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3 Farm-Level Economic Impacts
Pages 135-186

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From page 135...
... The chapter concludes by examining the economic implica tions of gene flow from GE crops to non-GE crops and weedy relatives. ECONOMIC IMPACTS ON ADOPTERS OF GENETICALLY ENGINEERED CROPS GE crops have affected the economic status of adopters in several ways.
From page 136...
...  THE IMPACT OF GE CROPS ON FARM SUSTAINABILITY BOX 3-1 Measuring Impacts To evaluate the economic impacts of GE crops on adopters and non adopters, the committee relied on the results of empirical analyses of farmer surveys and market data. Studies were peer reviewed, but the research approach and methods varied considerably with each study's purposes and data.
From page 137...
...  FARM-LEVEL ECONOMIC IMPACTS However, farmer surveys give a more accurate picture of the total farmlevel economic effects of GE-crop adoption in terms of the secondary behavioral changes resulting from adoption (e.g., adoption of conservation tillage and changes in the timing of pesticide application)
From page 138...
... For example, it is generally recognized that the adoption of Bt corn for European corn borer (Ostrinia nubilalis) control resulted in annual average yield gains across the United States of 5–10 percent (Falck-Zepeda et al., 2000b; Carpenter et al., 2002; Fernandez-Cornejo and McBride, 2002; Naseem and Pray, 2004; Fernandez-Cornejo and Li, 2005)
From page 139...
... . Likewise, in regions where European corn borer is an occasional pest, there was no indirect yield advantage from the use of Bt hybrids in comparison to nearisolines (Cox and Cherney, 2001; Baute et al., 2002; Ma and Subedi, 2005; Cox et al., 2009)
From page 140...
... Another Bt corn rootworm event, however, had superior control of western corn rootworm larvae in Iowa, Illinois, and Indiana (Harrington, 2006) ; this suggests that distinct Bt events from dif ferent seed companies may differ somewhat in corn rootworm control as they did initially in corn borer control.
From page 141...
... crops generally may have less spatial and temporal variability because weeds are ubiq uitous and cause yield losses in most situations. For example, the use of HR soybean with timely glyphosate application almost always achieves yield gains relative to production without weed control (Tharp and Kells, 1999; Corrigan and Harvey, 2000; Mulugeta and Boerboom, 2000; Wiesbrook et al., 2001; Knežević et al., 2003a, 2003b; Dalley et al., 2004; Scursoni et al., 2006; Bradley et al., 2007; Bradley and Sweets, 2008)
From page 142...
... . Yield Lag and Yield Drag Despite properties that result in indirect yield benefits, some farmers observed a yield reduction when they first adopted HR varieties (Raymer and Grey, 2003)
From page 143...
... . Similarly, early empirical studies of Bt corn hybrids indicated a potential yield lag, as indicated by the lower yield of Bt hybrids than of new elite hybrids (Lauer and Wedberg, 1999; Cox and Cherney, 2001)
From page 144...
... . Empirical studies have not documented that the use of Bt corn for corn borer provides a yield benefit in the presence of drought (Traore et al., 2000; Dillehay et al., 2004; Ma et al., 2005)
From page 145...
... In 2007, Monsanto developed a submission to the USDA Federal Crop Insurance Corporation for a new crop-insurance endorsement for corn that contains three traits: a Bt toxin that controls corn borer, one that controls corn rootworm, and herbicide resistance.9 The submission proposed a premium-rate discount for those hybrids based on several thousand on-farm field trials conducted over several years in the Corn Belt states of Illinois, Indiana, Iowa, and Minnesota. The trials demonstrated the yield and yield-risk reduction advantages of the hybrids compared with conventional or single-trait HR hybrids and showed that the current premium rates were no longer actuarially appropriate.
From page 146...
... In recent decades, private-sector research and development costs have risen with the application of new technologies. Much of the increase in seed prices paid by U.S.
From page 147...
... SOURCE: Fernandez-Cornejo, 2004; USDA-NASS, 2000, 2005, 2009a. 60 50 2007 $ per acre 40 30 20 10 0 1994 1996 1998 2000 2002 2004 2006 2008 Year Corn Cotton Soybean FIGURE 3-2 Estimated average seed costs for U.S.
From page 148...
... 150 120 90 60 30 0 2001 2002 2003 2004 2005 2006 2007 2008 Year FIGURE 3-4 Real (inflation-adjusted) corn seed prices paid by U.S.
From page 149...
... Some early investigations found evidence of a decline in pesticide use as adoption of GE crops increases (Heimlich et al., 2000; Hubbell et al., 2000; Carpenter et al., 2001; Marra et al., 2002)
From page 150...
... Changes in insecticide use for treatment of European corn borer were minimal because many farmers accepted yield losses rather than incur the expense and uncertain results of chemical control. A survey of corn growers in Iowa and Minnesota determined that only 30 and 17 percent, respectively, had managed European corn borer with insecticides during any season in the early 1990s because chemical use was not always profitable and timely application was difficult owing to the unpredictability of pest outbreaks (Rice and Ostlie, 1997)
From page 151...
... The indirect cost differences are particularly important for HR crops because of the complementary relationship between their adoption and conservation tillage. That is, GE-crop adoption increased the probability of adoption of conservation tillage, and conservation tillage increased the probability of higher adoption of GE crops (for a more detailed discussion of conserva tion tillage, see Chapter 2)
From page 152...
... Management Requirements and Nonpecuniary Benefits Many of the commercially available GE products have consistently been shown to be profitable for U.S. farmers.
From page 153...
...  FARM-LEVEL ECONOMIC IMPACTS Pesticide Use Profit Number of Number of Maximum Maximum Minimum Minimum estimates estimates Mean Mean (count) (sprays/acre)
From page 154...
... . HR soybean was adopted rapidly despite showing no statistically sig nificant advantage in net returns over conventional soybean in most studies, but adoption of such strategies as integrated pest management has been rather slow even though it has explicit economic and environmental advantages (Fernandez-Cornejo and McBride, 2002; Smith, 2002)
From page 155...
... Studies have also found that farmers value the convenience and reduced labor requirements of Bt cotton above and beyond the pecuniary benefits. Because conventional cotton faces heavy pest pressure, IR varieties decrease the time demands of spraying, and this leads to a 29-percent reduction in household labor requirements (Gardner and Nelson, 2007)
From page 156...
... Corn Rootworm Survey: n = 367 Time saving 0.588 0.997 1.390 23.86 Equipment saving 0.400 0.724 0.969 17.51 Operator and worker safety 0.429 0.991 1.623 17.12 Environmental safety 0.208 0.787 1.565 10.88 More consistent stand 0.800 1.773 2.862 30.63 3.000 5.272 6.222 Sum of the parts National Soybean Survey: n = 113 Operator and worker safety 0.913 1.660 2.026 20.97 Environmental safety 1.304 1.961 2.201 24.89 Total convenience 3.333 4.158 3.690 54.14 5.000 7.779 6.026 Sum of parts North Carolina Herbicide-Resistant Crop Survey: n = 52 Operator and worker safety 2.361 2.923 2.783 23.91 Environmental safety 1.666 2.720 2.660 20.45 Total convenience 5.000 7.793 7.818 55.63 10.000 13.437 10.612 Sum of parts Roundup Ready® Flex Cotton Survey: n = 72 Operator and worker safety 1.875 3.056 4.061 23.90 Environmental safety 0.958 2.592 3.382 18.06 Total convenience 5.000 11.180 15.441 58.04 10.000 16.828 17.383 Sum of parts aRescaled to conform the magnitude of the overall value, which is asked as a separate question. SOURCE: Marra and Piggott, 2006.
From page 157...
... noted no effect of adoption of Bt or HR corn on household labor. The lack of a significant relationship supports the observation that most farmers accepted yield losses rather than incur the expense and uncertainty of chemical control for European corn borer before the introduction of Bt corn (Fernandez-Cornejo et al., 2002a)
From page 158...
... The empirical models calculate the preinnovation and postinnovation prices and quantities in an international market setting by using information on adoption rates, crop yields, costs, technology fees, and seed premiums. The framework also takes into account the adoption of biotechnology outside the United States.
From page 159...
... The distribution of benefits varies by crop and technology because the economic incentives to farmers (crop prices and production costs) , the payments to technology providers and seed firms, and the effect of the technology on world crop prices are different for each crop and technology.
From page 160...
... Cotton 0.65 Falck-Zepeda et al., 2000b Bt cotton United States, other producing countriesa Cotton 1.11 Price et al., 2003 HR cotton United States Cotton 3.4 Price et al., 2003 HR soybean United States Soybean 0.17 Price et al., 2003 HR soybean United States Soybean 1.0 Moschini et al., 2000 HR soybean United States, South America Soybean 2.2 Moschini et al., 2000 HR soybean World Soybean 2.6 Moschini et al., 2000 HR soybean United States, Argentina Soybean 1.96c Qaim and Traxler, 2005 HR soybean and canola, Bt cornb United States, Canada, Argentina Oilseeds 2.9 Anderson and Jackson, 2005 HR soybean and canola, Bt cornb United States, Canada, Argentina Corn 1.94 Anderson and Jackson, 2005 HR soybean and canola, Bt cornb World Oilseeds 3.08 Anderson and Jackson, 2005 HR soybean and canola, Bt cornb World Corn 2.09 Anderson and Jackson, 2005 Bt corn, HR soybean United States Canada Oilseeds 1.5 Fernandez-Cornejo et al., 2007 Bt corn, HR soybean United States Canada Corn 2.5 Fernandez-Cornejo et al., 2007 Bt corn, HR soybean World Oilseeds 3.87 Fernandez-Cornejo et al., 2007 aAssumes that countries other than the United States would have a 50-percent efficiency of technology transfer. Adoption is for 1997.
From page 161...
... TABLE 3-5 Adoption of Genetically Engineered Crops and Their Distribution Share of Total Benefits (%) Total Benefits Study Year (�� million)
From page 162...
... (2009) found that average yield of soybean -- the crop with the highest rate of adoption of GE cultivars -- grew more slowly than that of cotton after the introduction of GE varieties, the introduction of GE soybean contributed to the expansion of harvested soybean area worldwide, which grew by nearly 30 percent from 1997 to 2007 (FAO, 2008)
From page 163...
... That supply shift caused downward pressure in soybean prices and had an adverse effect on growers in the United States, although the price effect was overwhelmed by the effect of increased global demand for soybean during the period 2006–2008. Many of the analyses summarized in Tables 3-4 and 3-5 are based on partial-equilibrium models (in which the price of one good is examined and all other prices are held constant)
From page 164...
... But there is a paucity of studies of the welfare effects of genetic-engineering technology in recent years, when adoption has increased globally, and this is an important subject for future research. ECONOMIC IMPACTS ON OTHER PRODUCERS Livestock Producers Much of the soybean and corn produced in the United States is fed to livestock (Figures 3-6 and 3-7)
From page 165...
...  FARM-LEVEL ECONOMIC IMPACTS Ending s toc k s 18 Ex ports Projections Ethanol 16 FSI less et hanol 14 Feed and res idual B illion bus hels 12 10 8 6 4 Figure 3-7 2 0 1980-1981 1989-1990 1998-1999 2007-2008 2016-2017 Year FIGURE 3-6 U.S. corn use.
From page 166...
... This is another subject on which future research is desirable. Producers of Non-Genetically Engineered Crops The adoption of GE crops affects production costs for non-GE farmers in several key ways.
From page 167...
... We have observed in Chapter 2 that GE crops can affect production of non-GE crops favorably or unfavorably through externalities associated with pest-control activities. To the extent that genetic-engineering technology successfully reduces pest pressure on a field, farmers of adjacent or nearby fields planted with non-GE crops may benefit from reductions in costs for pest control associated with reductions in regional pest popula tions (Sexton et al., 2007)
From page 168...
... A massive field trial of crop rotation and herbicide application practices in Britain has provided evidence that the production systems used for HR canola can improve weed control in cereal crops planted in rotation (Sweet et al., 2004)
From page 169...
... ; however, for farmers, consumers, and food distributors, the actual and perceived consequences of gene flow from GE to non-GE crops are greater than the consequences of gene flow from non-GE to GE crops. Gene flow between GE and non-GE crops occurs via three routes: cross-pollination between GE and non-GE plants from different fields (as discussed in "Gene Flow and Genetically Engineered Crops" in Chap ter 2)
From page 170...
... . Because of adventitious gene flow, the organic process does not necessarily result in a non-GE product when it goes to market; whether adventitious presence is discovered depends on if testing for GE material is conducted.
From page 171...
... The difficulty of maintaining the coexistence of GE and non-GE crops increases as the tolerance for the adventitious presence of GE traits in non-GE products becomes lower and the adventitious presence of GE traits in non-GE products becomes easier to detect even at very low levels due to technological advances. The situation has a drastically greater impact when GE traits not approved for human consumption contaminate non-GE products.
From page 172...
... . As explained above, because some level of gene flow between GE and non-GE crops is difficult to prevent, the adventitious presence of GE material has been detected in non-GE products, including certified organic products.
From page 173...
... . When volunteer crops acquire a GE trait for herbicide resistance via unintended gene flow, weed-management costs for a grower may increase and potential crop yield may decline if the crop planted the fol lowing season is also resistant to glyphosate (Owen and Zelaya, 2005)
From page 174...
... For GE farmers, the general increase in yield, reduction in some input costs, improvement in pest control, increase in personal safety, and time-management benefits have generally outweighed the additional costs of GE seed. The use of HR crops has not greatly increased yields, but it has generally improved weed control, especially on farms where substantial weed resistance to the specific herbicide to which the HR crop is resistant has not developed, and it has improved farmers' incomes by saving time thus facilitating more off-farm work or providing more management time on the farm.
From page 175...
... More research on the economic effects of GE-crop adoption on non–GE-crop producers would also be beneficial. Examples include the costs and benefits of shifts in pest management for non-GE producers due to the adoption of GE crops, the value of market opportunities afforded to organic farmers by defining their products as non-GE crops, the economic impacts of GE adoption on livestock producers, and the costs to farmers, marketers, and processors of adventitious presence or contamination from approved or unapproved GE traits and crops into restricted markets.
From page 176...
... 2002. Use of transgenic Bacillus thuringiensis Berliner corn hybrids to determine the direct economic impact of the European corn borer (Lepidoptera: Crambidae)
From page 177...
... 2002. Comparison of Bacillus thuringiensis corn hybrids and insecticide-treated isolines exposed to bivoltine European corn borer (Lepidoptera: Crambidae)
From page 178...
... 2009. Stacked corn hybrids show inconsistent yield and economic responses in New York.
From page 179...
... seedlots in Western Canada with genetically engineered herbi cide resistance traits. Agronomy Journal 95(5)
From page 180...
... 2002. Effect of planting date, residual herbicide, and postemergence application timing on weed control and grain yield in glyphosate-tolerant corn (Zea mays)
From page 181...
... 2005b. Genetically modified crops: Their market and welfare impacts.
From page 182...
... 2005. Evaluation of detection methods for genetically modified traits in genotypes resistant to European corn borer and herbi cides.
From page 183...
... 2003. Economic analysis of planting dates to manage European corn borer (Lepidoptera: Crambidae)
From page 184...
... 1997. European corn borer management in field corn: A survey of perceptions and practices in Iowa and Minnesota.
From page 185...
... 1999. Influence of herbicide application rate, timing, and inter row cultivation on weed control and corn (Zea mays)
From page 186...
... 2005. Southwestern corn borer damage and aflatoxin accumulation in conventional and transgenic corn hybrids.


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