THE experimental hormone that makes cows produce more milk may prove expensive for Uncle Sam. By stepping up milk production, bovine somatotropin (BST) could depress prices and require the federal government to pay more in price supports under the Food and Agriculture Security Act of 1985, predicts a pair of agricultural economists.
BST, a naturally occurring hormone which can now be produced in the laboratory, is under review by the Food and Drug Administration. In addition to the drug's effect on the public health, legislators should be concerned about its potential to effect the national economy, say Russell Gum of the University of Arizona, and William Martin of the University of Illinois.
Drs. Gum and Martin have been developing a series of economic models to explore the impact of biotechnology on the national economy. They take into account such factors as impact on related commodities and raw materials, imports and exports, federal price supports, and changes in patterns of use. They presented their findings last month at the annual meeting of the American Association for the Advancement of Science.
Consumers always benefit from biotechnology because of reduced costs, they found. But biotechnology holds a more checkered promise for producers: The first who turn to biotechnology enjoy substantial short-term gains, because their costs drop while the market price for their products remain relatively stable. But as more producers turn to biotechnology, lower costs force down prices. In the absence of federal price supports, producers eventually earn less money than they would have if they had never turned to biotechnology in the first place.
With federal price supports, milk producers stand to gain $3 billion in income, while consumers would save $1.7 billion. But the cost to the federal government would be $23 billion.
``For every dollar you expend, you get back 20 cents,'' said Gum. ``If we had BST, the government programs would have to change drastically to avoid having huge government removal.''
WITHOUT federal supports, milk producers would lose $59 million, while consumers would save $1.6 billion. ``Without the farm program, producers lose slightly, while consumers gain,'' he said.
Recently, small dairy producers across the country have been urging the banning of BST, saying that it will wipe out the family farm. But should BST be banned, the effects might ripple far beyond the dairy industry, says John W. McClelland, an economist with the United States Department of Agriculture.
``If BST doesn't make it through the regulatory process, there are very large companies that are going to lose hundreds of millions of dollars.'' As a result, funding might ``dry up'' for other biotechnology projects, says Dr. McClelland.