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Four things I’ve learned about chestnuts (so far)

When I moved to Michigan, I knew the agriculture would be different… and Michigan has delivered.  The climate, the soils and the people have all proved to be a different breed when compared to my home state of Kansas.  In the past year, I’ve had discussions with growers involved in tart cherries, cider apples, hops, soybeans, and more.   So many different crops, in fact, that it’s becoming difficult to keep everything I’ve learned straight!  In an effort to help myself out, I’ve decided to keep track of the things I learn in the field via this blog.

For the first crop, I’d like to talk about chestnuts.  This is the crop that is probably the furthest outside of my knowledge base – prior to this year, I’d never even eaten a chestnut!   The learning curve has been extremely drastic, but here are four things I’ve learned about this crop.

1.  Chestnut trees can be extremely difficult to grow.

Last week, I had the opportunity to attend the Midwest Chestnut Producers Council (MCPC) annual farm tour.  They hosted the event at a new orchard outside Ravenna, MI, where the grower talked about the difficulties he had over the past couple years.  While I’m no agronomist (I’m hardly a gardener), his discussion of the trials and tribulations associated with establishing his 10 acre orchard was eye-opening.  Although an established orchard can thrive for decades (if not centuries), planting the trees requires many considerations as the gap between planting and nut production is generally five to ten years! 

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In the orchard we toured last week, the grower had dug his holes slightly too deep, which prevented adequate oxygen from reaching the roots, killing more than half of his saplings.  Annual weather patterns also influence the livelihood of chestnut saplings and mature trees. Last year was particularly challenging for Michigan growers because the fall season was wetter and milder than usual. This caused the trees to ramp down production more slowly and enter dormancy late, leaving the trees vulnerable to freezing winter temperatures. Despite the warmer fall temperatures, the winter temperatures plummeted near the danger zone for the chestnut trees’ hardiness (approx. -20 degrees Fahrenheit) a few times. To make matters worse, the orchard was surrounded by large trees on all sides, which trapped cold air in the winter and contributed to the demise of his saplings.

2.  The average American consumer knows shockingly little about chestnuts.

When I was asked to present something to the MCPC back in Spring 2018, the first thing I did was to go to the Food Demand Survey to see if any consumer data had been collected in the recent past.  To my delight, Bailey Norwood had recently sent a survey out to 1,022 U.S. consumers. More than 60% of U.S. consumers could not recall ever trying a chestnut!  Almost half (14.5%) of those Americans who had tried a chestnut had only consumed one in the last year.

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Source: Food Demand Survey, N=1,022

 As one might expect, the consumers who eat chestnuts at least once per year were more likely to be vegetarian.  This is likely good news for chestnut demand, as an increasing percentage of Americans are interested in plant-based proteins.  In fact, a Nielsen survey this past summer found that 39% of Americans are actively trying to eat more plant-based foods.  Even the big players in animal-based proteins are investing in non-meat alternatives.

Slide2

Source: Food Demand Survey, N=1,022

Chestnut consumers in the United States are also more likely to be younger.  If I break the sample of 1,022 U.S. consumers down by age category, we see that the majority of 18 to 34 year olds in our sample had in fact tried chestnuts in the past year.  This is grounds for optimism, as chestnuts require a relatively large amount of knowledge to prepare properly (Search YouTube for “exploding chestnuts” and you’ll see why).  The fact that consumers are being exposed to chestnuts at a younger age is great because they will hold that preparation knowledge with them throughout their lives.

Slide3

Source: Food Demand Survey, N=1,022

 3.  Growth in U.S. consumer demand for chestnuts is likely to track immigration patterns.

Bailey surprised me again, as he had just recently surveyed 1,000 Chinese consumers to compare nut preferences across the United States and China.  The results shocked me.  Where more than half of Americans hadn’t tried a chestnut, almost every single Chinese consumer (97%) was extremely familiar with the product.

Slide4

Source: Food Demand Survey and Bailey Norwood, PhD.

This is an optimistic fact for the burgeoning chestnut industry, because despite the current rhetoric, immigrants contribute substantially to the growth and vibrancy of the cities they live in.  As such, chestnut marketers might be best off targeting the cities that are most welcoming to immigrants.  In the future, I’d like to survey certain cities in the U.S. to compare chestnut demand for different immigrant communities.  I don’t really know how that data might shake out, but I think it would be an interesting exercise to see the different ways these communities incorporate chestnuts into their diets.

4.  Michigan chestnut growers are incredibly proactive, resilient, and entrepreneurial.

 Probably my biggest takeaway from the Michigan chestnut growers so far is their dedication to promoting the industry.  I’ve attended two meetings thus far, and was very impressed by the passion of the group’s leadership.  These people are willing to do whatever it takes to grow the chestnut industry!  As is often the case in agriculture, they’ve had “up” years and “down” years, and while that variability might push other growers apart, it seems clear to me that it actually brought the leadership of the chestnut industry together.

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Chestnut growers at the MCPC annual farm tour.

 As an example, consider their marketing strategy from a few years back.  In an effort to promote chestnuts as a high-end product, they applied for a USDA grant to pay high-end Michigan chefs to try Michigan chestnuts in a new recipe.  The buzz generated enough interest from chefs across the country that Martha Stewart even proposed a recipe.  This strategy tracks Malcolm Gladwell’s book The Tipping Point extremely well.  The marketing strategy is connected to the idea of a “maven”, which is Yiddish for “one who accumulates knowledge.” (Gladwell, pg. 60).  They’re the influencers.  These are the people the rest of us look toward in an effort to get the best prices, try the best products, and prepare the most delicious meals.  By targeting the influencers, the MCP simultaneously targeted the population of amateur chefs and foodies who are connected to the influencers.

Though currently understudied, the effects of this innovative marketing strategy can still be observed in a few random places across the state.  For example, while having dinner at Hermann’s European Café in Cadillac, Michigan, a month back, hanging above the entrance was an article from the Chicago Tribune titled, “GOOD EATING: Return of the chestnut.”

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The article that greets you at Hermann’s in Cadillac, MI.

One worthwhile project I’d love to see conducted is an “event study” on the effect of this marketing strategy on chestnut prices.  This would be methodologically similar to McKenzie and Thomsen’s 2001 Journal of Agricultural and Resource Economics paper on the effect of E. Coli 0157:H7 on beef prices, but of course the evaluation would be focused on the success (or failure) of a marketing strategy.

 Moving Forward

Thus far, I see nothing but room for optimism regarding Michigan chestnut demand – especially when I look at the competition.  Out of curiosity, I got on Amazon and ordered a package of organic chestnuts from Spain.  If I were to describe the packaging, “unappetizing” would be putting it lightly.  The vacuum-sealed chestnuts were exceedingly squishy, the smell seemed off, and the shiny plastic covering the chestnuts did not appear too alluring.  Michigan chestnut growers have a clear comparative advantage over these competitors, as they can sell fresh chestnuts – which are far more appetizing than this hyper-processed alternative.  Prior research suggests fresh chestnuts are likely best marketed via institutional buyers such as restaurants “in order to create a positive experience for consumers that should lead to an increased interest in consuming chestnuts.” (Gold, Cernusca, and Godsey, 2004; pp. 588).

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The unappetizing package my chestnuts came in from Amazon.

In terms of future marketing research related to chestnuts, the published papers I’ve been able to find are somewhat dated.  For example, Gold, Cernusca, and Godsey collected survey data from 232 participants at the 2003 Missouri Chestnut Roast.  Their work, published in HortTechnology in 2004, suggested that consumers at this roast considered  the locally grown nature of chestnuts to be the most important attribute.  Even at the Missouri Chestnut Roast, more than 60% of attendees had never tried a chestnut before that day.

 That study was followed up via the use of conjoint analysis (read: discrete choice experiment) in 2007 at the same festival.  The surveyed sample was significantly more likely to have tried a chestnut, as only 34% had never tried a chestnut this time.  Their findings, published in HortTechnology in 2009 (n=104), suggest that the festival participants again valued the “localness” of the product they were consuming and that price was the least important attribute.  I would like to revisit this study for a number of reasons.  First, the study is over a decade old, and consumer preferences are likely to have even changed.  Second, it is unlikely that the festival participants are representative of the chestnut consumers more generally.  Third, I am skeptical of the (relatively) small price coefficient and believe that consumers at a local foods festival are likely to overstate their willingness to pay for local foods.  I’d like to re-run this hypothetical experiment with different attributes and focus on a representative sample of U.S. consumers.  Then I’d like to conduct non-hypothetical choice experiments on a stratified sample of urban consumers – perhaps at farmers markets or at a sensory lab.

To reiterate, I am NOT an expert on chestnuts by a country mile.  That being said, Michigan State University has a strong handful of dedicated folks who have probably forgotten more about chestnuts than I’ll ever know.  Here are links to contact pages for a few of them

Agricultural Tariffs 101

I’ve had RFD-TV‘s Market Day Report on for most of today in an effort to stay informed of the current sentiments regarding trade retaliation from China.  Ag economists Wally Tyner and Chris Hurt from Purdue made some great points about the current situation.   Exports of agricultural products from the U.S. to China totaled $19.6 billion in 2017, so this could be a big deal for the agri-nation.  The big mover is likely to be soybeans, which forecasts suggest Chinese soybean imports from the U.S. could drop by as much as 71 percent if the proposed tariffs go into effect.  Other important products currently targeted include pork, although U.S. pork exports to Chinese markets represent a smaller portion of the U.S. market compared to demand from elsewhere.  There could be some impacts on food waste and pork producer profitability because Chinese consumers enjoy certain variety cuts of pork more than their American counterparts.  That being said, it seems appropriate to post a few broad comments on tariffs and what they might mean for the agricultural industry.

  • What is a tariff?

In simple terms, a tariff is a tax on imports.  Tariffs artificially inflate the market price of a product which, in turn, reduces the quantity demanded as well as the price likely to be taken home by producers.

  • How common are they?

Tariffs have been around for centuries.  Alexander Hamilton implemented the first U.S. tariff as far back as 1789.  There have been a few really famous tariffs over the past century , such as the “Chicken Tax” of 1963 (which arguably gave us the American pickup truck, of all things).  Probably the most  (in)famous was the Smoot-Hawley Tariff Act of 1930.  To quote one assessment:

The Smoot-Hawley tariff, enacted on the eve of the economic collapse of the early 1930s, will forever be associated with an outbreak of worldwide protectionism, the collapse of world trade, and the onset of the Great Depression.  (Irwin, 1998; pp. 326)

If you’re interested in how this played out, NPR’s Planet Money has a fantastic podcast episode on Smoot-Hawley (Title: “Worst. Tariffs. Ever”).  Tariffs have become one of the least popular development mechanisms for economists; more than a thousand economists pushed back against Smooth-Hawley in the 1930’s.   To this day, most economists are against tariffs.  Last month, not a single economist in the Chicago Booth’s panel of economists agreed with or were uncertain about the statement, “Imposing new US tariffs on steel and aluminum will improve Americans’ welfare.”  It’s probably safe to say the (near) consensus view of economists is that tariffs are not great.  The most famous exception being Peter Navarro.

One of the big concerns surrounding tariffs is retaliation.  It appears as if China is responding tit-for-tat.  In other words, China might just continue to match our tariffs with their own similarly sized tariffs.   This might seem puzzling given that:

“One of the main lessons of the theory of international trade is that a unilateral reduction of tariff barriers is beneficial to the country granting it, whether or not other countries reciprocate.” (Hovi, 1998; pp. 69)

It’s not so confusing if you think less about economics and more about psychology.  For example, behavioral economists use the “ultimatum game” to show that people are willing to forego benefits to themselves in order to punish someone who they think harmed them.

  • What does this all mean for U.S. agriculture?

The fallout of this tariff battle could be felt for decades – or it could simply induce important bilateral trade negotiations.  The timing of the Chinese tariffs on U.S. goods is linked to the timing of the U.S. tariffs on Chinese goods.   Also, the items targeted by China seem to be pretty well correlated with the places were many Trump voters live.   Quite a few of the targeted crops are specialty products, which means Michigan growers might have a special reason for concern.  Either way, the story will continue to develop.

Here is a quick list of the list of agricultural commodities scheduled to receive a Chinese tariff.  According to CNBC, the April 4 agricultural commodities currently on the block are:

  • Yellow soybeans
  • Black soybeans
  • Corn
  • Cornflour
  • Uncombed cotton
  • Cotton linters
  • Sorghum
  • Brewing or distilling dregs and waste
  • Other durum wheat
  • Other wheat and mixed wheat
  • Whole and half head fresh and cold beef
  • Fresh and cold beef with bones
  • Fresh and cold boneless beef
  • Frozen beef with bones
  • Frozen boneless beef
  • Frozen boneless meat
  • Other frozen beef chops
  • Dried cranberries
  • Frozen orange juice
  • Non-frozen orange juice
  • Whiskies
  • Unstemmed flue-cured tobacco
  • Other unstemmed tobacco
  • Flue-cured tobacco partially or totally removed
  • Partially or totally deterred tobacco stems
  • Tobacco waste
  • Tobacco cigars
  • Tobacco cigarettes
  • Cigars and cigarettes, tobacco substitutes
  • Hookah tobacco
  • Other tobacco for smoking
  • Reconstituted tobacco
  • Other tobacco and tobacco substitute products

Previously listed products, according to Fortune Magazine , include agricultural products such as:

25% tariffs:

  • Fresh or cold boned pig forelegs, hindquarters, and their meat
  • Other fresh or cold pork
  • Other frozen whole head and half pork
  • Frozen bone forelegs, pigs’ legs, and their meat
  • Other frozen pork
  • Frozen pork liver
  • Other frozen pork chops

15% tariffs:

  • Dried coconut
  • Coconut without inner shell
  • Other coconut
  • Unhulled Brazilian nuts
  • Shelled Brazilian nuts
  • Unshelled cashews
  • Shelled cashew
  • Unshelled almonds
  • Shelled almonds
  • Hazelnuts
  • Unshelled hazelnuts
  • Unshelled walnuts
  • Walnut kernels
  • Unhealed chestnut
  • Other shelled chestnuts
  • Unhulled pistachio fruit
  • Hulled pistachi nut
  • Other unhealed macadamia nuts
  • Roasted macadamia nuts
  • Betel nut fruit
  • Pine nuts
  • Other fresh or dried nuts
  • Fresh or dried plantain
  • Other fresh or dried bananas, except for plantains
  • Fresh or dried dates
  • Fresh or dried figs
  • Fresh or dried pineapple
  • Fresh or dried avocados
  • Fresh or dried guava
  • Fresh or dried mango
  • Fresh or dried mangosteen
  • Fresh or dried orange
  • Other citrus (including mandarin and satsuma oranges)
  • Clementine orange
  • Virgin orange and similar hybrid citrus
  • Grapefruit, including pomelo
  • Lemons and limes
  • Unlisted citrus fruit
  • Fresh grapes
  • Raisins
  • Fresh watermelon
  • Fresh cantaloupe
  • Papaya
  • Fresh apples
  • Fresh pears
  • Fresh sour cherries
  • Other fresh cherries
  • Peaches, including nectarines
  • Fresh plum and promos
  • Fresh strawberries
  • Fresh raspberry, blackberry, mulberry and Logan berry
  • Fresh cranberry and cowberry
  • Kiwi
  • Fresh durian
  • Persimmon
  • Fresh lychee
  • Fresh longan
  • Rumbatan
  • Fresh sweet lychee
  • Fresh carambola
  • Fresh lotus fog
  • Fresh pitaya
  • Fruits not listed
  • Frozen strawberries
  • Frozen raspberries, blackberries, mulberries, rose hips, currant and gooseberries
  • Frozen fruits and nuts, not listed
  • Other temporarily preserved fruits and nut
  • Fried apricots
  • Mei Qiang and Li Gan
  • Dried apples
  • Dried longan and meat
  • Dried persimmons
  • Red dates
  • Dried litchi
  • Dried fruits not listed
  • Assorted nuts or dried fruits
  • Sparkling wine
  • Other fresh brewed wines packing containers of 2-liters or less brewed with alcohol
  • Wines brewed with other fresh grapes packed in 2-liter containers, but not more than 10 liters
  • Wines made from other fresh grapes packed in containers of 10 liters or more
  • Other items from grape juice wine
  • Modified Ethanol and other alcohols of any concentration
  • American ginseng
  • Other fresh ginseng
  • Unlisted ginseng

We know people don’t pay complete attention on surveys. Our new article shows how to tell if it’s a problem in your own discrete choice research.

Like it or not, economists rely on surveys to conduct their research and survey fatigue is an increasing issue.  The problem of survey fatigue has led many to conclude that household surveys are in crisis in large part because of measurement error.  Those survey issues can have serious problems when it comes to policy analysis.  As Jayson Lusk and I showed in an article recently published in Ecological Economics, inattentive participants can reduce policy-relevant estimates by almost half.  For that study, we identified inattentive participants with a question with an obvious answer: if the participant missed it, we would know that they weren’t paying attention.   These questions effectively “trapped” these people, which meant that they had revealed their inattention.   Our results showed that people who missed the trap question responded differently than people who responded correctly.

The trap questions worked well for revealing that inattention is important.  But what about if you don’t want to find “revealed inattention” but would rather infer inattention in discrete choice data?  A new article written by Jayson Lusk and I does precisely that.  Titled “A simple diagnostic measure of inattention bias in discrete choice models” and released this week in the European Review of Agricultural Economicswe recommend discrete choice modelers consider estimating a “Random Response Share” – or RRS for short.

Basically, you estimate a 2-class latent class model where all of the parameters in the second class are restricted to zero.  The percent of the sample that is placed in the restricted class is equal to the RRS.  It’s easy, simple, and comparable across discrete choice models – which makes it super useful when discussing survey data quality.  As a proof of concept, we ran the RRS model on some of our trap question data from the Ecological Economics paper, and showed that – as one would expect – people who missed the trap question were also much more likely to be inattentive in the discrete choice questions.

Of course, this measure only gives us a starting point to compare the survey quality of different groups (producers/consumers/voters?) and methods (hypothetical/non-hypothetical?).  A next step to this project will be to derive RRS estimates for data from those different types of groups to see how different they in fact are.

One issue with the measure is that this article doesn’t really tell you what to do to discourage inattention bias.  That being said, we do have a paper in review on that topic as well!

Seems like people love to hate on the abstract nature of ‘local foods.’ Some points of clarification.

The cover story in USA Today took a bunch of pot-shots at state branding local food campaigns.  From the article titled: “‘Buy local’ food programs deceive consumers and are rarely enforced, a USA TODAY Network investigation finds”:

Think of it like this: Coffee beans don’t grow in Utah. They must be imported. “But if you roast the beans here, you’re qualified for the program,” said Wayne Bradshaw, marketing and economic development division director for the Utah Department of Agriculture and Food, which runs the Utah’s Own program.

The same is true for tea brewed in Alabama, peanut butter processed in Oklahoma and potato chips cooked and bagged in Virginia. The main ingredient can come from around the world or across the country.

Ultimately, the article isn’t wrong – nor is it the first to point out problems with local (The Tampa Bay Times wrote about a similar problem in Florida “farm to table” back in 2016, for example).  The notion of “local” has always been confusing and misleading – and mostly urban-centric.   That being said, here are a few answers to important questions.

 1.   How close does something need to be to be considered “local”?  

Someone actually asked me this after a recent talk of mine at the Great Lakes Hops and Barley Conference.  The Food Safety Modernization Act in 2011 set the line at within 275 miles or within the same state, but Dawn Thilmany McFadden found that the average farmers’ market patron sees local as constrained to “produced within 50 miles” or “produced within my county.

2.  Is local agricultural production the same as “local food”?

This is a tough one, and (I think) merits more study.  Part of it depends on the perception of local itself.  When I think of “local” Chicago food, I think of Deep Dish Pizza – but I never think about where the beef for the sausage was raised or where the feed for the beef cattle was grown.  In my eyes, the resurgence of local foods echoes this social desire to reconnect with one’s location, meaning that demonizing local food production is not not particularly productive.  Why can’t a tart cherry AND a coney dog be considered “local” in Detroit?  Bailey Norwood’s Food Demand Survey at Oklahoma State University is in the process of some data collection to try to evaluate that question right now.  Specifically, he is curious about how a consumer’s identity of local foods relates to a state’s production of local foods.  My guess is there is a pretty big disconnect.

3.  How much of a food needs to be locally grown to be considered local?

Think about beer.  I like to order craft beer from wherever I am when I travel.  If I’m in Stillwater, OK, in the spring, I’ll probably be drinking the Exit 174 Rye Pale Ale from Iron Monk; if I’m in Hillsdale, MI, in the wintertime, I’ll probably be drinking the Oatmeal Raisin Stout from Hillsdale Brewing Company.  That probably won’t change even if I were to find out that Iron Monk’s Rye isn’t from Oklahoma or HBC’s Oatmeal and Raisins weren’t from Michigan.  So the better question might be: Are consumers willing to pay more for a local food with locally sourced ingredients?  In the case of beer, the answer looks like a reserved yes.  But it’s possible that other foods might be different.

4.  What is local all about anyways?

I’ve been thinking a lot lately about the Wichita Flag.

Image result for wichita flag

Despite there never being a political push nor a constraint on its usage, the thing has taken Wichita, KS, by storm.  For example, the Wichita Eagle ran an article titled, “Popularity of Wichita flag firmly planted in city.”  I’d love to see some kind of research on how this grassroots campaign influences local food demand.  I’m inclined to believe that it might be more effective at local food promotion than a “Grown In Sedgwick County” campaign – although that’s an untested hypothesis.

 

The conclusion of the USA Today article seems to suggest that there needs to be more government oversight of companies who are incorrectly labeling their products.  This is a tough call in a world where you can find GMO-Free Water and gluten-free tomatoes, but I hearken back to a standard argument from local food advocate Joel Salatin: You can’t legislate morality.

Further Reading

Jayson L. Lusk. The Food Police.

F. Bailey Norwood et al. Agriculture and Food Controversies: What Everyone Needs to Know.

Joel Salatin. Everything I Want To Do Is Illegal: War Stories from the Local Food Front.

Laura B. DeLind. Are local food and the local food movement taking us where we want to go? Or are we hitching our wagons to the wrong stars? Agriculture and Human Values. 2011. 28(2):273-283.