By Stu Ellis, University of Illinois
Shame on you! Shame on you for throwing away good money and for causing your neighbors to suffer lower commodity prices because of your actions. How can you sleep at night? You are planting all of those biotech crops to make your job easier and they are causing lower market prices. What were you thinking about, anyway?
When your neighbor reads this you'd better duck and then accuse him of doing the same thing to you. In fact, the cultivation of biotech crops around the world has impacted every farmer because of their efficiency, and efficiency leads to lower market prices. At least that is the 5 second version of an in-depth study by economists who researched the impact of biotech crops on market prices. The group included agricultural economists in the United Kingdom, University of Tennessee, Iowa State University and the Washington-based International Food Policy Research Institute. Their findings may initially put you on the defensive until you think about it for a while and understand their conclusions.
Biotech crop traits were planted on approximately 300 million acres of global cropland in 2008, with the driving concern being the food security, biodiversity and the agricultural environment. It has provided farmers with productivity improvements through a combination of yield improvements and cost reductions. But the economists say it is a challenge to assess the impact of biotechnology on market prices. They examined the production impacts of biotech crops and quantified the impact of biotech traits on prices of corn, beans, canola and other crops produced in North and South America and the European Union.
For insect resistant corn, the economists looked at the success of Bt traits to control European corn borers and corn rootworm, with a yield increase from 5 percent in the U.S. to 24 percent in the Philippines. Based on global production, such traits have added 47 million tons of corn production.
For herbicide tolerant soybeans, the primary impact is to provide less expensive weed control, but better weed control has resulted in higher soybean yields, with a 30 percent yield increase in Romania alone. The practice has allowed a shorter production cycle in South America, where some farmers have been able to expand their production to an additional soybean crop that has added 53 million tons in Argentina and Paraguay.
For herbicide tolerant corn, the benefit has been easier weed control with a resulting higher yield in some parts of the world. Argentina increased its corn yield by 9 percent and the Philippines added 15 percent to yields.
The economists computed all of the yield increases, the amount of acreage planted to biotech seed, and the impact on the crop if the biotech seeds had not been used. The latter indicated a 2.5 percent drop in corn yields in the U.S., for example. Then the economists applied the increased production against pricing models to determine how much of an impact there were on prices as a result of the more abundant crops. They found that if biotech traits were no longer used, prices would increase by 5.8 percent for corn, 9.6 percent for soybeans, 2.7 percent for wheat, 8.9 percent for soybean meal, and 5.2 percent for soybean oil. They totaled that up to an additional $25 billion in crop income, if biotech traits were no longer used, with $9.82 billion for corn and $5.24 billion for wheat.
The economists say the downward world price represents a loss of income to the farmer and a gain to consumers. But they also say there has been a $33.8 billion gain for farmers from 1996 to 2006 because of the adoption of biotechnology. If the biotech gains had been taken away, global corn production would have dropped 1.2 percent and soybean production would have dropped 2 percent. Without the biotech crops, the economists estimate an additional 6 million acres would be brought into production, but total production would still fall by 14 million tons along with world grain trade. With the lower production, the economists calculate that the cost of global consumption of the non-biotech cops would increase by $20 billion.
In the U.S. corn production would fall by 3 percent without the biotech traits, or 424 million bushels. The economists believe that soybean production would increase because of increased plantings from the resulting competitive relationship between corn and soybeans. That would mean an additional 88 million bushels of soybean production.
The increase in production efficiency with the use of seed with biotech traits to provide insect resistance or herbicide tolerance has resulted in more bushels being available to the market. More production means a lower price in most markets. The result of growing use of biotech crops has lead to a $25 billion dollar loss to farmers over the past 10 years, but a gain for consumers. Even without the use of biotech seeds, production would have increased, but not enough to replace the loss.