FIGURE A.1 Trends in real (constant dollar) seed and pesticide sales, 1959-1997 Source: Economic Research Service (1999b).

into a number of crops and crop varieties to obtain desired common characteristics (such as the resistance to lepidopteran insects provided by genes that express Bacillus thuringiensis (Bt) toxins). Discovering novel genes can cost millions, while inserting the genes into germplasm can cost $10,000-200,000 per gene, depending on the crop.2 Once a gene has been introduced into a crop line, however, it can be bred into many varieties at no additional cost beyond the normal cost of breeding a new variety. Companies offering a larger number of varieties of a single crop can thus reap economies of scale from a line that contains a gene of interest. Possession of a novel gene, and the specialized knowledge obtained from developing it and breeding it into crops, can lower the cost of inserting the gene into new crops and breeding varieties from the original germplasm. Thus, companies that sell seeds for a large number of crops can reap economies of scope. Furthermore, plant breeding offers new product areas in which to apply proprietary genetic-engineering methods and general expertise derived from pharmaceutical development (that is, economies of scope in the use of human capital and equipment).

Second, genetic engineering may also allow agrichemical firms to


Information for estimating the costs of breeding new varieties was obtained from conversations with the following people and their cooperation is greatly appreciated. However, the author is solely responsible for the final estimates.

Carlos Quiros, University of California at Davis (celery)

Walt Fehr, Iowa State University, James Orf, University of Minnesota and Bill Kenworthy, University of Maryland (soybeans)

Deon Stuthman and Don Rasmussen, University of Minnesota (small grains)

Stephen Baenziger, University of Nebraska (wheat)

Harry Swarz, University of Maryland (small fruits).

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