AgDM newsletter article, October 1999

Is GMO or non-GMO more profitable – a look at 1998

Mike DuffyBy Mike Duffy, Extension Economist, 515/294-6160, mduffy@iastate.edu

Although GMO crops have gained in popularity, the extent of their impacts on costs and returns to Iowa farmers are not fully understood.  There have only been a few comparisons of GMO versus non-GMO crops. Below I present an economic comparison of growing GMO vs. non-GMO corn and soybeans using cross-sectional data for 1998.

The source of the data was the 1998 Costs and Returns survey conducted by the Iowa Agricultural Statistics Service.  The survey used personal interviews with farmers to determine the extent and nature of their crop production practices in 1998.  The Iowa State Leopold Center for Sustainable Agriculture funded an expansion of the survey in Iowa to increase the reliability of the estimates.  There were 377 randomly selected corn fields and 365 soybean fields covered in the survey.

Genetically modified soybeans

In 1998 just over 40 percent of Iowa soybean acres were planted with GMO soybeans.  The farmers were asked why they planted GMO soybeans.  As shown in Table 1, increased yields through improved pest control was listed most often followed by decreased pesticides costs. 

Table 1.  Why did you plant GMO soybeans?

Reason

Percent

Increase yields through improved pest control

53%

Decrease pesticide costs

27

Increase planting flexibility

12

Other reason

8

Farmers using GMO soybeans made an average of one pre-plant tillage trips across the field.  Those using non-GMO soybeans made an average of 1.45 trips. 

The use of no-till or drilled soybeans was also higher for those using GMO’s.  A third of those using GMO soybeans used no-till and 39 percent used drilled soybeans.  For the non-GMO soybean farmers only 13 percent used no-till and 17 percent used drilled soybeans.

Table 2: Average Cost and Return Comparison per Acre for GMO and non-GMO Soybeans in Iowa, 1998                                                  

GMO

Non-GMO

Yield

49.3

51.2

Tillage and planting costs

$  11.59

$  13.06

Seed cost

26.42

18.89

Total weed management costs

24.91

33.65

Total variable cost (excluding land and labor)

115.11

124.11

Return to Land, Labor and Management*

$ 144.50

$145.75

Return to Management**

$ (11.63)

(15.83)

* Assumes a sale price of $5.27 per bushel
** Subtracts a land charge of $2.80 per bushel and the labor charges reported by ISU.

Table 2 shows the cost and return comparison for the GMO and non-GMO soybeans. The GMO soybeans averaged 49.3 bushels per acre.  The non-GMO soybeans averaged 51.2 bushels per acre.  In other words, on average, the non-GMO soybeans yielded almost 2 bushels more per acre than the GMO varieties.

Total weed management costs are almost $9.00 per acre lower with the GMO soybeans.  Herbicide costs are $7.00 per acre lower with the GMO soybeans.  Other weed management cost savings are for herbicide applications and row cultivation.

Total variable costs are approximately $9 per acre lower for the GMO soybeans.  However, with the slightly lower yield the overall advantage shifts very slightly to the non-GMO soybeans.  The difference in returns is less than $2 per acre without land charges and less than $5 per acre when all costs are included.

Genetically Modified Corn

There are more genetic modification options available in the corn plant.  In 1998, 24 percent of the corn was Bt corn, 14 percent had some other genetic modification, and the remaining 62 percent were not genetically modified as the term is used today.

More than three-fourths (77 percent) of the farmers using Bt corn said they did so to increase yields.  Another 7 percent said they used it to reduce pesticide costs.  The remaining 16 percent gave some other reason for using Bt corn.

Table 3: Average Cost and Return per Acre Comparison for Bt Corn in Iowa, 1998                      

Bt

non-Bt

Yield
160
148

Insecticide cost per treated acre
$  17.56
$  14.94
Seed cost
39.62
29.96

Total costs (excluding land & labor)

$199.14

$179.10

Return to land, labor & management*

$105.64

$101.67

Return to management**

(62.14)

(54.73)

Adjusted return to management***

(50.65)

(54.73)

* Uses $1.90 corn price
** Subtracts a land charge of $.91 per bushel and the labor charges reported by ISU
***Adjusted land charge assumes increased yield is due to seed not land

Table 3 compares Bt to non-Bt corn. Increasing yields with Bt corn did occur in 1998 in Iowa.  Bt corn averaged 160 bushels per acre whereas the non-Bt corn averaged only 148 bushels per acre.

Seed costs are higher and so is the total cost per acre for the Bt corn.  However, with the increased yields the return to land, labor and management is almost $5 per acre higher. 

When a land charge is subtracted the non-Bt corn looks more favorable.  However, it is important to remember that the land charge is based on the reported yield.  If the higher yield for the Bt corn is not due to land but to seed, then this approach would penalize the Bt corn. 

If the land charges are calculated using an adjusted yield, adjusted by subtracting the difference between the average Bt and non-Bt corn yields, the resulting return to management is nearly identical.  This is the adjusted return to management shown in Table 2.

Conclusions

When considering the results presented here it is important to remember that this was a cross-sectional study not a direct comparison.  Many factors could influence the results presented.

From the data for 1998 it doesn’t appear that the GMO crops have a distinct advantage or disadvantage over the non-GMO.  With soybeans there are some added flexibility factors for the individual to consider.  Similarly, the Bt corn will be more efficacious, and thus more profitable, in situations with heavy infestations.  However, on the average, there doesn’t appear to be any compelling reason to adopt or not adopt the GMO crops.

It is interesting to note that the genetic modification in soybeans resulted in lower yields with lower costs while the Bt corn had higher yields with higher costs.  Either way it produced the net result of nearly identical returns. 

The GMO situation will continue to evolve.  Genetically modifying higher yielding varieties could improve yields.  However, pest resistance could result in higher costs or decreased effectiveness.   In 1998, the conclusion from this cross-sectional study, was that the use of GMO crops didn’t influence profitability.  Other factors, including marketability, will influence the decision to use or not use GMO varieties.

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