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They distort the prices of both soy products and meat, but not by equal proportions - the reduction depends on the distribution of cost components. Say it take
by tfehring 8y ago
They distort the prices of both soy products and meat, but not by equal proportions - the reduction depends on the distribution of cost components.
Say it takes 50 cents' worth of soy and 50 cents' worth of other expenses to produce $1 worth of beef, and it takes 90 cents' worth of soy and 10 cents' worth of other expenses to produce $1 worth of meat substitute. If the effective price of soy falls by 10% due to subsidies (and other costs remain the same), the cost of beef will fall by 5%, while the cost of meat substitute will fall by 9%.
- danans 8y agoThe economics are skewed in the opposite direction, though. It takes many times more soy, water, and energy to produce $1 of beef vs $1 of substitute, because most of the soy you feed the cow is lost to heat and non-edible cow parts. Once R&D costs of the meat substitute are accounted for, the marginal cost of production is lower. So at the same or slightly lower retail price than meat, an equivalent substitute's profit margin will be huge compared to meat. That's what these firms are after. And in the long run, industrial scale meat production will take a big hit.