The International Consortium on Agricultural Biotechnology Research (ICABR)

 

 

Farm-level effects of adopting genetically engineered crops in Finland

 

Jyrki Niemi, Meri Virolainen, Agricultural Economics Research Institute, Finland

 

 

Abstract

 

This paper analyses the development and possible introduction of genetically modified (GM) food in the Finnish agro-food chain. More specifically, it discusses the perspectives and barriers for commercial introduction of GM crops on Finnish farms. The information given in the study is based on documentary analysis, and on interviews with key persons directly or indirectly involved in the production, trade or consumption of genetically modified food. The concept of the food chain is used, both for defining the actors involved and for searching the economic impact. The food chain consists of all actors involved with agricultural biotechnology research, breeding, farming, trade, processing industry and consumption.

 

The following questions are discussed in the paper:

  • what are economic and strategic impact of the commercialisation of new GM crop technology on the farm level?
  • how will GM developments influence productivity and international competitiveness of Finnish agriculture?
  • who benefits from the new technology, and who faces the disadvantage?

 

The paper argues that there is little doubt that GM technology is able to generate concrete productivity gains on the farm level. Such benefits come in the form of cost reductions, yield increases, improved insurance against pests, and possible new products. However, the distribution of these gains from the new technology among farmers is likely to be uneven. In the short run, early adopters might realise increased profits, but widespread adoption of GM crops could increase production and, given an inelastic demand for most farm commodities, could reduce farm-level and retail prices for the affected commodities. Therefore, the gains from higher agricultural productivity will be most likely transferred to consumers and to other sectors of the economy.

 

Furthermore, the paper suggests that in the long run GM technology will change the structure of the whole agricultural supply chain. To be a viable player in the value-added chain, Finnish farmers are required to develop closer relationships along the entire chain. Both supply and demand factors underlie this trend toward a greater vertical integration. Vertical integration may involve direct acquisitions or a use of formal contracts between producers and marketing firms. For farmers, contracts are likely to offer premiums over average market prices for agricultural commodities, greater access to new technology and inputs, and new sources of capital. However, contracts may also erode a tradition of farmer independence in production decisions and management.

 

Concerns have also been raised as to whether large farms in good agricultural regions can make better use of the GM technology and reduce their unit production cost below of those of small farms in remote areas. This advantage could make small Finnish farms less competitive and eventually force them out of the market. In a large sparsely populated country with few alternative sources of income, this is could be a threat to vitality of certain regions. The relationship between new technology and farm size/location may, therefore, determine the structure of rural communities, and who wins and loses from technological change.

 


 

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