A Composed-Error Model for Estimating Pest-Damage Functions and the Impact of the Western Corn Rootworm Soybean Variant in Illinois

We describe a composed-error model for estimating pest-damage functions. The composed-error model, originally developed to account for statistical noise when estimating technical efficiency, removes the effect of experimental errors when estimating the variance of yield loss from pest damage. As a result, the estimated variance of yield loss is often less than for a conventional model, which has economic implications when the analysis incorporates risk aversion. We find that, depending on the level of risk aversion, the western corn rootworm soybean variant reduces farmer certainty-equivalent returns 16–26% more with a conventional model than with the composed-error model.     

Technological change and risk management: an application to the economics of corn production

The paper investigates the linkages between technological change and production risk, with an application to corn. The effects of technology on risk exposure are analyzed. We define technological progress to be risk‐increasing (risk‐decreasing) if it increases (decreases) the relative risk premium. The analysis is applied to panel data from Wisconsin research stations. Conditional moments (including mean, variance and skewness) of corn yield, grain moisture and corn profit are estimated for different sites. We investigate how the trade‐off between expected return and the risk premium varies over time and over space. The empirical results indicate that technological progress contributes to reducing the exposure to risk as well as downside risk in corn production, although this effect varies across sites. They also stress the role of the relative maturity of corn hybrids as a means of managing risk.     

Bias from Farmer Self‐Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm‐level yield gains from GM crop adoption. Yet most farm‐level studies in the literature do not control for farmer self‐selection, a potentially important source of bias in such estimates. We use farm‐level panel data from Indian cotton farmers to investigate the yield effect of GM insect‐resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self‐selection. A production function is estimated using a fixed‐effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross‐sectional estimates of the yield effect of Bt cotton, which do not control for self‐selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.     

Stakeholder views on issues to consider when assessing the sustainability of genetically modified potato

The importance of assessing socio-economic and sustainability aspects of genetically modified (GM) crops is increasingly recognized by policy-makers, both within the EU and internationally. Nevertheless, experience has shown that it is challenging to assess and implement these aspects in actual decision-making processes. This paper argues that stakeholder engagement may provide valuable insights when developing frameworks for sustainability assessment of GM crops. We organized two stakeholder workshops with the aim to gather perspectives on the sustainability of cultivating late blight resistant (LBR) GM potato in Norway. Sixteen Norwegian stakeholders involved in potato production and in agriculture in general took part in the workshops. Here, we present and discuss the outcomes of this participatory approach. The stakeholders identified several conditions that an LBR GM potato ought to satisfy in order to contribute to sustainable development. These conditions concerned environmental and health safety aspects of cultivating LBR GM potato, potential for fungicide reductions, durability of the LBR GM potato plant's resistance, farmers' profitability and consumer acceptance. In addition, the stakeholders considered issues such as maintenance of a diversity of potato cultivars, transparency during product development and risk assessment processes, ownership and control and opportunity for independent risk research as important considerations in a sustainability assessment. While focusing on a specific application of agricultural biotechnology, we believe that these findings are useful contributions to the ongoing efforts to develop frameworks and guidelines for assessing sustainability and socio-economic considerations of GM crops in general.     

Adverse Shocks in Agriculture: The Assessment and Management of Downside Risk

This paper investigates the assessment and effects of adverse shocks on agricultural production, with an application to corn yield. Adverse shocks are assessed by the probability of facing low yields, i.e. by the probability of being exposed to downside risk. Defined in terms of willingness‐to‐pay to eliminate risk, the ex‐ante cost of facing adverse events is evaluated under prospect theory. Prospect theory is relevant in the evaluation of adverse shocks as it identifies a role for both loss aversion and oversensitivity to low probability events. The analysis is applied to experimental data on corn yield in the US Corn Belt. Estimates show how the distribution of corn yield is affected by management and technology. Implications for the cost of adverse shocks are examined. The results show how management and technology can reduce exposure to adverse shocks and lower the cost of risk in agriculture.     

Is Bt Cotton a Pro‐Poor Technology? A Review and Critique of the Empirical Record

Policy makers, journalists and other commentators have hailed genetically modified (GM) crops as a ‘pro‐poor’ success in the developing world. Their confidence appears to be justified by the encouraging conclusions reached by academic studies on the performance and impacts of GM crops, which seem to provide convincing evidence of substantial benefits for smallholders in developing countries. However, a detailed, critical examination of studies on transgenic, insect‐resistant cotton in China, India and South Africa demonstrates that the technology's impacts have been evaluated and represented in selective and misleading ways. The performance and impacts of GM crops have in fact been highly variable, socio‐economically differentiated and contingent on a range of agronomic, socio‐economic and institutional factors. The shortcomings of the GM crop‐impacts literature have done a disservice to public and policy debates about GM crops in international development and impeded the development of sound, evidence‐based policy.     

Consumers’ Response to Genetically Modified Ingredients in Processed Food in an Emerging Economy

Genetically modified (GM) foods are available in many countries including post–Soviet Union countries. However, empirical evidence on consumer acceptance for this region is scarce. In this study, we investigate consumers’ willingness to purchase a processed food containing GM ingredients. For this purpose, a consumer survey was conducted in 2015 in Tajikistan. In many aspects, our results confirm previous empirical findings showing that women are more skeptical toward GM food and a higher level of respondents’ education and the presence of minors in households are negatively correlated with their willingness to purchase a processed food containing GM ingredients. Moreover, a higher risk perception of GM food is negatively associated with the probability to purchase and consume such foods. However, our results indicate that risk perceptions of GM food seem to be relatively low in comparison to other studies with 41.5% of Tajik respondents connecting no risks with GM food. This result is surprising given the existing knowledge about post–Soviet Union consumers who are usually assumed to reject GM food due to their strong focus on naturalness.     

EU and US Regulations for Handling and Transporting Genetically Modified Grains: Are Both Positions Correct?

Differences in the way GM grains are treated in the US and the EU motivate the question of whether there is a single correct policy towards identification of such products. This issue is addressed here, based on a mathematical model that assumes that the cost of maintaining identity on non-GM markets is borne by the non-GM industry. The economic welfare impacts of introducing GM technology depend on the levels of consumer concern and production cost savings, and the cost of maintaining non-GM grain identity. The introduction of a new cost-reducing GM technology often increases total welfare as one might expect. However, society loses when GM production cost-savings are small and consumers are highly concerned about GM grain because introducing GM technology creates a need to preserve the identity of non-GM grain. Taken together, the results suggest that the US may have maximized welfare by not requiring labeling of GM corn and soybeans, and that the recently approved EU legislation enforcing labeling of GM crops also makes sense in the EU. The reason for this is that consumer concern in the EU appears to be greater than in the US, and fewer EU producers stand to benefit from cost savings in GM corn and soybean production.     

Matching Supply and Demand: The Value of a Second Chance in Producing Seed Corn

This paper analyzes the supply chain for hybrid seed corn in which there are two sequential production periods with random yields before demand occurs. We show that the problem of managing the supply chain can be viewed as a multiperiod optimization model that is easily solved. By examining data that represents actual costs, prices, and yields encountered in the seed corn industry, we gain some insight into the value that the second production period provides. Using a representative sample of hybrids from a major seed corn producer, we show that margins could be enhanced considerably by using the model.     

Differentiating the consumer benefits from labeling of GM food products

Although recurrent evidence is found that consumers have different willingness to pay for GM and non-GM products, there is disagreement in the scientific community about the size of consumer benefits from GM labeling. In this article we use a theoretical model based on a standard constant elasticity of substitution (CES) to explain the importance of the quality effect. It is shown that failing to consider the quality effect may yield an overestimation of benefits from GM labeling, voluntary or mandatory.     

Risk,learning, and technology adoption

This article explores how decision makers learn and use information, with an application to the adoption of biotechnology in agriculture. The empirical analysis relies on experimental and survey data measuring risk preferences, learning processes, and the adoption of genetically modified (GM) seeds among U.S. grain farmers. While controlling for risk aversion, we link individual learning rules with the cognitive abilities of each decision maker and their actual GM adoption decisions. We find evidence that very few individuals are Bayesian learners, and that the population of farmers is quite heterogeneous in terms of learning rules. This suggests that Bayesian learning (as commonly assumed in the analysis of agricultural technology adoption) is not an appropriate characterization. In addition, we do not find a strong relationship between observed learning styles and the timing of GM seed adoption. To the extent that learning is a key part of the process of technology adoption, this suggests the presence of much unobserved heterogeneity in learning among farmers.     

Do they always say no? German consumers and second‐generation GM foods

European consumers and, in particular, German consumers are known to be very critical toward the introduction of genetically modified (GM) foods. It is analyzed here whether German consumers do reject second-generation GM foods, too. Whereas first-generation GM crops induced producer-related benefits, second-generation GM crops are associated with consumer-oriented benefits like an improvement of nutritional quality. The determinants of demand for second-generation GM rapeseed oil are investigated within an online survey of 1,556 German consumers. It is elaborated how two functional properties of the product matter; that is, long-chain omega-3 fatty acids and the cholesterol-lowering effect of phytosterols. It turns out that GM rapeseed oil is neglected by 74% of all respondents. Output traits, however, will increase the probability of purchases of GM rapeseed oil. This is more the case for long-chain omega-3 fatty acids than for phytosterols.     

The economic impacts of technology and climate change: New evidence from U.S. corn yields

Over the past century, U.S. farmers have been offered a steady stream of new agricultural technologies, and more recently, experienced climate change. Because these two events have been occurring simultaneously, identifying their separate effects is difficult, and misimputation is easy. This article explicitly examines the economics of technical change and the interaction between weather and technology as revealed in a half century of panel data on U.S. Midwest rainfed state‐average corn yields. Observed yields reflect two components: yield potential and damage to the potential caused by weather and pests. Yield potential is modeled as a stochastic production frontier where nitrogen fertilization, public corn research, and introduction and adoption of biotech corn seeds impact yield potential and excess heat impacts nitrogen productivity. The yield‐damage/damage‐control function permits biotech corn plants to abate adverse effects of weather and pest events. Results include the following: nitrogen use, public corn research, and biotech seed‐corn adoption increase yield potential; soil moisture stress reduces yield potential, and excess heat severely reduces nitrogen productivity. Biotech corn plants abate yield damage caused by soil moisture stress but not excess heat.     

Which farmers benefit the most from Bt corn adoption? Estimating heterogeneity effects in the Philippines

The potential contributions of new biotechnologies to sustainable food and income security have been the subject of widespread discussions around the turn of the 21st century. But distributional issues of which segments of adopters of genetically modified (GM) crops benefit the most have not been given ample attention). Using propensity scores, we apply the (a) stratification‐multilevel method of estimating heterogeneous treatment effects; and the (b) matching‐smoothing method of estimating heterogeneous treatment effects proposed by Xie et al. We find that the incidence of higher yields, lower insecticide use, and reduced seed utilization in the Philippines diminishes progressively as a farmer's propensity to adopt Bt corn increases. Farmers with a low propensity to adopt Bt are those who farm smaller, nonirrigated farms located farther from seed suppliers and farmers without previous training on pest identification. In most cases, while these farmers are typically poorer farmers in smaller parcels, cannot afford irrigation and are situated in remote areas away from easily accessible seed suppliers, there is no evidence, however, that profits differ across farmers with varying propensities to adopt the Bt variety.     

An analysis of bundle pricing in horizontal and vertical markets: The case of the U.S. cottonseed market

The U.S. cottonseed market has seen the rapid development and adoption of seeds with differing bundles of genetically modified (GM) traits. It has also seen an increase in vertical integration by biotechnology firms. In this article, we investigate the price impacts associated with structural changes in the U.S. cottonseed market from 2002 to 2007. We develop a structural model to examine the substitution/complementarity relationships among cottonseeds sold with different genetic trait bundles and under different vertical arrangements. We examine the price impacts emanating from product differentiation, market concentration, and market size. The econometric investigation finds evidence of subadditive bundle pricing in patented biotech traits. While higher own‐market concentrations are found to be associated with higher prices, we also uncover evidence of cross‐product complementarity effects that lead to lower prices. Simulations are used to evaluate net price effects, illustrating the usefulness of the approach in the analysis of changing market structures.     

Comment on sustainability and innovation in staple crop production in the US Midwest

This comment highlight issues when comparing genetically modified (GM) crops to non-GM ones across countries. Ignoring structural differences between agricultural sectors and assuming common yield trajectories before the time of introduction of GM crops results on misestimating the effect of GM varieties. Further data collection and analyses should guide policy-makers to encourage diverse approaches to agriculture, rather than excluding specific technologies (like GM crops) from the onset.     

Perceptions of the risks and benefits of genetically-modified foods and their influence on willingness to consume

There has been debate in the literature as to whether: (1) the risks and benefits of genetically-modified (GM) food and agriculture are considered and determined by individuals separately or whether they are jointly determined by attitudes; (2) consumer acceptance is determined by individuals weighing up their risk and benefit perceptions in a rational, even-handed manner, or if benefit perceptions are more important than risk perceptions, and (3) certain types of risk and benefit are more important than others. Against this background, this paper assesses the categories of risks and benefits and their relative importance in determining willingness to consume. A survey was carried out to collect data on the categories of risks and benefits in the US, UK and France, and the relative importance of selected perceived risk and benefit dimensions was estimated. The findings show: risk and benefit perceptions are negatively correlated, but not perfectly and, given that regressions we performed support the proposition that benefits are more important than risks in determining willingness to consume, a strong case can be made for measuring risks and benefits separately. Almost 2/3 of consumers perceive medium to high potential benefits from GM, though the proportion is slightly lower in the UK and down to 40% in France. Nevertheless, this suggests a much higher level of support for the technology than is normally assumed. From the study, benefits are more important for consumers' willingness to consume than perceived risks, and slightly more interviewees scored above than below the mean on willingness to consume GM food.     

Is Site-Specific Yield Response Consistent over Time? Does It Pay?

This study examines the profitability and stability of site-specific (SS) nitrogen fertilizer recommendations using an empirical model of SS yield response to controlled inputs, stable site characteristics, and time-varying weather factors. Using a three-year panel of on-farm corn yield experiments and new, continuous variables to describe site characteristics, both spatial and ordinary least squares regression models show clear evidence of SS corn yield response to nitrogen fertilizer. Yield response is predictable only on irrigated fields. Even there, bootstrapped confidence intervals for profitability gains on selected fields indicate that SS nitrogen application would rarely cover its costs.     

A latent class approach to investigating demand for genetically modified banana in Uganda

This study explores consumer acceptance and valuation of a genetically modified (GM) staple food crop in a developing country prior to its commercialization. We focus on the hypothetical introduction of a disease‐resistant GM banana variety in Uganda, where bananas are among the most important staple crops. A choice experiment is used to investigate consumer preferences for various attributes related to the banana (such as bunch size, technology, producer benefit, and price) and examine their opinions on GM foodstuff. Choice data come from 421 banana‐consuming households randomly selected from three regions of Uganda. A latent class model is used to investigate the heterogeneity in consumers’ preferences for selected attributes related to the banana and to profile consumers who are more or less likely to accept GM bananas. Our results reveal that there is significant heterogeneity in consumer preferences across our sample. GM bananas are valued the most by poorer households located in the rural areas of the Eastern region. These food‐insecure households would experience the highest benefits (i.e., welfare gains) from the commercial release of GM bananas. In contrast, urban consumers are less accepting of GM bananas, and they would experience significant welfare losses if GM banana is released. According to our welfare estimates, both the total welfare benefits acquired by the gainers and the total welfare losses borne by the losers of this technology are significant and large. These results suggest the need for further investigation of the overall welfare effects of the introduction of GM bananas on the Ugandan society as a whole.     

An analysis of bundle pricing: the case of biotech seeds

Biotechnology has provided opportunities for strategic management and pricing of patented products. This article analyzes the economics and strategy of bundling and bundle pricing of biotech traits in seeds. When the bundling of genes/traits is decided by biotech firms, firms may choose among subadditive pricing, component pricing, or superadditive pricing strategies. We argue that complementarity among component genes contributes to subadditive pricing, while substitution among components contributes to superadditive pricing. The nature of bundle pricing is explored empirically using U.S. seed corn data from 2000 to 2007. We document that subadditive bundle pricing of traits is commonly found in the seed corn market. However, we also present evidence of superadditive pricing and component pricing. The presence of different pricing and bundling strategies suggests a rapidly advancing and complex market. The preponderance of subadditive pricing suggests that trait bundling offers benefits to farmers exhibiting strong demand for multiple complementary genetic traits.