The International Consortium on Agricultural Biotechnology Research (ICABR)
Consumer Attitudes Towards
Genetically Modified Foods
The Modelling of Preference Changes
Chantal Pohl Nielsen,
The sharp reaction against the use of genetically modified organisms (GMOs) in food production by some consumers has already initiated the creation of differentiated marketing systems for genetically modified (GM) and conventional maize and soybeans in the United States. Consumer attitudes will be an important determinant for the profitability and hence the viability of markets for non-GM varieties in the longer term. For producers it is a matter of assessing the benefits and costs of gaining access to niche markets for non-GM crops relative to the benefits of lower production costs associated with cultivating GM crops. Furthermore, many consumers are not only critical of the use of genetic engineering techniques in the production of bulk commodities such as soybeans and cereal grains. They are also concerned about GM ingredients in animal feed and processed foods. To the extent that consumers are in fact willing to pay the additional costs of having these preferences, identity preservation systems will develop so that these demands can also be satisfied.
These divergent consumer attitudes toward genetically modified foods and the increasing demand to be informed about production processes through identity preservation systems etc. will have consequences for the structure and pattern of world food trade. Regardless of whether a country is a net exporter or net importer of agricultural and food products, it will be affected to some extent by the changing consumer attitudes toward GMOs in the developed world. Some countries are highly dependent on exporting particular primary agricultural products to GM-critical regions. Depending on the strength of opposition toward GM products in such regions, the costs of segregating production, and the relative productivity difference between GM and non-GM production, such countries may benefit from the establishment of segregated agricultural markets for GM and non-GM products. In principle these countries may choose to grow GM crops for the domestic market and for exports to countries where consumers are indifferent as to GMO content, and to supply GMO-free products to countries where consumers are willing to pay a premium for this characteristic. Such a market development would be analogous to the niche markets for organic foods. Other countries are net importers and can benefit from the widespread adoption of GM technology. To the extent that consumers in those countries are not opposed to GM products, they will benefit from lower world market prices.
This paper analyzes the price, production and trade consequences of changing consumer preferences regarding the use of genetically modified organisms (GMOs) in food production. The analytical framework used is an empirical global general equilibrium model, in which the entire food processing chain from primary crops through livestock feed to processed foods is segregated into genetically modified (GM) and non-GM lines of production. This GM and non-GM split is maintained throughout the entire processing chain: GM livestock and GM food processing industries use only GM intermediate inputs; likewise non-GM livestock and non-GM food processing industries use only non-GM intermediate inputs. This model is used to analyze the implications of widespread use of genetically engineered crops in some regions whilst consumers in Western Europe and High-income Asia adopt a critical attitude toward GM foods. Two different representations of consumer preference changes are illustrated: (1) a change in price sensitivity: i.e. consumer demand is less sensitive to a decline in the price of GM foods relative to non-GM varieties, and (2) a structural demand shift: for a given price ratio consumers simply demand less of the GM variety relative to the non-GM variety.
The empirical analysis described in this paper brings attention to two very important aspects of the GMO debate: (1) segregation of GM and non-GM production and marketing systems, and (2) the power of consumer sentiment. The results show that when production and marketing systems are segregated into GM and non-GM lines all the way from primary crops through livestock feed to food processing, changing consumer attitudes toward GMOs will have substantial effects on trade, production and prices not only for the crop sectors that benefit directly from the new technology, but also for the sectors that use these crops as inputs in production. Interpreting consumer dislike of GM foods as a reduced sensitivity to relative price changes dampens the impact of the productivity difference between the two varieties. If consumer preference changes are in fact more a matter of rejection rather than reduced price sensitivity, the effects on prices, production and trade flows are much more dramatic and the direction of effects reverses. Countries that are heavily dependent on exporting GM-potential crops to the GMO-critical regions find themselves increasing exports and hence production of non-GM varieties and reducing production of GM-varieties in spite of the productivity benefit. Clearly, the results depend crucially on the extent of GMO-rejection by consumers and the size of the productivity gain foregone in comparison with the relative price premium obtainable on non-GM varieties. For some countries the development of segregated GM and non-GM food markets is a way of retaining access to important export markets if and only if the non-GM characteristic can in fact be preserved and verified throughout the marketing system at reasonable costs.