Nonfarm concerns with farm-level adoption of genetically engineered (GE) crops has prompted the U.S. Department of Agriculture's Economic Research Service (ERS) to strive to try to get an accurate read on benefits and costs for the technology to farmers.

ERS researcher Jorge Fernandez-Cornejo reported that his just-completed study showed the most widely and rapidly adopted bioengineered crops in the U.S. are those with herbicide-tolerant traits. Herbicide-tolerant soybeans became available to farmers in limited quantities in 1996. Use expanded to about 17% of the soybean acreage in 1997, 56% in 1999 and 68% in 2001. Herbicide-tolerant cotton has expanded from 10% of cotton acreage in 1997 to 42% in 1999 and reached 56% in 2001.

In contrast, the adoption of herbicide-tolerant corn has been much slower and has yet to exceed 10%, noted Fernandez-Cornejo.

Crops containing the gene from a soil bacterium, Bacillus thuringiensis (Bt), are the only insect-resistant GE crops commercially available as of 2002. Bt has been built into several crops, including corn and cotton.

After its introduction in 1996, Bt corn grew to 8% of U.S. corn acreage in 1997 and 26% in 1999 but fell to 19% in 2000-01. Bt cotton expanded rapidly from 15% of U.S. cotton acreage in 1997 to 32% in 1999 and about 37% in 2001.

According to Fernandez-Cornejo, the growth rate of Bt crop adoption will vary over time, both in a positive and a negative direction, mainly as a function of the infestation levels of Bt target pests.

The growth rate for Bt corn adoption is likely to be low since adoption has already occurred where Bt protection can do the most good, he said. On the other hand, Fernandez-Cornejo said, adoption of herbicide-tolerant crops will likely continue to grow, particularly for cotton, unless there is a radical change in U.S. consumer sentiment.

The adoption of herbicide-tolerant soybeans has been found to be invariant to farm size, as expected since GE crop technologies only require changes in variable inputs (such as seeds), which are completely divisible, said Fernandez-Cornejo. However, the adoption of herbicide-tolerant and Bt corn has been found to be positively related to farm size.

For herbicide-tolerant corn, this appears due to its low overall adoption rate, which implies that adopters were largely innovators and other early adopters. As other researchers have observed, adoption is more responsive to farm size at the innovator stage, and this effect generally diminishes as diffusion increases, said Fernandez-Cornejo. The observed relationship between Bt corn adoption and farm size may have arisen because Bt corn targets a pest problem that is generally most severe in areas where operations growing corn are largest, he noted.

GE crop adoption also has been found to be positively and significantly related to operator education, experience or both. More educated or experienced operators are more likely to understand that the greatest economic benefits of new technologies accrue to early adopters, said Fernandez-Cornejo.

The use of contracting (marketing or production) is positively associated with GE crop adoption in most cases, possibly reflecting the greater importance placed on risk management by adopting farms, the researcher said. Contracting, he said, also ensures a market for GE crops, reducing price and any market access risk that could result from uncertain consumer acceptance.

Farm-level impacts of GE crop adoption have been found to vary by crop and technology.

The adoption of herbicide-tolerant corn has been found to improve farm net returns among specialized corn farms (deriving more than 50% of the value of production from corn), said Fernandez-Cornejo. The limited acreage on which herbicide-tolerant corn has been used is likely acreage with the greatest comparative advantage for this technology, he said.

The positive financial impact of adoption may also be due to seed companies setting low premiums for herbicide-tolerant corn relative to conventional varieties in an attempt to expand market share, noted Fernandez-Cornejo.

The adoption of herbicide-tolerant soybeans did not have a significant effect on net farm returns in either 1997 or 1998, according to USDA data. However, Fernandez-Cornejo said this was not to say that GE crops have not been profitable for many adopting farms.

As a recent study comparing weed control programs found, the use of herbicide-tolerant soybeans was quite profitable for some farms, but the profitability depended specifically on the types of weed pressures faced on the farm and on other factors. This suggests, he said, that other factors may be driving adoption for some farms, such as the simplicity and flexibility of herbicide-tolerant soybeans, which allow growers to use one product instead of several herbicides to control a wide range of both broadleaf and grass weeds and make harvest "easier and faster." Fernandez-Cornejo noted that management ease and farmer time-savings are not reflected in the standard calculations of "net returns to farming."

Adoption of Bt cotton had a positive effect on net returns among cotton farms, but adoption of Bt corn had a negative impact on net returns among specialized corn farms, said Fernandez-Cornejo. This marginal analysis, he said, suggests that Bt corn may have been used on some acreage where the value of protections against the European corn borer (ECB) was lower than the Bt seed premium.

Because pest infestations differ across the country (for example, ECB infestations are more frequent and severe in the western Corn Belt), the economic benefits of Bt corn are likely to be greatest where target pest pressures are most severe, he said.

Fernandez-Cornejo pointed out that some farmers may also have made poor forecasts of infestation levels, corn prices and yield losses due to infestations. A reduction in the Bt corn adoption rate between 1999 and 2000-01, from 25 to 19%, may be due in part to producers learning where this technology can be used profitably.

On the environmental side, the USDA analysis showed an overall reduction in pesticide use related to the increased adoption of GE crops (Bt cotton, herbicide-tolerant corn, cotton and soybeans). The decline in pesticide use was estimated to be 19.1 million acre-treatments, or 6.2% of total treatments (1997).

Total active ingredients also declined by about 2.5 million pounds. The pounds of active ingredients applied to soybeans increased slightly, as glyphosate was substituted for other synthetic herbicides. However, this substitution displaced other synthetic herbicides that are at least three times as toxic to humans and that persist in the environment nearly twice as long as glyphosate.

Fernandez-Cornejo noted that his findings should be interpreted carefully, especially since the impact studies are based on just two years (1997 and 1998) of survey data. The extent and impacts of GE crops vary with several factors, most notably annual pest infestations, seed premiums, prices of alternative pest control programs and any premiums paid for segregated crops. These factors, he said, will continue to change over time as technology, marketing strategies for GE versus conventional crops and consumer perceptions evolve.

Finally, the most widely touted farmer benefits of herbicide-tolerant seeds -- that it is just plain easy to use and less management intensive -- do not get captured by the standard measurement of net returns to management and own labor, he said, noting that future surveys and analyses will correct for this weakness in the standard economic yardstick. n

Link to the ERS article -- Adoption of Bioengineered Crops, by Jorge Fernandez-Cornejo and William D. McBride -- ERS Agricultural Economic Report No. AER810. 67 pp, May 2002

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