3
Farm-Level Economic Impacts

As shown in Chapter 1, farmers growing soybean, cotton, and corn adopted genetically engineered (GE) varieties over the last decade on the majority of acres planted to these crops in the United States. Much smaller acreages were planted in 2009 to a few other GE crops, such as canola, sugar beet, squash, and papaya. The decision to plant GE crops has affected the economic circumstances not only of the adopting farmers but in some cases of farmers who chose not to adopt them. The economic effects on farmers who adopt GE crops span their production systems and marketing decisions. In this chapter, we discuss the potential yield effects, changes in overhead expenses and management requirements, and shifts in market access and value of sales. A wide array of studies conducted mostly during the first 5 years of adoption has provided evidence for assessing the overall economic implications for farmers (see Box 3-1). We also discuss here the economic effects of GE-crop use on livestock producers who use the crops for feed and on farmers who do not elect to use the technology. The chapter concludes by examining the economic implications of gene flow from GE crops to non-GE crops and weedy relatives.

ECONOMIC IMPACTS ON ADOPTERS OF GENETICALLY ENGINEERED CROPS

GE crops have affected the economic status of adopters in several ways. The use of GE crops has had an effect on yields and their risk-management decisions. Genetic-engineering technology has also changed



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3 Farm-Level Economic Impacts A s shown in Chapter 1, farmers growing soybean, cotton, and corn adopted genetically engineered (GE) varieties over the last decade on the majority of acres planted to these crops in the United States. Much smaller acreages were planted in 2009 to a few other GE crops, such as canola, sugar beet, squash, and papaya. The decision to plant GE crops has affected the economic circumstances not only of the adopting farmers but in some cases of farmers who chose not to adopt them. The economic effects on farmers who adopt GE crops span their production systems and marketing decisions. In this chapter, we discuss the potential yield effects, changes in overhead expenses and management requirements, and shifts in market access and value of sales. A wide array of studies conducted mostly during the first 5 years of adoption has provided evidence for assessing the overall economic implications for farmers (see Box 3-1). We also discuss here the economic effects of GE-crop use on livestock produc- ers who use the crops for feed and on farmers who do not elect to use the technology. The chapter concludes by examining the economic implica - tions of gene flow from GE crops to non-GE crops and weedy relatives. ECONOMIC IMPACTS ON ADOPTERS OF GENETICALLY ENGINEERED CROPS GE crops have affected the economic status of adopters in several ways. The use of GE crops has had an effect on yields and their risk- management decisions. Genetic-engineering technology has also changed 

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 THE IMPACT OF GE CROPS ON FARM SUSTAINABILITY BOX 3-1 Measuring Impacts To evaluate the economic impacts of GE crops on adopters and non- adopters, the committee relied on the results of empirical analyses of farmer surveys and market data. Studies were peer reviewed, but the research approach and methods varied considerably with each study’s purposes and data. Each study has its own strengths and limitations. For example, some studies may use a different guideline in judging the significance (i.e., confidence level) of factors affecting the adoption of GE crops compared to other studies. The committee could not make the various studies comparable and accepted each set of findings as valid evidence. Some of the general approaches used to estimate economic impacts are explained here. Empirical data. A comparison of means or averages is sometimes used to analyze results from experiments in which factors other than the item of interest are “controlled” by making them as similar as possible. For example, means of yield or pesticide use can be compared for two groups of soybean plots that are similar in soil type, rainfall, sunlight, and all other respects. One of the two groups is considered to have a treatment (e.g., soybean with a genetically engineered trait), and the other does not (e.g., conventional soy- bean). As an alternative to controlled experiments, the subjects that receive treatment and those that do not can be selected randomly with data collected through mail, phone, Internet, or personal surveys. Survey data. Caution must be exercised in interpreting the results obtained by analyzing the differences in means from data from “uncontrolled experiments,” such as farm surveys. Conditions other than the “treatment” are not equal across the farms surveyed. For example, differences between mean estimates for yield and pesticide use from survey results cannot necessarily be attributed to the use of GE seeds because the different results are influenced by many other factors which are not controlled, including irrigation, weather, soil, nutrient and pest-management practices, other cropping practices, opera- tor characteristics, and pest pressures. Moreover, farmers are not assigned randomly to the two groups (adopters and nonadopters) but make the adoption choices themselves. Therefore, adopters and nonadopters may be systematically different as groups, and these differences may manifest themselves in farm performance. They could be confounded with differences due to the adoption of GE crops (i.e., the treat- ment). This situation, called self-selection, would bias the statistical results unless it is recognized and corrected.

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 FARM-LEVEL ECONOMIC IMPACTS However, farmer surveys give a more accurate picture of the total farm- level economic effects of GE-crop adoption in terms of the secondary behav- ioral changes resulting from adoption (e.g., adoption of conservation tillage and changes in the timing of pesticide application). Moreover, it is rarely the case that a farmer would or could choose to adopt a GE cultivar to replace a non-GE cultivar that is an isoline or near-isoline, so relying on agronomic experimental data to measure the economic differences can be biased. Also, only farmer surveys can reveal the value of the changes in nonpecuniary characteristics that can occur with the adoption of GE cultivars. Social scientists often are able to statistically control for certain influencing factors for which there are data (apart from the GE-crop treatment) by using multiple regression techniques in econometric models. That is, differences in economic conditions and crop or management practices that also influence yield or other outcomes are held constant so that the effect of adoption can be isolated. For example, in research on GE crops, economists control for many factors, including output and input prices, pest infestation levels, farm size, operator characteristics, and management practices such as crop rotation and tillage. In addition, economists control for self-selection and simultaneity (of GE adoption and pesticide use decisions) using particular types of econometric models. To account for simultaneity of decisions and self-selectivity, a two-stage model may be used. The first stage consists of the adoption-decision model for GE crops. The second stage then uses the findings from the first stage to examine the impact of using GE crops on yield, farm profit, and pesticide use. The Counterfactual. Ideally, measuring the impact of a treatment requires the observation of the results that would emerge in the absence of the treat- ment: a counterfactual. Aside from controlled experiments, it is not possible to observe this counterfactual outcome. Rather, the counterfactual is inferred by methods such as those summarized above (e.g., controlling for all other influ- encing factors). Moreover, regarding environmental impacts, Ferraro (2009) argues that “elucidating casual relationships through counterfactual thinking and experimental or quasi-experimental designs is absolutely critical in envi- ronmental policy and that many opportunities for doing so exist.” The use of the two-stage estimation procedure to correct for selection bias exemplifies such a quasi-experimental design. However, Ferraro also admits that “not all environmental programs are amenable to experimental or quasi-experimental design.” In those cases, firm conclusions cannot be drawn about the causative factors inducing GE-crop adoption or other outcomes of interest.

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 THE IMPACT OF GE CROPS ON FARM SUSTAINABILITY farmers’ production expenses and altered their decisions related to time management. Furthermore, because of the widespread adoption of GE crops and their subsequent impact on yields, genetic-engineering technol- ogy has influenced the prices received by U.S. farmers. Yield Effects The first generation of GE varieties contains traits that control or facil- itate the control of pest damage. A starting point for analyzing the produc- tivity effect of such control is the damage-control framework (Lichtenberg and Zilberman, 1986) that was developed to estimate the effectiveness of the use of chemical pesticides and other pest-control activities. The framework recognizes that damage-control agents, like pesticides and GE traits for pest management, have an indirect effect on yield by reducing or facilitating the reduction of crop losses, in contrast with such inputs as fertilizers, capital, and labor, which affect yields directly. In particular, the framework assumes that effective yield = (potential yield)(1 – damage). Potential yield is defined as the yield that would be realized in the absence of damage caused by pests (i.e., weeds, insects).1 It is a function of production inputs, such as water and fertilizer, and of agroecological con- ditions and seed varieties. The yield actually observed is called effective yield and is equal to potential yield minus damage. Damage is affected by the pervasiveness of pests, which may be controlled with pesticides, the adoption of GE varieties, or other control activities. With that framework, the yield effects of GE varieties can be analyzed, but spatial, temporal, and varietal factors must be taken into consideration. Indirect Yield Effects The indirect yield effects of the use of insect-resistant (IR) crops are most pronounced in locations and years in which insect-pest pressures are high. For example, it is generally recognized that the adoption of Bt corn for European corn borer (Ostrinia nubilalis) control resulted in annual average yield gains across the United States of 5–10 percent (Falck-Zepeda et al., 2000b; Carpenter et al., 2002; Fernandez-Cornejo and McBride, 2002; Naseem and Pray, 2004; Fernandez-Cornejo and Li, 2005). Empirical 1 Damage may also be caused by weather conditions, such as wind, rain, drought, and frost. For succinctness and convenience here, the definition of damage is restricted to pest problems.

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 FARM-LEVEL ECONOMIC IMPACTS studies, however, have clearly indicated that the indirect yield effects of Bt corn hybrids for European corn borer control vary temporally and spatially. In years with high pressure—corn borer damage of more than one tunnel per plant that exceeds 2 inches in length (Baute et al., 2002; Dillehay et al., 2004)—the yield advantage for Bt hybrids relative to near- isolines2 was 5.5 percent in Pennsylvania and Maryland (Dillehay et al., 2004), 6.6 percent in Wisconsin (Stanger and Lauer, 2006), 8 percent in New Jersey and Delaware (Singer et al., 2003), 9.4 percent in Iowa (Traore et al., 2000), and 9.5 percent in South Dakota (Catangui and Berg, 2002). The yield advantage for Bt corn was negligible in those regions during years with low pest pressure (Traore et al., 2000; Catangui and Berg, 2002; Singer et al., 2003; Dillehay et al., 2004; Stanger and Lauer, 2006). Likewise, in regions where European corn borer is an occasional pest, there was no indirect yield advantage from the use of Bt hybrids in comparison to near- isolines (Cox and Cherney, 2001; Baute et al., 2002; Ma and Subedi, 2005; Cox et al., 2009). Most of the early empirical studies, however, included some Bt events3 that did not have season-long control of corn borer, and this may have muted the yield advantage of Bt hybrids (Traore et al., 2000; Catangui and Berg, 2002; Pilcher and Rice, 2003). There have been fewer empirical studies of the yield effects of Bt corn for control of corn rootworm (Diabrotica spp.) than of the effects of Bt corn for control of European corn borer. Rice (2004) estimated potential annual benefits if 10 million acres of Bt corn for corn rootworm control were planted. They included • Intangible benefits to farmers (safety because of reduced exposure to insecticides, ease and use of handling, and better pest control). • Tangible economic benefits to farmers ($231 million from yield gains). • Improved harvesting efficiency due to reduced stalk lodging. • Increased yield protection (9 to 28 percent relative to that in the absence of insecticide use and 1.5 to 4.5 percent relative to that with insec - ticide use). • Reduction in insecticide use (a decrease of about 5.5 million pounds of active ingredient per 10 million acres). 2 Near-isolines are cultivars that have the same or near genetic constitution (except for alleles at one or a few loci) as the original cultivar from which they were developed. Near- transgenic isolines that have similar genetic makeup except for the transgenic trait allow a comparison of the cultivar with or without the transgene for its agronomic, quality, or nutritional aspects. 3 Each seed company has different events associated with different insertion places of the Bt gene and different promoter genes that allow a Bt toxin to be produced at different times of the season or in different plant parts.

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0 THE IMPACT OF GE CROPS ON FARM SUSTAINABILITY • Increased resource conservation (about 5.5 million gallons of water not used in insecticide application). • Conservation of aviation fuel (about 70,000 gallons not used in insecticide application). • Reduced farm waste (about 1 million fewer insecticide containers used). • Increased planting efficiency. • Improved safety of wildlife and other nontarget organisms. A recent study by Ma et al. (2009) indicated spatial and temporal vari- ability in indirect yield responses. Bt corn rootworm hybrids produced yields 11–66 percent larger than untreated near-isoline hybrids. Bt yields were also larger than yields of the non-Bt hybrid variety planted on clay soils and treated with insecticide in 1 of 3 years that had high infestations of western corn rootworm (Diabrotica irgifera irgifera). On sandy soils, where corn rootworm infestations are typically much lower than on clay soils, yield differences also occurred between Bt corn rootworm hybrids and their near-isolines with or without the standard soil-applied insecti - cide treatment in 1 of 2 years. The study reported low levels of western corn rootworm on droughty sandy soil, however, and attributed yield increase to improved drought tolerance from the finer, longer fibrous roots of the Bt hybrid corn. Cox et al. (2009) found no yield advantage for corn hybrids with Bt rootworm control compared with near-isolines in a dry year when rootworm damage did not occur.4 Gray et al. (2007) expressed concern that one of the Bt corn rootworm events was somewhat susceptible to injury by a variant of western corn rootworm in Illinois. Another Bt corn rootworm event, however, had superior control of western corn rootworm larvae in Iowa, Illinois, and Indiana (Harrington, 2006); this suggests that distinct Bt events from dif - ferent seed companies may differ somewhat in corn rootworm control as they did initially in corn borer control. Cox et al. (2009) evaluated both Bt rootworm events on second-year corn in field-scale studies on four farms 4 As discussed in Chapter 1, all Bt rootworm corn hybrids are treated with a low level of insecticide and fungicide (typically a neonicotinoid). The low level (0.25 mg of active ingredient per seed) targets secondary pests but does not affect corn rootworm. In fields planted continuously with corn, the low level used with a soil-applied insecticide resulted in lower corn yields compared to a high level (1.25 mg of active ingredient per seed) with a soil-applied insecticide (Cox et al., 2007c). That is indirect evidence that the high level of seed-applied insecticide increases control of corn rootworm, but the low level does not. In addition, the low and high levels of seed-applied insecticides had no positive effects on corn grain (Cox et al., 2007b) or corn silage yields (Cox et al., 2007a) when following soybean, which suggests there is no yield enhancement of these seed-applied insecticides in the absence of pests.

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 FARM-LEVEL ECONOMIC IMPACTS in New York and found that neither rootworm event provided a yield advantage because rootworm occurrence was low in all fields. As with Bt corn for corn borer, Bt corn for rootworm control did not provide an indirect yield benefit in the absence of pest pressure. Piggott and Marra (2007), relying on 1999–2005 university field-trial data from North Carolina, found that Bt cotton with two endotoxins out-yielded conventional cotton by 128 more lbs of lint per acre (14 per- cent of average yield in the region) and out-yielded Bt cotton with one endotoxin by 80 lb/acre (8 percent of average regional yield). A study of Bt cotton varieties with two endotoxins in 13 southern locations that had mostly moderate to high infestations of cotton bollworm (Helicoerpa zea), with or without foliar-applied insecticides, showed that indirect yield effects had spatial variability. The Bt cotton cultivars without insec - ticide use provided consistent control of the Heliothines (cotton bollworm and tobacco budworm, Heliothis irescens), regardless of the magnitude of infestation (Siebert et al., 2008). Furthermore, supplemental insecti - cide applications to the Bt cotton cultivars rarely improved control of budworm and bollworm. In the low-infestation environments, however, the use of Bt cultivars with or without insecticides provided no yield improvement relative to the control of the non-Bt cultivar without insec - ticide application. In the moderate- to high-infestation environments, the Bt cultivars provided the same 30-percent yield increase in lint yield with or without insecticides compared with the control (Siebert et al., 2008). In a large-scale study of 81 commercial cotton fields conducted in 2002 and 2003, average yield did not differ among Bt cotton, Bt cotton resistant to glyphosate, and non-GE cotton (Cattaneo et al., 2006). However, after statistical control for variation in two factors significantly associated with yield (number of applications of synthetic insecticide and seeding rate), the yield of Bt cotton and Bt cotton with herbicide resistance was signifi- cantly larger (by 8.6 percent) than the yield of non-GE cotton. A total of eight GE cotton cultivars and 14 non-GE cultivars were included in the study. For those cultivars, it appears that Bt cotton (herbicide-resistant or not) would generally out-yield non-Bt cotton given similar production inputs and agronomic conditions. The indirect yield effects of herbicide-resistant (HR) crops generally may have less spatial and temporal variability because weeds are ubiq - uitous and cause yield losses in most situations. For example, the use of HR soybean with timely glyphosate application almost always achieves yield gains relative to production without weed control (Tharp and Kells, 1999; Corrigan and Harvey, 2000; Mulugeta and Boerboom, 2000; Wiesbrook et al., 2001; Knežević et al., 2003a, 2003b; Dalley et al., 2004; Scursoni et al., 2006; Bradley et al., 2007; Bradley and Sweets, 2008). Likewise, the use of HR corn and cotton varieties with timely glyphosate

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 THE IMPACT OF GE CROPS ON FARM SUSTAINABILITY application almost always results in yield increases (Culpepper and York, 1999; Johnson et al., 2000; Gower et al., 2002; Dalley et al., 2004; Richardson et al., 2004; Sikkema et al., 2004; Thomas et al., 2004; Cox et al., 2005; Myers et al., 2005; Sikkema et al., 2005; Cox et al., 2006; Thomas et al., 2007). Yield Lag and Yield Drag Despite properties that result in indirect yield benefits, some farmers observed a yield reduction when they first adopted HR varieties (Raymer and Grey, 2003). Indeed, shortly after the adoption of glyphosate-resistant soybean, university soybean trials reported lower yields of HR varieties (Oplinger et al., 1998; Nielsen, 2000). In a study that compared five HR varieties with five non-HR varieties in four locations in Nebraska, evi- dence of “yield lag” and “yield drag” was found (Elmore et al., 2001a, 2001b).5 A 5-percent yield lag was due to the difference in productivity potential between the older germplasm used to develop the HR varieties and the newer, higher yielding germplasm of the non-HR varieties. 6 A 5-percent yield drag resulted from the reduced production capacity of the soybean plant following the presence or insertion process of the HR gene (Elmore et al., 2001b). Although not as pronounced as in the Nebraska study, Bertram and Petersen (2004) also presented data that indicated a potential yield lag at one location in Wisconsin with the early HR soybean varieties. Fernandez-Cornejo et al. (2002b) reported that a national farm-level survey indicated that HR soybean showed a small advantage in yield over conventional soybean, probably because of better weed control. 5Yield lag is a reduction in yield resulting from the development time of cultivars with novel traits (in this case, glyphosate resistance and Bt). Because of the delay between the beginning of the development of a cultivar with a novel trait and its commercialization, the germplasm that is used has lower yield potential than the newer germplasm used in cultivars and hybrids developed in the interim. Consequently, the cultivars with novel traits have a tendency to initially yield lower than new elite cultivars without the novel traits. Over time, the yield lag usually disappears. Yield drag is a reduction in yield potential owing to the insertion or positional effect of a gene (along with cluster genes or promoters). This has been a common occurrence through - out the history of plant breeding when inserting different traits (e.g., quality, pest resistance, and quality characteristics). Frequently, the yield drag is eliminated over time as further cultivar development with the trait occurs. 6 During selection for a particular trait in a plant-breeding program, many other traits may also change. Such “correlated” changes may occur because a gene controls more than one trait (pleiotropy), because genes controlling two traits are in physical proximity on a chromosome (linkage), or because of random segregation (drift). The distinctions among the three causes are important because the solutions to them differ. Solutions may be necessary because some correlated changes are undesirable.

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 FARM-LEVEL ECONOMIC IMPACTS A national survey of soybean producers in 2002 found that there was no statistical difference in yield between conventional soybean and HR soybean (Marra et al., 2004). A mail survey of Delaware farmers in 2001 found that HR soybean had a 3-bushel/acre yield advantage (Bernard et al., 2004). The survey data and results of empirical studies in Wisconsin indicate that the use of more elite germplasm in variety development has probably eliminated the yield lag or yield drag associated with the use of HR varieties (Lauer, 2006). Similarly, early empirical studies of Bt corn hybrids indicated a poten- tial yield lag, as indicated by the lower yield of Bt hybrids than of new elite hybrids (Lauer and Wedberg, 1999; Cox and Cherney, 2001). How- ever, Bt hybrids yielded as well as or better than near-isolines (Lauer and Wedberg, 1999; Traore et al., 2000; Cox and Cherney, 2001; Baute et al., 2002; Dillehay et al., 2004), and this suggests that there was no yield drag or loss of yield because of the insertion of the Bt gene with the early Bt corn hybrids. Furthermore, whether a yield loss or a yield increase materializes for a GE crop depends on the particular farming situation. For exam - ple, in their comparison of HR corn hybrids with non-HR varieties, Thelan and Penner (2007) reported that in low-yield environments HR hybrids yielded 5 percent more than non-HR hybrids and in high-yield environments non-HR hybrids yielded about 2 percent more than HR hybrids. An early study of cotton (May and Murdock, 2002) that com - pared first-generation glyphosate-resistant cultivars with nonresistant cultivars showed no yield lag in glyphosate-resistant cultivars and a yield advantage of using glyphosate instead of the standard conven - tional soil-applied herbicides. The results of the study suggested that the use of soil-applied herbicides resulted in some type of injury to cotton, whereas glyphosate application before the fourth leaf stage did not. A study at nine locations across the United States (May et al., 2004) showed that one of Monsanto’s later glyphosate-resistant cotton lines provided even greater yield than the first-generation glyphosate-resistant cotton when glyphosate was applied from the fourth to the 14th leaf stage; this resulted in an agronomic advantage of the later technology. A 2002 U.S. Department of Agriculture (USDA) survey found that increases in cotton yields in the Southeast were associated with the adop - tion of HR cotton and Bt cotton in 1997: A 10-percent increase in HR- cotton acreage led to a 1.7-percent increase in yield and a 10-percent increase in Bt cotton acreage led to a 2.1-percent increase in yield if other productivity-influencing factors were constant (Fernandez-Cornejo and Caswell, 2006). It was noted above that most of the yield studies of GE versus non- GE crops conducted in the United States used data from the late 1990s

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 THE IMPACT OF GE CROPS ON FARM SUSTAINABILITY and early 2000s.7 Any yield differences between GE and non-GE varieties found during the first 5 years of adoption could have diminished as seed companies developed new IR and HR events. One reason for the lack of recent studies on yields may be that it is increasingly difficult to find suffi- cient data on non-GE varieties owing to the predominance of GE varieties in major crops (see Chapter 4). Improved Crop Quality and Risk Management Bt corn has been found to decrease concentration of the toxic chemi - cal aflatoxin (Wiatrak et al., 2005; Williams et al., 2005) and some other mycotoxins produced by fungi (fumonisins in particular) in the grain (Clements et al., 2003). In doing so, it decreases the risk of price dock - age to farmers because of poor crop quality and increases food safety for consumers. Bt crops also have reduced stalk lodging at harvest (Rice, 2004; Wu et al., 2005; Stanger and Lauer, 2006; Wu, 2006);8 this improves crop quality and increases harvest efficiency, thus reducing the farmers’ fuel and labor costs. A benefit of the use of HR soybean is that the pres - ence of foreign matter (such as weed seeds) in the harvested crop has greatly decreased (from 5-25 percent to 1-2 percent in the southeastern states) (Shaw and Bray, 2003), reducing the need for handlers to blend soybean with high foreign matter with soybean with lower foreign matter to improve the overall quality of the crop. The use of GE crops can also reduce agronomic risks for farmers. For example, in the case of HR crops, glyphosate breaks down quickly in the soil, removing the potential for the residual herbicide to injure a suc - ceeding crop (Scursoni et al., 2006). Additionally, some Bt varieties may improve drought tolerance (Wilson et al., 2005). Empirical studies have not documented that the use of Bt corn for corn borer provides a yield benefit in the presence of drought (Traore et al., 2000; Dillehay et al., 2004; Ma et al., 2005), but Ma et al. (2009) found in an empirical study on Bt corn for corn rootworm that in a drought year on sandy soil, the Bt corn rootworm hybrid yielded 10 percent more than the near-isoline. The roots of the Bt corn rootworm hybrids were longer and more dense than those of the non-GE hybrid because the Bt trait kills the below-ground larvae that feed on the roots of the corn plant. Ma et al. (2009) speculated that Bt 7 More recent data from field trials are available but have not been published in peer- reviewed literature. 8 Stalk lodging is the permanent displacement of the stems of crops from their upright position, resulting in a crop that either leans or can be prostrate. A mildly lodged crop results in only a slight slowdown of harvest, whereas a severely lodged crop greatly slows down harvest (in some instances the crop can only be harvested in one direction, further reducing harvesting efficiency).

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 FARM-LEVEL ECONOMIC IMPACTS corn rootworm hybrids may have more drought tolerance than standard hybrids in drought years because the root system is more intact and there- fore capable of taking up more water. Such risk reduction may explain in part farmers’ motivation to adopt these GE crops. A related risk posed by adoption of Bt corn in northern latitudes, however, is the potential for higher grain moisture at harvest because of improved plant health, which increases drying costs or delays harvest (Pilcher and Rice, 2003; Dillehay et al., 2004; Ma and Subedi, 2005; Cox et al., 2009). Because GE crops have the ability to reduce yield loss, adopting farmers also have different insurance options for managing risk. In 2007, Monsanto developed a submission to the USDA Federal Crop Insurance Corporation for a new crop-insurance endorsement for corn that contains three traits: a Bt toxin that controls corn borer, one that controls corn rootworm, and herbicide resistance.9 The submission proposed a premium-rate discount for those hybrids based on several thousand on-farm field trials conducted over several years in the Corn Belt states of Illinois, Indiana, Iowa, and Minnesota. The trials demonstrated the yield and yield-risk reduction advantages of the hybrids compared with conventional or single-trait HR hybrids and showed that the current premium rates were no longer actuarially appropriate. A lower insurance premium became available in the 2008 crop year to farmers who adopted the triple-stacked hybrids. The rate discount was applied to the yield portion of the premium for actual production history of the field and based policies on crop-insurance units in which at least 75 percent of the acreage was planted to qualifying corn hybrids. The average premium-rate discount was 13 percent in 2008, or about $3.00/acre. Comparable triple-stacked hybrids from seed companies Dupont/ Pioneer and Syngenta were approved for inclusion in the program for the 2009 crop year, and the premium-rate discount applies to all three companies’ and licensees’ seed brands that contain at least the above- mentioned traits for dryland corn in at least a subset of 13 Midwest states and irrigated corn in Kansas and Nebraska. This is the first approved crop-insurance innovation that has resulted in reduced premium rates, and it provides a saving for farmers and reduces the need for premium subsidies by the federal government. Cox et al. (2009), however, found no consistent yield or economic advantage for triple-stacked hybrids compared to double-stacked hybrids from both companies in second- year corn in New York, despite one of the years being dry and warm. In both years, corn rootworm damage was low, and corn borer damage was sporadic across locations. 9 These products are marketed by Monsanto as YieldGard® Plus, Roundup Ready 2®, and YieldGard VT Triple® hybrids.

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