Potential impacts of biopharming on New Zealand: results from the Lincoln Trade and Environment Model

Abstract

Biopharming is an agricultural technology on the cusp of commercialisation. The technology uses genetically modified crop plants and animals to produce pharmaceuticals. Biopharm crops are now grown in the United States and Europe, and biopharm animals are being raised in New Zealand and elsewhere. The Agribusiness and Economics Research Unit (AERU) conducted research on the industry in 2006 and 2007 (Kaye-Blake, Saunders, & Ferguson, 2007), finding that ‘the necessary information to develop a robust economic analysis of these products is lacking. Much of the information on the relevant dimensions is simply unknown.’ This report builds on the prior AERU study. First, it presents an update on the biopharming industry and the economics literature on it. Secondly, it presents economic modelling to estimate the potential impacts of biopharming in New Zealand. This analysis uses the Lincoln Trade and Environment Model (LTEM) to simulate different market impacts from biopharming and estimate the net economic impacts. Finally, the ramifications of these estimates for biopharming in New Zealand are discussed. The literature on biopharming has not developed appreciably in the last year or two. There are still a number of unknowns, and its profitability and potential impacts on the wider agricultural sector depend on the pharmaceutical, crop, and region being studied. Consumer reactions appear to be a significant factor. Consumer perceptions of biopharming and the food system are presented in the literature in essentially three ways. One model of perceptions is ecological: it considers the biopharm organism in an agro-ecological environment. A second model is genetic, and focuses on the potential for modified genes to escape the biopharm crop or animal and enter the genome of other organisms. The third model considers how food is produced and the potential for mixing biopharm material with food crops and ingredients in the food industry. A model of international trade in agricultural commodities – the LTEM – was used to analyse the impact of changes in agricultural markets due to the introduction of biopharming into the dairy sector in New Zealand. The results provided information about the relative sizes of potential economic impacts given different future changes in the markets. Biopharming could have either positive, neutral, or negative impacts on the demand for New Zealand dairy products. In addition, it may be pursued without any impact on the cost structure of the wider dairy sector, but it could impose segregation or similar costs on non-biopharm producers.