The Cost of a GMO-Free Market Basket of Food in the United States
The following is an excerpt of a study at AgBioForum comparing the costs of a grocery basket of GMO-free food vs. food containing GMOs.
Technological progress in the production of foods and fiber has led to unprecedented growth in the productivity of agriculture. The US Department of Agriculture (USDA) reports that total US agricultural output grew at an average annual rate of 1.49% between 1948 and 2011 while input use only grew at 0.07% per year (USDA Economic Research Service [ERS], 2015a). There are many reasons for this impressive growth, including improvements in cropping practices, input qualities, resource management, selective breeding, and other widespread innovations in production practices. One important innovation that many believe has increased productivity is the genetic modification of crops in order to achieve increased output, higher quality, or lower production costs. According to the USDA, 90% of corn, 93% of soybeans, and 90% of cotton planted in 2013 in the United States were genetically modified (USDA ERS, 2015b).
Technological improvements have increased the overall quality and variety of the US food supply while, at the same time, lowering overall food costs. The share of disposable personal income spent on food at home fell from 21.2% in 1930 to 5.7% in 2012 (USDA ERS, 2015c). However, these technological advances have not been viewed as positive by all consumers. In particular, despite scientific evidence to the contrary, skepticism and suspicion regarding the safety and quality of genetically modified organisms (GMOs) exists among many consumers, especially outside of the United States. This has led to efforts to legislate labeling of any foods containing GMOs (e.g., Proposition 37, which was defeated by California voters in 2012 and Vermont H.112, which was signed into law on May 8, 2014). To date, three state legislatures have passed mandatory GMO labeling laws and two states have passed laws against GMO labeling (Center for Food Safety, 2015). Similar labeling laws have existed in the EU for many years.
While there seems to be little lingering doubt about the yield increases brought about by GM crops with insect resistance, much less is known about the extent to which consumer concern about GMOs translates into price and food expenditure effects. A number of studies have evaluated consumers’ willingness to pay for GMO-free food. Studies by Huffman (2010), Bukenya and Wright (2007), and Tegene, Huffman, Rousu, and Shogren (2003) find that US consumers are willing to pay premiums ranging from 14% to 21% for food certified to be GMO-free. Lusk, Roosen, and Fox (2003) found that US consumers were willing to pay an additional $2.83 to $3.31 per pound for beef that was not fed GMO ingredients. They also found that analogous premiums in Europe ranged from $4.86 to $11.01. Research has also documented that the information that consumers have about GMO foods heavily influences their willingness to pay. For example, Lusk et al. (2003) found that a lack of knowledge about GMOs significantly increased a consumer’s stated willingness to pay for GMO-free foods. Such willingness-to-pay studies are also widely recognized to have a number of biases that can result in stated values far exceeding what consumers actually pay. The segregation and identity preservation needed to ensure food ingredients remain GMO-free from the farm gate to the retail store are also likely to be substantial. Such costs depend upon tolerance levels and the degree of regulation entailed.
Many retail outlets already offer foods that are certified to be GMO-free. The market share of GMO-free foods is modest, but some retailers are identifying such products in their in-house brands. For example, the Whole Foods supermarket chain recently announced a commitment to complete labeling of all foods containing GMO ingredients. Fernandez-Cornejo, Wechsler, Livingston, and Mitchell (2014) report that of the 7,637 new food products introduced between February 12, 2010 and February 11, 2011, 2.6% advertised that they were GMO-free and 8% advertised that they were organic.
To our knowledge, no existing research has considered the cost implications of adopting a totally GMO-free diet for a typical family. We attempt to fill this void by considering the composition of the typical US household’s food bill and the prominence of GMO ingredients across the diet. To this end, we utilize data from the US Department of Labor’s Bureau of Labor Statistics (BLS) on the market basket weights used in calculating the consumer price index (CPI) and the composition of the average household’s annual food bill that is reported in the Consumer Expenditure Survey. The CPI uses expenditure weights calculated from surveys of about 7,000 families per year and collects detailed purchase data for over 200 item categories. We use the latest market basket weights (2007-2008) and Consumer Expenditure Survey (2011) reported by the BLS.
Overall, our calculations suggest that the cost of a typical US family’s market basket of food would rise from 8% to 50% annually, depending on the impacts on retail prices from going to a GMO-free diet. To put this in perspective, consider a comparison of food spending in developed countries that regulate GMO ingredients to that of the United States. According to calculations presented by Civil Eats, the typical US family spends approximately 6.9% of its household budget on food at home as compared to 13.9% in France and 11.1% in Germany (Jones, 2011). Dietary differences beyond GMO regulation are likely reflected in these statistics, but it is likely that at least part of the budget differences reflect the higher costs associated with GMO-free foods.
In short, the budgetary implications of a GMO-free diet are substantial. GMO-free food items are shown to be more expensive than conventional alternatives. GMO ingredients play an important and ubiquitous role in the US food supply. Even small increases in the costs of these ingredients translate into significant impacts on the typical US household. Increased food costs would not only impact food consumption patterns but would also affect all classes of expenditures as limited income is redistributed across alternative consumption items.
To read the entire study, please visit The Cost of a GMO-Free Market Basket of Food in the United States at AgBioForum.