The Market Potential of a New High-Oleic Soybean: An Ex Ante Analysis

Abstract

This paper develops a model of heterogeneous consumer preferences to analyze the market potential of a second-generation, genetically modified, high-oleic soybean developed at the University of Nebraska. The paper identifies the factors that will determine the effectiveness of the new technology and the implications for domestic producer welfare if the new technology were licensed exclusively to producers in the United States. Analytical results show that the market and welfare effects of the introduction of high-oleic soybeans are determined by the relative prices of products utilizing the new soybeans as an input in their production process, the distribution of consumer preferences, and the benefits consumers perceive from the new product. The lower the prices of products using the new soybeans and/or the greater the value consumers place on the new product attribute, the greater the market acceptance of the new high-oleic soybeans, the market share of the United States in the world market for soybeans, and the domestic producer welfare gains from the introduction of the new technology. When the value consumers place on the new product attribute is sufficiently high, the introduction of high-oleic soybeans is shown to drive the conventional soybeans out of the market, attract consumers of substitute products, and confer considerable benefits to all domestic soybean producers.