Economics: What have Economics: What have Transgenics Meant for U.S. Transgenics Meant for U.S. Farmers? Farmers? Paul D. Mitchell Paul D. Mitchell Agricultural and Applied Agricultural and Applied Economics Economics University of Wisconsin- University of Wisconsin- Madison Madison ASA-CSSA-SSSA International ASA-CSSA-SSSA International Annual Meeting Annual Meeting November 13, 2006 November 13, 2006 Indianapolis, IN USA Indianapolis, IN USA
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Economics: What have Transgenics Meant for U.S. Farmers? Paul D. Mitchell Agricultural and Applied Economics University of Wisconsin-Madison ASA-CSSA-SSSA.
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Economics: What have Economics: What have Transgenics Meant for U.S. Transgenics Meant for U.S.
Farmers? Farmers? Paul D. MitchellPaul D. Mitchell
Agricultural and Applied Agricultural and Applied EconomicsEconomics
University of Wisconsin-MadisonUniversity of Wisconsin-Madison
ASA-CSSA-SSSA International ASA-CSSA-SSSA International Annual MeetingAnnual Meeting
November 13, 2006November 13, 2006
Indianapolis, IN USAIndianapolis, IN USA
Economic analyses of the Economic analyses of the benefits of transgenic cropsbenefits of transgenic crops
Transgenic adoption in 2006Transgenic adoption in 2006 Are transgenics valuable?Are transgenics valuable? Why do farmers value transgenics?Why do farmers value transgenics? How valuable are the non-monetary How valuable are the non-monetary
benefits of transgenics?benefits of transgenics? Who captures the value of transgenics?Who captures the value of transgenics? Remaining issues economists can Remaining issues economists can
addressaddress
Adoption of TransgenicsAdoption of Transgenics
More rapid than comparable More rapid than comparable technology changestechnology changes
USDA NASS Acreage Report data bestUSDA NASS Acreage Report data best By state, by crop, by type: herbicide By state, by crop, by type: herbicide
tolerant, insect resistant, stacked, and tolerant, insect resistant, stacked, and all biotech: www.nass.usda.govall biotech: www.nass.usda.gov
Go to Go to PublicationsPublications, then , then AcreageAcreage
StateState CornCorn SoybeanSoybeanss
CottonCotton
ARAR 9292 9494
ILIL 5555 8787
ININ 4040 9292
IAIA 6464 9191
KSKS 6868 8585
MIMI 4444 8181
MNMN 7373 8888
MSMS 9696 9898
MOMO 5959 9393 9797
NENE 7676 9090
NDND 8383 9090
OHOH 2626 8282
SDSD 8686 9393
TXTX 7777 7070
WIWI 5050 8585
USUS 6161 8989 8383
StateState CottonCotton
ALAL 9595
ARAR 9494
CACA 5757
GAGA 9696
LALA 9494
MSMS 9898
MOMO 9797
NCNC 9898
TNTN 9393
TXTX 7070
USUS 8383
2006 percent 2006 percent planted acres planted acres planted with planted with transgenic seedtransgenic seed
StatStatee
CornCorn SoybeanSoybeanss
CottoCottonn
ARAR 00 -2-2
ILIL 1919 66
ININ 1414 33
IAIA 44 00
KSKS 55 -5-5
MIMI 44 55
MNMN 77 55
MSMS 00 22
MOMO 44 44 22
NENE 77 -1-1
NDND 88 11
OHOH 88 55
SDSD 33 -2-2
TXTX 55 77
WIWI 44 11
StateState CottonCotton
ALAL 33
ARAR -2-2
CACA 44
GAGA 11
LALA -1-1
MSMS 22
MOMO 22
NCNC 33
TNTN -3-3
TXTX 77
Additive percentage Additive percentage increase in increase in transgenic planted transgenic planted acres from 2005 to acres from 2005 to 20062006
-10
-5
0
5
10
15
20
25
0 50 100 150
% transgenic 2005
% p
oin
ts i
ncr
ease
200
6
corn
soyb
cotn
fit
RR22 = 0.57 = 0.57
Cotton and soybeans have saturated market at 85%-Cotton and soybeans have saturated market at 85%-95%95%
Corn has more growth yet: IL and INCorn has more growth yet: IL and IN
Are transgenics valuable?Are transgenics valuable? Adoption data would seem to say YES!Adoption data would seem to say YES! Yield Trial and Survey DataYield Trial and Survey Data
Fernandez-Cornejo and Caswell (2006) Fernandez-Cornejo and Caswell (2006) summarize 29 studies of both typessummarize 29 studies of both types
HT crops yield: mixed with more positiveHT crops yield: mixed with more positive HT crops returns: split 50:50 HT crops returns: split 50:50
Bt corn increase net returns, depending Bt corn increase net returns, depending onon pest pressure, yield potential, tech fee, pricepest pressure, yield potential, tech fee, price Simple tool based on historical ECB dataSimple tool based on historical ECB data
Yield effect from isoline trials in IowaYield effect from isoline trials in Iowa Control for ECB tunneling, still have 1.65% Control for ECB tunneling, still have 1.65%
yield increase for Bt even if no ECB damageyield increase for Bt even if no ECB damage Source:1Source:1stst generation ECB control, secondary generation ECB control, secondary
pest control, differential genetics?pest control, differential genetics?
Expected % Yield Loss due to ECB by WI Crop Districts
3.7%3.0%
3.4%
4.7%4.6% 3.7%
5.4% 5.1% 4.8%
Why do farmers value Why do farmers value transgenics?transgenics?
Fernandez-Cornejo and Caswell (2006) Fernandez-Cornejo and Caswell (2006) based on ARMS 2001-2003 surveysbased on ARMS 2001-2003 surveys
HT and Bt cottonHT and Bt cotton Increased yields: 59-67%Increased yields: 59-67% Save mngmt time/easier practices: 15-Save mngmt time/easier practices: 15-
How valuable are the non-How valuable are the non-monetary benefits of monetary benefits of
transgenics?transgenics? Marra and Piggott (2006)Marra and Piggott (2006)
Decompose willingness to pay for trangenics Decompose willingness to pay for trangenics crops (above tech fee) into its componentscrops (above tech fee) into its components
US RR soybeans, North Carolina HT cropsUS RR soybeans, North Carolina HT crops Convenience 53-58%Convenience 53-58% Operator/worker safety 21-22%Operator/worker safety 21-22% Environmental safety 20-25%Environmental safety 20-25%
CRW Bt CornCRW Bt Corn Improved standability 34%Improved standability 34% Time savings; Equipment savings; Time savings; Equipment savings;
Who gets the value of Who gets the value of transgenics?transgenics?
Price et al. (2003) analyze Price et al. (2003) analyze World Social SurplusWorld Social Surplus If willing to pay $15/ac for Bt corn, but actually If willing to pay $15/ac for Bt corn, but actually
pay $10/ac, have $5 of surpluspay $10/ac, have $5 of surplus Comparable version for seller’s tooComparable version for seller’s too Transgenics decrease crop prices, change seed Transgenics decrease crop prices, change seed
demands, affect world consumers and farmersdemands, affect world consumers and farmers Price et al. build system to analyze these issues, Price et al. build system to analyze these issues,
plus compare their results to others’plus compare their results to others’ Three crops: Bt cotton, RR cotton, RR soybeansThree crops: Bt cotton, RR cotton, RR soybeans
Price et al. (2003)Price et al. (2003) Bt Cotton: $212-300 million in 1997Bt Cotton: $212-300 million in 1997
US farmers 29-39% (small yield effect on US farmers 29-39% (small yield effect on cotton price and pesticide costs drop)cotton price and pesticide costs drop)
US consumers: 14-17%US consumers: 14-17% Monsanto 21-29%Monsanto 21-29% Delta and Pine Land 4-6%Delta and Pine Land 4-6% Rest of World farmers and consumers 19-22%Rest of World farmers and consumers 19-22% Big losers: ROW farmers lose $135-235 millionBig losers: ROW farmers lose $135-235 million Big winners: ROW consumers $181-291 millionBig winners: ROW consumers $181-291 million Decreased world cotton price 0.5-0.8 ¢/lbDecreased world cotton price 0.5-0.8 ¢/lb
Price et al. (2003)Price et al. (2003) RR Cotton: $231 million in 1997RR Cotton: $231 million in 1997
US farmers 4% (high tech fee and seed US farmers 4% (high tech fee and seed price and lower cotton price)price and lower cotton price)
US consumers 57% (Big Winners)US consumers 57% (Big Winners) Monsanto 5%Monsanto 5% Delta and Pine Land 2%Delta and Pine Land 2% Rest of World farmers and consumers Rest of World farmers and consumers
33%33% Big losers: ROW farmers lose $733 millionBig losers: ROW farmers lose $733 million Big winners: ROW consumers $809 millionBig winners: ROW consumers $809 million Decreased world cotton price 2.5 ¢/lbDecreased world cotton price 2.5 ¢/lb
Price et al. (2003)Price et al. (2003) RR Soybeans: $308 million in 1997RR Soybeans: $308 million in 1997
US farmers 20% (small yield increase, small US farmers 20% (small yield increase, small herbicide savings, lower price)herbicide savings, lower price)
US consumers 5%US consumers 5% Monsanto 28% (not including Roundup Monsanto 28% (not including Roundup
sales)sales) Seed companies 40% (minus licensing fees)Seed companies 40% (minus licensing fees) Rest of World farmers and consumers 6%Rest of World farmers and consumers 6% Big winners: Seed companies & MonsantoBig winners: Seed companies & Monsanto Decreased world soybean price 1.2 ¢/buDecreased world soybean price 1.2 ¢/bu
Bt corn: My guessBt corn: My guess Bt corn has a yield increasing effect, Bt corn has a yield increasing effect,
which suppresses prices somewhich suppresses prices some Bt corn tech fees transfer some, but Bt corn tech fees transfer some, but
not all, Bt value to companiesnot all, Bt value to companies Companies supply Bt competitivelyCompanies supply Bt competitively Not lots insecticide used beforeNot lots insecticide used before Winners: consumers and farmersWinners: consumers and farmers Losers: ROW farmers (price effect)Losers: ROW farmers (price effect) Companies: get some surplus, but not Companies: get some surplus, but not
lotslots
SummarySummary Adoption saturation in soybeans and cotton, Adoption saturation in soybeans and cotton,
corn continuing to increasecorn continuing to increase Adoption data and many analyses show Adoption data and many analyses show
transgenics are valuable: how much?transgenics are valuable: how much? Source of value is more than yield/profit: Source of value is more than yield/profit:
time/management convenience, safetytime/management convenience, safety Who gets benefits varies among cropsWho gets benefits varies among crops
Raise three that economists can play Raise three that economists can play role inrole in
Transgenics and pesticide useTransgenics and pesticide use Resistance management and Resistance management and
mitigationmitigation Transgenics and IPMTransgenics and IPM
Transgenics and Pesticide Transgenics and Pesticide UseUse
Do transgenics reduce pesticide use?Do transgenics reduce pesticide use? Economic models using experimental Economic models using experimental
data or econometric analyses of survey data or econometric analyses of survey datadata
Fernandez-Cornejo and Caswell (2006)Fernandez-Cornejo and Caswell (2006) Debated, but generally find (small) decreaseDebated, but generally find (small) decrease
Lots potential for transgenics to reduce Lots potential for transgenics to reduce pesticide usepesticide use RW Bt corn and 2006 IL and IN adoptionRW Bt corn and 2006 IL and IN adoption Insect Resistant SoybeansInsect Resistant Soybeans Why Bt sweet corn and not Bt potatoes?Why Bt sweet corn and not Bt potatoes?
Resistance and TransgenicsResistance and Transgenics
When will resistance/field failures occur?When will resistance/field failures occur? Weed shifts due to RR systemWeed shifts due to RR system Roundup resistant mare’s tailRoundup resistant mare’s tail Expect more with long-term widespread Expect more with long-term widespread
useuse Secondary pest problems due to Bt cotton Secondary pest problems due to Bt cotton
without refuge in China (Wang et al. 2006)without refuge in China (Wang et al. 2006) Bt crops in USA—no resistance yet!Bt crops in USA—no resistance yet!
Resistance ManagementResistance Management Why no weed resistance management?Why no weed resistance management?
Use economic incentives to promote?Use economic incentives to promote? Is the compliance assurance program Is the compliance assurance program
(CAP) sufficient for IRM in Bt crops?(CAP) sufficient for IRM in Bt crops? Do we need something different/stronger?Do we need something different/stronger?
With multiple pests, multiple toxins, With multiple pests, multiple toxins, multiple crops, does refuge still work?multiple crops, does refuge still work?
Economics of resistance mitigation Economics of resistance mitigation plansplans Ecological-Economic model to determineEcological-Economic model to determine
IPM and transgenic cropsIPM and transgenic crops
Why no IPM for transgenic crops?Why no IPM for transgenic crops? Bt and RR crops over 10 years, no IPM!Bt and RR crops over 10 years, no IPM! NC IPM Grant: IPM for RW Bt corn t control NC IPM Grant: IPM for RW Bt corn t control
rotation resistant Western CRWrotation resistant Western CRW Regional ECB population forecast to make Regional ECB population forecast to make
regional recommendations for Bt useregional recommendations for Bt use Economics of regional/areawide pest Economics of regional/areawide pest
management via transgenicsmanagement via transgenics Regional pest suppression via Bt cotton in Regional pest suppression via Bt cotton in
First Decade of Genetically Engineered First Decade of Genetically Engineered Crops in the U.S. (F-C and Caswell 2006)Crops in the U.S. (F-C and Caswell 2006)
Size and Distribution of Market Benefits Size and Distribution of Market Benefits From Adopting Biotech Crops (Price et al. From Adopting Biotech Crops (Price et al. 2003)2003)
Regulating Agricultural Biotechnology: Regulating Agricultural Biotechnology: Economics and Policy, Just et al. 2006Economics and Policy, Just et al. 2006 Marra and Piggott, Wang et al. Marra and Piggott, Wang et al.
Questions?Questions?
Paul D. MitchellPaul D. Mitchell
Agricultural and Applied EconomicsAgricultural and Applied Economics
University of Wisconsin-MadisonUniversity of Wisconsin-Madison