5.9 MYTH:

GM crops bring economic benefits to farmers


Economic impacts of GM crops on farmers are variable

“Perhaps the biggest issue raised by these results is how to explain the rapid adoption of GE crops when farm financial impacts appear to be mixed or even negative.”
– J. Fernandez-Cornejo, W. D. McBride, The adoption of bioengineered crops, US Department of Agriculture6

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:

  • Suitability of the crop for local conditions
  • Climate
  • Pest and disease prevalence
  • Cost of weed management
  • Subsidies and incentives offered by governments or corporations
  • Cost of seed
  • Availability of markets for the crop.
  • The following studies give an overview of the issue.

Fernandez-Cornejo (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.6

Gómez-Barbero (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.124

Why do US farmers adopt GM soy if it brings no financial gain? The authors suggested that the reason may be simpler weed control,124 though the data cited to back up this claim pre-date the explosion of herbicide-resistant superweeds that has caused the cost of GM soy production to rise (see 5.2).

The review found that Bt cotton in China had produced economic gains for farmers, mostly because of reduced expenditure on pesticide sprays. Bt cotton in India was claimed to provide economic benefits, though with considerable “local variability”.124 These studies were also carried out before the full impact of pest resistance and emergence of secondary pests was experienced by Chinese and Indian farmers.

Morse (2005)

This study found that 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.125 Recent studies suggest that they are already evolving resistance (see 5.4).

These findings are confirmed by a leaked advisory from the Indian government which blamed 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 added 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 Bt cotton production in the last five years has reduced.”126

5.9.1. The rising cost of GM seed

An important factor in assessing the economic impact of GM crops is the cost of seed. In the United States, where GM firms dominate the seed market, a 2009 report documents that prices for GM seeds have 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 2001.127

US farmers have grown increasingly concerned about the high price and poor performance of GM seed. A 2011 media report said that the seed companies had responded by withdrawing a high-performing non-GM variety of maize, which gave higher yields than GM varieties. The report added that the companies are hiking the prices of herbicides used by non-GM farmers to artificially increase the cost of non-GM production.128

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.131

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 an investigation into the consolidation of agribusiness firms that has led to anti-competitive pricing and monopolistic practices. Farmers actively gave evidence against companies like Monsanto.132,133

The same pattern has been reported in India. Moreover, as prices of GM Bt cotton seed have escalated,134 non-GM varieties – in some cases better-performing than the GM varieties – have been withdrawn from the market.135,136 The result is that farmers are forced into dependency on the GM industry. Such reports expose claims that GM crops increase “farmer choice” as misleading.

5.9.2. Conclusion

The economic impacts of GM crops on farmers are variable and depend on complex factors. However, consolidation in the seed market has led to steep increases in the price of GM seed as compared with non-GM seed. This consolidation has also led to competing high-performing non-GM seed varieties being withdrawn from the market, restricting farmer choice.

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