To run the simulations, the technology fee and all CRCA assessments are set equal to zero and 10,000 draws from the distributions are made for each of four scenarios, depending on which parameters are assumed random. This gives an estimate of the gross surplus generated by the technology before pricing and assessment policies determine the distribution of those benefits. The first and second simulations assume no price premium with yields only and with both yields and price random; the third assumes that yields and the price premium are stochastic with the output price fixed at $6.50 per cwt, and the fourth assumes that all three parameters are random. As peracre benefits do not vary with output price alone, this scenario is excluded. In addition, each simulation is run for two groups—one that exhibits yields across the entire range of the distribution, labeled “all producers,” and one in which attention is restricted to those growers who are expected to increase their yields with adoption of the transgenic crop. This group is labeled “yield gainers” and yields are distributed as a nonsymmetric triangular distribution with a most-likely and minimum value of 80 cwt per acre and a maximum value of 88 cwt . The yield gainers are most likely to adopt the new technology, raspberry container and results from these simulations may more accurately represent the distribution of benefits among those who actually grow transgenic rice.
Results from the Monte Carlo analyses are reported in Table 6. Under these assumptions, gross benefits from the technology are generally positive except on the lower end of the distributions. Yield gainers, on average, see a return of between $9.84 and $11.60 per acre more than the overall average producer with a slightly smaller variance due to the smaller yield variance assumed for this group. For both groups, introduction of the price premium increases the variability of the benefits by more than the introduction of output price variability. The price premium also reduces the magnitude of the surplus gains by approximately $20 at the median. Table 6 does not account for CRCA assessments or technology fees, generally bounded between $6.30 per acre and $21.10 per acre . Although not exact, a “back of the envelope” calculation suggests that median farm-level benefits, after accounting for these fees, are expected to be positive; however, not all farmers will see increased returns. The same is true for yield gainers in that median benefits are greater than $21.10 for each scenario but the lower end of the distribution may experience negative returns from adoption. The majority in each group, however, will benefit. More specifically, the exact probabilities of net returns greater than zero can be calculated. Assuming all three parameters are stochastic and bounding the fees according to the preceding assumptions, the probability that net returns are greater than zero for all producers is between 60.14 and 85.8 percent.
For yield gainers, this range increases to between 89.4 and 100 percent, once again highlighting the importance of yield assumptions on net returns and hence on adoption.To further test the potential adoption impacts of the LibertyLink® transgenic rice variety, we apply the preceding methodology to the results of a three-year field study conducted by Fischer . The exercise uses the weed-management regimes and corresponding yield measures of the Fischer study, together with the pricing assumptions previously maintained, to estimate net returns for a hypothetical farm using identical herbicide rotations. To elaborate, Table 7 describes the rice-variety and herbicide-treatment regime used in each year of the Fischer study. The project was implemented on a rice field in Glenn County, California, on which watergrass was found to be resistant to molinate, thiobencarb, and fenoxaprop—three of the four chemicals registered in the state to control grass weeds at the time of the study . Four treatment regimes were analyzed: continuous molinate each year, an intensive combination of several chemicals each year, a rotate-mode-of-action regime in which chemicals with differing properties were rotated from year to year, and a continuous transgenic regime resistant to glufosinate. Each regime was applied to four plots of 0.57 acres each, and indicator measures such as yields were averaged for each treatment group . It is important to note that the choice of treatment regime was not related to economic considerations but, rather, to evaluation of the efficacy of differing treatment regimes under resistance conditions .
To estimate potential returns over operating costs, the yield and herbicide regime data are used in conjunction with the structure presented in Table 2 to estimate per-acre costs and revenues on a hypothetical farm unit. Herbicides, custom operations, contract operations, interest on operating capital, assessments, and yields vary according to the experimental data while the remainder of the cost components are held constant at the levels presented in the first table. Again, to provide a basis for comparison, we set output prices for the transgenic variety equal to the conventional product and the CRCA assessments and technology fee equal to zero. Table 8 reports the results of the exercise. The first year of the trial included eight plots planted with LibertyLink® M-202 seed treated once with varying levels of glufosinate mixed with ammonium sulfate and eight plots planted with conventional M-202 seed, four of which were treated once with molinate and the remainder of which were treated once with propanil. The continuous-molinate treatment served as a baseline for the entire experiment as the field had demonstrated watergrass resistance to this particular chemical . From an economic standpoint, the intensive-combination regime was slightly superior to the two transgenic regimes with net returns per acre approximately 4 to 10 percent greater but less than the yield advantages of 8 to 13 percent. As operating costs for this treatment were higher than those for the transgenic rice, the difference in returns is explained primarily through yield advantages. It should be noted, however, that propanil drift is known to cause significant damage to fruit trees and cotton, and the chemical was banned in some areas at one point in the 1960s . Both propanil and glufosinate achieved comparable control of the watergrass weed, prompting the authors to conclude that both are “options to control multiple-resistant watergrass. For these treatments to be effective in the long term, [watergrass] seed rain reinfestations still need to be much lower” . In other words, to control the weed in the future, multiple applications of each herbicide may be necessary, reducing the profitability of the transgenic system. In response to this conclusion, the second trial year included two applications of varying chemicals for each herbicide regime with two treatments of propanil on conventional M-202 rice in the rotate-mode-of-action regime and two treatments of glufosinate on the LibertyLink® plots. Two issues with regard to this year warrant mentioning. First, the initial planting of LibertyLink® seed showed poor germination and was reseeded at 17 days after submergence . The additional reseeding costs are included in Table 8. Second, the researches mistakenly applied 350 g AI/ha of glufosinate in the first application rather than the recommended 500 g AI/ha. This presumably decreases both yields and costs, ceteris paribus, although watergrass control was still estimated at approximately 99.99 percent for this treatment regime . The economic results show that the intensive combination regime based on herbicide tank mixes is economically inferior with very small returns relative to the others due to relatively large herbicide material and application costs and little yield advantage. The propanil treatments again outperformed the transgenic regime in terms of yields and returns with advantages of 11 and 6 percent, respectively, despite significantly higher herbicide costs. However, growing raspberries in container seeding costs for the transgenic variety were twice as high due to the reseeding.
The authors of the watergrass study attributed this poor germination to “the experimental nature of the LibertyLink® rice seed used in this experiment” . If the same yield results could be obtained without reseeding, the transgenic variety would dominate the alternative treatments with net returns of approximately $237.39, 11.8 percent higher than the next best alternative . Furthermore, the transgenic regime offered better control of watergrass than the rotational treatment . The 2001 growing season offered the opportunity for the third and final year of the Fischer project. No propanil treatment regimes were included in this final year, and all but the transgenic regimes used multiple applications of chemical herbicides. Given the germination problems in the previous year, the seeding rate of LibertyLink® rice was increased from 1.5 to 2 pounds per acre and these increased costs are reflected in the results presented in Table 8. Of the four treatment regimes compared in this year, the transgenic variety offered the highest returns—2 percent above the next best option . The intensive combination offered the highest yields but lowest economic performance due to the high cost of herbicide material and applications. It should be noted that, even with the higher seeding rate, the continuous glufosinate regime with LibertyLink® rice in this final year offered the highest returns of any of the years. Perhaps more significantly, when taken as a three-year program of management, the regime offered returns that were 72 percent, 68 percent, and 1 percent greater than the continuous-molinate, intensive combination, and rotation-mode-of-action regimes. However, the undiscounted difference between the two best alternatives is $9.20 per acre, part of which would likely be as a technology fee. The authors of the Fischer study concluded the following in their 2002 final report: “Overall, the use of glufosinate on transgenic LibertyLink® rice has demonstrated its potential as a viable strategy for the control of thiocarbamate-resistant watergrass.” The economic results presented here, based partially on those findings, suggest that a transgenic weed-management strategy can be, at the very least, competitive with alternative pest-control regimes such as herbicideaction rotation. Overall benefits of such a program, however, are subject to individual growing conditions, market acceptance, and the pricing strategy of the technology owners.Most commercial rice production in the Sacramento Valley region is cultivated under flooded conditions and is heavily dependent on chemical herbicides and insecticides to control weeds and insect pests. Release of the standing water into the Sacramento Valley watershed is thus an important negative externality arising from rice farming and one that may be affected by introduction of transgenic varieties. For example, in the early 1980s, a large number of fish were killed as a result of molinate poisoning in rice water drainage areas while small levels of thiobencarb were found to adversely affect the taste of drinking water . These findings led to implementation of the Rice Pesticides Program by DPR in 1983 . The program was originally designed to reduce molinate and thiobencarb pollution of local waterways and expanded in the early 1990s to include performance goals for these and the insecticides methyl parathion and malathion and to address damage done by drift and dust from aerial application of herbicides . Other chemicals such as bentazon have been prohibited or at least restricted in geographic use as in the case of propanil . Furthermore, the Central Valley office of the California Regional Water Quality Control Board passed an amended conditional waiver of waste discharge requirements for irrigated lands in 2003. This waiver tightens quality standards for water released from agricultural uses in the Central Valley as well as requires monitoring and reporting of water quality and implementation of management practices that improve the quality of discharged water. Coverage under the conditional waiver can take the form of a “coalition group” with a common interest, such as the rice industry, and CRC has indicated that a commodity-specific rice waiver is preferred . Efforts to obtain this specific waiver are ongoing and have been received favorably by the board given the success of the rice pesticides program . Many of the chemicals currently registered for use on rice in California require holding periods for floodwaters that range from four to fifty-eight days in length and vary by water-management system . Ideally, these programs allow the chemicals to degrade in the water, resulting in ambient concentrations at least 90 to 99 percent less than the initial application . While these programs are generally effective in holding ambient concentrations at monitoring stations at or below maximum allowable levels, with some exceptions, significant holding periods can affect water depth and salinity within farms and thus initial establishment of rice plants and yields .