NSF Center for Integrated Pest Management Technical Bulletin An Ex

NSF Center for Integrated Pest Management Technical Bulletin 103 An Ex Ante Analysis of the Benefits from the Adoption of Monsanto’s Corn Rootworm Resistant Varietal Technology -YieldGard® Rootworm NSF Center for Integrated Pest Management Technical Bulletin 103. 68pp Published 15 July, 2002 Raleigh, NC An Ex Ante Analysis of the Benefits from the Adoption of Monsanto’s Corn Rootworm Resistant Varietal Technology -- YieldGard® Rootworm Julian M. Alston (University of California-Davis) Jeffrey Hyde (The Pennsylvania State University) Michele C. Marra (North Carolina State University) May 17, 2002 The authors are Professor, Department of Agricultural and Resource Economics and Associate Director of the UC Agricultural Issues Center, University of California-Davis, Davis, CA; Assistant Professor of Agricultural Economics, The Pennsylvania State University, University Park, PA; and Professor of Agricultural and Resource Economics, North Carolina State University, Raleigh, NC, respectively. Copies of this publication may be obtained from the NSF Center for IPM, 1017 Main Campus Dr, Suite 1100, Raleigh, NC 27606 (phone 919-513-1432) 2 An Ex Ante Analysis of the Benefits from the Adoption of Monsanto’s Corn Rootworm Resistant Varietal Technology⎯YieldGard® Rootworm Julian M. Alston, Jeffrey Hyde, and Michele C. Marra Abstract This study examined the potential economic impacts in the United States of the commercial adoption of Monsanto’s corn rootworm (CRW) resistant varietal technology, YieldGard® Rootworm. We estimated that if the technology had been made available in the year 2000 at a price that would equate per acre costs to those for insecticide-based corn rootworm control, and adopted on 100 percent of acres treated for corn rootworm in that year, the total benefits would have been $460 million. This benefit includes $171 million to the technology developer and seed companies, $231 million to farmers from yield gains, and a further $58 million to farmers from reduced risk and time savings, and other non-pecuniary benefits associated with reduced use of insecticides. This is a one-year benefit with 100 percent adoption. Our survey results suggest that initial adoption might be as low as 30 percent, which means that the first-year benefits might be only one-third of the value implied by 100 percent adoption. Different pricing assumptions would mostly change the distribution of the benefits between farmers and others, so long as the pricing did not influence the adoption rate as well. Benefits over time would reflect changing adoption patterns and evolving insect resistance. Further analysis would include the effects of any refuge requirements implemented to slow the development of resistance, when such requirements are known. ® Registered trademark of Monsanto Technologies, LLC 3 1. Introduction The purpose of this study is to estimate the likely economic impacts in the United States of the commercial adoption of Monsanto’s corn rootworm (CRW) resistant varietal technology, YieldGard Rootworm. This involves two steps. The first step is to evaluate the farm-level economic impacts of the adoption of YieldGard Rootworm varieties. The second is to translate those farm-level impacts into an estimate of the economy-wide impacts. The scope of such a study could be very broad. Adoption responses are central to the analysis of new technologies. These responses are driven primarily by relative profitability, which, in the case of seed technologies such as Monsanto’s YieldGard Rootworm, depends on the price of the new seed, its performance, and on the availability, nature, and relative price of close substitutes, including other CRW-resistant corn varieties, or conventional CRW control technologies. As well as determining adoption, the availability and relative price of the various alternatives are critical determinants of the benefits from any particular technological package at the level of both the individual farm and the nation. With a view to focusing on the central aspects, while keeping the work manageable, we adopted a counterfactual approach (Alston, Norton and Pardey, 1998). In this approach, rather than looking forward in time and attempting to predict the relevant variables, we look backward in time and compare hypothetical (counterfactual) alternatives against the actual past outcomes. This approach means that many of the relevant variables for the analysis—that would have to be predicted in a forward-looking analysis—are known. Specifically, we set out to estimate what would have been the 4 impacts in a specific recent past year—i.e., 2000—if Monsanto’s CRW-resistant YieldGard Rootworm technology had been available and was priced such that the variable cost per acre would be the same as for a representative conventional (nontransgenic) CRW control technology. The assumption of a seed price premium set so that the variable cost per acre for the new technology equals that of the next-best alternative technology implies that YieldGard Rootworm would have been adopted on all of the acres that were treated for corn rootworm in that year. It also implies that the benefits from any resulting yield gains (and other on-farm benefits) would have been captured entirely by farmers.1 The actual distribution of the benefits from this new technology among farmers, consumers of corn, and suppliers of CRW control technologies (including seed, agricultural chemical, and biotechnology companies) will depend on the nature of competition and the underlying market supply and demand conditions, which will govern the pricing and adoption of the technological alternatives. The main implication of the pricing of the technology is for the distribution of the benefits rather than for the total benefits, and the pricing assumption we have adopted is both plausible and useful for obtaining a measure of farmer benefits that is a reasonable proxy for “total” benefits.2 We explore the sensitivity of the results to alternative pricing assumptions in section 4. Monsanto might be able to charge a slightly higher premium, but this would be constrained by competition from suppliers of conventional and transgenic alternatives. Moreover, the firms supplying the next-best alternative technology might be expected to drop their price in response to such competition from Monsanto, such that farmer benefits were even greater. Hence, this particular pricing assumption is less extreme than it might appear at first blush. In a companion study we documented the evidence in the literature on the farm-level benefits from U.S. adoption of transgenic crop technologies (Marra and Alston, 2001) and related pieces that extend that work to include the rest of the world (Marra, 2001; Marra, Pardey, and Alston 2002). That companion study provides a set of benchmarks for the consideration of the results of the work undertaken here, as well as guidance to related literature and methodological approaches. 2 1 5 The remainder of this report is structured as follows. In section 2 we begin with a brief discussion of the nature of the economic problem caused by corn rootworm, including relevant information about the biology of the pest, its prevalence, the extent of the economic damage it causes (including both control costs and crop losses), and its implications for production practices (including rotations and the use of insecticides, and some of the burdens these impose on farmers and their neighbors). Section 3 lays out an approach to understanding and quantifying the economic determinants of the likely future patterns of adoption of the new transgenic CRW technology, and for translating those patterns into estimates of farm-level and national benefits. Section 4 presents the actual methodology used in this study and the quantitative results on farm-level benefits. Along with best-bet estimates we provide some simple sensitivity analysis to show how the benefits from having adopted depend on key variables in the analysis. The measures of benefits in section 4 include only pecuniary benefits associated with improvements in farm productivity. They do not include some non-pecuniary benefits perceived by farmers, associated with the convenience aspects and use of non-chemical technologies. Measures of these non-pecuniary benefits, based on a survey of corn growers, are presented in section 5. Section 6 summarizes results and concludes the report. 2. Nature and Economic Importance of Corn Rootworm Corn rootworm (Diabrotica spp.) causes extensive economic damage to corn in the United States. Populations of the western corn rootworm (D. virgifera virgifera Le Conte) and the northern corn rootworm (D. barberi Smith and Lawrence) together are estimated to result in annual yield losses and control costs that exceed $1 billion (Wright, 6 Meinke and Jarvi, 1999 and Mitchell, Gray and Steffey, 2002).3 The larvae hatch in the spring and feed on corn roots for several weeks. The damage to the roots can result in stunted growth of the corn plant, lodging, and eventual yield losses. The adults emerge in mid- to late summer after the three larval stages (instars) and the non-feeding pupal stage that occur in the soil. The female adult corn rootworms feed for about two weeks before laying their eggs. They feed primarily on corn silk, pollen, leaves, and kernels of exposed ear tips. They then lay their eggs to overwinter in the soil. Dense populations of feeding adults can interfere with pollination and, therefore, cause some yield loss, although most of the damage is caused by the root feeding of the larval stages (Wright, Meinke and Jarvi, 1999). The timing of egg hatch, as well as the lengths of the larval and pupal stages, are temperature-dependent. The larval (the root feeding) stage is longer in cooler temperatures. For example, in a constant temperature of 64.4 degrees, the larval and pupal stages of western corn rootworm in Nebraska average a total of about 44 days, while at 75.2 degrees, the average falls to about 27 days (Wright, Meinke and Jarvi, 1999). In general, corn rootworms cannot complete their life cycle without the food supplied by corn plants. Therefore, until recently they caused damage almost exclusively in areas where corn is grown at least two years in a row. A one-year corn rotation has been an effective control strategy. Lately, however, two opportunistic variants of corn 3 Two others, the southern corn rootworm (D. undecimpunctata howardi Barber) and the Mexican corn rootworm (D. virgifera zeae) cause economic damage to corn in areas south of the Corn Belt, but the total economic impact is minor compared to their northern counterparts because of the lower corn acreage in these areas. Areawide management programs for adult southern corn rootworm have been instituted in some areas (Trécé Inc., no date). YieldGard Rootworm will not be labeled for southern corn rootworm since it is not expected to provide adequate control in this sub-species with current levels of gene expression. 7 rootworm have developed. One variant of the western corn rootworm has developed the ability for females to lay their eggs in crops other than corn. So, in areas where corn/soybean rotations are common, eggs laid in soybean fields will hatch in corn fields in the next spring. This variant is called the rotation-resistant variant, or the soybean variant (SBV). It evolved in eastern Illinois and has since spread into Indiana, Michigan and Ohio. A variant of the northern corn rootworm has adapted in a different direction. While most corn rootworm eggs hatch in the following spring, in this extended diapause variant (EDV) some of the eggs hatch after two winters and, thus, the larval stages are able to feed on corn roots even in rotated corn. The EDV is most prevalent in eastern South Dakota, northeastern Nebraska, northwestern Iowa, and southeastern Minnesota. These variants have resulted in increasing yield losses and control costs in recent years (Mitchell, Gray and Steffey, 2002). Prevalence Among States and Agroecologies In consultation with Monsanto scientists and others, we identified a total of 11 distinct corn production regions (or sub-regions) in the United States, which we treat as separate agroecologies for the purposes of this analysis. The regions are roughly equivalent to the nine Farm Resource Regions as recently defined by the Economic Research Service of USDA (Heartland, Northern Crescent, Northern Great Plains, Prairie Gateway, Eastern Uplands, Southern Seaboard, Fruitful Rim, Basin and Range, and Mississippi Portal) with two additional sub-regions (hereafter considered to be separate regions) defined within the Heartland where the two corn rootworm variants, the extended diapause variant (the EDV region) and the soybean variant (the SBV region), are currently found. 8 Figure 1 shows the geographic boundaries and short descriptions of the 11 regions as defined in this study, and table 1 presents an overview of corn production in the different regions. Within all of the regions corn is grown either continuously or as an element of a crop rotation plan. In many regions corn rootworm is a significant problem only in continuous corn. In the Heartland region, in particular, however, corn rootworm damage can be a significant problem both in first-year corn (corn grown where a different crop was grown in the previous year) and in continuous corn (corn grown where corn was grown in the previous year). These observations are reflected in the figures for the percentages of continuous and first-year corn acreage treated for corn rootworm (table 1), and the treated acres of continuous and first-year corn (table 2).4 Current Practice: Control Agents, and Costs Control methods available currently to deal with the corn rootworm problem include (a) crop rotation (in all but the EDV and SBV regions), (b) soil-applied insecticides to control corn rootworm larvae, and (c) insecticide sprays to control corn rootworm adult beetles. The cost of crop rotation is the foregone profit from growing corn less the profit generated by the rotation crop. This “opportunity cost” will be a function of the relative prices and yields of the crops, relative production costs, which in corn is a function of corn rootworm pressure among other things, and government programs pertaining to each crop. The opportunity cost of rotation is assumed to be positive in many areas, given the large acreage of continuous corn each year. Multiplying the total acreage by the percentage treated for corn rootworm in table 1 yields the number of acres treated. In the figures for “treated acres” in table 2 some acres are counted more than once, reflecting the fact that some acres were treated more than once. 4 9 Table 2 presents an overview of conventional corn rootworm insecticide use by region in crop year 2000. The cost of soil-applied insecticides averaged about $12.43 per acre in material and application costs across the United States, but varied slightly among regions.5 Spraying for adult beetles—using tractor-driven spray rigs, aerial application, or chemigation—is not as prevalent as soil-applied larval control (Wright, Meinke and Jarvi, 1999). Total expenditure for corn rootworm-targeted insecticides topped $171 million in the 2000 crop year (Doane, 2000). Monsanto’s CRW Technology, Effectiveness and Costs Monsanto’s YieldGard Rootworm corn is expected to be priced so that the premium charged for the seed is equal to the average cost of CRW control in conventional corn. On the basis of variable costs of control, per acre, then, the grower should be just indifferent between the two control methods. Additional factors, both pecuniary and non-pecuniary in nature will affect the grower’s decision to adopt the technology, however. The YieldGard Rootworm technology is expected to provide a yield gain relative to conventional control, since its effectiveness does not depend on timing, weather, calibration of application equipment, or soil condition. This yield gain is estimated to range between 0 and 7 percent, depending on the insect pressure (Mitchell, 2002). In addition, the Monsanto technology will be safer and more convenient for operators and farm workers to handle relative to conventional chemical treatments. Savings in fixed and variable planting costs may occur, since the insecticide application The figures for CRW insecticide cost per acre in table 2 were from Doane (2000). They refer specifically to the cost of materials, but they are regarded as providing a reasonable measure of total insecticide costs including costs of both materials and application, since the insecticides were applied at planting. 5 10 equipment attached to the planter will no longer be needed. Without the planter-attached insecticide application equipment (and safety features required) larger seed hoppers can be installed. While their amortized purchase price will mean a slight increase in per acre capital cost, these larger hoppers will cut refilling time in half, which should result in significant time saving and, perhaps, an additional net benefit (Anderson, 2002). We discuss the benefits our sample of farmers place on time savings and convenience in more detail in section 5 of this report. The implementation of an insect resistance management (IRM) program involves some direct costs (e.g., the expense of planning, planting, and managing a refuge for corn rootworm). In addition, adoption of an IRM program would imply that the per acre benefits from adoption of the YieldGard Rootworm technology would only apply only to a fraction of the total area that would otherwise be counted as having adopted the technology, and these opportunity costs should be added to the direct costs associated with an IRM plan. These additional costs to corn producers, are not included at this time because exact IRM requirements are not defined. On the other hand, the purpose of any IRM program is to preserve the benefits from the new technology over a longer time period. An effective IRM program imposes costs in the short run in order to generate benefits in the longer run that are worth more than the short-run costs. If we were to consider the short-run costs, we ought also to take into account the long-run benefits, and to do this would require a full dynamic analysis of the impacts of the technology over time, factoring in the role of resistance. In the analysis below we look at the impacts of adoption of the technology in one year, in a static analysis, without any consideration of the impacts over time of either increasing 11 pest resistance or of IRM programs that might be introduced to reduce the losses resulting from resistance build-up. Until IRM plan elements are delineated, it is difficult to estimate the financial impact of IRM on growers in the static analysis. Even with knowledge of the plan elements, the full dynamic analysis would remain difficult. Competing Technology A profitable innovation provides impetus for both Monsanto and other companies to continue development of competing technologies. Several players currently involved in this industry are devoting resources toward developing improved transgenic technologies in corn and in many other crops. Progress is sure to continue at a rapid pace. At the same time, companies selling conventional control products will respond to their loss of market share by lowering their products’ prices or offering non-price incentives. We observed this response with the previous transgenic introductions, such as the Roundup Ready® technology and the first generation YieldGard® crops. These competitive responses will benefit all corn growers and, in some instances where products are labeled for other crops, other farmers, as well. It is difficult to predict, given these market forces, precisely how the total benefits from the YieldGard Rootworm technology will change over time, but easy to say with confidence that they will. 3. Evaluation Methodology—Key Concepts A key element in the evaluation of the benefits from the adoption of a particular varietal technology, such as Monsanto’s CRW-resistant varieties of corn (YieldGard Rootworm), is to estimate the adoption pattern—the numbers of acres (or percentages of total corn ® Registered trademarks of Monsanto Technologies, LLC 12 acres) annually planted to YieldGard Rootworm for each of a range of different agroecologies. Adoption Model In each relevant agroecology, the projected adoption paths can be defined as a function of estimates of the expected agroecology-specific yields and costs (and hence profitability) of growing YieldGard Rootworm relative to the next-best alternative corn variety.6 We assume that all of the farmers in agroecology i will adopt YieldGard Rootworm in year t if it is expected to be more profitable than the next-best alternative technology (with suitable allowance for a risk premium and for other differences including non-pecuniary aspects), which includes the option of not applying any treatment for CRW control. Algebraically, we can represent this behavior as: (1) ⎧1 if π it ≥ cit ⎫ ait = ⎨ ⎬ where π it = (1 − ρ it )( Pit ΔYit − Yit ΔPit − ΔVCt − ΔSit ) ⎩ 0 if π it < cit ⎭ where, in agroecology i in year t, • ait is a dichotomous indicator variable that is equal to 1 if farmers in agroecology i adopt YieldGard Rootworm in year t: • cit is the fixed cost per acre associated with YieldGard Rootworm technology;7 6 The estimated cost and profitability outcomes will depend, perhaps crucially, on the pricing of YieldGard Rootworm relative to alternative varieties, which may vary spatially or in other ways across different farmers and in future years as the pricing of alternatives adjusts. How to estimate (or usefully parameterize) this aspect will be discussed in some detail below, but for now we treat the seed price premiums as given. This could entail fixed benefits from enhancements to farmer and farm-worker safety associated with the use of the technology as well as costs of risk or information costs associated with learning about the new technology (which could decline with experience with YieldGard Rootworm technology, giving rise to progressive adoption at the level of the agroecology). In the case of YieldGard Rootworm the costs of risk are expected to be close to zero, since the estimated distribution of yield benefits has more probability mass associated only with benefits higher than the conventional CRW technology. Therefore, even though the variance of benefits is higher, it is higher only because there is a high probability of superior outcomes relative to the conventional CRW technology. 7 13 • πit is the total difference in variable profit in dollars per acre between YieldGard Rootworm technology and the next-best alternative corn technology; • ρit the fraction of YieldGard Rootworm corn acreage that must be planted to the nextbest alternative (i.e., non-transgenic corn or other crops) to provide a refuge for nonresistant corn rootworm (we assume ρit = ρ for all i and t); • Pit is the price per bushel of corn in year t, and ΔPit is the price discount per bushel for corn grown using YieldGard Rootworm technology, compared with conventional (non-transgenic) corn; • Yit is the average yield, and ΔYit is the difference in yield in bushels per acre between YieldGard Rootworm technology and the next-best alternative corn technology; • ΔVCit is the difference in variable cost of production, in dollars per acre, between YieldGard- Rootworm technology and the next-best alternative corn technology; • ΔSit is the difference in seed price per acre between YieldGard Rootworm technology and the next-best alternative (which might be constant across agroecologies within a year, or across years, or both). Total Farmer and Nonfarmer Benefits Total benefits are given by combining information on the per acre benefits from adoption and the implied number of acres on which adoption is profitable. The area planted to YieldGard Rootworm in agroecology i in year t, Ait, is equal to the value of the indicator variable (i.e., ait = 1 or 0), multiplied by the total relevant corn acreage in agroecology i in year t, TAit (corn acreage that was or would be treated for CRW). Thus, Ait = TAit if ait = 1, and Ait = 0 if ait = 0. The aggregate farmer benefit within agroecology i (FBit) is equal to the benefit from adoption times the total area of adoption: 14 (2) FBit = π it Ait = π it ait (⋅)TAit And, summing these benefits across all agroecologies in the nation, we can obtain a measure of the national aggregate farmer benefit from adoption in year t (FBt): (3) FBt = ∑i =1 FBit = ∑i =1π it ait (⋅)TAit I I The only missing element, for measuring the full net economic impact, is a measure of the profits of seed companies and Monsanto, given the pricing strategy that drove the assumed pattern of adoption. The gross, non-farmer benefit (GNFBt) can be estimated as the seed price premium per acre, ΔSit, multiplied by the number of relevant acres and added up across agroecologies. This is a gross rather than net benefit to the extent that, as well as the costs of license fees and royalties paid by seed companies (a transfer), it might have to cover additional marketing costs that may be incurred in developing and marketing the new seed relative to the benchmark alternative. (4) GNFBt = ∑i =1 ΔSit Ait = ∑i =1 ΔSit ait (⋅)TAit I I Summing the farmer and non-farmer benefits provides a measure of the total, national benefits from the adoption of the technology (TNBt = FBt + GNFBt), the elements of which have been derived under an assumption that there are no substantial effects on the total quantity of corn produced and thus on the price of corn. If the adoption of YieldGard Rootworm technology led to an increase in the total quantity of corn, and this caused a significant reduction in price of corn, there would be effects on the welfare of corn consumers (positive) as well as corn growers (negative effects on adopters and non-adopters alike, if we assume no segregation costs and no price discounts for transgenic varieties). These distributional effects would probably not mean 15 a significant change in the overall national impact, but the distributional story might be of interest nevertheless.8 Counterfactual Scenario As noted in the introduction, we adopted a strategy here of using data for a particular past year, 2000, to evaluate what would have been the benefits if YieldGard Rootworm technology had been commercially available in that year and was priced such that it would have been fully adopted by those farmers who treated their corn crop for CRW. Having made these assumptions, the adoption outcome was clearly defined: i.e., ait = 1 for every acre in every agroecology that was treated for CRW in year t, and hence Ait = TAit (i.e., it is assumed that every acre treated for CRW would have adopted the new technology). This measure of adoption may not exactly represent the total adoption because it leaves out those acres that were not treated using conventional CRW-control technology (because it was not profitable to do so) but would be treated using the new technology (because it is more profitable than the conventional technology). It also ignores any conventionally-treated acres on which the transgenic alternative would not be adopted under any circumstances. These two effects are small and potentially off-setting. To implement this approach and estimate the benefits from having the YieldGard Rootworm technology available for adoption (and adopted) in the year 2000, we assumed that the new technology would be priced such that the variable costs of pest control per This measure does not account for any impacts on the suppliers of agricultural chemicals and others whose business may be reduced as a consequence of farmers shifting to the new technology. If the industries in question could be regarded as competitive and only earning “normal” economic profits, then there would not be any net welfare impacts to consider. On the other hand, if the affected firms had been earning more than “normal” economic profit, such as they would if they were exercising some market power in a patented technology, then they would experience net economic losses as a result of farmers adopting the new technology, and these economic losses ought to be considered as well in the estimate of net national benefits. Moschini, Lapan, and Sobolevsky (1999) present a model of this kind of situation. We do not have access to any information or data that would enable us to begin to estimate such impacts. 8 16 acre, including the seed premium in the case of YieldGard Rootworm technology, would be equal between the new technology and a benchmark technology. That is, for the analysis, the premium for the transgenic seed was set equal to the additional variable costs per acre associated with insect control for the conventional technology (i.e., material and application costs). In addition, we assumed that there would not be any premium or discount for transgenic corn (ΔPit = 0) and that the fixed cost of adoption was negligible (cit = 0), and since we are setting aside the issue of an IRM plan, we assume away refuge requirements (i.e., ρit = 0 for all i and t). 4. Measurement of Benefits As described in section 2, we identified a total of 11 distinct corn production regions, which we would treat as different agroecologies for the purposes of this analysis. For each of the regions (and for each relevant cropping system within each region), we developed a partial budget for a representative acre of corn, comparing the new YieldGard Rootworm technology and a benchmark technology, assuming that the new technology would be priced to equate the variable costs of CRW control, per acre, between the two alternatives. Estimated Yield Impacts of Alternative Treatments Variation in the benefit per acre across regions is determined primarily by variation in the yield gain from using the new CRW-control technology relative to the conventional (non-transgenic) alternative. In turn, this depends on the yield potential of the crop in that region in conjunction with weather conditions and pest pressure (which in turn depends on weather, past cropping patterns within the same field, and the extent of 17 infestations in neighboring fields). A benefit of conducting a counterfactual analysis is that we can use observations of corn production in the field, under different treatments— conventional pest-management strategies and YieldGard Rootworm technology—, which reflect the actual situation in terms of yield potential, pest pressure, weather conditions, and so on. However, data are available only for root damage assessments, rather than corn yield, associated with the different treatments. An additional step is necessary to estimate the corn yield associated with the different degrees of root damage associated with the different treatments. Mitchell (2002) has studied the relationship between corn yields and root damage ratings, and he provided estimates of the yield differences corresponding to the different treatments, based on the observations of root damage associated with corn rootworm infestations. In addition we used information from Mitchell (2002) to estimate the untreated yield, which we do not observe directly for the regional aggregates. Actual yield is related to untreated yield according to the following equation: (5) Y = X(1 – p) + X p s Where Y is actual yield, X is untreated yield, p is the fraction of acres treated, and s is the yield increase factor (from Mitchell, 2002). So the first term on the right-hand side is the untreated yield times the fraction of acres left untreated. The second term is the untreated yield, adjusted upward for treatment, times the fraction of acres treated. Solving this equation for X gives an expression for the untreated yield. (6) X = Y/(1 – p(1 – s)) Equation (6) was applied to actual region-specific average yield data for the year 2000. We used yield data from ERS (1999-2000) for all regions except Mississippi Portal, 18 Fruitful Rim, and Basin and Range. For those regions, we calculated average yield by dividing total production in representative states by total acres harvested in those states. These data are from the NASS online database. The representative states for Mississippi Portal were LA, MS, TN, and AR. For Fruitful Rim, they were AZ, CA, WA, and ID. For Basin and Range, they were UT, CO, NV, MT, WY, and NM. Partial Budgeting Methodology We used a partial budgeting approach to estimate the per acre net benefits of YieldGard Rootworm corn, relative to corn sprayed for CRW, on a representative acre for each agroecological region. In partial budgeting, we are concerned only with the elements of the enterprise budget that may change given the change in control measures, which is the focus of the analysis. For the problem at hand, only yields, harvest costs, and (possibly) control costs were assumed to change. Yields may differ because the YieldGard Rootworm technology is more effective than chemical applications in controlling CRW. Harvest costs, $0.375 per bushel, are a direct function of yields (harvest cost based on enterprise budgets from several universities—e.g., Duffy and Smith, 2002). Finally, the seed price premium may differ from the regional average chemical control cost, so it is included.9 A spreadsheet model was developed for each of the 11 regions. The models account only for the variables analyzed in the partial budget approach. Each calculates net benefits of CRW control: insecticide application relative to no control, YieldGard Rootworm relative to no control, and YieldGard Rootworm relative to insecticide We assume that an explicit, separate “technology fee” as such would not be applied in the case of YieldGard Rootworm. Rather the equivalent of a technology fee would be incorporated in the seed price. Hence, we refer to the “seed premium” rather than the “technology fee.” 9 19 application. For each analysis, values were specified for a base (untreated) yield and price (USDA/ERS, 1999-2000). To calculate the yield, given CRW control, the base yield was adjusted upward by the average yield increase associated with the type of control (YieldGard Rootworm or chemical treatment). Mitchell (2002) provided estimates of “yield saved” (YSj) by control type, j.10 The values were converted to estimates of yield increases ()Y ≥ 1) using the following equation: (7) ΔY j = 1 . 1 − YS j The (net) farmer benefit (FBA-B) from control using treatment A relative to an alternative treatment, B, then was calculated as follows: (8) FB A− B = P (Y A − YB ) − ( H A − H B ) − (CC A − CCB ) , where A indicates the control treatment of interest (using insecticide or YieldGard Rootworm) and B indicates the comparison treatment (applying insecticide or not applying any treatment), P is the corn price, taken from USDA/ERS (1999-2000), and which varies among regions, Y is yield, H is harvest cost, and CC is control cost (Doane, 2000), which may be zero in untreated corn. Detailed information on the region-specific farm budgets and the sources of data underlying them are provided in Part A of the appendix. Part B reports details on the results from using these budgets to generate estimates of the benefits from the adoption of YieldGard Rootworm technology. Separate tables are presented for each region. For instance, table B.9 represents the important “Heartland, Remaining” region. 10 It should be noted that all of these calculations used the “average” yield saved reported by Mitchell (2002). However, his estimates include a relatively wide 95 percent confidence interval. 20 Partial Budgeting Results The spreadsheet models were used to calculate three important factors: namely, (a) economic root rating thresholds for CRW control (YieldGard Rootworm and chemical application), (b) net benefits of YieldGard Rootworm at the insecticide application threshold, and (c) net benefits of YieldGard Rootworm relative to insecticide application. Control thresholds. To calculate the control thresholds for insecticide application, the Goal Seek function in Microsoft Excel® was used to find the yield increase that would result in net benefits equal to zero. The yield was then converted to a root rating using Mitchell’s data in two steps. First, inverting equation (5) provides yield saved (YS) as a function of the yield increase (ΔY), which was found with the Goal Seek function. Then the measure of yield saved was converted to a corresponding root rating (RR) using: (9) ⎛ YS ⎞ RR = 5⎜ ⎟ +1, ⎝ MYS ⎠ where MYS represents maximum yield saved, which corresponds to a root rating of 6 and is equal to 35.3 percent for insecticide application. The same method was used for YieldGard Rootworm, where the maximum yield saved is 46.9 percent. This analysis was performed over a range of potential base yields. We estimated threshold values of root ratings for adoption of the technological alternatives under different values for (a) the untreated yield, and (b) the seed premium for YieldGard Rootworm technology (one corresponding to the national average cost of conventional spray treatment applied to continuous corn, the other corresponding to the ® Registered trademark of Microsoft Corporation 21 region-specific average cost). These thresholds, reported in panel a of each of the regional tables in appendix B, are the values for root damage assessment at which the implied yield loss (from Mitchell’s work) would just warrant adopting the treatment in question—either a conventional insecticide application technology or YieldGard Rootworm. The threshold decreases with increases in the untreated yield (since the implied loss from a given rate of CRW infestation is higher) and with decreases in the seed premium. Net benefits at insecticide application threshold. The net benefits from YieldGard Rootworm at the insecticide application threshold shows the net benefits that may accrue on farms with CRW pressure between the YieldGard Rootworm threshold and the insecticide application threshold. (Where the YieldGard Rootworm threshold exceeds the insecticide application threshold, then net benefits are negative. This occurs where insecticide application is relatively inexpensive.) To calculate these benefits requires converting the root rating into yield increase in the case of YieldGard Rootworm corn. This is accomplished by first converting the root rating to a measure of yield saved (using the inverted form of equation (9)), and subsequently converting the yield saved to a yield increase, using equation (7). The net benefits were calculated for each combination of root rating and untreated yield level. In panel b of each of the regional tables in appendix B we show the net benefits from the adoption of the YieldGard Rootworm technology if the root damage rating were at the threshold value (specific for each level of untreated yield) at which it would be just profitable to apply the conventional insecticide application technology. These estimates of per acre net benefits correspond to both the minimum benefits from adopting 22 YieldGard Rootworm technology for those who had opted to apply insecticide (since at best their root rating would have been just above the threshold), and at the same time they represent the maximum potential benefits for those who opted not to apply insecticide (since at worst their root rating could have been just below the threshold). Net benefits relative to insecticide application. The net benefits of YieldGard Rootworm relative to chemical applications were found by setting each yield increase (for insecticide application and for YieldGard Rootworm) to the average level associated with a given root rating. Net benefits were then calculated over a range of potential untreated yields and root ratings. In panel c of each of the region-specific tables in appendix B we show the net benefits per acre from adopting YieldGard Rootworm technology, compared with conventional insecticide application technology, for a range of combinations of root damage rating and what the untreated yield would have been given that root damage scenario. It can be seen how the benefits from YieldGard Rootworm technology increase linearly with increases in untreated yield, and how the benefits increase dramatically with increases in the index of root damage. To complete the analysis, all we require is an estimate of the number of acres in the region corresponding to each cell of the table; that is, the joint distribution of untreated yield and root damage rating in the region among farmers who adopted conventional CRW control technology. Unfortunately these data are not available. As an approximation we used an average root damage rating for each region. Corn rootworm pressure within a given region can vary greatly from year to year. The variance is also very high among fields within a region for any given year. The variation is attributable to many factors, including cultural practices (such as the number of years of corn following 23 corn, or hybrid genetics) and environmental factors (biotic and abiotic). To examine the sensitivity of the results to the regional average values for root damage ratings, as well as “moderate” estimates for root damage ratings, which apply in a “most-likely” scenario, we also used two alternative sets of estimates, corresponding to “high” and “low” rates of corn rootworm pressure for each region.11 Table 3 lists the region-specific root damage ratings under the “high,” “moderate,” and “low” scenarios, which are assumed to apply with probabilities of 15 percent, 70 percent, and 15 percent, respectively. Table 4 lists the corresponding values of untreated base yields, derived from the combinations of actual yields and root damage ratings. Farm-Level, Regional and Aggregate Benefits In table 5 we report estimates of benefits for each region from adopting YieldGard Rootworm technology. First, we used information from table 4 on regional average root ratings and the corresponding regional average untreated yields to deduce an estimate of per acre benefits for each region (using the values for net benefits from panel c of each region-specific table in part B of the appendix) corresponding to the assumed root rating value. For instance, in the Basin and Range region, the base yield estimate is 117 bushels per acre, associated with a moderate root damage rating of 4. Using these two figures, we can infer a benefit per acre from panel c of the corresponding regional table of net benefits per acre of YieldGard Rootworm corn relative to conventionally treated corn; in this case, table B.1. In table B.1, for a root damage rating of 4, the benefits are $14.69 11 The ranges established were based on several factors including personal communication with university scientists (Dr. L. Meinke, University of Nebraska; Dr. M. Rice, Iowa State University; and Dr. K. Steffey, University of Illinois). 24 per acre for an untreated yield of 110 bushels per acre, or $18.15 per acre for an untreated yield of 130 bushels per acre. The relationship of benefits with untreated yields is linear, so we can interpolate linearly and doing so yields an estimate of $15.89 for continuous corn ($17.25 for first-year corn). In table 5, for each region we report estimates of regional average benefits per acre, derived in this fashion, for both continuous and first-year corn, under our three different scenarios of “low,” “moderate,” and “high” CRW pressure. Total annual regional benefits, computed by multiplying the region-specific benefits per acre by the relevant number of acres in the region, are also reported in that table for each scenario. The sum across regions is the total national benefit to producers, and dividing this total by the total number of base acres treated yields an estimate of the overall average benefit per acre. These aggregate figures are shown in the last row of table 5. In the moderate scenario, the total annual benefits across the 11 regions amounted to $231 million, spread across 13.8 million acres, an average of about $16.49 per acre treated. Between the “low” and “high” scenarios, the estimates of total benefits ranged from $111 million to $406 million (or from $8 to $29 per acre). Finally, the last column in table 5 shows the “average” estimate of total regional benefits, obtained by weighting the benefits under the “low,” “moderate,” and “high” scenarios by their probabilities of 0.15, 0.70, and 0.15, respectively. Since the probability distribution is symmetric, with a high weight on the “moderate” scenario, the “average” estimates are generally similar to their “moderate” counterparts—a total benefit of $239 million, a little over $17 per acre treated. 25 The estimates in table 5 are based on the regional prices of corn in 2000, which averaged $1.85/bushel.12 In table 6 we compare estimates based on those prices with alternative estimates made under the assumption of a corn price equal to the ten-year average U.S. corn price ($2.32/bushel), for the moderate scenario. As can be seen in table 6, in some regions the estimate of the net benefit per acre is significantly higher when we use the ten-year average corn price rather than the actual regional average price in 2000. Summing across regions, the total annual benefits increased from $231 million ($16.50 per acre treated), using the year 2000 regional corn price to $319 million (just over $23 per acre treated), using the U.S. ten-year average corn price. Figure 2 shows the frequency distribution of national average corn prices for the decade 1991–2000 to give some perspective on our alternative price assumptions. Comparing across the regions we can see that the measures of benefits vary from negligible amounts in Mississippi Portal or Southern Seaboard up to $54 million in the Heartland, Remaining region (up to $76 million in the Heartland, Remaining region using the ten-year average U.S. corn price assumption). Some of this variation is attributable to variation in benefits per acre, but variation in the number of acres treated for CRW is a much more important factor. The four regions that account for most of the benefits, the Northern Crescent, Prairie Gateway, Heartland, Remaining, and Heartland, SBV, also account for most of the acreage treated. In addition to the farm-level benefits, non-farm benefits are given by multiplying the seed premium ($12.43 per acre) by the number of acres to which it applies 12 The year 2000 corn price average was more than 20 percent below the 10-year average (not adjusted for inflation). Since the year 2000 price was so far below the normal price, we report the regional and aggregated results using both price scenarios in table 6. 26 (13,796,901 acres), a total benefit of $171 million. It is worth noting that if the seed premium increases by a dollar per acre, this simply reduces the farmers’ net benefits by one dollar per acre, which is exactly offset by an increase in the non-farm benefits of one dollar per acre. So long as this hypothetical price change would not give rise to any changes in farmers’ decisions about adopting the technology (i.e., so long as the premium was initially low enough such that the adoption decision would not be marginal) the seed premium affects only the distribution of benefits. Accordingly, even if there is an adoption response, it can be seen that the main impact of varying the seed premium would be for the distribution of benefits, with less-important implications for the total. Combining the annual farmer benefits of $231 million in the “moderate” scenario ($319 million with the ten-year U.S. average corn price assumption) and the annual nonfarmer benefits ($171 million), we estimate that the total annual national benefits from the adoption of YieldGard Rootworm technology in the year 2000 would have been equal to $402 million ($490 million with the alternative corn price assumption). 5. Non-Pecuniary Benefits – Discussion and Survey Results Farmers make the choice of whether to adopt a new technology or continue to use the old technology based on their assessment of the additional benefits of adoption compared to the additional costs of doing so. If the additional benefits outweigh the additional costs, then they will decide to adopt. Some of the benefits may not lend themselves to precise measurement in money terms, but may still be important to the decision maker and thus will affect both adoption decisions and appropriate measures of the benefits from adoption. This section begins with a general discussion of these types of benefits. We 27 then discuss the results of a survey designed to collect both quantitative and qualitative information about farmers’ perceptions of their value. Flexibility and Time Savings The flexibility of the technology, and its influence on the flexibility of other aspects of the farming operation, can be important components of the adoption choice. If a technology can be used under a variety of circumstances, leaving farmers with more choices concerning which crops to grow and which inputs to use, then farmers will tend to favor it over other competing technologies. In the current environment, where farmers are more exposed to market forces than they have been in the past (i.e., since the implementation of the 1996 Farm Bill), any technology that gives the farmer more flexibility is viewed as especially valuable. Farm size. Many large farms today are made up of tracts of owned and rented land that may not be contiguous. In fact, there may be significant distances between the tracts, with many farmers farming in more than one county and in some instances more than one state. If the technology saves time relative to the competing technologies, it should allow more acres to be farmed with the same labor and equipment, providing an opportunity to earn more profit. Cropping patterns. Crop farmers typically produce three to five different crops on their farm in one crop year. Growing several crops in the same year allows farmers to diversify and thereby reduce the overall risk they face. As supply and demand conditions change, some crop prices will rise and others will fall, and local weather conditions in a particular growing season may favor yields of some crops over others. In addition, crop diversification reduces some types of diseases and pest infestations, such as corn 28 rootworm in most of the United States, and can benefit the soil. Hence, growing a number of crops can be beneficial from an agronomic standpoint, as well as reducing overall business risk. The additional benefits from multiple crops must be balanced against the additional management and equipment costs, however. Figures 3 through 5 illustrate the many other activities that may be going on during the time when corn insecticide decisions are made in North Carolina, Illinois, and Ohio, for example. A typical North Carolina crop farmer may be harvesting wheat, planting soybeans, possibly planting peanuts, in addition to planting cotton, and may be transplanting tobacco plants into the field (which is a labor-intensive operation) during the time period when most corn rootworm control applications are made. Illinois farmers could be planting oats, sorghum, and soybeans, as well as cutting hay, while Ohio farmers may divide their time and attention during this time period between hay cutting and planting soybean and oats. Any new technology that is convenient, easy, and frees resources during this crucial time in the growing season for other crops, allowing the farmer to perform management tasks in a more timely manner for those crops, will be provide additional benefits to farmers. Health and Environmental Effects Farmer and farm worker health and safety. Given a choice between two pest control technologies, both equally profitable, a typical farmer will choose the one that is safest. Even if a safer pest-control regime costs a bit more, most farmers will choose to use it (Beach and Carlson, 1993 and Lichtenberg, Spear and Zilberman, 1993). Part of the reason for this is that safer pesticides are easier to use, with reduced requirements for 29 safety precautions, such as specialized safety clothing, breathing apparatus, handling restrictions, re-entry intervals, and pre-harvest intervals. This saves time and expense. Product safety is important also because farmers (like most of the rest of us) care about their own health, their family's health, and the health of their workers. Most pesticides available to farmers today are safe as far as meeting the minimum requirements set by the EPA, but the transgenic insect-resistant technologies, such as YieldGard Rootworm pose no farmer or farm worker safety concerns. Attitudes toward environmental quality. As well as caring about their own and their workers' health and safety, it has been demonstrated repeatedly in economic research that many farmers also care about the environment in terms of water quality and the impacts of their decisions on wildlife (e.g. Beach and Carlson, 1993 and Lichtenberg, Spear and Zilberman, 1993). Since some new agricultural technologies are more environmentally benign than others, this may be viewed as an additional benefit of these technologies from the farmer's, as well as from society's, perspective. The YieldGard Rootworm technology is one of a class of insect-resistant transgenic technologies achieving near perfection in terms of minimizing the negative environmental externalities from insect control. Survey Results A computer-assisted telephone survey of corn farmers was conducted in late March and early April of 2002 by Doane Marketing Research, Inc. under the direction of the authors. The survey sample was randomly selected from Doane’s list of corn farmers. To qualify for the survey, a respondent must have planted a minimum of 250 acres of corn in 2001 and must be the primary decision maker for purchases of insecticides and 30 seed in their farm operation. Qualifying farmers must have also used a soil-applied insecticide for corn rootworm control on at least some of their corn acreage in 2001. The sample was weighted toward the regions with the most acreage planted to corn. The numbers of respondents from the different regions were: Heartland-Remaining (100), Northern Crescent (100), Northern Great Plains (100), Prairie Gateway (101), HeartlandEDV (50), Heartland-SBV (50), and all other regions combined (100). The survey respondents treated 93 percent of their continuous corn acres and 62 percent of their first year corn acres at least once in 2001 for corn rootworm. Force® was the insecticide applied on the most acres (36 percent of continuous corn acres and 31 percent of first-year corn acres), followed by Aztec® (19 percent of continuous and firstyear corn acres).13 The average price paid for all soil-applied insecticides targeted at corn rootworm on both continuous and first-year corn acres ranged from $10.56 to $11.84 per acre. Respondents were moderately well-satisfied with their soil insecticides used to control corn rootworm, with an overall mean satisfaction rating of 7.7 to 8.4 for the mostused products on a scale of 1 = “Not at all satisfied” to 10 = “Very satisfied.” The most common reasons reported for dissatisfaction with soil-applied insecticides to control corn rootworm were: “Cost or added expense” (35 percent reported), “Toxic/hazardous to handle” (21 percent reported), “Don’t like handling bags/materials” (13 percent reported), and “Time consuming to apply” (9 percent reported). A generic description of the product on which respondents were asked to base their responses can be seen in box 1. There was no mention of Monsanto or any other 13 Force is a registered trademark of Syngenta Corp. and Aztec is a registered trademark of Bayer Corp. 31 biotech or seed supplier during the survey. Respondents indicated they would plant a biotech-trait, seed-treatment combination, as described in box 1, on about 29 percent of their corn acres in the first year after introduction, and about 34 percent in the following year, assuming it performed as described. It is difficult to predict the ultimate percentage of corn acreage that would be planted to this product.14 Box 2 shows the advantages and disadvantages of the product mentioned most frequently by the survey respondents. The advantage most frequently mentioned (by 30 percent of respondents) is the safety of not handling an insecticide. This and the other advantages listed in box 2 are consistent with the listing of non-pecuniary benefits described in this section of the report. The most frequently mentioned disadvantage is the fear that the cost of the new product might be too high (48 percent of respondents). There was no mention of the product’s price in the product description in box 1, so this perceived disadvantage might disappear once the respondents learn that YieldGard Rootworm is going to be priced comparably with other rootworm control options. Respondents were asked a series of questions designed to elicit the value they would place on a set of “nonpecuniary” benefits from adopting the product, in addition to the benefits associated with increases in their average yields, including savings in handling and labor time, human safety benefits (operator and worker safety), environmental quality benefits, and more consistent control (less yield risk). First they were asked if they agree or disagree with a statement that a particular benefit would be gained by adopting the product. An overwhelming percentage of respondents agreed that 14 In our estimation of farm and non-farm benefits we assumed 100 percent adoption by growers who had used insecticide treatments for corn rootworm in the year 2000. If the new technology were adopted on a smaller percentage of corn acres, our estimates of farm level and total benefits would be proportionately smaller, as well. 32 at least some of each non-pecuniary benefit could be gained by adoption (92 percent agreed it would be safer for humans and 82 percent agreed it would be safer for the environment than soil-applied treatment). They were then asked to place a separate value per acre on each of the benefits. In addition, they were asked to place a separate value on savings in equipment costs that might be gained by adoption and another on an increase in standability (less lodging, resulting in more harvested yield) of between two and five percent. They were then asked to give a value per acre for the total package of nonpecuniary benefits plus equipment cost savings and then an additional value for the nonpecuniary, equipment cost and standability benefits. Table 7 presents the average values placed on the benefits listed above by likely adopters, unlikely adopters, and the total sample. Notice that the values placed on the total package of benefits together (both with and without standability benefits) are less than the sum of the separate values. We believe the values the respondents placed on the total packages of benefits (see table 7) are probably closer to their true willingness to pay for these benefits, since they were asked to value the benefits packages after they had had a chance to think further about the individual components. Using these values is also consistent with our approach of using the more conservative values, if more than one value could be used, throughout the study. 6. Summary and Conclusion We have examined the potential impact of the introduction of a new transgenic technology for control of corn rootworm, Monsanto’s YieldGard Rootworm. Under a reasonable set of assumptions, and using production and price data for 2000 (NASS, 33 2002), we found that if the technology had been available in the year 2000, and priced equivalent to the benchmark pesticide technology so that it would be adopted comprehensively, the benefit for farmers in the United States would have been $231 million in that year. Adding the annual non-farmer benefits of $171 million (the benefits accruing to the technology developer and seed companies), the total benefits in the United States in 2000 would have been $402 million ($490 million if the ten-year average corn price is used, instead of the actual price in 2000, to place a value on the yield increase). The total (farm and non-farm) benefit is estimated to be 2.36 percent of the value of the year 2000 corn crop. The estimates above may be understated for several reasons. First, we estimated all of the benefits using an average root-rating index. It is clear that acres with aboveaverage root damage ratings would realize greater benefits from the technology. It is also true, as discussed earlier, that some acres below the root-rating threshold for insecticide treatment would realize a small net benefit from the new technology. However, the major reason why these estimates can be considered to be less than the true net benefits is that the technology provides further, non-pecuniary benefits to farmers, in addition to those associated with yield gains. These non-pecuniary benefits include all of those discussed in section 5, for which estimates were elicited in a survey of farmers. Perhaps the most important of these are the value of time saved and the yield-risk reduction associated with YieldGard Rootworm. The survey results indicate the value of time saved would be $1.60 per acre for unlikely adopters, or $1.94 for likely adopters, with an overall average of $1.87 per acre. The respondents’ valuation of the potential yield risk reduction from consistent insect 34 control ranges from $1.25 per acre for unlikely adopters to $4.03 for likely adopters with an overall average of $3.80 per acre. These are reported values when the respondents were asked to value each of the benefits separately. When they were asked to value the benefits discussed in the first part of section 5 as a package, including potential equipment cost savings, the range is from $2.55 per acre for the unlikely adopters to $4.55 for the likely adopters, with an overall average value of $4.18 per acre. Applying these average benefits per acre to the 13,796,901 acres treated for corn rootworm in the year 2000 would imply a total additional farmer benefit of $58 million if YieldGard Rootworm had been made available and was adopted on 100 percent of the treated acres. Adding this additional $58 million to the farmer benefit from yield improvement ($231 million) increases the total farmer benefit to $289 million, and the total farmer plus nonfarmer benefit to $460 million. Table 8 summarizes the alternative estimates of the total benefits, the forms of benefits, and their distribution among farmers and others. These estimates of pecuniary and non-pecuniary benefits to farmers and others are based on the assumption of 100 percent adoption—that all corn acres currently treated with conventional control methods would be switched to the new technology, instantaneously and completely. This is an extreme assumption and for that reason probably unreasonable—even under our assumption about the pricing of the YieldGard Rootworm technology, which meant that it would entail lower pest-control costs and higher yields and would clearly dominate conventional pest-control technology—since some farmers have said they would not plant a crop with a biotech trait under any circumstances. Our survey results indicate that this proportion of farmers may be 35 significant, although the number of farmers in this category will probably decrease after product commercialization and adoption begins to take place. The survey results indicated that adoption might be only 30 percent in the first year, which would imply that the benefits in the first year would be 30 percent of the figure implied by 100 percent adoption (the relationship is linear under our assumptions unless we use a more-sophisticated analysis in which the farmers identified as those who choose to adopt are those who are likely to obtain higher-than average benefits per acre). Table 8 shows the effects of this lower adoption rate on the pattern of benefits as well as the total. Using an adoption rate of 30 percent, instead of a total benefit of $460 million in the year 2000, a conservative estimate of the benefits is $138 million. This might not be the maximum annual benefit, since adoption would evolve over time with the development of information and knowledge of the technology and its impacts. Other conditioning factors on adoption and on the benefits from adoption, which have not been addressed directly, include the potential effects of refuge requirements, price discounts, or identity preservation costs, if they become a reality. It is important to remember also that the pace of technological innovation in agricultural biotechnology and other pest management systems will likely place an upper limit on the amount of time over which the maximum level of benefits can be realized. Additional work could be done, both to refine the estimates of this ex ante study and to estimate the benefits after commercial introduction, as well as to compare the two. One of the more crucial pieces of information we need, to improve on our ex ante estimates, is information about the distribution of corn rootworm damage within each production region. This would allow us to calculate the benefits associated with the acres 36 experiencing higher-than-average rootworm pressure, and also to identify those acres that are not now treated but for which the technology would provide a net benefit. The relationship between root damage as measured by the root rating and ultimate yield should receive more attention, as well. 37 7. References Alston, J. M., G. Norton, and P. G. Pardey. 1998. Science Under Scarcity: Principles and Practice for Agricultural Research Evaluation and Priority Setting. Wallingford, U.K.: CAB International. Anderson, J. Monsanto Company, Raleigh NC. Personal communication. March 12, 2002. Beach, E., and G. Carlson. 1993. A Hedonic Analysis of Herbicides: Do User Safety and Water Quality Matter? American Journal of Agricultural Economics 75: 612−23. Carpenter, J.E. and L.P. Gianessi. 2001. Agricultural Biotechnology: Updated Benefit Estimates. National Center for Food and Agricultural Policy, Washington, DC. Doane’s AgroTrak. 2000 Corn Insecticide Product Use. Data supplied by Monsanto Company. Duffy, M. and D. Smith, 2002. Estimated Costs of Crop Production in Iowa - 2002. Publication FM 1712, Iowa State University. Gianessi, L. 2001.National Center for Food and Agricultural Policy, Washington, DC. Personal communication. September 14. Lichtenberg, E., R. Spear, and D. Zilberman. 1993. The Economics of Reentry Regulation of Pesticides. American Journal of Agricultural Economics, 75: 946958. Marra, M. 2001 Agricultural Biotechnology: A Critical Review of the Impact Evidence to Date. Ch. 18 in Philip Pardey, ed. The Future of Food: Biotechnology Markets and Policies in an International Setting, Washington DC, International Food Policy Research Institute, pp. 155-184. Marra, M, and J. Alston. 2001. The Farm-Level Economic Impacts of Transgenic Crops in the United States: A Review of the Evidence in the Public Domain. Report to the NSF Center for Integrated Pest Management, Raleigh, NC. Marra, M, P. Pardey, and J. Alston. 2002. The Payoffs to Agricultural Biotechnology: An Assessment of the Evidence. EPTD Discussion Paper No. 87, Environment and Technology Division, International Food Policy Research Institute. Mitchell, Paul D. 2002. Yield Benefit of MON 863. Unpublished report prepared for Monsanto Company and supplied by the author. 38 Mitchell, Paul D., Michael E. Gray, and Kevin L. Steffey. 2002. Composed Error Model for Insect Damage Functions: Rotation Resistant Western Corn Rootworm in Illinois. Unpublished manuscript, Department of Agricultural Economics, Texas A&M University, College Station, TX. Moschini, G., H. Lapan, and A. Sobolevsky. 1999. Trading Technology As Well As Final Products: Roundup Ready Soybeans and Welfare Effects in the Soybean Complex. Proc. The Shape of the Coming Agricultural Biotechnology Transformation: Strategic Investment and Policy Approaches from an Economic Perspective. Rome, Italy: International Consortium on Agricultural Biotechnology Research. National Agricultural Statistics Service (NASS). 2002. Crop Production 2001 Summary. United States Department of Agriculture, January. Rahm, M.R., and W.E. Huffman. 1984. The Adoption of Reduced Tillage: The Role of Human Capital and Other Variables. American Journal of Agricultural Economics 66: 406-413. Trécé Incorporated. Corn Rootworm (CRW). http://www.trece.com/crw_monitor.pdf (accessed 3/12/02). USDA/ERS. Corn Production Costs and Returns, Excluding Direct Government Payments, 1999-2000. www.ers.usda.gov/data/costsandreturns/data/current/ccorn.xls (accessed 3/18/02). Wright, Robert, Lance Meinke, and Keith Jarvi. 1999. Corn Rootworm Management. Extension Publication EC99-1563-C, Nebraska Cooperative Extension Service, University of Nebraska-Lincoln, Lincoln, Nebraska. http://www.ianr.unl.edu/pubs/fieldcrops/ec1563.htm (accessed 1/12/02). 39 Figure 1: USDA-ERS Farm Resource Regions and CRW Variant Sub-Regions 40 Figure 2: Frequency Distribution of U.S. Corn Prices, 1991-2000 3.5 3 2.5 Frequency 2 1.5 1 0.5 0 < 1.85 1.85-2.15 2.16-2.46 2.47-2.76 >2.76 Corn Price Range ($/bu) 41 Figure 3: Typical Crop Planting and Harvesting Periods in North Carolina Crop Corn Cotton Peanuts Soybeans Tobacco Wheat = Planting Dates = Harvesting Dates Source: USDA, NASS Agricultural Handbook No. 628, 1997 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Figure 4: Typical Crop Planting and Harvesting Periods in Illinois Crop Corn Oats Sorghum Soybeans Wheat = Planting Dates = Harvesting Dates Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: USDA, NASS Agricultural Handbook No. 628, 1997 Figure 5: Typical Crop Planting and Harvesting Periods in Ohio Crop Corn Oats Soybeans Wheat Hay, Alfalfa = Planting Dates = Harvesting Dates Source: USDA, NASS Agricultural Handbook No. 628, 1997 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 42 Table 1: Corn Acreages and Shares Treated for CRW, by Region in 2000 Total Area Planted to Corn acres 1,347,885 2,136,491 882,273 1,705,355 11,288,731 34,516,415 2,788,455 8,951,127 4,867,966 9,931,175 211,827 79,579,030 Share Treated for CRW percent 1.0 7.7 50.5 11.6 14.7 13.8 5.2 33.0 8.7 29.7 33.7 17.3 Total Area of Continuous Corn acres 502,916 706,933 432,626 733,404 4,536,048 6,601,637 265,913 936,815 1,442,112 5,506,741 112,420 22,268,847 Share Treated for CRW percent 0.0 8.3 52.0 18.4 25.6 44.5 12.7 47.6 26.4 45.5 55.8 35.7 Total Area of First Year Corn acres 844,969 1,429,558 449,646 971,951 6,752,683 27,914,778 2,522,542 8,014,312 3,425,855 4,424,434 99,407 57,310,183 Share Treated for CRW percent 1.5 7.3 49.1 6.5 7.5 6.6 4.4 31.3 1.3 10.1 8.6 10.2 Region Mississippi Portal Southern Seaboard Fruitful Rim Eastern Uplands Northern Crescent Heartland, Remaining Heartland, EDV SBV Sub-Region Northern Great Plains Prairie Gateway Basin and Range TOTAL 43 Table 2: Treated Acres, Expenditure on CRW Insecticides, and Average Cost per Acre, by Region Expenditure on CRW Insecticides, Continuous. Corn dollars 361 626,588 2,758,341 1,572,652 14,265,651 36,527,083 449,777 6,634,121 4,983,995 30,482,413 509,743 98,810,724 First-Year Corn Acres Treated for CRW Acres 13,079 104,945 220,675 63,208 520,509 1,835,713 111,954 2,546,584 45,369 455,272 8,563 5,925,871 Expenditure on CRW Insecticides First-Year Corn dollars 116,922 1,253,360 2,578,802 674,833 6,726,710 21,010,532 1,369,327 33,301,669 371,885 5,213,527 81,229 72,698,796 Average CRW Insecticide Cost per Acre dollars/acre 8.94 11.50 11.98 11.33 12.63 12.07 12.49 13.52 12.59 12.09 8.29 12.43 Region Mississippi Portal Southern Seaboard Fruitful Rim: Target Eastern Uplands Northern Crescent Heartland, Remaining Heartland, EDV Heartland, SBV Northern Great Plains Prairie Gateway Basin and Range TOTAL Total Acres Treated for CRW acres 13,115 163,442 445,505 198,413 1,680,410 4,820,048 145,594 2,992,309 532,094 3,134,778 71,282 14,196,990 Total Expenditure on CRW Insecticides dollars 117,283 1,879,948 5,337,143 2,247,484 20,992,361 57,537,615 1,819,104 39,935,790 5,355,880 35,695,939 590,972 171,509,520 Continuous Corn Acres Treated for CRW Acres 36 58,497 224,830 135,204 1,159,901 2,984,335 33,640 445,725 486,724 2,679,506 62,719 8,271,117 44 Table 3: Actual Average Regional Yield in 2000, and Subjective Distributions of Regional Average Root Damage Ratings Regional Average Root Rating ActualYielda Low Moderate High (bu/ac) Mississippi Portal 113 1 2 3 Southern Seaboard 106 1 2 3 Fruitful Rim 175 3 4 5 Eastern Uplands 128 2 3 4 Northern. Crescent 127 2 3 4 Heartland, Remaining 148 2.5 3.5 4.5 Heartland, EDV 148 2 3 4 Heartland, SBV 148 2.5 3.5 4.5 Northern Great Plains 97 2 3 4 Prairie Gateway 127 2.5 3.5 4.5 Basin and Range 128 3 4 5 a Yield taken for ERS budgets except for Mississippi Portal (LA, MS, TN, AR), Fruitful Rim (AZ, CA, WA, ID), and Basin and Range (UT, CO, NV, MT, WY, NM). These were calculated using NASS data and represent total production divided by acres harvested in the states indicated. b The range of root damage ratings, corresponding to “low”, “moderate,” and “high” CRW pressure was established for each region, based on several factors including personal communication with university scientists (Dr. L. Meinke, University of Nebraska; Dr. M. Rice, Iowa State University; and Dr. K. Steffey, University of Illinois). Region 45 Table 4: Estimates of Average Yield Increase Factor with “Low,” “Moderate,” and “High” CRW Pressure, and Untreated Base Yield Average Yield Increase Factor “Low” “Moderate” “High” CRW CRW CRW Pressure Pressure Pressure 1.000 1.000 1.164 1.076 1.076 1.119 1.076 1.076 1.119 1.119 1.076 1.119 1.164 1.076 1.076 1.269 1.164 1.164 1.214 1.164 1.164 1.214 1.214 1.164 1.214 1.269 1.164 1.164 1.393 1.269 1.269 1.328 1.269 1.269 1.328 1.328 1.269 1.328 1.393 Untreated Base Yielda (bu/ac) 113 105 154 126 124 144 145 147 134 139 96 119 117 Region ActualYielda (bu/ac) 113 106 175 128 127 148 148 148 148 148 97 127 128 Mississippi Portal Southern Seaboard Fruitful Rim Eastern Uplands Northern. Crescent Heartland, Remaining Heartland, EDV (cont) Heartland, EDV (first) Heartland, SBV (cont) Heartland, SBV (first) Northern Great Plains Prairie Gateway Basin and Range a Untreated base yield computed based on “moderate” CRW pressure. 46 Table 5: Farm Level Benefits from Adoption Under Low, Moderate, or High Corn Rootworm Pressure Continuous (C) or First-Year (F) Corn C F C F C F C F C F C F C F C F C F C F C F b b Region Mississippi Portal Southern Seaboard Fruitful Rim Eastern Uplands Northern Crescent Heartland, Remaining Heartland, EDV Heartland, SBV Northern Great Plains Prairie Gateway Basin and Range Base Acres a Treated acres 36 13,079 58,498 104,944 224,830 220,676 135,205 63,208 1,158,988 503,397 2,936,189 1,829,706 33,640 111,954 445,725 2,507,346 381,016 44,431 2,505,954 446,796 62,720 8,563 13,796,901 Benefits per Acre “Low” “Moderate” Total Regional Benefits “Low” “Moderate” “High” “High” “Average” c 14.31 13.73 4.35 3.39 4.74 5.80 9.03 8.08 6.39 5.32 10.85 9.56 4.02 (0.69) 7.90 7.40 6.70 8.05 8.08 dollars per acre 1.91 0.82 2.80 4.03 26.42 25.84 11.89 10.94 11.87 12.92 18.40 17.44 14.37 13.42 19.56 18.60 8.96 4.25 16.36 15.87 15.89 17.25 16.49 8.22 7.13 9.42 10.66 44.91 44.33 22.51 21.55 21.89 22.95 32.14 31.19 25.61 24.81 32.36 31.87 15.91 11.20 28.80 28.30 29.94 31.30 29.42 3,217,317 3,029,881 588,142 214,275 5,493,603 2,919,703 26,513,787 14,784,024 214,960 595,595 4,836,116 23,970,228 1,531,684 (30,657) 19,797,037 3,306,290 420,217 68.932 111,471,141 dollars 69 10,725 163,794 422,924 5,940,009 5,702,268 1,607,587 691,496 13,757,188 6,503,889 54,025,878 31,910,073 483,407 1,502,423 8,718,381 46,636,636 3,413,903 188,832 40,997,407 7,090,653 996,605 147,712 230,911,872 296 93,253 551,051 1,118,703 10,097,115 9,782,567 3,043,465 1,362,132 25,370,247 11,552,961 94,369,114 57,068,530 861,520 2,777,579 14,423,661 79,909,117 6,061,965 497,627 72,171,475 12,644,327 1,877,807 268,022 405,902,565 93 21,495 197,314 463,852 6,155,171 5,913,455 1,670,052 720,508 14,259,609 6,723,622 55,950,549 33,114,934 499,857 1,557,672 8,991,833 48,227,547 3,528,780 202,228 42,493,462 7,356,049 1,042,327 153,941 239,244,367 Total Across Regions 47 a Base Acres Treated from Doane (1999-2001) tables. Based on data in table 4 and tables B.1 through B.11. c Average is the weighted average of “low,” “moderate,” and “high” using weights of 0.15, 0.70, and 0.15, respectively. b 48 Table 6: “Moderate” Farm Level Benefits under Alternative Corn Prices Continuous (C) or First-Year (F) Corn C F C F C F C F C F C F C F C F C F C F C F Base Acres a Treated acres Region Year 2000 Corn Priceb Per Acre Benefits $/acre Regional Benefits dollars 10-Year Average Corn Price ($2.32/bu.) Per Acre Benefits $/acre Regional Benefits dollars 69 3.60 130 10,725 2.52 32,959 Southern Seaboard 163,794 3.86 225,802 422,924 5.09 534,165 Fruitful Rim 5,940,009 36.90 8,296,227 5,702,268 36.31 8,012,746 Eastern Uplands 1,607,587 15.72 2,125,423 691,496 14.76 932,950 Northern Crescent 13,757,188 16.13 18,694,476 6,503,889 17.18 8,648,360 Heartland, Remaining 54,025,878 26.02 76,399,638 31,910,073 25.06 45,852,432 Heartland, EDV 483,407 19.94 670,782 1,502,423 19.07 2,134,963 Heartland, SBV 8,718,381 26.66 11,883,029 46,636,636 25.96 65,090,702 Northern Great Plains 3,413,903 13.23 5,040,842 188,832 8.52 378,552 Prairie Gateway 40,997,407 21.23 53,201,403 7,090,653 20.73 9,262,081 Basin and Range 996,621 23.85 1,495,872 147,712 25.21 215,873 Total 230,911,872 319,129,407 a Based on data in table A.1 and tables B.1 through B.11; Base Acres Treated From Doane 1999-2001 Tables. b Prices in 2000 by region were Heartland ($1.75), Northern Crescent ($1.81), Northern Great Plains ($1.66), Prairie Gateway ($1.88), Eastern Uplands ($1.87), Southern Seaboard ($1.95), and all others ($1.77). Mississippi Portal 36 13,079 58,498 104,944 224,830 220,676 135,205 63,208 1,158,988 503,397 2,936,189 1,829,706 33,640 111,954 445,725 2,507,346 381,016 44,431 2,505,954 446,796 62,720 8,563 1.91 0.82 2.80 4.03 26.42 25.84 11.89 10.94 11.87 12.92 18.40 17.44 4.37 13.42 19.56 18.60 8.96 4.25 16.36 15.87 15.89 17.25 MSL-17993 Page 49 of 69 Table 7: Values Placed by Respondents on Various Characteristics of the New Technology Relative to Soil-Applied Insecticide Applications Respondent Adoption Category Product Characteristic Likely to Adopt Unlikely to Adopt ($ per acre) 1. Handling and Labor Time Savings 2. Human Safety 3. Environmental Safety 4. Consistent Control (Reduced Yield Risk) Sum of 1 through 4 1.94 1.79 1.46 4.03 9.22 1.60 1.24 0.82 1.25 4.91 1.87 1.68 1.34 3.80 8.69 Total Respondents 5. Equipment Cost Savings Sum of 1 through 5 1.57 10.79 1.00 5.91 1.46 10.15 6. Better Standability (2-5% increase) 5.29 3.70 4.99 Sum of 1 through 6 16.08 9.61 15.14 Items 1 through 5 Valued as a Package 4.55 2.55 4.18 Items 1 through 6 Valued as a Package 7.24 3.86 6.61 50 Table 8: Estimated Aggregate Benefits from Adoption of YieldGard-Rootworm Technology under Alternative Assumptions about Adoption Rates and Corn Prices Total Benefits (Million Dollars in Year 2000) 100 percent adoption Form of Benefits Actual Corn Price in 2000 Farmer benefits from a. Yield Gains b. Non-Pecuniary Benefits Total Farmer Benefits Total Non Farmer Benefits Total Farmer and Non Farmer Benefits 460 548 138 164 231 58 289 171 319 58 377 171 69 17 86 51 96 17 113 51 10-Year Average Corn Price 30 percent adoption Actual Corn Price in 2000 10-Year Average Corn Price Note: Column totals might not add exactly because of rounding. 51 Box 1: Product Description Given to Survey Respondents This method uses a combination of a biotech trait for controlling corn rootworm, plus a new no-dust insecticide seed treatment for controlling other insects like cutworm, seed corn maggot, grubs, wireworms and selected other insects. Corn rootworm control and control of other insects would be similar to that provided by currently available insecticides. The control provided by the rootworm trait would be more consistent than currently available insecticide products because the rootworm trait would not be affected by weather or variable planting conditions. The biotech trait would be bred directly into many of the popular seed corn hybrids sold in your area. And, the seed treatment would be applied as a no-dust coating on the seed by seed corn companies. The biotech trait and the seed treatment combination insect control would be purchased from local seed dealers in corn varieties that were “ready to plant”. The biotech trait to control rootworm plus the seed treatment for other insects would be sold by most seed companies and would be readily available in your area. In addition, the biotech trait plus the seed treatment combination has been proven to be safe to humans and the environment. 52 Box 2: Advantages and Disadvantages of a Biotech Trait and Seed Treatment for Corn— Features Mentioned Most in Response to Unaided Questions Primary advantages of this concept are: Safety of not handling an insecticide Easy to use/handle All in one product insect control Saves time and labor Better control Primary disadvantages of this concept are: Cost might be too high Lack of grain market acceptance GMO concerns Percentage of Growers 48 15 5 Percentage of Growers 30 21 21 14 14 53 8. Appendix Tables This appendix contains tables documenting various elements of the computation of estimates of the farm-level (region-specific) and national farmer and total benefits from the adoption of Monsanto’s CRW-resistant corn varieties. Part A includes a representative partial budget. Part B includes the results from using the partial budgets to compute per acre benefits. 54 Table A.1: Typical Per Acre Base Budget Used in the Analysis – Heartland, Remaining Yield Level Income Per Acre Harvest price per bushel Crop sales per acre Returns per Acre Variable Costs Field Prep: Fertilizers Number of trips Pounds of N Pounds of P Pounds of K Pounds of Lime Field Prep: Discing Preplant Spray Mach & Equipment Chemical Cost Planting Machinery & Equipment (Planting) Seed Number of spray trips Chemical Cost Cultivating Crop Scouting Spraying for Insects Total number of trips Trips to spray for CRW Trips to spray for other insects CRW chemical cost per trip Other chemical cost per trip Harvest Total Cost/acre Variable $ $ 171.99 27.01 $ $ 206.64 71.96 $ $ 236.49 121.71 $ $ $ $ 2 0 2 $ $ $ 13.00 12.00 37.50 10.00 5.75 6.00 31.00 $ $ $ $ $ $ $ 7.00 11.50 3.50 8.00 44.29 9.00 24.75 1 $ $ $ $ 2 0 2 $ $ $ 13.00 12.00 52.50 10.00 5.75 6.00 31.00 $ $ $ $ $ $ $ 7.00 11.50 3.50 8.00 48.79 9.00 29.25 1 $ $ $ $ 2 0 2 $ $ $ 13.00 12.00 67.50 Legend Changeable Cells Cost Category 10.00 5.75 6.00 31.00 $ $ $ $ $ $ $ 7.00 11.50 3.50 8.00 53.29 9.00 33.75 1 Machinery & Equipment Apply Fertilizers Disc Spray herbicides Planting Spraying at Planting Field Cultivation Spray insecticides Harvest $ 3.50 $ 7.00 $ 3.50 $ 9.00 $ 0.54 $ 5.75 $ 3.50 $ 0.38 100 $ $ $ $ 1 100 45 1.99 199.00 199.00 28.95 140 $ $ $ $ 1 175 60 1.99 278.60 78.60 44.10 180 $ $ $ $ 1 220 75 1.99 358.20 358.20 54.45 Inputs Price Seed Rate (low) Seed Rate (med) Seed Rate (high) Seed Cost/bag Cost of N/pound Cost of P/pound Cost of K/pound Cost of Lime/pound Herbicide cost/acre CRW Insecticide cost/acre (at planting) CRW Insecticide cost/acre (adult) Other Insecticide cost/acre Custom Scouting per acre (w/CRW) Custom Scouting per acre (w/o CRW) $ 1.99 22000 26000 30000 $ 90.00 $ 0.16 $ $ $ $ 0.21 0.14 0.01 8.00 a Unit $/bu seeds/ac seeds/ac seeds/ac $/bag $/lb $/lb $/lb $/lb $/acre $/acre $/acre $/acre $/acre $/acre $ 10.00 $ 13.00 $ 12.00 $ $ 6.00 4.00 Unit $/ac/trip $/acre $/ac/trip $/acre $/acre $/acre $/ac/trip $/bu Contribution Margin a Parameters are changed to reflect those appropriate for each region. 55 Table A.1: Continued Field Operation Apply Fertilizers Disc Source KS Budgets Nebraska Crop Budgets EC99872-S (1999) KS and NE KS and NE pubs Notes Lists costs of $3.22, $3.64, $3.67, and $3.59. Costs of $0.28 and $0.35 for fert. Listed $6.55 for SW NE and $7.02 for N NE Spray herbicides Planting KS lists $3.38, $3.61, $3.59, and $3.50. NE lists $2.77 KS lists costs of $9.10, $8.01, $7.79, and $8.29. NE lists costs of $9.09, $11.35, and $10.99. Does not include seed. Adds $0.54 to cost of planting. Spraying at Planting Field Cultivation Spray insecticides Harvest NE Budgets KS and Budgets KS and NE NE Budgets NE KS lists costs of $5.55, $5.74, $5.97, and $5.51. NE lists cost of $5.31 KS lists $3.38, $3.61, $3.59, and $3.50. NE lists $2.77 Source: Prepared by the authors using data from Doane (green cells), Mitchell (tables as marked), or representative harvest costs (see Duffy, M. and D. Smith. “Estimated Costs of Crop Production in Iowa 2002.” Publication FM 1712. Iowa State University. 2002. for example). 56 Table B.1: Basin and Range Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $8.13/acre bushels/acre --Root Rating Threshold-90 1.86 1.96 1.65 110 1.71 1.80 1.54 130 1.61 1.68 1.46 150 1.53 1.60 1.40 170 1.47 1.53 1.35 190 1.42 1.48 1.32 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $8.13/acre bushels/acre --Net Benefits ($/acre)-90 1.86 -1.41 2.89 110 1.71 -1.48 2.82 130 1.61 -1.42 2.88 150 1.53 -1.48 2.82 170 1.47 -1.49 2.81 190 1.42 -1.56 2.74 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 -0.87 4.16 11.23 22.04 38.09 110 -0.11 6.04 14.69 27.89 47.51 130 0.65 7.92 18.15 33.74 56.93 150 1.41 9.80 21.61 39.59 66.35 170 2.17 11.68 25.07 45.44 75.77 190 2.93 13.56 28.53 51.29 85.19 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $8.13/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is higher by $1.36/acre. 57 Table B.2: Prairie Gateway Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $12.16/acre bushels/acre --Root Rating Threshold-90 2.17 1.90 1.88 110 1.97 1.74 1.73 130 1.83 1.64 1.62 150 1.72 1.56 1.55 170 1.64 1.49 1.48 190 1.58 1.44 1.44 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $12.16/acre bushels/acre --Net Benefits ($/acre)-90 2.17 4.53 4.80 110 1.97 4.41 4.68 130 1.83 4.35 4.62 150 1.72 4.19 4.46 170 1.64 4.18 4.45 190 1.58 4.29 4.56 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 3.17 8.59 16.22 27.88 45.20 110 3.99 10.62 19.95 34.20 55.36 130 4.81 12.65 23.68 40.52 65.52 150 5.63 14.68 27.41 46.84 75.68 170 6.45 16.71 31.14 53.16 85.84 190 7.27 18.74 34.87 59.48 96.00 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $12.16/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is lower by $0.49/acre. 58 Table B.3: Northern Great Plains Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $13.08/acre bushels/acre --Root Rating Threshold-90 2.44 2.03 2.08 110 2.20 1.86 1.90 130 2.03 1.74 1.77 150 1.90 1.65 1.68 170 1.80 1.57 1.60 190 1.72 1.52 1.54 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $13.08/acre bushels/acre --Net Benefits ($/acre)-90 2.44 5.63 4.98 110 2.20 5.50 4.85 130 2.03 5.44 4.79 150 1.90 5.34 4.69 170 1.80 5.29 4.64 190 1.72 5.25 4.60 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 4.46 9.09 15.61 25.56 40.35 110 5.16 10.83 18.79 30.96 49.03 130 5.86 12.57 21.97 36.36 57.71 150 6.56 14.31 25.15 41.76 66.39 170 7.26 16.05 28.33 47.16 75.07 190 7.96 17.79 31.51 52.56 83.75 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $13.08/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is lower by $4.71/acre. 59 Table B.4: Northern Crescent Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $12.31/acre bushels/acre --Root Rating Threshold-90 2.23 1.94 1.93 110 2.02 1.78 1.77 130 1.88 1.67 1.66 150 1.77 1.58 1.58 170 1.68 1.52 1.51 190 1.61 1.46 1.46 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $12.31/acre bushels/acre --Net Benefits ($/acre)-90 2.23 4.41 4.53 110 2.02 4.27 4.39 130 1.88 4.35 4.47 150 1.77 4.33 4.45 170 1.68 4.19 4.31 190 1.61 4.12 4.24 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 3.29 8.46 15.74 26.86 43.37 110 4.07 10.40 19.29 32.88 53.06 130 4.85 12.34 22.84 38.90 62.75 150 5.63 14.28 26.39 44.92 72.44 170 6.41 16.22 29.94 50.94 82.13 190 7.19 18.16 33.49 56.96 91.82 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $12.31/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is higher by $1.05/acre. 60 Table B.5: Eastern Uplands Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $11.63/acre bushels/acre --Root Rating Threshold-90 2.13 1.90 1.85 110 1.94 1.75 1.70 130 1.80 1.64 1.60 150 1.70 1.56 1.53 170 1.62 1.50 1.47 190 1.56 1.45 1.42 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $11.63/acre bushels/acre --Net Benefits ($/acre)-90 2.13 4.32 5.12 110 1.94 4.27 5.07 130 1.80 4.14 4.94 150 1.70 4.13 4.93 170 1.62 4.06 4.86 190 1.56 4.12 4.92 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 2.08 7.47 15.05 26.63 43.83 110 2.89 9.48 18.75 32.90 53.93 130 3.70 11.49 22.45 39.17 64.03 150 4.51 13.50 26.15 45.44 74.13 170 5.32 15.51 29.85 51.71 84.23 190 6.13 17.52 33.55 57.98 94.33 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $11.63/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is lower by $0.95/acre. 61 Table B.6: Fruitful Rim Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $12.27/acre bushels/acre --Root Rating Threshold-90 2.26 1.96 1.95 110 2.05 1.80 1.79 130 1.90 1.68 1.68 150 1.78 1.60 1.59 170 1.70 1.53 1.52 190 1.63 1.48 1.47 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $12.27/acre bushels/acre --Net Benefits ($/acre)-90 2.26 4.40 4.56 110 2.05 4.33 4.49 130 1.90 4.29 4.45 150 1.78 4.09 4.25 170 1.70 4.24 4.40 190 1.63 4.22 4.38 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 3.11 8.14 15.21 26.02 42.07 110 3.87 10.02 18.66 31.86 51.49 130 4.63 11.90 22.11 37.70 60.91 150 5.39 13.78 25.56 43.54 70.33 170 6.15 15.66 29.01 49.38 79.75 190 6.91 17.54 32.46 55.22 89.17 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $12.27/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is higher by $0.58/acre. 62 Table B.7: Southern Seaboard Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $10.71/acre bushels/acre --Root Rating Threshold-90 2.00 1.86 1.75 110 1.82 1.71 1.62 130 1.70 1.61 1.53 150 1.61 1.53 1.46 170 1.54 1.47 1.41 190 1.49 1.43 1.37 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $10.71/acre bushels/acre --Net Benefits ($/acre)-90 2.00 2.24 3.96 110 1.82 2.01 3.73 130 1.70 1.96 3.68 150 1.61 1.91 3.63 170 1.54 1.86 3.58 190 1.49 1.99 3.71 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 Bushels/acre --Net Benefits ($/acre)-90 0.43 6.11 14.10 26.30 44.42 110 1.30 8.24 18.00 32.91 55.06 130 2.17 10.37 21.90 39.52 65.70 150 3.04 12.50 25.80 46.13 76.34 170 3.91 14.63 29.70 52.74 86.98 190 4.78 16.76 33.60 59.35 97.62 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $10.71/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is higher by $1.23/acre. 63 Table B.8: Mississippi Portal Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $10.03/acre bushels/acre --Root Rating Threshold-90 2.05 1.96 1.79 110 1.87 1.80 1.65 130 1.74 1.68 1.56 150 1.65 1.60 1.49 170 1.57 1.53 1.43 190 1.52 1.48 1.39 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $10.03/acre bushels/acre --Net Benefits ($/acre)-90 2.05 1.29 3.69 110 1.87 1.21 3.61 130 1.74 1.10 3.50 150 1.65 1.16 3.56 170 1.57 0.97 3.37 190 1.52 1.16 3.56 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 Bushels/acre --Net Benefits ($/acre)-90 1.03 6.06 13.13 23.94 39.99 110 1.79 7.94 16.59 29.79 49.41 130 2.55 9.82 20.05 35.64 58.83 150 3.31 11.70 23.51 41.49 68.25 170 4.07 13.58 26.97 47.34 77.67 190 4.83 15.46 30.43 53.19 87.09 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $10.03/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is lower by $1.09/acre. 64 Table B.9: Heartland: “Remaining” Sub-Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $12.44/acre bushels/acre --Root Rating Threshold-90 2.29 1.97 1.97 110 2.08 1.81 1.81 130 1.92 1.69 1.69 150 1.81 1.61 1.61 170 1.72 1.54 1.54 190 1.64 1.48 1.48 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $12.44/acre bushels/acre --Net Benefits ($/acre)-90 2.29 4.61 4.60 110 2.08 4.62 4.61 130 1.92 4.45 4.44 150 1.81 4.53 4.52 170 1.72 4.50 4.49 190 1.64 4.25 4.24 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 3.40 8.36 15.33 25.98 41.80 110 4.15 10.21 18.73 31.75 51.09 130 4.90 12.06 22.13 37.52 60.38 150 5.65 13.91 25.53 43.29 69.67 170 6.40 15.76 28.93 49.06 78.96 190 7.15 17.61 32.33 54.83 88.25 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $12.44/acre is the region-specific average cost of treatment with insecticide in continuous corn. For first-year corn, the corresponding figure is lower by $0.96/acre. 65 Table B.10: Heartland: SBV Sub-Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $14.88/acre bushels/acre --Root Rating Threshold-90 2.52 1.97 2.14 110 2.27 1.81 1.96 130 2.09 1.69 1.82 150 1.95 1.61 1.72 170 1.85 1.54 1.64 190 1.76 1.48 1.57 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $14.88/acre bushels/acre --Net Benefits ($/acre)-90 2.52 5.69 3.24 110 2.27 5.57 3.12 130 2.09 5.47 3.02 150 1.95 5.29 2.84 170 1.85 5.37 2.92 190 1.76 5.17 2.72 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 8.29 13.24 20.21 30.87 46.69 110 9.04 15.10 23.62 36.64 55.97 130 9.79 16.96 27.03 42.41 65.25 150 10.54 18.82 30.44 48.18 74.53 170 11.29 20.68 33.85 53.95 83.81 190 12.04 22.54 37.26 59.72 93.09 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $14.88/acre is the region-specific average cost of treatment with insecticide in continuous corn. 66 Table B.11: Heartland: SBV Sub-Region (First-Year Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $13.28/acre bushels/acre --Root Rating Threshold-90 2.37 1.97 2.14 110 2.14 1.81 1.96 130 1.98 1.69 1.82 150 1.85 1.61 1.72 170 1.76 1.54 1.64 190 1.69 1.48 1.57 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $13.28//acre bushels/acre --Net Benefits ($/acre)-90 2.37 3.36 2.51 110 2.14 3.23 2.38 130 1.98 3.21 2.36 150 1.85 2.99 2.14 170 1.76 3.06 2.21 190 1.69 3.19 2.34 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 5.08 10.04 17.01 27.67 43.49 110 5.83 11.89 20.41 33.43 52.77 130 6.58 13.74 23.81 39.19 62.05 150 7.33 15.59 27.21 44.95 71.33 170 8.08 17.44 30.61 50.71 80.61 190 8.83 19.29 34.01 56.47 89.89 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $13.28/acre is the region-specific average cost of treatment with insecticide in first-year corn. 67 Table B.12: Heartland: EDV Sub-Region (Continuous Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $13.37/acre bushels/acre --Root Rating Threshold-90 2.38 1.97 2.04 110 2.15 1.81 1.87 130 1.99 1.69 1.74 150 1.86 1.61 1.65 170 1.77 1.54 1.58 190 1.69 1.48 1.52 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $13.37/acre bushels/acre --Net Benefits ($/acre)-90 2.38 5.97 5.03 110 2.15 5.86 4.92 130 1.99 5.87 4.93 150 1.86 5.67 4.73 170 1.77 5.77 4.83 190 1.69 5.65 4.71 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 5.26 10.22 17.19 27.84 43.66 110 6.01 12.07 20.59 33.61 52.95 130 6.76 13.92 23.99 39.38 62.24 150 7.51 15.77 27.39 45.15 71.53 170 8.26 17.62 30.79 50.92 80.82 190 9.01 19.47 34.19 56.69 90.11 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $13.37/acre is the region-specific average cost of treatment with insecticide in continuous corn. 68 Table B.13: Heartland: EDV Sub-Region (First-Year Corn) (a) Root Rating Thresholds as a Function of Untreated Yields CRW Control Technology Bt Corn Seed Premium Untreated Yield Insecticide $12.43/acre $12.23/acre bushels/acre --Root Rating Threshold-90 2.27 1.97 2.04 110 2.06 1.81 1.87 130 1.91 1.69 1.74 150 1.79 1.61 1.65 170 1.70 1.54 1.58 190 1.63 1.48 1.52 (b) Net Benefits per Acre of Bt Corn at Insecticide Threshold Root Rating Bt Corn Seed Premium Untreated Yield Root Rating $12.43/acre $12.23/acre bushels/acre --Net Benefits ($/acre)-90 2.27 4.31 4.51 110 2.06 4.27 4.47 130 1.91 4.25 4.45 150 1.79 4.08 4.28 170 1.70 4.00 4.20 190 1.63 3.98 4.18 (c) Net Benefits per Acre of Bt Corn Relative to Conventionally Treated Corn Root Damage Rating Untreated Yield 2 3 4 5 6 bushels/acre --Net Benefits ($/acre)-90 2.98 7.94 14.91 25.56 41.38 110 3.73 9.79 18.31 31.33 50.67 130 4.48 11.64 21.71 37.10 59.96 150 5.23 13.49 25.11 42.87 69.25 170 5.98 15.34 28.51 48.64 78.54 190 6.73 17.19 31.91 54.41 87.83 Notes: (a) $12.43/acre is the national average cost of treatment with insecticide in continuous corn. This value is also the assumed seed premium used in panel (c). (b) $12.23/acre is the region-specific average cost of treatment with insecticide in continuous corn. 69