By Shannon Hartenstein
IANR News Service
University of Nebraska - Lincoln

Farmers may embrace it. Companies can invest billions. Yet, ultimately, the fate of agricultural biotechnology hinges on consumers.

Consumer acceptance and demand depend largely on whether people think this technology benefits them and whether they believe foods made from genetically modified, or GM, crops differ from traditional products, said Konstantinos Giannakas. The University of Nebraska agricultural economist has extensively studied the economic ramifications of ag biotechnology for consumers, producers and biotech companies.

"My research looks at the market and welfare effects of introducing genetically modified products into the food system," he said. His economic analysis provides a clearer picture of what's likely to happen to GM products in the marketplace under different regulatory and labeling scenarios.

Overall, he found that consumer attitudes toward GM food and their influence on public policy will significantly affect demand for GM products throughout the food system.

"This will affect farmers' decisions on which crops to grow, as well as life science companies' decisions on pricing and developing GM technologies," the university's Institute of Agriculture and Natural Resources economist said.
Giannakas' analysis indicates that imposing mandatory labeling in the United States could increase costs to segregate GM and non-GM products during processing. That ultimately could boost consumer food prices.

Labeled or not, if consumers believe GM products differ from traditional foods, they may conclude that introducing GM crops lowers their utility and some consumers may prefer to see them banned, he found.

"This has important implications for GM product regulation and agricultural research and development activity," Giannakas said.

The distribution of benefits from agricultural biotechnology also affects the market potential of this technology.
First-generation biotech products such as crops that produce their own insect-beating toxins and soybeans that withstand herbicide spraying primarily benefit farmers and biotech companies, he said.

GM crops are used to produce food products but consumers so far haven't enjoyed cost savings or other direct benefits, he found. And some people have health, environmental, moral or ethical concerns about this technology.

Benefits and concerns may shift as a new generation of consumer-focused biotech products emerges. Foods with enhanced nutritional properties or health products made from GM crops are likely to boost consumer appeal.

"My analysis reveals the potential for significant benefits from the introduction of consumer-oriented GM products for consumer welfare as well as for the market acceptance and growth of agricultural biotechnology," he said.
If these second-generation products really take off with consumers, they also could trigger some surprising consequences, Giannakas discovered.

"They might eliminate similar conventional and first-generation GM products and jeopardize the prospects for fast-growing organic agriculture," he said.

While many Europeans strongly oppose GM foods and the European Union requires mandatory GM food labeling, Americans generally are more accepting.

"The major difference is that American consumers trust the food safety and inspection systems that are in place," he said. "Europeans do not trust their system."

Since Europe is a major player in the world market, "what happens in Europe in terms of regulations and consumer demand has a direct effect on Nebraska producers."

While U.S. consumers are less critical of GM products, their introduction and regulation are likely to continue to create conflicts of interest among growers, companies and consumers.

Consumers, ag producers and biotech companies seldom agree on the regulation and labeling of GM products, he found.

"It certainly implies that the introduction of GM technologies is likely to result in a conflict between consumers, producers and life science companies," he said. This has implications for regulating GM products and contributes to regulatory uncertainties that influence companies' research spending.

This research is conducted in cooperation with IANR's Agricultural Research Division.

This story is from the spring/summer issue of Research Nebraska magazine, which is published twice annually by the Agricultural Research Division in the University of Nebraska's Institute of Agriculture and Natural Resources.