GMO labels up grocery bill $500

GMO labels up grocery bill $500

Cornell study finds consumers will bear brunt of costs for GMO food labeling.

MANDATORY state laws on labeling genetically modified organisms (GMOs) in foods, such as those recently enacted in Vermont and proposed in New York, among other states, would cost a family of four an average of $500 in additional food costs each year and could even come in closer to the $800 midpoint of the range, according to a new study from Cornell University.

This is higher than previous estimates of $450-520 in annual increases from an analysis of Washington's Initiative 522, which failed in November 2013.

California's referendum was projected to increase grocery costs by as much as $400 per year, based on a study by Northbridge Environmental Consultants and a fiscal impact study by the non-partisan California Legislative Analyst's Office.

The latest installment on the impact to consumers comes as New York's legislature looks to adopt its own GMO labeling measure.

In the study, professor Bill Lesser of the Dyson School of Applied Economics & Management at Cornell University outlined the added costs the industry will pass down to consumers if forced GMO labeling becomes law in New York. Additionally, the state could face millions of dollars in added costs to implement and monitor such a labeling initiative.

Forced GMO labeling would affect virtually every aspect of the food production industry — from seed to store shelf. Additional costs levied on farmers and producers, warehousing and distribution centers and inventory management would all contribute to the added costs to consumers, the study found.

"It is important to note that the consequences of a labeling law will be so significant in terms of the number of food items affected and the presentation of additional choices to consumers that no one, at this point, can be certain of the eventual outcome beyond the fact that there will be costs, which will largely be passed on to consumers," Lesser wrote.

"The bottom line is that food costs will increase dramatically as a result of this mandatory labeling bill," added Rick Zimmerman, executive director of the Northeast Agribusiness & Feed Alliance. "This new study from Cornell illustrates how this legislation, if passed, would directly impact those least able to afford it."

The Cornell study calculated that 60-66% of foods sold in New York would be exempt, and the remaining 40% of foods that must be labeled equate to 21,000-25,000 separate items, or 50-58% of items available in supermarkets.

Firms can comply with the proposed GMO labeling requirements either by labeling or by using ingredients in amounts below the specified GMO threshold level of 0.9%.

The report explains that labeling costs involve — in addition to the labeling function itself — the annual costs of warehousing more items as well as the charges leveled for supermarkets to stock "new" items. The study estimated that additional costs for a family of four would be $64-68, with a midpoint of $66 (Table).

The second approach to compliance is using non-genetically modified (GM) ingredients, which means the ingredients are either organic or are produced without the use of GM seeds. Those ingredients are more costly, particularly organically grown ones.

Additionally, the GM and non-GM ingredients must be kept separate (known as identity preservation), which involves both handling and recordkeeping costs, the report explains.

For the non-GM option, estimated costs for a family of four would range from a low of $44 to a high of $412, with a midpoint of $228.

The costs for using organic ingredients would range from $360 to $1,552, with a midpoint of $956.

 

Additional costs

Additional costs to the state would include the potential loss of net farmer income from producing GM corn and soybeans, which — while very real for the state's farmers — would be minor compared to the direct consumer costs.

The Cornell report explains that there are environmental benefits to using GM crops, including benefits from reduced pesticide use and a more benign herbicide to enhanced soil retention and carbon sequestration for the high proportion of GM crop producers who use conservation tillage (no till). However, those benefits were not possible to monetize at the state level.

Additionally, regulatory costs must be borne by the state. The study estimated that it will cost New York $1.6 million to implement the GMO labeling law and subsequently monitor compliance.

Vermont legislators estimated the possible lawsuit liability costs to their state to be in the $8 million range.

"While the likelihood of such a lawsuit and any defense costs in the eventuality (that New York's) proposed bill is adopted is difficult to assess, the potential is real and the costs considerable," the Cornell report says.

Adding $1 per capita for all of those costs brings the maximum costs for the four-person household to a range of $48-1,556, with a midpoint of $800.

 

Loss of choice

Multiple surveys across time responses indicated that around 50% (range of 49-57%) of food shoppers would be "less likely" to purchase foods with a GMO label.

Those survey results are consistent with several studies that have found that, when given a choice between conventional and GM foods, consumers have a strong preference for the conventional variety.

The Cornell report points out that, when considered from another perspective and using a different methodology, studies indicate that consumers are willing to pay 14% less for the same products once labeled. That would result in a loss of 14% of revenue from labeled products, which would greatly reduce their viability in the competitive food industry.

The study projected that 10% of consumers would switch to organic foods, and 40% of shoppers would be expected to purchase unlabeled foods, i.e., foods produced with non-GM ingredients. The remaining 50% would purchase products labeled with what could include GM ingredients.

The study found that the costs reflect added consumer choice through the availability of both labeled and unlabeled (non-GM) food products. However, it is possible that, over time, consumers and/or the food industry will decide that some options are not viable, and those options will disappear from the food aisles.

"That will reduce system costs at the expense of consumer choice," the report points out.

If the discontinued items are from the to-be-labeled group — those that contain GM ingredients over the allotted amount — then there will be limited system savings on warehousing but overall higher costs due to the more costly non-GM ingredients.

"Experiences suggest that once GM products are labeled, they are not selected and disappear from the marketplace, resulting in higher costs with no net enhancement in consumer choice," Lesser wrote.

Find the full study at http://dyson.cornell.edu/people/profiles/docs/LabelingNY.pdf.

 

Costs for each of 3 approaches to compliance of proposed New York GMO labeling law

 

Low

Midpoint

High

1. Label existing products: Account for warehouse, store costs, labeling

Annual, family of 4

$64

$66

$68

2. Use non-GM ingredients: Higher ingredient costs, keeping inputs separate

Annual, family of 4

$44

$228

$412

3. Use organic ingredients: Much higher ingredient costs, separation

Annual, family of 4

$360

$956

$1,552

Aggregate, per capita (includes regulatory costs)

$12

$200

$389

Aggregate, family of 4 (includes regulatory costs)

$48

$800

$1,556

Aggregate, state

$234 million

$3.9 billion

$7.6 billion

Source: Cornell University.

 

Volume:86 Issue:20

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