Agricultural Research and Biotechnology

Dr. George NortonAgricultural and

Applied EconomicsVirginia Tech

Copyright 2008

AAEC 3204AAEC 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

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Economic surplus analysis

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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

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Arctic fish DNA strawberry

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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.

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How are animals modified?

The microinjection method uses a fine needle to inject a solution of DNA into a developing embryo.

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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 organismsPollen 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

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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: AgriculturalExtension

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