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Did BSE Announcements Reduce Beef Purchases?
Fred Kuchler and Abebayehu Tegene
Economic Research Report No. (ERR-34), December 2006
In May 2003, several U.S. Government agencies announced that
Bovine Spongiform Encephalopathy (BSE—also known as Mad
Cow disease) had been found in a cow in Alberta, Canada. The
following December, agencies reported that BSE had been found
in a cow in Washington State. Both of these sets of announcements
had the potential to influence consumers’ food choices
and retail food markets in the United States.
What Is the Issue?
Knowing how consumers responded to these announcements and,
more generally, to news about the safety of the food supply,
is important for the design of food policy. Public information
programs that effectively communicate risk information could
prevent consumers from responding out of proportion to the risks
they face. Consumers and food suppliers might both gain if consumers
do not avoid foods that are safe. When consumers make informed
risk decisions, they create incentives for food suppliers to
take cost-effective safety precautions. Also, accurate assessments
of consumer responses to food safety risk information will help
the public sector gauge the need for industry relief.
Currently, most of the quantitative information about consumers’
responses to the BSE announcements has come from consumer opinion
surveys. Such surveys allow researchers to quickly gauge consumers’
response to announcements. However, survey responses may differ
from actual market behavior where consumers have to pay for
each of their choices.
The proof of how consumers interpret news about food safety
is in the market. Our goal is to see if market data reveal impacts
of the BSE announcements, and if so, the magnitude and duration
of those impacts.
What Did the Study Find?
Among the three markets examined—fresh beef, frozen beef,
and frankfurters—fresh beef provided the strongest case
for an impact of the BSE announcements. There is no evidence
that the Canadian announcement altered purchase patterns of
fresh beef, but purchases during the first 2 weeks after the
Washington State announcement were unusually low. Frozen beef
purchases fell only for the first week after the Washington
State announcement. Frankfurter purchases dropped in the second
week following each announcement, but purchases of no-beef frankfurters
also fell, suggesting that unrelated events were more likely
responsible for the decline.
The magnitude of responses in the market was difficult to estimate
precisely, but the duration was clear: within 2 weeks, consumers
were behaving exactly as they had before the announcements.
For each of the three commodities, the variation in weekly
purchases is large, with seasonal purchasing peaks 2-10 times
higher than seasonal troughs. However, about three-quarters
of this variation can be explained by trend and seasonality,
and, to a lesser extent, retail prices. Having explained most
of the variation in weekly purchases with these factors, large
and persistent market impacts related to BSE announcements could
be easily detected. In fact, such effects were not detected.
Other food safety announcements could meet with different responses.
But, similar responses could reasonably be anticipated in situations
where consumers’ prior awareness of food safety risks
is comparable and where risks have similar characteristics.
How Was the Study Conducted?
The study used purchase records from the ACNielsen Homescan
panel (1998-2004) to create nationally representative weekly
estimates of U.S. retail purchases. The ACNielsen Homescan panel
is a nationally representative panel of households that scan
their grocery purchases at home, thereby providing information
on each food item purchased. For each item purchased, the data
set shows the date of purchase, expenditure, quantity, and attributes
of each food (finely differentiating food products). Thus, the
researchers were able to construct high-frequency purchase data
that were suitable for testing for the presence of even short-lived
impacts.
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