University study shows

Farmers benefit from Bt WHO BENEFITS the most from new agricultural technology such as Bt cotton - the developers of the technology, the farmers who use it, or the consumers who purchase cotton products?

Discovering the answer to this question was the goal of a recent Auburn University study that reveals that the worldwide adoption of Bt cotton has generated a total surplus of as much as $240 million per year, and that U.S. farmers have gained most of the benefits from the new technology.

The Auburn study, entitled "Surplus Distribution from the Introduction of a Biotechnology Innovation," evaluated the distribution of the surplus generated from Bt cotton technology among the technology developers, seed suppliers, U.S. and foreign producers and cotton consumers in 1996 and 1997.

Bt cotton was introduced by Monsanto and Delta & Pine Land Co. in 1996. Monsanto developed the Bollgard gene in the late 1980s using a soil microorganism, Bacillus thuringiensis, which causes the cotton plant to produce a protein that's toxic to certain species of lepidopteran pests - specifically, tobacco budworm, cotton bollworm and pink bollworm.

After a disastrous pest year in some cotton production areas in 1995, about 1.8 million acres - 14 percent of the total U.S. crop - were planted in Bt varieties in 1996. Bt cotton was introduced on small acreage in Mexico and Australia in 1997 and in China in 1998. It's also been introduced in South Africa, Argentina and Israel.

"When Bt cotton was introduced in the United States in 1996, it generated a total surplus of about $240 million per year," says Greg Traxler, Auburn University associate professor of agricultural economics and co-author of the study. "Fifty-nine percent of those benefits went to U.S. farmers in the form of reduced pesticide use and yield differences attributable to controlling worms.

"Monsanto received about 21 percent of that $240 million through their technology fee, and some of that was passed on to Delta & Pine Land Co. The rest of the world's producers lost money."

The surplus value was determined through comparisons of pest control savings and yield differences between Bt cotton and conventional varieties. Indepen-dent data was gathered from farmers, on-farm trials and experimental plots in the U.S. Cotton Belt.

Bt cotton varieties, says Traxler, have consistently out-yielded conventional varieties in field and research plots. Research also has shown overall pest control savings of 5 to 73 percent for farmers who planted the Bt varieties.

U.S. cotton production increased as a result of Bt technology, he says, causing downward pressure on the world cotton price. "The introduction of Bt technology depressed the price by about one-fifth of a cent. The remainder of the world's producers got a lower price for their cotton, but they didn't get the cost savings of using the technology, so they lost money. Consumers both in foreign countries and in the United States received benefits from this slightly lower cotton price," notes the economist.

Cotton technologies also benefit U.S. consumers, who have gained as much as $22 million since the introduction of Bt cotton, he says. This benefit currently may seem small, but the global price of cotton products - such as apparel, textiles and furnishings - should continue to decrease as cotton technologies are more widely adopted.

Monsanto and Delta & Pine Land returned a significant share of their benefits by not initially attempting to price discriminate based on regional pest pressure and seed costs, says Traxler.

"In 1996, there were large differences across the Cotton Belt in lepidopteran infestation levels. Some areas had the Boll Weevil Eradication Program, and there were differences in pyrethroid resistance. As a result, there were differences in the farm value of Bt technology and in the agronomic performance of the two Bt varieties that initially were available.

"This technology was worth a lot in some areas of the country and not so much in other areas. But Monsanto used a one-price policy, and there was no attempt to price-discriminate by region. It's in their best interest to charge a reasonable price to increase their market share."

The distribution of benefits from Bt cotton technology will continue to evolve, says Traxler, as new varieties are dispensed throughout the United States, as foreign producers increase adoption, as competitive technologies are introduced and as manufacturers consider alternative marketing techniques such as diverse pricing structures.

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