Why US Farmers adopt GM Biotech Crops.

Biotechnology and Agriculture
Jorge Fernandez-Cornejo

Farmers adopting first-generation genetically engineered (GE) crops derive tangible benefits, even though not all benefits are reflected in standard measures of net returns. The impacts of GE crops vary with annual pest infestations, seed premiums, prices of alternative pest control programs, and any premiums paid for segregated (i.e., non-GE) crops...

Main Reasons Stated by U.S. Farmers for Adopting GE Crops
According to surveys conducted by USDA in 2001-03, most farmers (59-79 percent) adopting GE corn, cotton, and soybeans indicated that they did so mainly to “increase yields through improved pest control” (fig. 3.3.2). The second most cited aim was to “save management time and make other practices easier” (15 to 26 percent, except for Bt corn, which was much lower); the third reason was to “to decrease pesticide costs” (9-17 percent of adopters). All other reasons combined accounted for 3-7 percent of adopters.
Hence, factors expected to increase economic profitability by increasing revenues per acre (yield times price of the crop) or reducing costs (operator labor, pesticides) are expected to promote adoption most.

Adoption, Net Returns, and Household Income
According to an ERS study, the impacts of GE crop adoption on U.S. farmers vary by crop and technology (Fernandez-Cornejo and McBride, 2002, pp. 20-25). The main results of the ERS study are presented below.

• Planting HT cotton and corn was associated with increased producer net returns, but HT corn acreage was limited. The limited acreage on which herbicide-tolerant corn has been used is likely to be acreage with the greatest comparative advantage for this technology. The positive financial impact of adoption may also be due to seed companies’ setting low premiums for herbicide-tolerant corn relative to conventional varieties in an attempt to expand market share. Limited adoption of HT corn may be due to constraints imposed on rotation with soybeans. Also, some HT corn varieties have limited approval outside the U.S., restricting their export market potential.
• Adoption of Bt cotton and corn was associated with increased returns when pest pressures were high enough. The adoption of Bt cotton had a positive association with producer net returns in 1997, but the association was negative for Bt corn in 1998. This suggests that Bt corn may have been used on some acreage where the value of protection against the European corn borer (ECB) was lower than the premium paid for the Bt seed. Because pest infestations differ across the country, the economic benefits of Bt corn are likely to be greatest where target pest pressures are most severe. The decision to use Bt corn must be made before observing the ECB pest pressure, and damage caused by the ECB varies from year to year. Some farmers may incorrectly forecast infestation levels, corn prices, and yield losses due to infestations, resulting in “overadoption.” Also, producers may be willing to pay a premium for Bt corn because it reduces the risk of significant losses if higher-than-expected pest damage does occur.
• Despite the rapid adoption of HT soybeans by U.S. farmers, no significant impact on net farm returns was evident in 1997 or 1998.
• This lack of profitability suggests that other factors may be driving adoption for many adopters, such as the simplicity and flexibility (less management time) of weed control. This implies more time available to off-farm employment by farm operators and their spouses. (On average, off-farm earned income is more than twice the net income earned from farming.)
• Recent ERS research using 2000 data showed that adoption of HT soybeans was associated with significantly higher off-farm household income for U.S. soybean farmers. Onfarm household income was not significantly related to adoption, but total farm household income is significantly higher for adopters.

Agricultural Resources and Environmental Indicators, 2006 Edition
USDA ERS, Chapter 3.3

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