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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.


Plant-Based versus Conventional Meat: Substitution, Complementarity, and Market Impacts

That’s the title of a new paper co-authored with Vincenzina Caputo and Dan Blaustein-Rejto. Here’s the abstract:

“Evidence regarding whether consumers view plant-based meat alternatives (PBMAs) as substitutes or complements to animal-based meat is limited; however, the ultimate effect of increased demand for plant-based meats on poultry and livestock production depends on this relationship. While the research on consumer demand for meat alternatives is growing, most current elasticity estimates are based on stated preferences discrete choice models, which assume consumers choose only one option and that all options are substitutes. This study employs a basket-based choice experiment (BBCE) to estimate own- and cross-price elasticities at both disaggregate and aggregate product levels. We utilized a between-sample approach and designed two BBCEs to reflect both at-home and away-from-home consumption settings. We then used the results from the BBCE to inform an equilibrium displacement model. Our findings indicate that: 1) consumers are more price-sensitive when dining out than when eating at home, 2) own price elasticity for PBMAs lie between premium meat options (salmon and ribeye steak) and more affordable choices (burgers and chicken breast), 3) PBMAs complement conventional meat in at-home consumption but show a mix of complementarity and substitution dynamics in dining out; and 4) lowering prices of plant-based beef and chicken alternatives is unlikely to significantly impact conventional poultry and livestock production. ”

Read the whole thing here.

Beliefs about Beef vs. Plant-Based, Cell-Cultured, and Lab Grown Alternatives

The July 2023 edition of the Consumer Food Insights survey is now out. I want to draw attention to one set of questions we added that delved into consumers’ beliefs about beef vs. plant-based, cell-cultured, and lab grown alternatives. Each respondent was only asked one set of these questions. Cell-cultured and lab-grown refer to the same thing, but we were curious if the the alternative labeling produced a different set of beliefs.

By and large, respondents have positive perceptions of beef. Animal welfare is the only characteristic which consumers rated more positively than beef. The specific wording on this item was “Animal Welfare (if consuming the product improves overall animal well-being in the country).” Interestingly, “cell cultured” was not substantively different than “lab grown”; the later actually produced more positive views on the alternative in some dimensions such as environment and animal welfare. I say “interesting” because the start-ups seem to prefer “cell cultured” over “lab grown.”

This is the last edition of Consumer Food Insights I will be directly leading. I look forward to see the excellent work continue from the team at the Center for Food Demand Analysis.

Research Reports on Soy-based Food Demand

With the Center for Food Demand Analysis and Sustainability (CFDAS) at Purdue, we’ve been working on a project funded by the United Soybean Board and the Foundation for Food and Agricultural Research to explore the impacts of various investment alternatives on soy farmer profitability. To undertake the economic modeling, we need to understand consumer demand for a variety of soy-based foods, and the extent to which consumers are willing to substitute between soy-based foods and other products.

We’ve now released three short research reports on consumer demand for:

There is a lot of interesting material in each report. For example, here are a couple graphs showing trends in the milk and milk-alternative markets. The big story here is the rise of oat milk, which has cut into sales of other milk-alternatives.

Another interesting finding from the meat and meat-alternatives paper that is consistent with prior research is the low degree of substitutability between conventional meats and the new meat alternatives. In fact, the estimates suggest chicken is a weak complement with (rather than a substitute to) meat alternatives.

Alternative Protein Sources: Balancing Food Innovation, Sustainability, Nutrition, and Health

That’s the title of a new publication from the National Academies of Science, Engineering, and Medicine summarizing the outcomes from a workshop on alternative proteins. I served on the planning committee and gave a talk about the market prospects for alternative proteins.

The report (pages 23-30) summarizes my talk. Here are a couple excerpts from my portion:

“Jayson Lusk, Purdue University, explored the socioeconomic impacts of increasing the intake of alternative proteins. He began with an overview of the economics of protein production in the United States, including agricultural land use, the current agricultural economy, farmers’ attitudes toward various protein sources, consumer purchasing habits and preferences, and market trends for alternative proteins. He explained that most dietary protein consumed in the United States is derived from animal sources, with poultry and meat as the top sources, followed by bread products, milk, cheese, eggs, plant-based protein foods, and seafood (Pasiakos et al., 2015). When the data are aggregated by animal, dairy, or plant-based sources, more than 80 percent of U.S. protein consumption comes from animal and dairy foods (Phillips et al., 2015). Lusk noted that protein quality varies, and statistics based solely on grams of protein consumed do not account for quality. ”

and

“Sales of plant-based meat alternatives constitute some level of substitution for animal proteins, as well as an expansion of the protein market, Lusk explained. Using an economic model that links retail consumption to cattle production, he examined how a shift in demand toward plant-based
meat alternatives—namely those created by processing a combination of ingredients such as soy, wheat, and pea, with novel additive ingredients such as heme (as opposed to less processed products such as tofu and tempeh)—could affect meat production (Lusk et al., 2022). Currently, he reported, these effects are fairly small. As an example, he observed that a 10 percent decrease in the price of plant-based meat alternatives is projected to create only a 0.15 percent decline in the number of cattle raised in the United States. As contributing factors he pointed to the small size of existing estimates across price elasticities of demand and the relatively inelastic nature of the U.S. cattle supply, which does not directly compete for land use with other forms of agriculture. ”

There is a lot more in the report, which summarizes a wide range of perspectives on alternative proteins.