Artificial Meat

​I was interviewed recently for this piece on artificial meat that appeared a couple days ago in a major online French publication.  I'm not fluent enough in French to competently comment on the content of the article, but I found one line of questioning by the journalist, Yannick Demoustier,  quite perceptive.  

He noted the demand for meat substitutes and artificial meat was motivated by many factors including animal welfare and environmental concerns.  Many (though not all) of the folks trying to reduce meat consumption are also motivated by a "return to nature" phenomena - seeking to avoid "artificial" food. ​  

The journalists asked how these folks will react to meat made in a lab with the latest scientific technologies.  The choice pits desires for "naturalness" against desires for "sustainability" and highlights the fact that these two are not the same.  I don't think we know much about this trade-off and it is a great question for future research.

Gestation Crates and Unfunded Mandates

The New York Times had a nice piece ​on the challenges faced by hog farmers converting from gestation crate systems to open pen systems.  For background, the Human Society of the United States (HSUS) has won successful ballot initiatives in states such as California, Florida, and elsewhere banning gestation crates, and in recent months several large restaurant chains have said they will (at some future date) no longer source pork from farms that use gestation crates.

I strongly disagree with the ​farmer in the piece who says,

What I don’t like is some big restaurant chain in Chicago that knows nothing about raising animals is telling us how to raise pigs.

It is the consumer, after all, who wins the day.  Nobody who makes a living selling what they produce to others has the final say so (at least as long as they want to stay in business).

Despite that quibble, the article does a nice job characterizing the trade-offs ​entailed in phasing out gestation crates and documenting the reasons why farmers adopted these systems in the first place (something we also tried to do in our book on the subject).

The end of the piece has a quote from my friend and collaborator, Glynn Tonsor at Kansas State University, ​who gets at the crux of the problem faced by many pork and egg producers.  The issue is that when consumers show up in the voting booth, they enthusiastically vote to ban practices such as gestation crates in pork production and battery cages in egg production.  Yet, when those same people visit the grocery store, they aren't willing to pay the extra amount for meat and eggs produced in alternative systems.  

In essence, we have consumers requiring farmers to adopt practices, which the consumers (according to their own behavior) aren't fully willing to pay for.  Farmers, then, face something very much like an unfunded mandate (a phrase I believe I heard Glynn first use in this context).  Unfunded mandates normally come about when the government requires the adoption of a costly practice or service without providing the funding to accomplish the outcome.  In a similar manner, consumers and restaurant chains are requiring farmers to adopt practices without being willing to pay for what they say they want.

​The ultimate result will be lower profits for hog farmers (well, at least US hog farmers).  It should be noted that hog farmers are already predicted to suffer record losses over the next year because of rising feed costs.  

While we may have to live with a less profitable hog sector, I at least implore voters to count the costs in the voting booth in the same way they do in the grocery store.​  Some hog farmers, who have transitioned away from gestation crates, have found niche markets of consumers who are willing to pay the higher prices.  Here's hoping the niche grows mainstream so that funding will follow the mandate.

A Vegetarian on the Board of Tyson Foods?

I read this story with some amusement (here is the version from HSUS).  According to the article, the CEO of the Humane Society of the United States (perhaps the largest animal advocacy organization in the US), Wayne Pacelle has bought shares in and is seeking a seat on the board of directors of Tyson Foods.  Tyson Foods, by the way, is the largest producer of chicken and the second largest producer of beef and pork in the US. 

My initial reaction was that a vegetarian on the board of a major meat packer just seems wrong.  Yet, upon further reflection, I have to give it to Pacelle.  I'm having a hard time finding anything wrong with his move from the perspective of liberty and freedom of choice. 

I like to eat a good steak.  But, I'm not entitled to it.  If, hypothetically, Tyson decided its money would be better invested in another venture and decided to shut down its beef, pork, and poultry operations, how can I blame them?  I'd be sad, but Tyson doesn't owe me hamburgers. 

To garner sufficient influence in the election of Tyson's business, Pacelle and colleagues had to fork over major dough.  And, he'll have to convince other shareholders to give their support.  If Pacelle gets on the board and advocates for decisions that ruin Tyson's profitability, Pacelle looses financially as do other shareholders who support him.  That's the price he and others are willing to pay to change animal living conditions. 

Again, I'd be sad to pay higher beef prices or perhaps even sad if there was no beef from Tyson to buy.  But, I can't (and shouldn't) have the right to tell Pacelle and others how to spend their own money. 

If you don't like Pacelle's attempt to buy board membership in Tyson Foods, I have one piece of advice.  Put you money where your mouth is.  Buy shares in Tyson Foods.

Compassion by the Pound

Over at Freakonomics.com, James McWilliams graciously referred to the (in his words "superb") book Bailey Norwood and I wrote last year, Compassion by the Pound​.

​The question he raises in his post is whether it is profitable for farmers to adopt higher animal welfare standards.  There is a common  belief in the agricultural community that happy animals are profitable animals.  And that is partly true.  But as we argued in our book, and in more detail in this recent journal article  entitled Animal Welfare Economics, farmers aren't necessarily interested in maximizing individual animal profitability but the profitability of a group of animals housed on a fix amount of land.  When the goal is to maximize the total profit calculated over all animals, we show that a producer will sacrifice some individual animal welfare to achieve higher group output.  The intuition is straightforward.  A larger group of slightly sadder animals can produce more output than can a smaller group of slightly happier animals.   

The Price of Happy Hens

​After Californians passed Prop 2 in 2008 banning egg production from so-called battery cage systems, there has been much speculation about the impacts on egg prices in California once the law is fully enacted.  It is said that politics makes strange bedfellows, and that is certainly true of the agreement struck between the United Egg Producers (UEP) and the Humane Society of the Unites States (HSUS) to extend Prop 2 like legislation for egg laying hens across the US (we speculate here on why such an agreement was reached for eggs but not pork). 

Although Congress has not yet given the agreement the force of law, prospects of likely passage have raised further questions about the impacts on the prices of everything from your morning omelet to your evening Chocolate Soufflé.  Given the ubiquity of eggs in our diet (they are in foods as diverse as mayonnaise to chef’s salad), there has particular concern about the prices paid by the poor. 

Frankly, I don’t know exactly what will happen to prices and let me tell you why. 

We published a paper in 2010 in the Journal of Agricultural and Resource Economics containing the graph at the bottom of the post which plots the average price of three types of eggs ($/egg) paid by consumers across the US from 2004 to 2008 as determined by grocery store scanner data.

Over this time period, organic eggs sold at an average premium of 142% and cage free sold at an average premium of 86% relative to conventional eggs.  

Yet, a study led by Dan Sumner at UC Davis suggests the costs of producing cage free eggs are only about 25% higher than the costs of producing conventional eggs. 

So what explains the discrepancy between the roughly 25% cost difference and the 86% retail price difference between conventional and cage free?  It could be that, given the lower volume of cage free sold, the marketing and shelf-space costs of cage free are substantially higher than conventional.  Alternatively, producers and retailers may be able to use the cage-free label as a mechanism to price discriminate and charge less-price-sensitive egg consumers more for “boutique” eggs. 

All this begs the question: what will happen if the UEP-HSUS agreement becomes law?  Will the price of cage free stay where it (or perhaps even rise) or will prices fall as cage free becomes the new conventional?  If the marketing cost explanation is correct, one would expect the prices of cage free to fall closer to the level of current conventional prices (only about 25% higher than current conventional prices).  If the price-discrimination explanation is correct, cage free prices will also fall but the relative premium for “niche” eggs like organic could grow.  Either way, it seems likely that the agreement will lead to lower prices for cage-free eggs albeit at higher levels than current conventional egg prices.  Overall egg prices will be higher, and as a result, overall industry sales will be lower relative to the current situation.

In our recent book on the animal welfare, we project the long-run impacts (after the industry has had time to adjust and invest in new housing systems) are that consumers would be about $1.8 billion/year worse off and producers would be about $187 million/year worse off than they were before a ban on batter cages.  The short-run losses are much higher.