The International Consortium on Agricultural Biotechnology Research (ICABR)
The Distribution of Benefits Resulting from Biotechnology Adoption
Gregory K. Price,
William W. Lin,
Economic Research Service,
With the promise of potentially higher yields and reduced pesticide costs, the adoption of genetically-modified crops has risen dramatically since their commercialization in 1996. One important question that is being asked is: "Who benefits from the adoption of these new technologies?" The purpose of this study is to estimate the distribution of benefits from adopting Bt cotton and herbicide-tolerant soybeans in 1997. The stakeholders considered are U.S. farmers and consumers, the technologies innovators, and producers and consumers in the rest of the world (ROW).
This study utilizes an approach adopted by Falck-Zepeda, Traxler, and Nelson (AJAE, 2000). It differs from previous analyses in that it accounts for variations in crop yields and pest-control costs across different data sources. U.S. farmers surplus and the innovators profits were determined in the input market, while the benefits accrued by U.S. consumers and the ROW were determined in the output market. To determine the distribution of benefits, a technology-induced supply shift was first estimated for each of several U.S. production regions using data on yields, adoption rates, and changes in pest-control costs. Second, the impact of the technologies on the commodities prices was calculated. Third, the distribution of Marshallian surplus was estimated using an approach presented by Alston, Norton, and Pardey. Finally, the monopoly profits accruing to the innovators were determined.
For each crop, U.S. farmers gained a significant portion of the total benefits. In the case of Bt cotton, the producers accrued between 22% and 47% of the total benefits, depending on the data source. The variation in gains from planting herbicide-tolerant soybeans was more considerable, but U.S. farmers share of the total benefits was comparable to that found in the case of Bt cotton.
The innovators benefits were derived primarily from per-acre technology fees and seed premiums. Accounting for royalty payments made for the use of the parent genes, Monsanto (the gene developer) received 22% to 45% of the total benefits from the adoption of Bt cotton, while Delta and Pine Lands (the germplasm supplier) benefits equaled approximately 18% of the total benefits. For herbicide-tolerant soybeans, Monsantos benefits represented 8% to 28% of the total benefits, and the seed companies gains were about 12% to 41% of the total benefits, not including royalty payments.
U.S. consumers benefited somewhat from the adoption of the two crops, accruing 9% of the total benefits. The rightward shift in the supply function lowered the world prices of the commodities to levels that were below what would have prevailed if the technologies had not been introduced. While ROW consumers gained from the lower prices, ROW producers were hurt by the technologies because most of them grew traditional varieties. As a result, they did not realize the benefits associated with the genetically-modified varieties and were directly affected by the reduced world prices. On a net basis, the ROW realized 17% of the total benefits. In general, the results for Bt cotton are consistent with Falck-Zepeda et al.s findings. However, the distribution of benefits with respect to 1997 herbicide-tolerant soybeans differs considerably from their results (Agribusiness, 2000).