Does planting GMO seed boost farmers' profits?

Genetic modification of crops has taken the national and international spotlight in recent months. Depending on your perspective, crops classified as genetically modified organisms (GMOs) may be the only hope to feed a hungry world, or an inappropriate use of technology that should be halted. In Iowa, the latest wave of discussion occurred when some major United States grain trading companies, reacting to European resistance to GMOs, announced that they would only accept crops that can be certified as GMO-free.

Fueling this furor is a debate over the relative merits and safety of GMO crops-a debate that is far from being settled. Without arguing the pros and cons of genetic modification, this report describes Iowa cropping practices in 1998.

NOTE: Figures accompanying this article may be viewed on pages 4 and 5 of the newsletter, available here.

The 1998 Iowa crop survey
Information was collected by the USDA's National Agricultural Statistics Service as part of its annual Cost and Return survey. The Leopold Center funded an expansion of the USDA's cropping practices survey to provide more reliable estimates.

This information was gathered in the late fall and early winter of 1998 during personal interviews with approximately 800 Iowa farmers. They were asked what crops they grew, and whether the seed they planted had been genetically modified. The results presented here represent a random selection of 62 continuous corn fields, 315 rotated corn fields, and 365 soybean fields. These numbers and the selection methods employed provide statistically reliable estimates at the state level.

It is important to emphasize that this is only a cross-sectional survey. It does not represent a side-by-side comparison of GMO and non-GMO crops. It represents a picture of what Iowa farmers experienced, under varying conditions and situations, during the 1998 crop year.

Genetically modified soybeans
Just over 40 percent of the Iowa acres planted to soybeans last year were GMO varieties. The number of soybean acres that a producer farmed had no relationship to whether or not GMO varieties were used.

When asked why they planted GMO soybeans, 53 percent of the farmers cited increasing yields through improved pest control. Another 27 percent listed decreasing pesticide costs, 12 percent said increased flexibility in planting, and 3 percent listed adoption of a more environmentally-friendly practice. The remaining farmers listed some other reason.

Farmers who did not use GMO varieties in 1998 reported a slightly higher yield than those who used GMO varieties. The average yield for non-GMO soybeans was 51.21 bushels per acre; the average yield for GMO soybeans was 49.26.

Farmers who used GMO varieties experienced significant savings in herbicide costs, spending nearly 30 percent less than farmers who grew non-GMO soybeans. Farmers using GMOs held a cost advantage in all aspects of weed management.

Costs differed in other areas, too. The biggest difference was in seed cost. Farmers who planted GMO varieties reported an average seed cost of $26.42 per acre, compared to $18.89 per acre for non-GMO varieties. Total costs without land or labor were $115.11 for GMO soybeans, and $124.11 for the non-GMO soybeans.

To estimate returns, we used the 1998 yearly average price of $5.27 per bushel. Figure 2 shows that returns to land and labor were essentially identical for GMO and non-GMO soybeans. GMO soybeans had a return of $144.50 per acre versus a return of $145.75 for non-GMO soybeans.

Results from these 365 soybean fields indicate that 1998 yields from GMO soybeans were slightly lower than conventional varieties, but so were the costs. According to this analysis, Iowa farmers had identical returns in 1998, whether they raised GMO or non-GMO soybeans.

Bt corn
Another genetic modification that is being used is the addition of Bacillus thuringiensis (Bt) to corn to fight a major pest, the European corn borer. Last year almost a fourth (23 percent) of Iowa corn contained the Bt gene. The overwhelming majority of farmers (77 percent) said they planted Bt corn to increase yields. Only 7 percent said that they planted it to decrease pesticide costs, and the remaining 16 percent gave a variety of other reasons. Of the Bt corn fields, 7 percent were continuous corn while 93 percent were corn following some other crop.

Iowa farmers were right about yields. In 1998, the average yield for Bt corn was 160.4 bushels per acre. The average yield for non-Bt corn was 147.7 bushels per acre.

Use of Bt corn didn't necessarily reduce insecticide costs. Farmers applied insecticides on 12 percent of their Bt corn fields at an average cost of $17.56 per acre. They applied insecticides on 18 percent of their non-Bt corn fields at an average cost of $14.94 per acre.

The biggest cost difference between Bt and non-Bt corn was in seed. Seed for Bt corn averaged $39.62 per acre, compared to $29.96 per acre for non-Bt corn. Bt fields had slightly higher weed control costs, averaging $2.82 per acre. Fertilizer costs were $5.02 per acre higher than non-Bt corn.

When comparing gross revenue, total costs, and the return to land and labor between Bt and non-Bt corn, corn was valued at the 1998 average price of $1.90 per bushel. The total difference in return to land and labor was only $3.97 per acre.

Based on a cross-sectional examination of Iowa cropping practices in 1998, genetically-modified crops provided farmers with no significant difference in returns. Remember, this is not a comparison of genetically-modified crops with their conventional counterparts, but a look at the bottom line last year for Iowa farmers-both those who raised GMO crops and those who did not.

Some producers said they used GMO soybeans to increase their flexibility during planting season. The value of this feature when evaluating use of GMO and non-GMO crops cannot be determined from the data available. It is interesting to note, however, that increasing crop yields was cited by over half the farmers as the reason for planting GMO soybeans, yet yields were actually lower.

Use of genetically-modified seed didn't appear to impact a farmer's bottom line for either corn or soybean production, but the reasons were different. In soybeans, GMO yields were lower but so were costs. In corn, yields and costs were higher when GMO seed was used.

Genetic modification, and the controversy surrounding it, will likely continue for many years to come. Based on what happened in 1998, Iowa farmers will find returns per acre relatively unaffected whether or not they plant the GMO corn and soybeans currently available. Marketing may be more of a problem with GMO crops, but using GMO crops has not affected profitability. Farmers will choose to use or not use GMO corn or soybeans based on their own situation and view of the issues, but profitability does not appear to be a decisive factor.