Global adoption of porcine reproductive and respiratory syndrome–resistant pigs will have significant economic and market impacts

That’s the title of a new article I’ve published in the American Journal of Veterinary Research.

A couple months ago, the FDA approved the use of genetic engineering to gene edit pigs to make them resistant to a disease that has ravaged the industry for decades: porcine reproductive and respiratory syndrome (PRRS). Pork producers have a number of key questions and concerns about the new technology. One fear is that the technology will “flood the market” with pork and depress prices. Another concern is that consumers will reject the new technology, resulting in lower consumer willingness-to-pay for pork or trade barriers placed on countries that adopt. This paper addresses both concerns.

I constructed an economic model to calculate the potential economic impacts of the release of PRRS-resistant pigs using data on PRRS-prevalence rates and data pigs-per-sow-per-year and mortality rates of pigs in different PRRS health statuses, provided by the Pig Improvement Company (PIC) which is commercializing the PRRS-resistant pig. More specifically, a model linking hog supply to consumer pork demand in 6 global regions, Canada, China, Japan, Mexico, the US, and the rest of the world, was constructed and parametrized using pork production and trade statistics, published supply and demand elasticities, PRRS prevalence rates, and productivity metrics by PRRS health status. The model projects changes in pork prices, production, trade, and producer profits in each country. I model a scenario in which global adoption of PRRS-resistant pigs increases over a 10 year period, with PRRS-resistant pigs ultimately reaching 70% of the swine herd in adopting countries by the 10th year.

Consistent with many producers’ concerns, I find that adoption of PRRS-resistant pigs is projected to increase pork production and reduce pork prices. However, it is also the case that the increase in pork productivity and the concomitant reduction in marginal costs of pork production are sufficient to increase pork producer profitability despite lower prices. The new technology allows producers to sell more pork at a higher net margin. Net margins rise because although pork prices fall, marginal costs fall even more.

The results also suggest that although demand reduction and trade barriers can offset some of the benefits of the technology, it all depends on the magnitudes. For example, even in an extreme scenario where retail consumers’ willingness to pay for pork from locations adopting PRRS-resistant pigs falls by 10% in every location after initial adoption (i.e., before any productivity gains are fully realized), the demand reduction initially has a detrimental effect on profitability in most locations up until about year 5, when the beneficial productivity effects of additional adoption of PRRS-resistant pigs begins to outpace the effects of the 10% reduction in willingness to pay.

From the abstract:

“In the baseline scenario (70% adoption over 12 years), assuming no change in pork demand or additional cost of swine genetics, the marginal cost of production declines and pork prices fall while pork production increases in adopting countries by 11% in China to 7% in the US and Canada, and pork production falls in nonadopting countries. In the 15th year after initial adoption, profits for pork producers increase, ranging from $33/head in China to $15/head in Canada relative to preadoption baseline. Producers in the rest of the world, who are assumed not to adopt, are less profitable.”

There is a lot more in the paper, including discussions on additional benefits, risks, and costs of the technology.

Innovation in Gene Editing and Plant Breeding

Yesterday I had the privilege of moderating a panel discussion focused on gene editing hosted by the Farm Foundation. The main speakers included:

• Allen Van Deynze, Ph. D., Director, Seed Biotechnology Center and Associate Director, Plant Breeding Center, University of California, Davis

• Richard Lawrence, Ph.D., Head of Genome Editing, Yield, Disease, and Quality Research, Bayer Crop Science

• Fan-Li Chou, Ph. D., Senior Vice President, Scientific Affairs and Policy, American Seed Trade Association

• Alison Van Eenennaam, Ph.D., Professor of Cooperative Extension in Animal Biotechnology and Genomics, University of California, Davis

You can watch the presentations and discussion here or at the video link below.

Consumer Acceptance Of Gene Edited Foods

That’s the title of a research paper co-authored with Vicenzina Caputo and Valarie Kilders for the Food Industry Association (FMI) Foundation. The paper came out in 2020 (based on surveys in 2019), but somehow I neglected to mention it here on the blog but was reminded of it earlier today when it was referenced.

Here is the executive summary.

The purpose of this project was to determine market potential and consumers’ beliefs, knowledge, understanding, and acceptance of gene-editing technology and gene-edited foods with the ultimate goal of providing valuable information to producers, retailers, consumers, and policy makers.

To achieve the project objectives, a nationwide consumer survey was developed. The survey was designed and programmed into an online accessible format by the director in August 2019 and administered to 4,487 U.S. food shoppers in September 2019. Different treatments were set up which varied the food product, whether the product was fresh or processed, and the information provided about gene-editing. Respondents were randomly grouped into the treatments. In each case, respondents completed simulated purchasing scenarios where they chose between products labeled to be organic, non-GMO, bioengineered, conventional, or gene-edited at varied price levels.  The core findings are as follows.

·       Regardless of food product, presence of processing, or information, mean willingness-to-pay for organic labels was higher than the other food labels/claims. Respondents considered organic food to be healthier, safer, and more beneficial for animal welfare, but also anticipated organic being more expensive.

·       Willingness-to-pay for gene-edited products tended to be lower than that for conventional and bioengineered ones. However, willingness-to-pay significantly increased with the provision of information; particularly information about the benefits of gene-editing technology. This evidence suggests that willingness-to-pay is not much changed by merely providing respondents with information about gene-editing technology, but rather it is necessary to supplement this information with specific benefit messages if the technology is to be more widely accepted. Benefits to the environment and consumers show an overall stronger impact than benefits to the farmers.

·       Consumers have a very low level of awareness and knowledge about gene-edited products when compared to the mediocre knowledge and high awareness of GMOs. About half of the respondents indicated they had never heard of gene-editing. 

·       Respondents completed open-ended word association tasks, which revealed fear associated with the unknown. Negatively connoted words dominated mentions in relation to “gene-editing.” Furthermore, these mentions closely resembled those given for genetically modified products.

·       Despite the positive perception of the organic products, respondents mostly purchase conventionally produced food products. Even though respondents have higher willingness-to-pay for organic food, it is also higher priced. When directly asked about primary purchase motivations, respondents typically rank price and taste first, while production methods usually fell somewhere in the middle of a list of possible motivations.

·       The cluster analysis resulted in three distinct risk preference segments, risk loving, risk averse, and risk neutral. A closer look at the segments by treatment reveals that when provided with basic information the share of respondents in the risk averse group increases and the risk loving group decreases. This effect reverses when information on the environmental benefits are provided.

·       The willingness-to-pay for gene-editing varies across type of products and levels of processing. As for the former, consumers are willing to pay relatively more for fresh gene-edited vegetables (tomatoes and spinach) compared to fresh meat when information is provided to them. For fresh plant products, the willingness-to-pay is higher compared to their processed counterpart.  On the other hand, the willingness-to-pay for gene-edited meat is higher for bacon than for pork chops.

·       Despite somewhat negative opinions about gene-edited food, some consumers value having the option to buy them. When consumers are informed of the benefits of gene-editing, the market share for gene-edited products (when pitted against organic, non-GMO, conventional, and bioengineered) exceeds 15%. Consumer willingness-to-pay to have gene-edited foods available range from $0.00 to $0.23 per choice.

Results of this study reveal consumers generally think about gene-editing in a negative light. However, over half of the respondents indicate having never heard of the technology. Simply informing consumers about the technology has trivial effects on willingness-to-pay, but specific information about the benefits of gene-editing can significantly improve consumer acceptance of gene-editing.

Comparing the views of the Italian general public and scientists on GMOs

You might recall the widely discussed 2015 study from the Pew Foundation comparing attitudes of the general public to that of scientists. The headline finding that captured public attention was the following:

“A majority of the general public (57%) says that genetically modified (GM) foods are generally unsafe to eat, while 37% says such foods are safe; by contrast, 88% of AAAS scientists say GM foods are generally safe. The gap between citizens and scientists in seeing GM foods as safe is 51 percentage points. This is the largest opinion difference between the public and scientists [out of more than a dozen issues].”

In a new paper with Gioacchino Pappalardo and Mario D’Amico, we were curious about the extent to which this finding extrapolated to other countries that have purportedly been even more averse to GMOs. Gioacchino and Mario are with the University of Catania in Italy, so naturally, we extended this question to Italians. Our work was recently accepted for publication in the International Journal of Food Science and Technology. Here is the abstract:

“The gap between statements from scientific organizations about the safety of genetically modified (or GMO) food and public concerns about the technology is puzzling, raising questions about the extent to which expert opinion and scientific consensus can sway public opinion and whether scientific progress might be hindered by public opposition. This study sought to determine whether beliefs about GMO safety are high among experts in countries where there has been significant public opposition to the technology. Surveys conducted among 1,006 members of the Italian general public and 258 members of the Italian Association of the Agricultural Science Societies (AISSA) reveal that whereas 54% of our sample of the Italian general public believes GMOs are generally safe to eat, 81% of sample of the Italian agricultural scientists believe the same. Despite the gap in lay‐expert safety beliefs, results reveal greater similarity between scientists and the general public on topics related to beliefs about the impact of GM food on food prices, the developing world, and concentration in the agricultural supply chain.”

Consumer preferences for GMOs before and after a ballot initiative

The journal Applied Economics Perspectives and Policy just released a paper I co-authored with Alexandre Magnier and Nicholas Kalaitzandonakes.

In this paper, we study how consumers’ purchase intentions toward non-GMO foods evolved leading up to a 2013 ballot initiative (I-522) which would have required the labeling of GM foods in the state of Washington. We are interested in how demand for non-GMO foods responds to a real-word information shock. As we indicated in the paper:

“During the several months leading up to the vote, more than $30 million was spent on TV, radio, press, and social media ads supporting and opposing mandatory GM labeling, making I‐522 the second most expensive ballot issue in the state of Washington. Newspaper articles and editorials, door‐to‐door distribution of pamphlets and street activism added to the information flow on agricultural biotechnology and GM foods Washingtonians were exposed to over this period of time.”

We asked Washingtonians to respond to some simulated shopping scenarios using a so-called “choice experiment” related to soymilk. We conducted the same exercise at two points in time: seven months before the vote, in late April and early May 2013; and at the time of the vote, during the first half of November 2013.

We found that consumers’ implied willingness-to-pay premium for soymilk with a non-GMO label (the non-GMO butterfly label) fell from $0.68 to about $0.32, a 53% decline, over this period. There were no significant changes in consumer willingness-to-pay for brand or organic or “natural,” but there was a slight increase in how much consumers were willing to pay for soy milk overall.

The fact that preferences for the non-GMO fell is likely a result of the divergence in spending for the pro- vs. anti-mandatory labeling groups. Of the $30 million spend on campaign advertising, 73% was from anti-mandatory labeling groups. The interesting thing is that information related to the desirability of a ballot initiative appears to have spilled over into affecting demand for individual products on the market.

Several other studies have shown that information affects consumers’ attitudes toward GMOs in surveys and laboratory experiments. What this study shows is that even in the messiness of the real world, information can influence consumer preferences and choices regarding GM foods.