Will GMO Labels Increase Food Prices?

Will adding a few words to food packages disclosing the presence of genetically modified organisms increase food prices?

Two recent industry-funded studies contend that mandatory GMO labels will increase the price of groceries. But, both studies suffer from the same basic flaws. Both studies assume that a mandatory GMO disclosure will require food manufacturers to reformulate all processed foods to use non-GMO ingredients. In addition, both studies ignore the impact of retail pricing strategies on the price a consumer pays at the point of sale.

By contrast, independent studies show that GMO labels will not act as a warning, as some farm and food organizations contend. In one recent study, two agricultural economists found that the mere presence of a GMO label did not increase consumer concern. Another study, based on five years of consumer data, also found that GMO labels would not scare consumers.

Two economists with the U.S. Department of Agriculture came to a similar conclusion after studying the behavior of consumers in countries that require GMO labeling. Their study found that most consumers look only for one or two attributes - like price or calories - and tend to overlook other disclosures.

The most recent study, financed by the Corn Refiners Association, concludes that simply changing labels will increase food prices. But, food companies frequently change their labels to highlight new innovations or make new claims. Adding a few words or a symbol to the package during a periodic refresh cycle will add little or no cost to designing and printing the label.

The biggest flaw with both studies is that they assume the cost of making food is directly reflected in the price at the point of sale. As explained in a 2013 paper, pricing strategies are based on many factors, including shopper demographics and rival pricing behavior. Simply assuming the costs of label changes, which are negligible, will be passed along to the consumer overlooks the competitive world in which retailers set prices.

Even Campbell Soup Co., which supports mandatory GMO labeling, has said GMO labeling will not increase food prices. Regardless of whether you think GMO labels should be mandatory, the evidence simply does not support the argument that mandatory labels increase the price of food.