolving around high fructose corn syrup’s role in the rise in obesity is whether or not sugar policies have contributed to the increased use of high fructose corn syrup. High sugar prices, caused by U.S. sugar policy, have contributed to the increased substitution of corn sweeteners for sugar. The U.S. sugar policy currently relies on a quota policy which the article states is the most expense support option. The demand for sugar depends on the price of sugar and other variables like the price of corn. Sugar quotas have forced sugar prices above market equilibrium allowing corn sweeteners to develop as a substitute. Economies of scale present in the corn market allowed the supply of corn sweeteners to shift outward which caused corn sweetener quantity to rise while prices fell. Total cane sugar consumption has decreased by more than 20% since the 1970s despite a 10% rise in population during that time. This loss in demand is accounted for in the increased demand for corn sweeteners.