An Economic Cost-Benefit Analysis of GM Crop Cultivation: An Irish Case Study Marie-Louise Flannery, Fiona S. Thorne, B Paul W. Kelly and Ewen Mullins GM Crops in Ireland At the time of study, no GM crop cultivation in Ireland (EU had put a moratorium on import and production of GM foods) Existing varieties of crops (non-GM) susceptible to disease- winter wheat susceptible to fungal diseases due to mild and wet Irish climate. Goal Conduct cost-benefit analysis of four genetically modified (GM) crops Winter wheat Spring barley Sugar beet Potato Methodology Compare net revenue from GM crop to existing (non GM) crop Include fixed and variable costs: • Materials (seed, fertilizers, herbicides, fungicides, insecticides, growth regulators) • Machinery hire (plowing, tilling, sowing, spraying, fertilizer spreading, harvesting) • Miscellaneous costs (interest [7%] and transport) Seed Cost GM seed not sold in Ireland • Relied on literature to derive a seed premium for sugar beet GM. • Other crops: assumed a 15% premium. Legislative Constraint GM crops must be kept separate from other crops Test importance of restriction, add “coexistence levy” of €25 per ha to capture extra cost of this rule. Benefits Trials in Europe and Ireland reveal 6% increase in yield for sugar beets. Wheat, barley and potato – no yield experiments in EU. Authors assume pesticide cost reduction. Sampling Finally, used two years that were considered representative: • 2002: low yield, high disease • 2003: high yield, low disease Took average of two years. Current Acreage • • • • Sugar beet: 31,500 (ha) Winter wheat: 60,500 ha Spring barley: 163,270 ha Potato: 14,150 ha Analysis Used actual, non-GM yields and costs for 2002 and 2003 to compute net revenue per hectare. Predicted net revenue for GM crops in 2002 and 2003 given yield and cost assumptions. Net benefit is change in net revenues across all acreage. Sugar Beet Results Category Yield Conventional GM Net Effect 45 48 3 Gross Revenue 2295 2407 112 Seed Cost 102 132 +30 Herbicide 172 31 -141 Other Costs 1139 1139 0 Total Cost 1413 1302 -111 Net Revenue 882 1131 223 % Change +29% Wheat Results Category Yield Conventional GM Net Effect 9.1 9.1 0 1250 1250 0 Seed Cost 60 94 +34 Herbicide 165 100 -65 Other Costs 707 707 0 Total Cost 932 901 -31 Net Revenue 318 349 +31 Gross Revenue % Change +9% All Crops . Unmeasured Factors EU may prohibit sale of GM crops in EU. Project could fail unless export to rest of world. Risk GM crops destroy regular crops- should be minimized by cost of coexistence levy Does not consider market responses (appropriate) Assumes no change in hectares planted Does not examine possible change in price Results GM crops have higher net benefits (net revenue per hectare) than non-GM crops. Net benefit varies by crop type (highest for sugar beet). Major gain is not in higher yields but in lower costs.