Agricultural Research and Biotechnology Dr. George Norton Agricultural and Applied Economics Virginia Tech Copyright 2008 AAEC 3204

Objectives Discuss economic issues associated with agricultural research Research as an investment Distributional effects Public versus private research Types of organization of research International research centers Biotechnology

Role of agricultural research Increase productivity of existing resources Generate higher productivity inputs and ways of producing food Design new or improved institutional arrangements Summary: Research produces new technologies and new institutions

Effects of Agricultural Research Reduces cost per unit of production, potentially increasing farm incomes Agr. production increases can reduce food prices or generate foreign exchange Demand for labor may increase or decrease Distributional effects occur by farm size, type of farm, income distribution Potential effects on risk, food security, and environment

Distributional effects of research Consumers versus producers Income distribution and nutrition Farm size effects Land versus labor Owners versus tenants Regional effects Environmental effects

D S0S0 S1S1 Price Quantity 0 P0P0 P1P1 d a b c I0I0 I1I1 Q0Q0 Q1Q1 Economic surplus analysis

D S0S0 S0S0 Price Quantity 0 P0P0 a b c I0I0 I1I1 Q0Q0 Q1Q1 Economic Surplus analysis with trade

High rates of return for agricultural research How are these returns measured? 1. By estimating a production function: Ag Output = F (land, labor, fertilizer, research, extension, education) Use results in a benefit cost analysis 2. By calculating changes in economic surplus

Why should the public sector get involved with research? Insufficient private incentive because of Public good nature of some research Risk Farms are small

What are intellectual property rights and why are they important for agricultural research? Examples: patents, copyrights, plant breeder’s rights Create incentives for private firms to undertake research because they can profit from their discoveries

Broad categories of research Basic research Applied research Adaptive research testing

Countries have 3 options with respect to research Direct transfer Borrow and adapt Comprehensive research What determines choice among these?  Cost  Environmental sensitivity  Differences in resource base  Availability of research to transfer in

Sources of new technologies Public and private research followed by local technology transfer Technologies transferred in from other countries (and often adapted before adopted)

International Technology Transfer: the Green Revolution What was the green revolution? Where did it occur? When did it occur? What were its distributional effects?

Hayami and Ruttan’s green revolution conclusions Rapid adoption of varieties where suited and superior to local varieties Farm tenure did not prove to be a serious constraint to adoption Wheat and rice technologies have increased demand for labor New varieties have increased regional disparities New varieties have kept down consumer prices

History of International Agricultural Research Centers Rockefeller and Ford Foundations began work in Mexico in 1940’s CIMMYT and IRRI established in early 1960’s CGIAR system with its common funding and Technical Committee in 1971

International Agricultural Research Centers

Modern Biotechnologies Examples: Marker assisted breeding Tissue culture Genetically modified organisms (GMOs) Pest resistance Drought, salt, or cold tolerance Nutritional enhancement of crops Pharmaceutical products from plants Genomics PCR disease diagnostics

Genetically Modified Organisms (GMOs) What are GMOs? Where do they come from? Why might economic issues ultimately determine the value of GMOs? Do you think GMOs will help in reducing world hunger? Why or why not? Do you think GMOs will help improve human health and the environment, or harm them?

What are genetically modified foods? Also called genetically modified organisms (GMO). Involves the insertion of DNA from one organism into another OR modification of an organism’s DNA in order to achieve a desired trait. + A strawberry resistant to frost 4 5 Arctic fish DNA strawberry =

Examples of GMO’s Golden rice – rice that contains beta- carotene (Vitamin A), which is not found in regular rice. Bt corn – corn that contains a chemical normally found in a bacterium (Bacillus thuringiensis) that is toxic to insects but not to humans. Herbicide resistant plants.

Rice Tobacco Eggplant

How are plants modified? Agrobacterium that normally normally infects plants with disease is used to infect plant with gene of interests or… A particle gun is used to shoot small bits of metal coated with the gene into the plant. 7

How are animals modified? The microinjection method uses a fine needle to inject a solution of DNA into a developing embryo. 6

Potential Benefits of GMOs Humanitarian: More food Cheaper food Reduced risk Increased nutrition Reducing world hunger and improving world health Pest resistance Herbicide resistance Cold tolerance Drought tolerance Edible vaccines Environmental: reduced use of pesticides in farming.

Potential Environmental Hazards Reduced effectiveness of pesticides as insects become resistant to engineered toxins. Loss of biodiversity Harm to other organisms Pollen from Bt corn was found to cause high mortality rates in monarch butterfly larvae. BUT follow-up studies have shown that the exposure levels in the fields are negligible 11

Potential Environmental Hazards Gene Transfer to non-target species  Herbicide resistant plants and weeds could cross breed and create “superweeds”  To address this one could: Create sterile male plants that don’t produce pollen Engineer the plants so that pollen doesn’t contain the foreign genes Create buffer zones of non-GM crops around GM crops. The buffer crops would not be harvested.

Potential Human Health Risks Allergens  Genetic engineering could potential introduce or create allergens  For example, inserting genes from a nut into another plant could be dangerous for people who are allergic to nuts Unknown health risks  Biological processes involve a lot of INTERACTIONS  It is often difficult to identify every possible interaction.

Economic Hazards Reduced competition  GM seeds are patented Suicide seeds  Plants with sterile seeds that are infertile are created  Farmers are forced to buy seeds every year However, some companies have reduced costs or donated GM seeds to impoverished nations.

Creating a balance So are GM foods a good or bad thing? It depend on each individual case. Consumers, the government and scientists should be responsible for weighing the benefits against the costs. Economic benefits Improved Nutrition Resistance to disease Reduced use of chemicals Environmental risks Health risks Economic risks

Components of a well-linked agricultural research system for developing countries International agricultural research centers Public agricultural research in developed countries National and local public experiment stations On-farm research and extension Private companies producing research results.

Domestic Technology Transfer: Agricultural Extension Speeds up transfer of knowledge

Many types of extension systems in the world Examples: Local and regional offices with specialists and generalists Training and visit system with regional offices Integrated into farming systems research and extension

What types of systems for technology transfer are most cost effective? Depends on information technology Depends on audience, types of technologies to transfer, infrastructure, etc. Depends on incentives for private sector

Requirements of a successful extension worker Technical competence Economic competence Farming competence Communications competence

Summary of effects of research and extension education Production, productivity, and efficiency up Food prices down Extension speeds up technology transfer Distributional effects Incomes up Solutions to environmental problems