As income increases, consumer rights and preferences for improved quality have become the major determinant of economic activities. In most developed countries, the primary potential for revenue generation is through enhancing the value-added of food products. Indeed, in developed countries, sectors in the agricultural economy (e.g., poultry) that have been able to provide a wider variety of quality choices and extend their product mix have been very successful. Becker (1965) provided a conceptual framework to analyze consumer choices for improved product quality. They suggest that consumers derive enjoyment from the characteristics of market goods that they consume, and that consumption activities may entail some effort. For example, the value of a meal to a consumer may be comprised of the value of its nutritional content, its taste, its safety to consume, and the degree of effort that its preparation requires. Economic factors are a major determinant of food quality preferences. Some characteristics, such as convenience in preparation, exhibit higher elasticities of income. Cultural factors may also influence the values assigned to various food characteristics. Thus, one of the challenges of agricultural industries is to economically produce products that contain the food characteristics desirable in their target markets.
As income in developing countries rises, the demand for improved food quality is likely to increase significantly. In the next 50 years, we expect that vast populations in Asia and South America will reach income levels that will enable them to pursue improved food quality. Projections made by the FAO indicate that by 2015 rises in income will translate into consumption of an average level of over 3000 kcals/day/person by 54% of the world's population (Bruinsma, 2003). This increase in caloric intake will stimulate a transition in food consumption patterns as well, from starchy staples toward "luxury" goods such as dairy products, fish, and meat. The demand for food characteristics associated with a high elasticity of income, such as food safety, nutritional content, and convenience is thus also likely to increase.
According to Welch and Graham (2002), "Micronutrient malnutrition (e.g., Fe, Zn and vitamin A deficiencies) now afflicts over 40% of the world's population and is increasing especially in many developing nations. Green revolution cropping systems may have inadvertently contributed to the growth in micronutrient deficiencies in resource-poor populations. Current interventions to eliminate these deficiencies that rely on supplementation and food fortification programs do not reach all those affected and have not proven to be sustainable." They argue that one approach to the micronutrient deficiency problem is enhancing the nutritional content of staple food products.
One of the major promises of biotechnology is its potential to enhance food characteristics. Biotechnology may be used to extend shelf life, modify size and shape, and enhance flavors and nutritional content. Parker and Zilberman (1993) have shown that improved food quality may more than double the retail price of peaches, and quality-enhancing biotechnology may be a major source of income for agriculture in the long run. Environmental preferences are also manifested through consumer behavior. One dimension that may enhance the demand for biotechnology products is the desire to consume pesticide-free food.
At the same time, consumer concerns over the health and environmental impacts of biotechnology products is resulting in a slower rate of their adoption in agricultural production. On the health side, concerns over the potential for increased levels of allergic reactions from consuming foods generated through biotechnology have been raised. Environmental concerns have also been raised regarding the potential for genetically modified organisms (GMOs) to escape into the larger gene pool, resulting in an irreversible change in the composition of genetic resources and the potential for the spread of undesirable organisms such as "super weeds" (Rissler and Mellon, 1996). r
A critical determinant of the future use of agricultural biotechnology products lies in the attributes consumers will demand of products and to what extent they will pay for these. At present this response is unclear and will be driven by conflicting concerns on environmental and food safety and the perception of biotechnology's impact on these, as opposed to the desire for quality characteristics biotechnology can deliver, such as improved taste and nutrition, enhanced shelf life, and also improved environmental performance associated with a reduction in pesticide use.
Considerable variations in consumer attitudes towards agricultural biotechnology products, particularly GMOs, are found in the potential markets for the products. Attitudes are often linked to income, with people from poorer countries having more positive attitudes than those from richer countries, although there are exceptions to the pattern (FAO, 2004). A survey conducted by Environics International in 34 countries revealed that, in general, people in developing countries are more likely to value the benefits of biotechnology over the potential risks, as compared with those in developed countries, particularly Europe. Consumer attitudes were also found to vary depending on the type of benefits biotechnology conveyed: Applications that address human health or environmental concerns were viewed more favorably than those that increase agricultural productivity.
Consumer rejection of GMOs has two major implications for the dissemination and adoption of agricultural biotechnology. Threat of loss of market share has caused exporting countries to ban the use of biotechnology in production, and this factor is now included in the risk-assessment procedures of some countries. For example, one of the largest soya-producing regions of Brazil banned the planting of GM soya and India stopped trials of BT cotton (FAO, 2004). Consumer demand for differentiated products has implications for the structure of the food processing industry as well. We have already seen the emergence of differentiated products in poultry and fresh fruits and vegetables in developed countries. Producers of these differentiated products are frequently either vertically integrated firms or a chain of firms that is linked through contracts. It is likely that some dominant firms in these industries (Proctor and Gamble, Gerber, etc.) will become actively involved in utilizing biotechnology to produce differentiated products. Both the marketing techniques and production structures that are associated with these industries are likely to transform the agricultural sectors that adopt biotechnology to meet differentiated consumer preferences. Increases in vertical integration and contracting in agriculture are likely to accompany the development of biotechnology to respond to these consumer demands.
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