24 October 2002

FARMER INCOME - SEEDS OF DOUBT/USDA APPROVES MONSANTO CORN

As USDA unleashes yet another Monsanto GM product onto US agriculture (item 2), here are some excerpts from the Soil Association report, SEEDS OF DOUBT (Sept 2002) - a report that shatters the industry myths of GM crops producing higher yields, reducing herbicide use, improving farm incomes and benefiting the economy.

For references and to see the full report, please order a copy from the  Soil Association on +44 (0)117 929 0661 or you can download a pdf version for FREE from http://www.non-gm-farmers.com/ This gives you the report in 3 parts. You will need the Acrobat Reader to view the files.

Research for this report was completed earlier in the year. Since then a report has also been released by the US Department of Agriculture which serves to further confirm much of the situation revealed in the Soil Association's report. Details of the USDA report are available at: http://www.btinternet.com/~nlpwessex/Documents/usdagmeconomics.htm

1.SEEDS OF DOUBT: Farmer income/the organic farmer
2.USDA Takes Action on Monsanto Corn Bred to Resist Cutworms

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1. SEEDS OF DOUBT: Farmer Income

"GMOs do not provide a quick fix solution to the economic problems of US  farmers. As time goes on the technology is proving to be more of a  hindrance than a help." - John Kinsman, vice-president of the National  Family Farm Coalition and dairy farmer in Wisconsin [1]

"There's profit in your fields. Unleash it with Asgrow Roundup Ready  soybeans. With Asgrow soybeans, profitability runs wild." - US farming  magazine advert, January 2002 [2]

The widespread introduction of GM crops in North America was achieved  through promises of higher profits for farmers. Many farmers were in a desperate  economic situation and ready to believe that GM crops could help them  into a better financial state.

However, the reality has been that GM soya and maize have worsened the  situation. The results differ between regions and from year to year, but  overall the effect of these crops on farm incomes has been negative.  Feedback from farmers and independent economic analysis of the data from  six years of commercial growing show that these two GM crops deliver less  income on average to farmers than non-GM crops. Furthermore, those farmers producing GM-free produce have been able to command price  premiums for their produce that, by definition, GM farmers cannot access.

This section looks only at the direct impact on farmer income of GM crops  (the indirect impacts of GM crops on the wider farm economy are addressed  in chapter l0).

HT soya

Analysis by Iowa State University economist Michael Duffy has shown that,  when all production factors are taken into account, herbicide tolerant GM  soya loses more money per acre than non-GM soya. GM soya lost $8.87/acre  while non-GM almost broke even, losing $0.02/acre.[3] This was based on a  conservative five per cent estimate for the extra cost of the GM seed  technology fee, and assumed the same market price for GM and non-GM soya,  in other words the differences are likely to have been underestimated.

Bt maize

In a December 2001 report, Dr Charles Benbrook presented the results of a  detailed analysis of the economics behind Bt maize.  The profitability of  Bt maize is variable;  it is also hard to predict in advance as it  depends on the level of pest problems. On an annual basis, the Bt  varieties paid off on average in three of the years they were grown  (1996, 1997, 2001), but not in the other three (1998, 1999, 2000). Over  the whole period the outcome was negative: "From 1996-2001, American  farmers paid at least $659 million in price premiums to plant Bt corn,  while boosting their harvest by only 276 million bushels - worth $567  million in economic gain. The bottom line for farmers is a net loss of  $92 million  - about $1.31 per acre" from growing Bt maize. [4]

Duffy undertook a similar analysis on Bt maize. He also found little  economic evidence to account for the rapid uptake of the GM variety.  Returns per acre from Bt maize were slightly worse, with Bt maize losing  $28.28/acre and non-Bt maize losing $25.02/acre. [3]

HT [herbicide tolerant GM] rape

There is a scarcity of independent research on the economics of growing  HT rape. However, one industry study of rape growers suggested that while  the herbicide use of those growing HT rape was higher, farm incomes were  slightly higher due to higher yielding varieties, lower herbicide costs  and lower fuel costs. [6] The Canadian government's Biotechnology  Advisory Committee said "As of January 2001 there is no publicly  available survey or data on how individual farmers have benefited from  the adoption of GM crops in Canada." [6]

Why farmer incomes are down

The differences in income that a farmer will receive from growing GM  crops compared to non-GM crops results from four factors, covering both  higher production costs and lower market prices.

- The technology fee for GM seed

Seeds are an important cost of production. For example, they typically  account for about 10 per cent of total maize production costs. [7] GM  seeds are significantly more expensive than non-GM seeds because the  biotechnology companies charge an additional 'technology fee' on top of  the seed price. Monsanto describes this as a way that growers can "share  a portion" of the extra profits that the crops will deliver.[8] The scale  of the fee can vary greatly depending on the crop, the company and the  particular package on offer.

With the technology fee, GM seeds cost 25-40 per cent more than non-GM  seeds.[9] For Bt maize, for example, the fees are typically $8-$10/acre,  about 30-35 per cent higher than non-GM varieties, though they can be up  to $30/acre. RR soya can have a technology fee of about $6/acre. [4, 10]

To buy GM seeds, farmers also have to sign a technology agreement with  the biotechnology companies. This contract prohibits the farmer from  saving seed (retaining a proportion of the harvest for planting the  following year). With approximately 20 - 25 per cent of farmers  traditionally saving their seed in the US, this prohibition introduces  another seed cost for these farmers.

- Yield differences

The biotechnology companies claimed that the higher costs would be more  than offset by the higher yields and reduction in agrochemicals. However,  RR soya and RR rape produced lower yields than non-GM varieties on  average, and although Bt maize produced a small yield increase overall,  it was not enough over the whole period to cover the higher production  costs (see chapter 4).

- Agrochemical costs

Agrochemicals make up a large proportion of farmers' production costs. RR  soya, RR maize, Bt maize, and HT rape have mostly resulted in an increase  in agrochemical use. However, because of a herbicide 'price war' that has  erupted in the US, herbicide costs have fallen significantly since the  introduction of GM crops. In many cases it has meant that total herbicide  costs have significantly reduced. Soya herbicide prices, for example,  have fallen over 40 per cent since the introduction of RR soya in 1996.
This has greatly helped to offset all the higher costs of RR soya (the
price of seed, the yield drag and higher agrochemical use).  - Lower market prices   Farmers did not bargain for the negative effect that GM crops have had on  market prices (see chapter 10). Since the introduction of GM crops a  tiered market has developed. Farmers growing GM crops now receive lower  market returns than previously, and also lower prices than those growing  non-GM crops. The income calculations by Benbrook and Duffy did not take  this into account.

For those growing non-GM crops, market premiums are available to offset  the fall in market prices. According to a survey of 1,149 grain elevators  in 1 l Midwestern US states by the American Corn Growers Association last  autumn, almost 20 per cent are offering farmers premiums for non-GM corn  and soya ranging from 5-35 cents per bushel. [11]

The farmers who have gained in terms of market prices are those who can  supply guaranteed GM-free produce, for the growing 'identity preserved'  (IP) markets which have developed since the introduction of GM crops. For  example, according to Minnesota farmers Susan and Mark Fitzgerald,  GM-free soya receives around 50 cents/bushel more than GM, selling at  $4.40/bushel (approximately a 13 per cent increase) and organic soya  sells at $12/bushel, an additional premium of 200 per cent. [12]

While there are some farmers growing GM crops who have been able to cut  their production costs or increase yields with GM crops, it appears that,  for most producers, any savings have been more than offset by the  technology fees and lower market prices, as well as the lower yields and  higher agrochemical use of certain GM crops.

...

Farmer experience: the organic farmer

Marc Loiselle

Marc Loiselle, from Vonda, Saskatchewan, describes himself as the  "steward of an intergenerational family farm" and has been farming  organically for 17 years. He grows hard red spring wheat, barley, oats,  flax, peas, alfalfa and clover.

He received inquiries from an Asian buyer for organic oilseed rape  offering C[anadian] $18/bushel compared to the conventional rate of  around C$7/bushel. But he knew it would be impossible to keep his crop  free from GM contamination during the growing season because of the  nearby GM oilseed rape fields.

If he had taken up the contract, Marc would have sown 130 acres to  canola. He estimates that with the drought conditions at the time he  would have had a yield of around 12 bushels/acre. This would have meant  an income of some C$28,080. In the end he had to plant barley, which  earned him C$4,160, some C$23,920 less. [17]

Marc is now hoping his losses will be compensated through a class action
by the Saskatchewan Organic Directorate (sse section 11.2).

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2.USDA Takes Action on Monsanto Corn Bred to Resist Cutworms

by AgWeb.com Editors,  10/23/2002

USDA has decided after a review of public comments, data submitted by Monsanto Co., and a review of scientific data, that the corn, MON 863, which has been genetically engineered for insect resistance, is no longer considered a regulated article under USDA regulations governing the introduction of certain genetically engineered organisms and products.

While comments against the decision outpaced those in favor, USDA said it based its decision on analysis of data submitted by Monsanto, a review of other scientific data, field tests of the subject corn, and comments submitted by the public. USDA's Animal and Plant Health Inspection Service (APHIS) has determined that MON 863 corn: (1) Exhibits no plant pathogenic properties; (2) is no more likely to become a weed than corn developed by traditional breeding techniques; (3) is unlikely to increase the weediness potential for any other cultivated or wild species with which it can interbreed; (4) will not harm threatened or endangered species or organisms, such as bees, that are beneficial to agriculture; and (5) will not cause damage to raw or processed agricultural commodities.

APHIS says this means that the corn and any progeny derived from hybrid crosses with other nontransformed corn varieties will be as safe to grow as corn in traditional breeding programs that is not subject to regulation.
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A North Dakotan farmer recently wrote of Monsanto's GM wheat: "Financially troubled Monsanto has everything to gain and nothing to lose by releasing GM wheat. It remains unclear what North Dakota farmers have to gain... we could let Monsanto decide. And maybe we also could get Enron to run our utilities and Arthur Andersen to keep the books."