Why Do Farmers Plant Genetically Engineered Crops and Who Profits From Them?

Whether measured as crop yield per acre or average output per farm worker, U.S. agricultural productivity is among the highest in the world and it has increased over time. In 2004, total agricultural productivity was 2.7 times higher than it was in 1948 (1). Nonetheless, farming is at best a low profit margin endeavor, and profitability often depends on factors outside the farmer’s control, e.g., weather, pest infestation, and market fluctuations. However, expected profitability plays a large role in decisions by farmers to adopt new innovations.

GE varieties can have potential positive economic impacts, but certain factors should be kept in mind. (a) The nature and performance of GE varieties change over time and in different locations. (b) No single method of assessing net economic impact of new crops is sufficient to accurately predict outcomes. (c) The length of time over which particular varieties are used influences assessments (2). Economic studies should also take into account impacts on labor, health, environment, equity, and poverty. Consideration of all these latter factors distinguishes GE crops from other modern varieties because risk assessments and the potential impacts of GE crops relative to these factors play larger roles in acceptance of GE crops than for those created by traditional practices.

One important factor for farmers in considering crop profitability is yield. Although current GE crops are not engineered for higher yield per se, increased yields have been observed. This higher yield has been demonstrated in numerous studies and surveys of HT corn, Bt cotton, and Bt corn (table 3 in Reference 3). Data analysis of the USDA Economic Research Service’s (ERS) Agricultural and Resource Management Surveys of 2001 to 2003 showed that most farmers, e.g., 79% of those choosing Bt corn, adopted GE varieties to increase yields through improved pest control (figure 7 in Reference 3). Other reasons included time savings and ease of agricultural practices.

In determining the profitability of Bt corn engineered for European corn borer protection, it is important to note that farmers must decide whether to purchase the more expensive Bt corn seeds before they know what the extent of insect damage to their crop will be. In years when corn borer infestations are high, farmers make a profit primarily because of increased yields. When insect pressure is low, yield losses to insect damage are slight and seed costs exceed profits (4, 5). Aside from yield considerations, another economic benefit of Bt corn is reduction of mycotoxins present in grain because of infection by toxin-producing fungi. The most prevalent impacts are due to aflatoxin, with lesser effects from Fusarium mycotoxins, or fumonisins, and deoxynivalenol (DON) also called vomitoxin because it induces vomiting and hemolysis of erythrocytes in animals. These compounds are known to cause a variety of short- and long-term health effects. Bt reduces insect damage on kernels, thus reducing infection by mycotoxigenic fungi (6). Economic losses are due to market rejection of contaminated grain, export market losses, and testing costs. A literature review in 2007 concluded that economic benefits of Bt maize in reducing the mycotoxins, fumonisin and aflatoxin, were ∼$22 M and $14 M, respectively (7). Mycotoxins are a significant health issue where unprocessed corn is a dietary staple (8), and thus, health benefits from mycotoxin reduction are particularly important in developing countries. When considering exports to these countries, the health situation could be improved by stricter mycotoxin standards; however, these standards would have negative economic impacts on major corn-exporting countries, i.e., the United States, China, and Argentina (7).

In the European Union, GE crops are planted on a limited area. Of European Union member countries, Spain grew the largest acreage (250,000 acres, 0.1 million hectares) in 2007 (9). In fact, Spain has grown commercial Bt maize for more than nine years; 15% of their total acreage is composed of Bt varieties and in regions with high corn borer infestation it can reach60%(10). Economic analyses were performed using data from face-to-face surveys with Spanish farmers in the three leading Bt corn-growing regions that accounted for∼90% of cultivated GE corn in 2006. A statistically significant (P < 0.001) 11.8% yield increase was observed in one region, Zaragoza, during three growing seasons, with lesser increases observed in the other two regions. Yield variation in these latter areas could be due to use of unadapted Bt varieties and to variations in pest pressure, but it is not due to Bt resistance development in corn borer populations (10). In one region, total revenues minus variable costs for Bt farmers versus conventional farmers were as high as ∼$69 per acre per year higher, which compensates for the price premium on seeds. Similar yield advantages were observed in South Africa (11). The Spanish surveys revealed that most farmers adopted Bt corn to lower corn borer damage; the main reason for not adopting was reluctance to change.

Seven other European Union countries grow smaller acreages of GE crops than Spain: the Czech Republic, France, Portugal, Germany, Slovakia, Romania, and Poland (9). In 2007 the Czech Republic grew ∼1.23 million acres (0.5 million hectares) of GE maize; additional income for Bt maize in the many areas of high infestation was as high as 2430 Czech koruny ($145) per acre (12). Similar analyses for HT sugar beet showed that, taking into account treatment of HT sugar beet and additional seed costs, farmers could still achieve a 1620 koruny ($96) additional profit per acre.

Studies on economic impacts on farmers in developing countries have also been conducted. Onestudy in India showed increases in yield and revenue with Bt cotton compared with non-Bt cotton using farmer plot rather than trial plot data, although there was some variation among subregions (13) and a few areas did not benefit (14). Yield increases in India improved when coupled with IPM practices (see “Can Use of Genetically Engineered Crops or Organic Farming Lead to More Sustainable Agricultural Production Systems? “) (15). A study of farm-level preproduction trials in China showed that compared with households cultivating non-GE rice, small and poor-farm households, without the aid of experimental station technicians, realized both higher crop yields and reduced pesticide use after adopting GE rice varieties (16). In some studies, farmers in developing countries realized greater yield benefits from such crops than in developed countries. It was suggested that this result was caused by small-scale farmers suffering larger pest-related yield losses because they do not have the technical or economic resources to manage pest infestations (14, 17). To realize the greatest economic benefits in developing countries, it is important, when selecting GE targets, to consider local production conditions, consumption preferences, appropriateness of local varieties, adequacy of biosafety regulatory policies, and possible impacts of marketing issues and consumer attitudes (18).

References:

1. Fuglie KO, Heisey PW. 2007. Economic returns to public agricultural research. USDA Econ. Res. Serv., Agric. Econ. Brief No. 10

2. Smale M, Zambrano P, Falck-Zepeda J, Gruere G. 2006. Parables: Applied economics literature about the impact of genetically engineered crop varieties in developing economies. EPT Discuss. Pap. 158. Int. Food Policy Res. Inst.,Washington, DC

3. Fernandez-Cornejo J, Caswell M. 2006. The first decade of genetically engineered crops in the United States. USDA Econ. Res. Serv., Econ. Inf. Bull. No. 11. http://www.ers.usda.gov/publications/eib11/eib11.pdf. Last accessed 2011-12-12. PDF

4. Lauer J,Wedberg J. 1999. Grain yield of initial Bt corn hybrid introductions to farmers in the Northern Corn Belt. J. Prod. Agric. 12:373–76

5. Witkowski JF, Wedberg JL, Steffey KL, Sloderbeck PE, Siegfried BD, et al. 2008. Bt corn and the European Corn Borer. Long-Term Success through Resistance Management. Univ. Minn. WW07055. http://www.extension.umn.edu/distribution/cropsystems/DC7055.html. Last accessed 2011-12-12. PDF

6. Bakan B, Melcion D, Richard-Molard D, Cahagnier B. 2002. Fungal growth and Fusarium mycotoxin content in isogenic traditional maize and genetically modified maize grown in France and Spain. J. Agric. Food Chem. 50:728–31

7. Wu F. 2006. Mycotoxin reduction in Bt corn: potential economic, health, and regulatory impacts. Transgenic Res. 15:277–89

8. Wu F. 2007. Bt corn and impact on mycotoxins. CAB Rev.: Perspect. Agric. Vet. Sci. Nutr. Nat. Resour. 2:8

9. James C. 2007. Global status of commercialized biotech/GM crops: 2007. ISAAA Briefs No. 37
Comprehensive review of current status of acreage of genetically engineered crops grown worldwide.

10. Gómez-Barbero M, Berbel J, Rodríguez-Cerezo E. 2008. Bt corn in Spain – the performance of the EU’s first GM crop. Nat. Biotechnol. 26:384–86

11. Gouse M, Pray C, Kirsten J, Schimmelpfenning D. 2005. A GM subsistence crop in Africa: the case of Bt white maize in South Africa. Int. J. Biotechnol. 7:84–94

12. Gate2Biotech. 2008. Economy of transgenic crops evaluated. http://www.gate2biotech.com/economy-of-transgenic-crops-evaluated/. Last accessed 2011-11-26. PDF

13. Morse S, Bennett RM, Ismael Y. 2005. Genetically modified insect resistance in cotton: some farm level economic impacts in India. Crop Prot. 24:433–40

14. Bennett R, Kambhampati U, Morse S, Ismael Y. 2006. Farm-level economic performance of GM cotton in Maharashtra India. Rev. Agric. Econ. 28:59–71

15. Bambawale OM, Singh A, Sharma OP, Bhosle BB, Lavekar RC, et al. 2004. Performance of Bt cotton (MECH-162) under Integrated Pest Management in farmers’ participatory field trial in Nanded district, Central India. Curr. Sci. 86:1626–33

16. Huang J, Hu R, Rozelle S, Pray C. 2005. Insect-resistant GM rice in farmers’ fields: Assessing productivity and health effects in China. Science 308:688–90

17. Qaim M, Zilberman D. 2003. Yield effects of genetically modified crops in developing countries. Science 299:900–2

18. Edmeades S, Smale M. 2006. A trait-based model of the potential demand for a genetically engineered food crop in a developing economy. Agric. Econ. 35:351–61

Updated 2/16/12