Consumers are paying up to three dollars more for non-genetically modified milk and their buying behavior is causing milk prices to fall, according to a University of Wisconsin study released last week. The study may have broad implications on the issue of milk labeling in the dairy industry.
Jeremy Foltz, the UW agriculture and applied economics professor who directed the study, said milk free of recombinant bovine somatotrophin, known as rBST or rBGH, represent a small share of the market.
“[Organic and rBST-free milks] together represent barely one percent of the overall market, but the people that are buying them are paying significant premiums of $1.50 extra per gallon for rBST-free and $3 extra for organic,” Foltz said. “Our study found that just having these types of labels has a competitive effect and drops [the price of all types of milk] by 2 cents a gallon. Whether you drink it or not, you benefit from it being in the market because it adds competition.”
Recombinant bovine growth hormone is an artificial growth hormone that increases milk productivity in cows. The FDA approved the hormone additives in 1993 amid a national controversy over genetically modified foods.
Once touted as a revolution in dairy farming, rBST has been adopted by about 15 percent of U.S. dairy herds, which account for roughly one-third of the nation’s cows. Its use has since been banned by Canada and the European Union.
Meanwhile, the introduction of rBST in the United States has coincided with the organic milk industry’s rise as the fastest growing segment of the dairy industry, creating a polarization of the industry that has turned the rBST’s safety issue into an issue of legality of milk labeling.
Foltz, who co-authored the study with University of British Columbia assistant professor of marketing Tirtha Dhar, said it was possible the study would increase the labeling of rBST-free milk.
“It requires a little bit of organization on the processing side, but consumers are willing to pay significant premiums, and in most parts of the country it’s not hard to find farmers who are not using rBST,” Foltz said.
Foltz said it is not a foregone conclusion that labeling milk as rBST-free will increase sales of rBST-free milk. Instead, Foltz said that his study shows people are more willing to pay for the whole organic process.
Monsanto, a St. Louis-based company that manufactures rBST, filed a lawsuit in July against a milk producer in Maine that labeled its milk as being rBST-free and paid its farmers a premium to avoid using rBST. Monsanto’s lawsuit claimed that the producer’s labeling implies their chemical is potentially harmful.
“One thing that could keep labeling from increasing is [the Monsanto lawsuit],” Foltz said. “People may be watching and waiting to see what the outcome of that suit is.” Wisconsin currently permits the labeling of milk as rBST-free, but at least one prominent Wisconsin farmer agreed with Monsanto’s position.”
Todd Doornik, president of the Professional Dairy Producers of Wisconsin and owner of a 1,500-cow dairy farm in Baldwin, Wisconsin, said that labeling milk as rBST-free or organic could lead consumers to wrongly think other milk is unsafe or dangerous.
“I think anything that differentiates milk is bad for the industry,” Doornik said.
Doornink said that although his farm does not use rBST, the decision whether to label his milk as rBST-free is up to his dairy coop. He added that he did not know if his milk is labeled as such, and suggested that most farmers are also unaware of whether their milk is labeled rBST-free.
Foltz’s and Dhar’s research was conducted by analyzing supermarket scanner data in 12 major U.S. cities and funded by UW’s non-partisan Food System Resarch Group, which in recent years has taken on a major economic watchdog role in the U.S. food industry.
