Farmers' valuation of incentives to produce genetically modified organism-free milk: Insights from a discrete choice experiment in Germany

This paper investigates farmers' willingness to participate in a genetically modified organism (GMO)-free milk production scheme offered by some German dairy companies. The empirical analysis is based upon discrete choice experiments with 151 dairy farmers from 2 regions in Germany. A conditional logit estimation reveals a strong positive effect of the price premium on offer. Reliable feed monitoring and free technical support increase the likelihood of scheme adoption, the latter however only in farms that have been receiving technical support in other fields. By contrast, any interference with the entrepreneurial autonomy of farmers, through pre-arranged feed procurement or prescriptive advice on the part of the dairy company, lowers acceptance probabilities. Farmers' attitudes toward cultivation of genetically modified soy, their assessment of the market potential of GMO-free milk and future feed prices were found to be significant determinants of adoption, as are farmer age, educational status, and current feeding regimens. Respondents requested on average a mark-up of 0.80 eurocents per kilogram of milk to accept a contract. Comparison of the estimates for the 2 regions suggests that farmers in northern Germany are, on average, more likely to convert to genetically modified-free production; however, farmers in the south are, ceteris paribus, more responsive to an increase in the price premium offered. A latent class model reveals significant differences in the valuation of scheme attributes between 2 latent classes of adopters and nonadopters.