Ep. 21 How Policy Influences Risk to Agricultural Production

[00:01] Intro/Outro
Welcome to Relevant Risk from the Fryar Price Risk Management Center of Excellence. Presenting conversations and analysis about risk and risk management for food and agriculture supply chain decision makers from farmers to consumers and everyone in between. This is Relevant Risk.

[00:20] Andy McKenzie
Hi, welcome to another episode of the Relevant Risk podcast. This is Andy McKenzie, Associate Director of the Fryar Price Risk Center Management of Excellence, and I’ve got two dynamic young economists with me today who are relatively young, I mean, relative to me at least.

[00:37] Aleks Schaefer
Thank you.

[00:38] Andy McKenzie
They both have already got well-established reputations in their respective research fields, though. So, one of them is Trey Malone, who’s an assistant professor here in our Department of Ag Econ at the University of Arkansas. As I say, he will be my co-host for the day. Welcome, Trey.

[00:57] Trey Malone
Yeah, thanks for inviting me back. I will point out that I am younger than our guest on the other side of the microphone today. He has more gray hairs. 

[01:08] Aleks Schaefer
So many more years.

[01:10] Andy McKenzie
And our guest today is Aleks Schaefer, who hails from Oklahoma State University. He is also an assistant professor there. Welcome, Alex. Good to have you here on campus.

[01:20] Aleks Schaefer
Thanks very much. I’m glad, so Trey said he was going to introduce me. I’m glad we started with the amount of gray hairs that I have. So off to a good start.

[01:29] Trey Malone
Aleks is old enough that in college he was a member or the front man for a Creed cover band, so that should put him at least in the correct age category of old.

[01:41] Aleks Schaefer
Which is the best and only band.

[01:45] Trey Malone
Oh my god. So bad.

[01:47] Trey Malone
So, Aleks and I actually worked together at Michigan State for a few years, kind of in the throes of COVID. He and I both moved back to closer to home, really. Aleks is originally from the same part of the world as I am. Actually, our grandparents know each other, so it’s funny to think that we both ended up in the same field working on very, very similar topics.

[02:10] Trey Malone
So, we’re really happy to have him on campus to present some research to our faculty and our students and engage a little bit more on some of the higher-level stuff that he’s doing. Today though, for the podcast, what I would like to focus on a little bit is kind of an overarching conversation about how policy influences risk to agricultural production.

[02:32] Trey Malone
So how policy change especially can create these outcomes that we might not have had without that type of policy. Aleks, you’ve done a lot of work on this. So, for context, Aleks has a law degree from the University of Kansas. He also has a Ph.D. from UC Davis. He has published a lot of papers that typically look at some type of a policy change and what the outcomes are for the agricultural production system in that area.

[02:59] Trey Malone
That fair?

[03:00] Aleks Schaefer
Yeah, I think that’s right. And that’s the questions that I get excited about as I think it’s fair to say that in most instances the government often has producers, stakeholders’ best interests at heart. But when we don’t have a really sound understanding of how the markets work in the nuances of these markets in agriculture, often times those well intentioned policies can have some really negative unintended consequences.

[03:30] Aleks Schaefer
And so that’s been a focus of several of my papers.

[03:34] Trey Malone
Yeah, I mean, what I like to say is that in regulation and policy, often times it’s about process and not outcome. And so, you know, there are all types of examples where maybe people have this good goal, but they focus so heavily on the process that the outcome is sometimes even worse than what the prior scenario was.

[03:58] Trey Malone
One of my favorite examples in your research is the research you did on strawberries in Australia. You know, talk about that and kind of how what the what that paper was about.

[04:07] Aleks Schaefer
Sure, yeah. So, Trey always makes fun of me for the weirdness of some of my research. And this is probably a good example of both the unintended consequences of policy and the weirdness of my research. So back in, I think it was around 2018, a person went to the grocery store in Western Australia, bought a little crate of strawberries and was eating a strawberry and was alarmed to find there was a needle in their strawberries, like a sewing needle.

[04:39] Aleks Schaefer
So, they contacted the store and said, what’s going on here? And they kind of wrote it off. And then a couple of days later, someone in a different state of Australia went and did the same thing, went and bought a little pack of strawberries, and they too found a needle in their strawberries. And then all of a sudden there was this huge kind of outcry and fear among farmers, of strawberries, among consumers, among retailers, to the extent that they ordered that all of the strawberries that were on retail stores, in retail stores be destroyed because of this, these needles, this needle scare.

[05:24] Aleks Schaefer
And so rather than, I guess the effect that you’d expect that we start finding these needles in the strawberries, prices fall. Actually, we found that by destroying all these strawberries, the price of these things was even higher than it would have been had the needles not been found.

[05:45] Trey Malone
Yeah, that’s to me, that’s exactly what I’m talking about here. That like, you have this this very real fear, the idea of buying some produce that could stab you in the in the mouth. Like that’s terrible. So, like, of course their needs to be like there is some public outcry, but then trying to measure what the effect of the public outcry is, I think, something that’s worthwhile and maybe hasn’t been done maybe as much as it should.

[06:12] Trey Malone
That’s an extreme example. Let’s circle back into like U.S. examples. So, you’ve got a paper on California’s battery cage bans. You want to talk about that one a little bit?

[06:25] Aleks Schaefer
Sure. Only to the extent that it’s sort of building on some of the work that you did.

[06:31] Trey Malone
That’s right. Well, mine’s been cited more. 

[06:34] Aleks Schaefer
So much more. So, yeah, I guess Trey is indirectly plugging his own work here. But so probably most people are aware that I believe is in 2015. So about 100 years ago now, California decided to ban conventional cages for eggs through a ballot measure for eggs produced in the state. The legislator kind of had a crisis realizing that that’s just going to totally destroy their own industry.

[07:06] Aleks Schaefer
And so, they quickly slapped on another part of the legislation, which wasn’t voted on, that required all eggs not only produced in the state, but also consumed in the state, whether they’re produced in state or out of state to be produced or banning the use of conventional cages. And so, you can think about that essentially as a trade barrier.

[07:28] Aleks Schaefer 
And so we what we did was say, well, gosh, this has got impacts not only in California in terms of the price of eggs, but also in terms of the economic returns for those producers who were selling into California and then for consumers in the rest of the U.S. So our paper with motivation of the kind of interstate commerce clause that we’re not allowed to create these interstate trade barriers was saying, to what extent was this an effective trade barrier and what were the implications of that?

[07:59] Trey Malone
Yeah, that one to me is almost follows a similar path in my mind to the needle scenario where you have this public outcry for improved animal welfare and that public outcry leads to some type of policy change, this time through a ballot initiative that causes maybe this, I guess I would call it an unintended consequence where, you know, my paper says the intended consequence to some extent was to raise the price of eggs in California to force everybody to buy this this new production system.

[08:32] Trey Malone
Your paper takes it a step further, though, and says, yeah, that’s what the voters asked for. And so that’s what the voters got. There are a lot of folks out there who didn’t vote on this but still had to pay that higher price due to that trade barrier, right?

[08:45] Aleks Schaefer
That’s exactly right. Yeah. So, we find that as a result of this California legislation, which is, you know, regulating behavior in California, consumers in the U.S., across the U.S. and the rest of the U.S. had to pay slightly higher prices for eggs as a result of this regulation that they didn’t get a chance to vote on. Producers faced these higher economic costs, which kind of drove up those price of eggs and cost other states billions of dollars.

[09:14] Aleks Schaefer
And so that I believe, I haven’t followed it recently, but this latest version of this case was taken to the Supreme Court. And I don’t remember where we’re at in the Supreme Court.

[09:30] Trey Malone
Yeah. I mean, that to me is such a strange outcome. You know, like in my mind, you would expect that all of a sudden you couldn’t sell into California. And so, the prices in the states that you could sell to should decrease. And so, like, why? Why did we not see what I would expect to be almost the normal?

[09:51] Aleks Schaefer
Because of your paper, right. So, the thing the regulation had two effects. One is the trade barrier, which you’d think if all it was, was a restriction on eggs being produced out of California, that’s essentially like a tax. Right. But at the same time, they put this really big penalty on their domestic producers in California, thinking about it as countries, their domestic producers, which tanked production.

[10:16] Aleks Schaefer
That’s part of the question that you look at, tank the production in California and so on net that to satisfy that demand in California we had to increase our supply from other states.

[10:32] Trey Malone
Yeah, that’s I mean it’s just I don’t know. Do you think that we’re going to see more of that type of policy change in the United States where some state almost acts autonomously and because of the interconnectedness of the food system now something that passes in Arkansas is going to have some massive ripple effect to all the other states in the U.S.. GMO labeling would be another one that is obvious.

[10:56] Aleks Schaefer 
Yeah. So, I would say not necessarily within the sphere of animal welfare. I think where you’ve seen that there’s a big political divide between the people that vote for these animal welfare regulations versus those that don’t. And essentially, we’ve seen kind of those pass in the states that we would expect them to pass. GMO labeling is another one that I wouldn’t expect to see much more because we had the same story of states kind of battling.

[11:26] Aleks Schaefer 
How do we how do we require these labels? And then in that case, the federal government came in and said, I had enough of this stuff. We’re going to pass a federal national bioengineered disclosure standard, the NBSDL, something like that, to kind of quash all of this weird state to state battling. I do think we could see…

[11:50] Aleks Schaefer
So before we started, we were briefly talking about some of the cannabis marijuana use issues, things like hemp. We’ve got different state legislation, another plug for one of Trey’s papers there. But I think there are several domains.

[12:07] Trey Malone
Also more cited than most of Aleks’ papers.

[12:09] Aleks Schaefer
And no one likes my papers. There are several domains where that kind of continues to play out. Yeah.

[12:15] Trey Malone
Well, we see that up here in northwest Arkansas a lot on cannabis. I mean, the difference in regulations between Arkansas, Oklahoma, Missouri, and Kansas could not be any more different. And so, you know, we, as we said, are probably well, like ten miles from all of those borders, maybe 20 miles. I mean, but enough that like you’re seeing this like arbitrage moment.

[12:40] Trey Malone
I wonder like are folks going to start maybe moving in different directions?

[12:44] Aleks Schaefer
Ooh I don’t know about that man. 

[12:46] Trey Malone
You don’t think?

[12:47] Aleks Schaefer
I mean, that’s the thing the cost of that arbitrage is pretty big.

[12:51] Trey Malone
But if you live in northwest Arkansas, like it’s I mean, I think about that with like Kansas City, like, do I live in Kansas City, Kansas, or I live in Kansas City, Missouri? I mean, it’s not that hard to change.

[13:00] Aleks Schaefer
If you already live in Kansas City, Kansas.

[13:02] Trey Malone
You could just drive across the border.

[13:04] Aleks Schaefer 
The costs of moving to Kansas City, Missouri, based on marijuana laws seems an unlikely reason to uproot your family and move across the street.

[13:14] Trey Malone
Sure, but I do wonder, maybe cannabis is the wrong example. But as we see this bigger push toward active state governments in policy making, will we see more people making decisions based on what that state government is choosing in food and agriculture?

[13:34] Aleks Schaefer
So, yeah, so maybe, maybe I convinced myself that I’m wrong. Not about the marijuana, you’re wrong about that, but about the fact that when we saw, I mean, coronavirus, we saw a big tension in kind of state control versus federal control in a way that really went towards stronger federal control. And as far as I can see, maybe that balance has tended to lean towards the federal control.

[14:07] Aleks Schaefer 
And so maybe this this state-to-state tit for tat stuff could potentially be less of an issue. I’m encouraging everyone not to cite my papers, I guess is what I’m saying. 

[14:20] Trey Malone
Well, I’m just thinking like so last week I was at this this startup competition for food businesses in northwest Arkansas. There’s a woman named Kim Bryden who set up this really interesting business model to try to create more innovative independent food businesses in Arkansas. And one of the competitors, they’d asked him like, why are you setting up the way you are, where he’s mostly operating a bakery outside of his house or like in his house.

[14:48] Trey Malone
He said, well, actually, the cottage food law in Arkansas is so much better than where I moved from that that’s actually a massive selling point to me to come here because I can start a food business in Arkansas much easier than I could, I think it was in California before. And so those scenarios, I think, are I feel like I hear about them more often now about differences in state policy, in the food and ag space.

[15:13] Trey Malone
And I don’t know if that’s true in terms of like maybe it’s always been like that and I just didn’t realize it. It’s like availability bias.

[15:20] Aleks Schaefer
Now you’re a professor in an Ag school. 

[15:21] Trey Malone
Right. Or if that’s something that maybe is just going to keep happening or is going to accelerate in terms of how policy changes.

[15:33] Aleks Schaefer
Gosh, I hope it continues to keep happening.

[15:36] Trey Malone
For my research program.

[15:37] Aleks Schaefer
Because I don’t have tenure yet and I need more papers. That’s right. 

[15:45] Trey Malone
Yeah. I mean, and that’s you know, this is at the state level. You know, you do a lot on trade. So, it’s not just about what’s going on in state policy. You know, differences in agricultural trade policy across the world have these massive implications, particularly in a scenario where I think we’re going to be talking more and more about changing climate and how some countries seem to be moving heavier into policy mandates surrounding climate change versus others.

[16:19] Trey Malone
The paper, do you want to talk about the paper you’re going to present today?

[16:22] Aleks Schaefer
We can do that. I actually had a different paper that was more relevant to the set up that you had.

[16:26] Trey Malone
Great shoot. 

[16:27] Aleks Schaefer
Well, just that, so as we have these changes in climate, we’ve got these regulatory responses in these regions to try to manage the scarce resources that we’ve already got. Right. And so, another we’re just kind of bashing bad mouthing California over and over again.

[16:47] Aleks Schaefer
Right.

[16:47] Trey Malone
It’s one of my favorite hobbies.

[16:48] Aleks Schaefer
Another issue they just passed, well they passed it a while ago, the Sustainable Groundwater Management Act, Sigma, in California, which is dramatically restricting the amount of groundwater that they can use in agriculture in California, the sort of they passed it and then they didn’t have any definitions and they left it up to the different groundwater management zones to figure out kind of how they were going to do that.

[17:14] Aleks Schaefer
And so that kind of our understanding of what that’s actually going to look like is becoming more and more clear in terms of what those policies mean. But in terms of the bigger impact, we can bad mouth California all we want, but it is a massive player in the agriculture space, particularly specialty crops, which absolutely use a whole bunch of water.

[17:37] Aleks Schaefer
Right. And so, when we restrict production, restrict groundwater usage, restrict production in California, that has major implications for the amount of water, the amount of resources used to produce those products of specialty crops elsewhere. And so, I am working with a person from Europe, a person from K State, and then a person from UC Davis to say, to what extent are these sorts of country by country or state by state laws designed to protect our resources in this in this region, just kind of exporting that problem of scarcity to other countries?

[18:17] Aleks Schaefer
So, if I restrict my access to groundwater in California, to what extent am I driving up the prices for specialty crops in Spain and Australia in a way that incentivizes those producers to ramp up production? So, we’ve just kind of sent that water scarcity issue to somebody else in the world.

[18:36] Trey Malone
It is like nimbyism for agricultural.

[18:38] Aleks Schaefer
That is 100% what it is. That’s right. I want access to all those products.

[18:42] Trey Malone
NIMBY, meaning not in my backyard.

[18:44] Aleks Schaefer
Yeah, I just don’t want to, I don’t want to be using my resources to pay for it. That’s right.

[18:48] Trey Malone
I mean, that says something weird about maybe the political economy of agriculture. To me that that in my mind, once upon a time, Ag had this outsize seat at the table in most state policymaking decisions. California being one of the most obvious ones. Is there, does there seem to be some type of a shift where Ag doesn’t have as large a seat at the table in these state policy decisions?

[19:11] Aleks Schaefer
I think that’s increasingly true in the U.S. As we see, kind of historically, we think everybody likes farmers, right, whether you’re or a Republican or a Democrat, your granddad was a farmer, or your dad was a farmer. So, we all like farmers. But as kind of our country gets more and more urbanized, we sort of lose,

even in this corner of Arkansas, maybe we sort of lose that connection with agriculture and associate ourselves more with that retail consumer and are voting for what we think is ostensibly the best thing for that person in a way that can really, really, you know, push that farmer further from the regulatory table that you’re talking about.

[19:59] Trey Malone
I mean, that’s an interesting like pivot from the paper that I thought we were going to talk about, which was international trade patterns where or what you’re actually saying, is it like let’s just double down on how state policy actually has not only in effect within the United States, but has this effect globally based on what it is that the feelings of the people of or the voters. 

[20:22] Aleks Schaefer
San Francisco, determining how much ground water gets used in Spain. That’s exactly right. Yeah.

[20:26] Trey Malone
Which is surreal to think about. So, I’m on a project right now that I think the name is the worst name that I could come up with called the Next California Project. Because if we’re going to keep going down this California road, you know, there are a lot of groups right now that are trying to explore alternatives, scenarios to move specialty crop production out of California.

[20:50] Trey Malone
So that one’s working, that one’s with the World Wildlife Fund, where what we’re explicitly trying to figure out is, could you imagine a world where you move a lot of the specialty crop production from California into the Mississippi Delta? Because, I mean, potentially there’s water there, sometimes except for last year. But, you know, there is this possibility that you could well, it’s going to have to move somewhere, basically.

[21:12] Trey Malone
And part of it is policy. Part of it is just climate change in general. So where is it going to go? And I, I don’t know. I don’t have a good answer for that. I feel like that’s the standard environmental conversation right now, though.

[21:27] Aleks Schaefer
I guess my only pushback to that is that climate is one of many, many factors in terms of agricultural production. And you can mitigate that driver, or you can adapt to that driver. Right. So if we’ve got people who are really, really good at growing, what were you guys moving to Arkansas in your paper?

[21:51] Trey Malone
Everything. 

[21:52] Aleks Schaefer
You’re moving everything. 

[21:55] Trey Malone
Everything we like in California and nothing that we don’t.

[21:57] Aleks Schaefer
Markets work really well, right? That if we become more vulnerable to climate we can expect kind of R&D companies to be developing varieties that are less sensitive to some of those climate, we can be developing you know, irrigation technologies which are more efficient and prices will adjust.

[22:20] Trey Malone
Let me let me play devil’s advocate on this.

[22:21] Aleks Schaefer
You’re just cutting me off.

[22:24] Trey Malone
Because I mean, this is like the I mean, I do the same thing. Like sometimes it feels like economists like to hand wave technology over things.

[22:30] Aleks Schaefer
 Yeah.

[22:31] Trey Malone
That like, well, given the current technology, this is what’s going to happen. But if we’re talking about climate change in this longer form conversation, the technology has to change. And that’s what an economist is going to say over and over again. Nobody could anticipate that the new technology is here, Chat GPT, nobody knew that was coming.

[22:48] Trey Malone
Well, maybe the tech people in San Francisco, but now it’s everywhere. Like, I mean, AI is taking over university campuses across the country. And is that a good thing or a bad thing? Well, there’s tradeoffs, but I it just feels almost insincere to just say, well, don’t worry too much about it because technology is going to take care of it.

[23:10] Aleks Schaefer
Oh dude, yeah, that is not, fair enough. I’m glad you cut me off because let me be a little bit more, better at saying those words that I was trying to say. In that climate change, I expect through people’s adaptation and through people’s use of technology or any other things to mitigate those effects, I would expect that the impacts of climate change on prices, on quantities, on regions of production in the relatively near term are going to be a lot smaller than sort of this let’s pack up everything and move it from California to Arkansas scenario.

[24:02] Trey Malone
So okay, let’s think about next steps. So, the next step that you, I think we’ve been talking about is the stick of the carrot and the stick scenario where we’re going to change policy and we’re going to create this this huge ripple effect by, you know, saying, well, now we have to restrict what groundwater can be produced or can be used here, etc..

[24:22] Trey Malone
Like that’s the stick scenario. What is a way that you could imagine like a carrot scenario? So, you know, investments in blank or how do we incentivize this technology and innovation in something that is clearly a need not just for climate. We haven’t mentioned this, but labor is obviously another big player in this in this space.

[24:43] Trey Malone
And we want to say we’re going to move production, but we have to be thinking about how labor flows work and where there are people who are available to work and how you get those people across international borders quite often. What is a way or what it are like kind of hot takes that you think we could, or maybe we shouldn’t be incentivizing some of that innovative solution as opposed to regulatory solution.

[25:07] Aleks Schaefer
So, the could be or will be I guess we’ve got right now the Inflation Adjustment Act, where we dramatically expanded our expenditures for environmental conservation.

[25:22] Trey Malone
 Climate smart. 

[25:23] Aleks Schaefer
There you go, climate smart, whatever that means. Under the kind of equip and our working lands programs of the farm bill. We’re currently negotiating a farm bill. You guys know Bozeman here really well.

[25:36] Aleks Schaefer
We’re currently negotiating a farm bill, which is at least suggested we’re going to have some changes in sort of that environmental conservation, climate smart agriculture policy, whether that’s conditionalities on your crop insurance and your commodity title payments, whether that’s new payments for sustainable practices or expanding our current working lands programs, I don’t know. But those are sort of the possibilities that I see in the near future.

[26:04] Trey Malone
I mean, the saber that I rattle constantly is that we should be making deeper investments in publicly funded university research, which is all obviously very self-serving. Of course, I think that.

[26:18] Aleks Schaefer
Specifically agricultural economics.

[26:20] Trey Malone
The agricultural economics department at the University of Arkansas, specifically, but I do think that there is like a role that we could play that universities can play in incentivizing and developing some of this technology. So here in northwest Arkansas, this has become a pretty intense entrepreneurial ecosystem. You know, just last week on campus, they hosted this. It’s called the Heartland Challenge.

[26:45] Trey Malone
I think the winner won like $100,000 to develop, I think there was a health care technology they were focusing on. But why aren’t we doing things like that in agriculture where we’re trying to incentivize and create startups and really focus on promoting and developing innovation in this space? Do you get the sense that there is a lot of movement there?

[27:07] Trey Malone
Or maybe I’m just being cynical in thinking that there isn’t as much as I’d like to see.

[27:13] Aleks Schaefer
I think it’s a little funny that you said we don’t have much R&D going on and then you name like seven things that are already funded.

[27:19] Trey Malone
But those are all non ag, you know. And so, what I’m saying is maybe we should be thinking more about how to incentivize technology development in agriculture explicitly.

[27:29] Aleks Schaefer
Yeah. And so, you guys are sort of the example of why the government has moved less away from that and that in the lab, my understanding, I had a cranky old professor at UC Davis who this was his main topic.

[27:46] Trey Malone
With a great accent.

[27:46] Aleks Schaefer
He had a great accent, he just retired. So, but his story was that over the last 50 years, we’ve kind of moved away from public R&D because of the fact that we’ve got really good R&D going on in the private sector. I think this is sort of, yeah, this northwest Arkansas is the poster child for that, right?

[28:10] Aleks Schaefer
Maybe that’s wrong. Maybe that will stop. I think that the risks we’re sort of really lucky in the U.S. in that we’ve got really good intellectual property protections, whereas that sort of private sector driving is not as guaranteed. And countries of the world where we don’t have those intellectual, intellectual property protections. And so as those countries become more and more important in terms of global agriculture, maybe that’s a risk.

[28:39] Aleks Schaefer
But I guess being a novice on this topic, my impression is the private sector is doing a really good job in that space.

[28:49] Trey Malone
Yeah. I mean, I think I think you’re not wrong that these private sectors are doing a great job. I to me I just wonder if the public sector is lagging in a way that maybe doesn’t need to be. So, for example, last week we had Sylvia Wolfe, who’s the CEO of AquaBounty on campus, and she spent a fair amount, well she presented her slide deck. 

[29:13] Trey Malone
AquaBounty for anyone that doesn’t know, is the only company in the United States that has a commercially available gene edited protein on the market. It’s the only gene edited animal that’s available and it’s a salmon that they basically added a gene from one salmon into another and increased the growth rate. The interesting thing about that is this is a technological advancement that could solve a lot of climate issues and sustainability issues surrounding overfishing.

[29:42] Trey Malone
So, it has this exciting future. This company was founded in 1989. They didn’t get FDA approval until 2015. They didn’t hit the U.S. market until 2021. So, this this firm has been around for decades at this point. And only recently have been able to sell to a consumer. And I just wonder about this tension where we have this desperate need to innovate in a space like food and agriculture.

[30:10] Trey Malone
But we also have this dramatic push toward regulating the same thing that we want to incentivize, and I think that we’re seeing that play out at state, at the state level as well as at the federal level. That’s my hot take.

[30:24] Aleks Schaefer
I like your hot take. I think there are well-founded risks in this area. I’m glad that that AquaAdvantage, is that the name of it?

[30:33] Trey Malone
AquaBounty.

[30:33] Aleks Schaefer
AquaBounty sorry.

[30:35] Trey Malone
AquaAdvantage is the fish.

[30:37] Aleks Schaefer
AquaAdvantage is the salmon. Yeah. I’m glad that they’re sort of taken off. I do think that there were kind of well-founded risks by environmentalists at the start of their development in terms of making sure that we could separate the gene edited fish from the wild population, so we didn’t get a contamination. I know we’ve had issues of GMO contamination in rice in Arkansas, so it is a real risk.

[31:03] Aleks Schaefer
I think some of those regulatory protections, those regulatory testing are really important and useful to make sure that we’re receiving the benefits while minimizing the costs of some of these new technologies. But I agree that they also can really slow the process.

[31:21] Trey Malone
Yeah, no, absolutely. Andy, what do you think? You’ve been pretty quiet.

[31:24] Andy McKenzie
I been just enjoying this conversation. It’s been really fascinating to me. It’s outside of my main area. But I would like to go back to your first paper that you talked about on the strawberries. 

[31:32] Aleks Schaefer
Strawberries. Yeah.

[31:33] Andy McKenzie 
I found that fascinating. You know, I’ve looked at some food safety related events as well and looked at stock price reactions to the companies that are selling the product.

[31:41] Andy McKenzie
I was thinking in terms of the strawberries, was there spillover effects to other berries or was it just strawberries? And how long were people’s perceptions affected by that? I mean, was the price affect long term or?

[31:55] Aleks Schaefer
So, my understanding is that the price increase persisted for like one month, which doesn’t seem like that long of a time, but it felt like forever, my understanding, in the industry. So, in terms of the spillover, we didn’t estimate those other effects. I could imagine a dramatic price increase in those and those other sort of substitute products as well as people are like, well, I can’t have my strawberries, let’s move to blueberries to put on my birthday cake, right?

[32:24] Aleks Schaefer
Something like that. There were super interestingly, so I never got to tell the punchline of what was happening, right with the needles in the strawberries. So, it turns out, yes, there was this crisis. They found some DNA on one of these needles and they were able to tie it with a disgruntled strawberry harvester, a woman that was out picking the strawberries.

[32:53] Aleks Schaefer
And so, they tied it back to her and were able to charge her with the offense. And so, I think that being able to identify who the culprit was, reduced those public fears in a lot of ways. But at the same time, we had they started having copycat people doing the same thing, not necessarily in Australia, but in New Zealand in some fruits in New Zealand.

[33:23] Aleks Schaefer
So, yeah, it was it was a mess.

[33:27] Andy McKenzie
Yeah, I mean, it’s just fascinating in all this conversation you’ve talked about, or I’m just, my mind sort of blows with all the spillover effects that can come out of things. I mean, egg prices affected on stuff, but how does that then ripple through to other ag products, do people substitute?

[33:41] Aleks Schaefer
Other animal proteins, yeah absolutely.

[33:41] Andy McKenzie
I mean, it’s just and as economists, we like to try to get behind these answers, but I think modeling is not always easiest to tease out this information. But yeah, fascinating work. Aleks really enjoyed the conversation. Do you have anything else to add Trey?

[33:55] Trey Malone
I love that you say modeling. Aleks basically uses the same model in every paper and it’s, it’s a very good model. So, his whole model is actually built on looking at the relative price change against the substitute. So, it starts with a substitute.

[34:11] Aleks Schaefer
So, I slightly panicked when you say did this affect other products? Because I sort of hope not because then my papers are wrong as well.

[34:23] Andy McKenzie
I really enjoy the conversation, as I said. Thanks so much, Aleks. We’ve really enjoyed having you here. Look forward to hearing your presentation this afternoon. Thanks for inviting him, Trey. Appreciate you being the co-host and filling John Anderson’s rather large shoes for the day. That’s been very useful. But yeah, I guess we’ll sign off today then. And that’s the end of another Relevant Risk podcast.

[34:44] Intro/Outro
Thanks for listening to the Relevant Risk podcast, a production of the Fryar Price Risk Management Center of Excellence in the Department of Agricultural Economics and Agribusiness within the University of Arkansas system. The Fryar Price Risk Management Center of Excellence carries out teaching activities through the Dale Bumpers College of Agricultural, Food and Life Sciences at the University of Arkansas in Fayetteville and Research and Extension activities through the University of Arkansas System Division of Agriculture.

[35:10] Intro/Outro
Visit fryar-risk-center.uada.edu for more information. Thanks for listening.