Production, pricing, and incentives in the fetal bovine serum market

Fetal bovine serum (FBS) is a valuable byproduct of cattle production, critical for vaccines, cell therapy, and other cell growth applications. Despite its value, cattle producers are not given incentives to increase FBS supply. This paper describes the FBS production process and investigates the economic and institutional barriers to increasing FBS production. The marketing channels and production process are described by interviews with industry employees. Opinions from these interviews led us to the hypothesis that concerns about the public's reaction to the animal welfare implications in the production of FBS are the primary cause for the market inefficiency of FBS. Production budgets show revenue potential and industry costs. To identify existing market incentives, least squares mean regression are used on replacement and slaughter cow auction price data. Results from the budget analysis show a positive net revenue from a pregnant cow, yet the results of the least squares regression show no significant incentives to produce a pregnant cow. This suggests that pregnant cows are not incentivized, regardless of the positive returns available, which aligns with interview responses that state animal welfare concerns stop purposeful production of pregnant cows for FBS production. While pregnant cows receive slightly higher prices, the premiums pale in comparison to the potential value of FBS. The budgets show potential profits of $908 per cow that is found to have a 23-kg fetus, but a maximum of $56.47 increase in premium for a cow that is further along in the pregnancy (7-9 months pregnant vs. 1-3 months pregnant) and would produce more serum. The current lack of incentives could be problematic for the future of FBS supply based on current short-term trends in the cattle markets.