Truth: Economic impacts of GM crops on farmers are mixed and depend on many factors

Myth at a glance

The economic impacts of GM crops on farmers are variable and depend on complex factors.

Well-controlled studies giving reliable data are rare.

Consolidation in the seed market has led to steep increases in the price of GM seed as compared with non-GM seed.

The question of economic impacts of GM crops on farmers is complex and a thorough examination is beyond the scope of this report. Results vary and depend on many factors, including:

  • The crops and agricultural practices that the adoption of the GM crop is being compared with (for example, subsistence farming, or high-yielding non-GM varieties of the same crop).
  • GM crop adopter and non-adopter characteristics, as described by Fernandez-Cornejo and colleagues in a report for the US Department of Agriculture. The authors explain that these two populations cannot be compared in a controlled scientific manner from survey data, since adopters and non-adopters may be systematically different from each other – for example, in management ability.1 Glenn Davis Stone noted that this same confounding factor applies to some studies claiming economic benefits to farmers in India who adopted GM Bt cotton.2
  • Cultivation bias, which Stone defines as resulting from seeds that are relatively costly, or for which the farmer has high expectations, being planted in preferred locations and given greater care and expense than other seeds. Stone found that this applied to GM Bt cotton in India and has not been properly controlled for in many studies on the economic impacts of the crop.2

Additional factors affecting economic impacts include:

  • Suitability of the crop for local conditions
  • Access to irrigation
  • Climate
  • Cost of seed
  • Pest and disease prevalence
  • Cost of weed and pest management
  • Subsidies and incentives offered by governments or corporations
  • Availability of markets for the crop.

The following studies give an overview of the issue.

Fernandez-Cornejo and colleagues (2014)

This report on the adoption of GM crops in the US concluded, “The profitability of GE seeds for individual farmers depends largely on the value of the yield losses mitigated and the associated pesticide and seed costs. GE adoption tends to increase net returns if the value of yield losses mitigated plus the pesticide savings exceeds the additional GE seed costs… The impacts of GE crop adoption vary by crop and technology. Most studies show that adoption of Bt cotton and Bt corn is associated with increased net returns… However, some studies of Bt corn show that profitability is strongly dependent on pest infestation levels. The impact of HT seeds (for corn, cotton, and soybeans) on net returns depends on many factors.”1

Fernandez-Cornejo and McBride (2002)

This report on farm-level economic impacts of adopting GM crops found that they were “mixed or even negative”. The report, mostly based on data from USDA surveys, found that adoption of herbicide-tolerant maize had a positive effect on net returns, but the effect was negative for Bt maize. GM soybeans had no effect either way.3

Gómez-Barbero and Rodríguez-Cerezo (2006)

This review for the European Commission of the economic impact of the main GM crops worldwide found that herbicide-tolerant soybeans had a negative effect on US farmers’ income. But the same crop brought income gains to Argentine farmers, due to lower prices for GM seed in that country.4

Why do US farmers adopt GM soy if it brings no financial gain? The authors suggested that the reason may be simpler weed control,4 though the data cited to back up this claim pre-date the explosion of herbicide-resistant superweeds that have caused management challenges for farmers (see Myth 5.2).

The review found that GM Bt cotton in China had produced economic gains for farmers, mostly because of reduced expenditure on pesticide sprays. GM Bt cotton in India was claimed to provide economic benefits, though with considerable “local variability”.4

However, many studies on GM Bt cotton in India suffer from the confounder of uncontrolled-for GM crop adopter/non-adopter variables described by Fernandez-Cornejo1 and Stone2 and from the cultivation bias described by Stone.2

In addition, many of these studies were carried out before the full impact of pest resistance and emergence of secondary pests had been experienced by Chinese and Indian farmers (see Myth 5.3).

“Farm financial impacts [of adopting GM crops] appear to be mixed or even negative.”
– J. Fernandez-Cornejo, W. D. McBride, “The adoption of bioengineered crops”, US Department of Agriculture3

Morse and colleagues (2005)

This study found that GM Bt cotton in India produced better profit margins for farmers than non-GM cotton. However, the authors pointed out that these benefits will only be sustained if pests do not evolve resistance to Bt cotton.5 Recent studies suggest that they are already evolving resistance (see Myth 5.3). These findings appear to be confirmed by a leaked advisory from the Indian government that blamed the failure of GM Bt cotton for the spate of farmer suicides across the subcontinent. The advisory stated, “Cotton farmers are in a deep crisis since shifting to Bt cotton. The spate of farmer suicides in 2011–12 has been particularly severe among Bt cotton farmers.” The advisory said that Bt cotton’s success had only lasted five years. Since then, yields had fallen and pest attacks had increased: “In fact cost of cotton cultivation has jumped… due to rising costs of pesticides. Total GM Bt cotton production in the last five years has reduced.”6

Importance of information that is independent of industry

Some who claim that GM crops bring economic benefits to farmers cite upbeat reports written by Graham Brookes and Peter Barfoot, the directors of a private consultancy firm called PG Economics, which has GM and agrochemical firms as its primary clients.7 Generally, PG Economics’ reports are commissioned by GM firms or industry lobby groups such as Agricultural Biotechnology in Europe,8the membership of which consists of GM seed companies.9

Agronomist Dr Charles Benbrook has published a detailed critique of what he termed PG Economics’ “creative – and highly questionable – methodological strategies” in calculating pesticide use on GM crops. These strategies included using data from partly or entirely industry-sponsored sources in preference to widely accepted data from the US government and projecting an increase in the total rate of herbicide application on non-GM crop acres, despite the trend in favour of low-dose herbicides.10

Most of PG Economics’ reports are not peer-reviewed and rely heavily on industry data. Some are published in a peer-reviewed journal – the Journal of Agrobiotechnology Management & Economics,11 otherwise known as AgBioForum.12 AgBioForum is funded by the Illinois-Missouri Biotechnology Alliance (IMBA).13 The IMBA states that its purpose is “to fund biotechnology research… directed at expanding the volume of profitable businesses in the US food and agricultural sector”.14 The IMBA has been funded since 1997 by the US Department of Agriculture. Its grant-funded status was obtained with the help of Richard Mahoney, who was at the time the CEO of Monsanto.15

Rising cost of GM seed and decreased seed choice

An important factor in assessing the economic impact of GM crops is the cost of seed. In the US, where GM firms dominate the seed market, a 2009 report documented that prices for GM seeds increased dramatically compared with prices for non-GM and organic seeds. This cut average farm incomes for US farmers growing GM crops. The $70 per bag price set for RR2 soybeans for 2010 was twice the cost of conventional seed and reflected a 143% increase in the price of GM seed since 2001.16

Farmers have little choice but to tolerate such price hikes because of consolidation within the seed industry. In other words, the GM industry dictates which seed varieties are available. In 2008, 85% of GM maize patents and 70% of non-maize GM plant patents in the US were owned by the top three seed companies: Monsanto, DuPont, and Syngenta. Even these three companies are not independent of each other but increasingly network to cross-license GM seed traits.17

The largest of the big three companies is Monsanto. In 2010 Monsanto raised its prices for its RR2 soybeans and SmartStax maize seeds so steeply that the US Department of Justice launched (but never completed) an investigation into the consolidation of agribusiness firms that has led to anti-competitive pricing and monopolistic practices. Farmers actively gave evidence against Monsanto and other seed companies.18,19

Conclusion

The economic impacts of GM crops on farmers are variable and depend on complex factors. Well-controlled studies giving reliable data are rare. However, consolidation in the seed market has led to steep increases in the price of GM seed as compared with non-GM seed.

References

  1. Fernandez-Cornejo J, Wechsler S, Livingston M, Mitchell L. Genetically engineered crops in the United States. Washington, DC: US Department of Agriculture; 2014. Available at: http://www.ers.usda.gov/publications/err-economic-research-report/err162.aspx#.U0P_qMfc26x.
  2. Stone GD. Constructing facts: Bt cotton narratives in India. Econ Polit Wkly. 2012;47(38):62-70.
  3. Fernandez-Cornejo J, McBride WD. The adoption of bioengineered crops. Agricultural Economic Report No. 810. Washington, DC: US Department of Agriculture; 2002. Available at: http://www.ers.usda.gov/publications/aer810/aer810.pdf.
  4. Gómez-Barbero M, Rodríguez-Cerezo E. Economic impact of dominant GM crops worldwide: A review. European Commission Joint Research Centre: Institute for Prospective Technological Studies; 2006. Available at: http://ftp.jrc.es/EURdoc/eur22547en.pdf.
  5. Morse S, Bennett RM, Ismael Y. Genetically modified insect resistance in cotton: Some farm level economic impacts in India. Crop Prot. 2005;24:433–440.
  6. Haq Z. Ministry blames Bt cotton for farmer suicides. Hindustan Times. http://bit.ly/IrPRRZ. Published March 26, 2012.
  7. PG Economics. Who we are. 2013. Available at: http://www.pgeconomics.co.uk/who-we-are.php.
  8. Brookes G, Barfoot P. Co-existence of GM and non GM arable crops: the non GM and organic context in the EU. Dorchester, UK: PG Economics; 2004.
  9. Gate2Biotech. 2014. Available at: http://www.gate2biotech.com/agricultural-biotechnology-in/.
  10. Benbrook CM. Impacts of genetically engineered crops on pesticide use in the United States: The first thirteen years. Washington, DC: The Organic Center; 2009. Available at: http://www.organic-center.org/reportfiles/13Years20091126_FullReport.pdf.
  11. Brookes G. Global impact of biotech crops: Environmental effects, 1996–2008. AgBioForum. 2010;13(1):76–94.
  12. AgBioForum (The Journal of Agrobiotechnology Management & Economics). Home page [website]. 2013. Available at: http://www.agbioforum.org/.
  13. AgBioForum (The Journal of Agrobiotechnology Management & Economics). Welcome [website]. 2013. Available at: http://www.agbioforum.org/welcome.htm.
  14. Illinois-Missouri Biotechnology Alliance (IMBA). Home page. 2010. Available at: http://www.imba.missouri.edu/.
  15. Illinois-Missouri Biotechnology Alliance (IMBA). History. 2010. Available at: http://www.imba.missouri.edu/index.php?region=3.
  16. Benbrook CM. The magnitude and impacts of the biotech and organic seed price premium. Washington, DC: The Organic Center; 2009. Available at: http://www.organic-center.org/reportfiles/Seeds_Final_11-30-09.pdf.
  17. Howard P. Visualizing consolidation in the global seed industry: 1996–2008. Sustainability. 2009;1:1266-1287.
  18. Neuman W. Rapid rise in seed prices draws US scrutiny. New York Times. http://www.nytimes.com/2010/03/12/business/12seed.html?_r=1. Published March 11, 2010.
  19. Kirchgaessner S. DOJ urged to complete Monsanto case. Financial Times. http://www.ft.com/cms/s/0/6327dfda-a3ef-11df-9e3a-00144feabdc0.html. Published August 9, 2010.