A couple of
days, one chanced upon a tweet by
PETA on animal milk and its impact as against the use of plant milk. Implied in
the tweet, given the way animals are milked, it would make sense to shift to
plant based milk. Without doubt, it sounds quite great in theory. It is well
documented on the treatment of animals as they are milked in the industrial
farms. In the earlier days, the animals were milked at home. Normally, there
would be few cows/buffaloes that would be reared. These would be milked as
against the demand for the product. There would of course some amount that was
milked for self-use. Yet with passage of time, the demand for milk increased
while the agrarian families usually engaged in rearing cattle declined. There was
a shift to the urban centres owing to industrialization. The demand for milk in
urban centres had to be met by relatively lesser number of agrarian families
owning dairy farms thus necessitating the transportation of milk. This invariably
led to improvements in milk transport and ensuring milk remained fresh for
longer period of times. This led to the growth of the dairy industry.
These dairies
could no longer work on a smaller scale. For these dairies to succeed and
sustain, they needed to operate on scale. Furthermore, unlike the villages
wherein the transportation cost and preservation costs were almost negligible,
the dairies operating at industrial level needed to incur these costs on a
higher scale so that they can reach wider markets. Further, these dairies
needed to extract higher amount of milk per cow or buffalo. In the absence of
the higher yield per unit of cattle, it would have been difficult to sustain
the industry. it was essentially seeking to reduce average costs by expanding
the output. Given good amount of costs were fixed in nature, higher output
reducing average costs would generate economies of scale. In the movement towards
labour saving and increased yield, they did not hesitate to use machines to be
attached to udders to extract greater milk. Use of antibiotics and other
medical products to increase the yield and ostensibly protecting the cow from
illness is not unknown. These antibiotics are known to get mixed with the milk
and result in undesirable consequences in the humans when they consume the
milk. The dangers of factory modelled dairy farms have been well documented
over the years.
In recent years,
there has been a movement or perhaps a fad of consuming plant based milk.
Usually soya or almond milk is preferred and there are many users of the same. Till
date, however, it has been a niche product. The tweet referred above talks
about the need to support the almond or soya milk while making a shift from
dairy based animal milk. Yet this likely to be a mirage at least in the near
future. The answer has nothing to do with the relatively lobbies at work. It is
hardly to do with the ostensibly strong lobby of the dairy farmers as against
the soya or almond farmers. The answer lies in sheer economics. It is the
relative economics that goes against the plant milk.
Organizations
like PETA might seek to glamourize plant milk with all its ostensible health
benefits, yet it remains a premium product. It is hardly something that the
masses would want to consume on a regular basis. The world, it must be
remembered has to be six billion plus people all over. The population is not
homogenous geographically, economically or demographically. They possess
different elasticity of demand with respect to price, income and substitute
goods. Implied is a rise in price of plant extracted milk would reduce its
quantity demand significantly given the relative price elasticity of demand. The
plant based milk do not come cheap. It must be borne in mind the supply of plant
based milk is very limited in nature. The scope for expansion of this industry
to a scale wherein it can become the dominant form of milk consumption in the
world is extremely limited in the present times.
In economics,
there is something called a price and substitution effect. Consumers or
household consume a basket of goods. Let us assume they are consuming animal
based milk with the other goods. Unless the plant based milk is offered on the
same price or at a lower price there would be little incentive for the
households to shift. Assuming a complete shift to plant based milk at the
current stage would only increase the price of milk which would lower the
consumption of other items in the basket partly due to the increased price of
milk and partly because of the inability of the income levels to keep pace with
the rise in prices. If plant milk has to substitute animal milk at this stage
or at least in the immediate future it is not just the decline in prices that
is essential but an increase in the incomes of the household to match with the
prices of the plant extracted milk.
The above
analysis is predicated on the assumption that the demand can be fulfilled. Yet it
ignores the supply side. The current state of things as they stand, apparently,
soya or almond milk occupy a very niche slot thus the supply too would be very
small. Furthermore, given the segment is health consciousness and price
inelastic relatively speaking, the producers can afford to go the extra mile
and prevent industrial practices from encroaching, again relatively speaking.
Plants which offer the possibility of extraction of milk again cannot be grown
everywhere. Therefore, the supply constraints are bound to exist. Assuming they
can be grown, what is total plant acreage that is essential for these plants to
be grown to meet the demands of the six billion plus population that exists on earth?
Moreover, is it possible to grow without trade-offs essential to produce at an
industrial scale without compromising on the price. The product would never be
a mass product until the price falls below the price of the milk produced by
animals. To produce at this price, one needs to factor in the industrial scale
of production that is essential. In other words, economies of scale is a must. The
scale indubitably necessitates the use of same chemicals, fertilizers,
pesticides or other products that would prevent disease in plants, improve
fertility in soil at least temporarily while increasing the yield per plant and
per hectare. Without doubt, within a few years, these would again face the
situation as demonstrated by the after effects of the Green Revolution in
India.
What
organizations like PETA or other advocates of vegan assume is the existence of
ceteris paribus. The assumption is erroneous in the real world. There are
trade-offs that are imposed as one shifts from the niche based to the mass
based. Producing plant based milk for may be a million consumers is very
different from producing for six billion or so people. The dynamics are
different. There is either reach or richness. Both might not exist
simultaneously. The personalisation of animal based milk is possible if there
is a willingness to pay higher prices.
Yet this would
be niche market and not a mass market. The organizations and advocacy for vegan
products or for that matter, organic products are predicated on Veblen goods
theory. These are essentially goods consumed by the rich for signalling their
extravagant tastes to the rest of the world. Veblen called them the leisure
class who has keep manifesting signals indicating their ‘superiority’ of tastes
and preferences. These tastes get manifested through consumption of these goods
which can be deemed esoteric by the normal crowd. There is a need for sense of differentiation
between the masses and elite and as Veblen would perhaps term it, the leisure
class would shift to these vegan products to signal their differentiation and message
of elitism.
Therefore, while
sound in theory, attractive proposition for onlookers, the reality check is the
animal milk offers the price advantage and the supply advantage to the masses
as opposed to the elites. If, in the distant future, the terms were to shift
towards plant based milk, the elite would come up with another proposition,
their new Veblen good. Therefore, the sheer economics drives the consumption of
goods rather than any analysis that is independent of these individual
subjective economic calculations.
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