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Banning GMOs in N.Y. School Lunches Carries a Price

October 20, 2016
Dr. W. Lesser, Susan E. Lynch Professor in Science and Business at the Dyson School of Applied Economics and Management at Cornell University, recently published a blog arguing that the New York PTA's proposal to go GMO-free in the State school meals program would come with a hefty financial burden.

Dr. Lesser's piece was published in the Cornell Alliance for Science blog page and an except can be found below:

The purpose here is to put a price tag on the New York PTA proposal to go GMO-free in the State school meals programs, claiming health and environmental benefits. 

To carry out the analysis it is first necessary to specify which food products are and are not to be included. Following the practice of labeling law proposals, dairy products and meat animals fed with GMO feeds are excluded. In terms of bulk commodities of relevance to school meal programs that leaves as significant GMO ingredients corn, soybeans (oil), canola (oil), and beet sugar. 

Using USDA data on the components and costs of school meals, the per-meal cost increase of the PTA proposal is seven percent, 3.4 cents, or $ 15.3 million across the State for the 450 million school meals served annually. These are estimates only, and based on national, not N.Y.-specific figures. Actual costs could be higher or lower.

Policy makers will need to decide if the claimed benefits are worth the costs to public and private funding sources, and to families purchasing meals.

We are all, for obvious reasons, very aware of and concerned about the food we eat, though differences in habit, culture, race/ethnicity, and life style, in addition to income and cost considerations, lead to very different food choices across the United States...

Assessing the costs

The cost-related aspects of the PTA resolution are as follows:

RESOLVED: That New York State PTA supports legislation and regulations that ban GMOs and GE foods from use in food and beverages provided by school meal programs and vending services, and be it further

RESOLVED: That until such ban is in effect, all school districts be encouraged to prohibit the use of foods and beverages that contain GMOs and GE foods provided by the school meal programs and vending services,

While as noted the focus here is on cost considerations as one dimension of the GMO/non-GMO debate as it applies to school meals in the State, it is nonetheless important to emphasize that there is no accepted evidence of the negative human or animal health effects of consuming GMO foods...

Any cost effect of school meals consisting of all non-GMO ingredients will be reflected through the cost differential, if any, of ingredients. That is, labor and other in-school costs are assumed to be unchanged. Making those calculations, though, requires several steps, beginning with a working definition of ‘GMO food’ and progressing to a summary of current ingredients costs, an estimate of the additional costs of non-GMO ingredients, and finally, a compilation of those costs for all school meals served in the State.

Identification of GMO food

GM describes a technology, or rather a composite of technologies, which have been applied to change the characteristics of food products. The term, however, does not in itself identify what the PTA resolution considers to be a GMO food. Costs cannot be estimated unless the targeted food products can be identified...

A definition is required, so for purposes here the characterization of what is and is not a GMO food used in recent GMO food labeling legislation is applied (see e.g., the Vermont labeling law, subsequently preempted by federal legislation). Such laws explicitly exclude meat produced with GMO feed. That convention will be applied here. Also excluded are all dairy products, including those produced using rBST, a natural hormone produced using GE methods and introduced into lactating cows. Following Vermont, and other state proposals, milk and milk products from rBST treated cows are excluded in this analysis as well.

Remaining then are two major GE technologies: herbicide resistance, and one expressing Bt (Bacillus thorengensis), a naturally occurring toxin for Lepidoptera (caterpillar) plant pests. These technologies, singly or in combination, are used primarily in soybean and soy products (cooking oil), corn (including starch and corn oil), canola (another cooking oil) and (beet) sugar...

Due to the prevalence of oils and sugars in processed foods, an estimated 55 percent of food items sold in N.Y. grocery stores fit this definition of a GMO food...For purposes here, it is assumed that processed foods (including beverages) containing oils or sugar are GMO, and when served in school meals are GMO as well.

Current expenditures on GMO foods in school programs

Nearly 100,000 schools/institutions serve school lunches to 30.5 million students daily, with additional numbers of breakfasts served...The USDA is a major funder for school meals, as well as donating some surplus food items directly to school meal providers. As part of that responsibility, the School Food Purchase Study compiles data on the unit (per pound) and cost per 100,000 meals for foods categorized into 16 main and 72 sub-categories. The most recent survey was completed in 2011 representing 2009-10 costs. These are average national costs; data are unavailable to compute costs specific for N.Y. State.

Of the 16 main categories, nine represent foods produced with oils and/or fats and/or sugar and thus likely to contain GMO ingredients. Some judgment is required in making these classifications. For example, unprocessed potatoes are not GMO, but when identified by the USDA along with ‘potato products, meaning chips and french fries, then oils are included in the cooking process so the group is classified as GMO foods. Conversely, soups are often produced with some cornstarch as a thickener, making that category a GMO food. The share of the GMO content seems modest, though, so the soup food category is treated as non-GMO for the purposes of this study. Those selected as GMO foods are bakery products, condiments, fats/oils, fruit juices, fruit drinks, prepared foods, soups and gravies, sugar/desserts, potatoes/potato products.

On a per meal basis, these 2009-10 costs come to.45.7 cents. With the national average meal cost in that period being $2.36, GMO ingredients account for about 20 percent of total costs. The School Nutrition Association places the food cost of school meals at 37 percent, but that figure includes all foods while here only a portion is considered. The residual beyond the ingredients cost includes labor, facilities and equipment, and management. The costs can be adjusted to 2016 by multiplying by the Consumer Price Index (CPI). The updated cost is 49 cents

Additional costs of GMO ingredients

GMO crops are generally profitable for farmers, meaning that non-GMO foods will be more costly. That profitability explains the high use (90%+) rate, backed up by cost of production studies. The price differential can be measured by the premium offered for non-GMO corn and soybeans; there is no indication of such a differential for beet vs (non-GMO) cane sugar. In recent years the differential has been 7–12 percent for corn and 20–24 percent for soybeans.

We do not know the composition value of corn and soybean (oil) ingredients in school meal products and so select, somewhat arbitrarily if conservatively, a figure of 10 percent for corn (the lower cost ingredient) and 20 percent for soybeans (also including canola oil). Doing the arithmetic and rounding, the contribution to ingredient costs is 1 and 4 percent for corn and soya, or 5 percent total. An additional cost is the maintenance of separation of GMO and non-GMO ingredients (known as ‘identity preservation’) in the bulk supply chain, which is to say prior to processing. A USDA report placed those costs in the three cents per bushel range around 2000. Converted to a percent cost using grain prices from the same time period, the amount comes to 1.6 and .6 percent for corn and soy respectively, summed and rounded here to 2 percent for GMO ingredients.

In total, then, the use of all non-GMO food ingredients in N.Y. state school meals programs would raise those costs by an estimated seven percent. In dollar terms, the ingredient costs would rise by 3.4 cents per meal. That may seem a small number, but consider that five billion school lunches and 2.3 billion breakfasts nationally are served annually. With 6.16 percent of the U.S. population the approximate shares for N.Y. State are 308 and 142 million respectively for lunch and breakfast. Considering that total of 450 million school meals served annually in the State, the aggregate annual cost of a non-GMO program there would be $15.3 million.

That sum would be shared by State, local and individual family sources as the federal reimbursement rate is fixed.

This estimate is just that — an estimate. It also assumes that the PTA’s plan for which foods are to be incorporated follows the pattern established by GMO labeling bills, which exclude dairy (rBST assisted production) and meats fed by GMO feeds. Costs would rise if they are included in the ban.