Consumer Preferences for Beef Alternatives

The journal Food Policy just published a paper I co-authored with Ellen Van Loo and Vincenzina Caputo entitled, “Consumer preferences for farm-raised meat, lab-grown meat, and plant-based meat alternatives: Does information or brand matter?” I blogged about the working version of this paper this past fall when we finished the first draft, so I won’t re-iterate all the main findings (I should also note the paper at Food Policy is open access, and as such the results are freely available).

What I thought I’d do here is convey some results from the study that are not in the published paper but that are based on the models described therein.

First, a big unresolved question that often comes up when discussing the introduction and evolution of plant-based or lab-based alternatives is whether the the projected market share for the new alternatives is “stealing” sales from beef or rather drawing new people into the market who wouldn’t bought beef to begin with. Using the models estimated in our paper (in the “control” no information, no brand condition), I project that before any alternatives are introduced about 74% of consumers would buy ground beef on a grocery shopping trip (assuming the price is $5/lb) and 26% would refrain from buying ground beef. After the alternatives are introduced (at an assumed price of $9/lb), it is projected about 12% of shoppers would buy one of the beef alternatives. Thus, of the buyers of the new alternatives, I project about 57% (6.9/12.1) would have instead bought conventional ground beef whereas the remaining 43% (5.2/12.1) wouldn’t have bought beef in the first place.

The paper in Food Policy shows some results related to the relationship between demographic characteristics and projections of which alternatives people would buy. To help make these findings a little more digestible, below is a table that shows the demographics of people predicted to choose conventional beef vs. people predicted to choose one of the beef alternatives (assuming all are the same price). Unsurprisingly, the people who are predicted to choose a beef alternative are way more likely to be vegetarian than are people predicted to choose beef. It is also the case that alt-beef buyers are much more likely to be younger and are somewhat more likely to have a college degree than conventional beef buyers. There are not big gender differences.

The table below shows a similar breakdown but instead of focusing on demographics, I report the importance consumers say they place on 12 different factors when buying food. Predicted beef buyers place greater importance on safety, taste, appearance, and naturalness. By contrast, people projected to buy one of the beef alternatives place more importance on novelty, environment, and animal welfare. (note: in general differences greater than about 0.1 are significantly different than zero at the 0.05 significance level).

Finally, one of the most interesting results of the survey were responses to open-ended questions we asked about people’s perceptions of the competing products. Here are some word clouds Ellen created.

These data were collected about a year and a half ago, and given the novelty of the products, it is possible perspectives have changed, particularly following COVID19. Fortunately I have some follow-up work planned with Glynn Tonsor and Ted Schroeder. Be on the lookout for some of those results hopefully some time this coming fall.

Economic Impacts of COVID-19 on Food and Agricultural Markets

That’s the title of a new report I co-edited with John Anderson at the University of Arkansas, which was released today by the Council of Agricultural Science and Technology (CAST) and the Agricultural and Applied Economics Association (AAEA). We brought together 17 short articles by more than 30 outstanding food and agricultural economists to address a broad range of impacts brought about by the pandemic. Here are the list of topics covered.

Hopefully the report will help improve understanding of our food supply chains, give an appreciation of the magnitudes of the disruptions, and lead to more informed policy responses.

You can read the whole thing here.

Thanks to all the authors who contributed and to the reviewers who gave prompt and excellent feedback.

Domestic Meat Shortages and Exports

The USA Today ran a story about meat shortages and exports in which I was quoted. There are several crisscrossing narratives running through the piece, so I thought it might be useful to clarify a few points.

On the one hand, the article discusses the volume of meat US packers exported to other countries, with the presumption being that it’s wrong to export meat abroad when we have shortages at home. But, then the article also argues:

“But Americans were never at risk of a severe meat shortage, a USA TODAY investigation found, based on an analysis of U.S. Department of Agriculture data and interviews with meat industry analysts.”

If that’s true, then the argument about exports seems irrelevant.

In any event, were we at risk of shortages? It is clear the packing sector took a significant, unprecedented hit and was producing far less beef and pork compared to last year. Here’s a figure I created based on USDA data on processing volumes.

It’s also important to clarify what is meant by “shortage.” Why weren’t there more empty shelves in late April and early May given the reduction in processing volume shown above? The answer: prices. We are going to consume whatever meat gets produced, whether it is a small or large amount. If there is a larger than expected amount of meat being produced, prices need to fall to induce us to consume more than we otherwise would have. By contrast, if a smaller amount of meat is being produced than expected, prices need to rise to induce us to cut back and consume less than we otherwise would have.

Thus, prices are the mechanism by which scarce resources (like meat) get allocated. Retailers sometimes use other non-price mechanisms (like: limit of 2 packages per customer or long wait lines) to ration scarce supplies if they don’t want to pass on the full cost increases to consumers. Higher prices and other mechanisms like store buying limits are what helped prevent many grocery store shelves from being completely empty (i.e., having “shortages”).

So, did beef and pork prices rise to help allocate the significantly lower quantity being produced? Absolutely! Here’s a graph of changes in wholesale beef and pork prices based on USDA data.

Finally, when discussing trade, I think it is really important to get the timing and trends right. If we want to explore how trade patterns responded to the plant shutdowns and reductions in domestic supplies, we need to look at data in late April and May. As the initial figure above shows, it was really only in mid April that we started seeing very significant reductions in processing volumes, with the “bottom” occurring in early May.

So, what happened to US meat exports? Here are some figures from the US Meat Export Federation (USMEF).

The USMEF defines an export as: “an actual shipment from the U.S. to a foreign country” whereas an “Export sale is defined as a transaction entered into between a reporting exporter and a foreign buyer. Sales can be cancelled or adjusted in following weeks, thus “net” sales are reported as the difference between new sales and any cancellations or adjustments.”

These figures show a sharp drop in sales of beef and pork at the time we starting seeing the worst of the packing plant shutdowns and closures. Actual exports (i.e., movement of meat across the border) also fell, albeit at a slower rate than sales, revealing the lagged nature between when a “sale” is made and when the meat leaves the country. It’s one of the reasons the data showed exports persisting for a few weeks even after plants began to close: the meat had already been sold weeks prior to the plant shutdowns occurring.

Why would exports fall in response to the COVID-related packing plant shutdowns? Perhaps it was patriotic duty on the part of packers to feed American consumers. I suspect the over-riding motivation was economics. As the price data illustrated above clearly shows, packers could fetch a higher price for their meat here at home. That is, packers didn’t have to be coerced into reducing exports as there was a strong economic incentive to sell into domestic markets. Again, we see prices serving as a key mechanism to re-direct meat supplies to help prevent “shortages.”

California Animal Welfare Laws Impacts Egg Prices Nationwide

The American Journal of Agricultural Economics just released an interesting new paper entitled “Piecemeal Farm Regulation and the U.S. Commerce Clause” by Colin Carter, Aleks Schaefer, and Daniel Scheitrum. The paper builds off some previous work I’d published with Conner Mullally and Trey Malone about the impacts of California’s animal welfare laws, which require more space for hens, on egg prices. The new paper by Carter, Schaefer, and Scheitrum goes further in answering some important questions. Namely, what impacts have California laws had on consumers and producers in other states?

They write:

“The balance between a state’s power to regulate food production within its borders and the impacts of such governance initiatives on consumers and producers in other states is the subject of intense policy debate. The food movement in America has generated piecemeal state laws that—in effect (and possibly by design)—influence how farms in other states operate. ”

Here’s a summary of their findings.

“Our results indicate that the policy had widespread effects across the U.S. In the months following implementation of AB 1437, wholesale egg prices in the Midwest, Northeast, Southeast, and South Central U.S. experienced a dramatic increase. Since then, prices have continued to trade at a 7¢–10¢ premium over their former long‐term equilibrium. AB 1437 has also increased the share of laying hens housed in California‐compliant enclosures across the U.S and led to increased concentration of out‐of‐state firms shipping eggs to California. Between January 2015–December 2017, California hen housing requirements cost U.S. consumers almost $2.7 billion. The majority of these costs ($1.98 billion) were borne out of state.”

They also found that California’s laws:

“shut many small producers out of the California market and led to more concentrated interstate trade. ”

Of course, some people really value improvements in animal welfare, and there may be “external benefits” that aren’t captured in market prices and transactions. Another externalities, that this paper reveals is that that Californians are imposing higher egg costs on consumers in other states who didn’t vote in their animal welfare referendum. The authors calculate:

“if we evaluate the policy from a U.S.‐wide perspective, the annual per‐capita external value would need to range between $35.61 and $108.57 per capita to be cost effective”

On a couple different occasions attorney generals from other states have tried to sue California over these laws based on arguments that they violated the U.S. Interstate Commerce Clause. The suits have failed, as I understand it, not necessarily on the merits of the case per se but because the courts have decided the attorney generals don’t have “standing” to bring the case because they aren’t egg producers. These issues are unlikely to go away. California recently passed new animal welfare standards that go beyond the space requirements for hens and will ultimately require all hens be cage free. California isn’t alone in passing cage free standards, and other states such as Massachusetts and Washington have similar measures being implemented. Moreover, these issues are unlikely to only relate to eggs. GMO labeling standards were going down the same route until a federal policy was ultimately passed. Might we see similar state-by-state regulations on pesticides, labor standards, or preservatives?

Update on Meat and Livestock Markets in the Wake of COVID

Fortunately, it appears the worst of the COVID-related disruptions to meat and livestock markets may be over.

The figure below shows the most recent data on livestock and chicken slaughter (cattle and hogs are daily on weekdays; chickens is weekly). The worst of the disruptions occurred in late April and early May when we were running about 40% below last year, but significant improvements have been made since then. For beef and pork, the plants are mainly back online, but are running at reduced capacity due to social distancing of workers, etc. Beef and pork are currently running at about 10% to 15% below last year. Chicken processing hasn’t deviated more than plus or minus 10% from last year at any point during this period.

The changes in processing capacity have translated into changes in wholesale prices. Below are wholesale beef, pork, and chicken prices.

The quantity and price data above can be used to calculate demand indices, which are shown below.

Here are beef and pork marketing margins (the difference between wholesale meat price and the farm-level livestock price), which I previously discussed here. One of the reasons the pork margin is lower is that it is based on a carcass-weight hog price whereas the beef margin is based on cattle live weight prices.

Finally, as I previously indicated, all meat isn’t created equal during a pandemic.