determinants of the gm cotton adoption: evidences for brazil

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Determinants of the GM cotton adoption: evidences for Brazil Paper presented in the XVI ICABR Conference- Ravello, Italy 25-27 June -2012. Alexande Gori Maia- IE/Unicamp Bruno C. B. Miyamoto – IE/Unicamp José Maria F.J. da Silveira – IE/Unicamp

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Determinants of the GM cotton adoption: evidences for Brazil. Alexande Gori Maia- IE/Unicamp Bruno C. B. Miyamoto – IE/Unicamp José Maria F.J. da Silveira – IE/Unicamp. Paper presented in the XVI ICABR Conference- Ravello , Italy 25-27 June -2012. cotton in Brazil. - PowerPoint PPT Presentation

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Page 1: Determinants of  the GM cotton adoption: evidences for Brazil

Determinants of the GM cotton adoption: evidences for Brazil

Paper presented in the XVI ICABR Conference- Ravello, Italy 25-27 June -2012.

Alexande Gori Maia- IE/UnicampBruno C. B. Miyamoto – IE/UnicampJosé Maria F.J. da Silveira – IE/Unicamp

Page 2: Determinants of  the GM cotton adoption: evidences for Brazil

2

cotton in Brazil• High growth of quantity due to increasing

productivity;• High price variability;

Graphic 1 - Index for acreage, quantity produced and production value (R$/t) of cotton in

Brazil (1994 = 100)

Source: IBGE - Municipal Agricultural Production

Page 3: Determinants of  the GM cotton adoption: evidences for Brazil

3

Spatial Distribution of Cotton• Mato Grosso and Bahia accumulate the

highest shares of total production (49% and 34%, respectively);

Figure 1 - Spatial distribution of the quantity produced (circles, in tons) and productivity

(colors, in tons/ hectare) of cotton - Brazil, 2010

Source: IBGE - Municipal Agricultural Production Elaborated with Phicarto. Available http://philcarto.free.fr/.

Page 4: Determinants of  the GM cotton adoption: evidences for Brazil

First GM cotton approval: 2005, Mon 810 (Cry1AC) and three years after,

HT Liberty link varietiesMain reason for a slow diffusion:

• Duopal and Nuopal were not considered good varieties in quality for growers and industry;

Alabama argilaceaDelay in the approvals of other Bt Genes, like Cr2Ab +

Cry1Ac), Vip3A e (Cry1Ac +Cry1F).Cry1F)- control of Spodoptera frugiperda and plusídios

Page 5: Determinants of  the GM cotton adoption: evidences for Brazil

I. Brazil: GM cotton in main production areas

Some features

Page 6: Determinants of  the GM cotton adoption: evidences for Brazil

Panels in main cotton regions

• Evaluate cost differentials of GM cotton in Brazil, 2010/2011 harvest.

• Comparison between conventional x GM production systems.

• Additionally, evaluate the potential general equilibrium impacts.(we skip this in the paper)

Page 7: Determinants of  the GM cotton adoption: evidences for Brazil

Methodology• First step: field survey by CEPEA(ESALQ-USP) on the

main cotton production regions. Cost differentials. – Sorriso (MT)– Campo Novo Parecis (MT)– Campo Verde (MT)– Mineiros (GO)– Luiz Eduardo Magalhães (BA).

• Surveys: “Panel” method. Costs and area with GM and conventional varieties estimates.

Page 8: Determinants of  the GM cotton adoption: evidences for Brazil

Survey results: adoptionRegion State Season Row spacing GM use

Luiz Eduardo Magalhães BA First harvest conventional No

Mineiros GO First harvest conventional Yes (LibertyLink) Second harvest conventional Yes (LibertyLink)

Primavera do Leste MT First harvest conventional No

Campo Verde MT First harvest conventional No Second harvest conventional Yes (LibertyLink)

Campo Novo do Parecis MT First harvest conventional No Second harvest Second harvest

conventional narrow

Yes (LibertyLink) Yes (LibertyLink)

Lucas do Rio Verde / Sorriso MT First harvest conventional No Second harvest Second harvest

conventional narrow

No Yes (LibertyLink)

Region 1st. Harvest 2nd. Harvest Conventional GM Conventional GM

Sorriso/MT 100% 0% 50% 50% Campo Novo do Parecis/MT 100% 0% 8% 92% Campo Verde/MT 100% 0% 0% 100% Mineiros/GO 60% 40% 60% 40% Luiz Eduardo Magalhães/BA 100% 0% 0% 0%

Page 9: Determinants of  the GM cotton adoption: evidences for Brazil

GM adoption in regions

• Only herbicide tolerant (HT) GM cotton in use.– Mineiros: low potential of GM varieties.– Luiz Eduardo: low potential, BT cotton do not control

other common pests in the region.• Only Mineiros used GM cotton in the first harvest.• Use of HT in the second harvest to facilitate weed

control.• Low availability of seeds reported for this year.• No price differentiation for the fiber.

Page 10: Determinants of  the GM cotton adoption: evidences for Brazil

Cost comparison, R$/ha. No GM cotton in Bahia.

Cost item Cotton 1st Harvest

Cotton 2nd. Harvest

MNR

MNR CNP OGM NOGM

OGM NOGM OGM NOGM

Fertilizers 875.05 875.05 551.55 551.55 759.60 759.60 Chemical inputs 739.38 847.06 541.53 693.21 690.83 669.26 Herbicides 270.24 377.92 186.80 338.48 218.89 197.33 Insecticides 369.04 369.04 304.68 304.68 400.64 400.64 Fungicides 100.10 100.10 50.05 50.05 71.29 71.29 Seed treatment 0.00 0.00 0.00 0.00 0.00 0.00 Seeds 117.94 79.04 117.94 79.04 81.00 42.00 Emulsionable oil 95.66 95.66 95.66 95.66 39.65 39.65 Mechanical operations 406.54 417.11 397.88 408.45 335.33 367.80 Transportation 0.00 0.00 0.00 0.00 0.00 0.00 Labor 111.97 188.40 106.41 182.84 295.63 358.10 Trade/Storage 795.27 795.27 745.81 745.81 648.23 648.23 Taxes 148.66 148.66 141.23 141.23 202.80 202.80 Insurance 18.21 18.83 19.70 20.32 19.86 22.05 Technical assistance 46.93 50.05 36.22 40.21 44.04 44.73 Interest over capital 233.85 250.63 312.50 336.92 228.86 232.44 CO 3589.44 3765.76 3066.41 3295.24 3345.83 3386.65 COT 3825.54 4011.77 3327.86 3566.61 3600.74 3669.99 CT 4195.73 4389.96 3722.82 3969.57 4053.51 4145.69

Page 11: Determinants of  the GM cotton adoption: evidences for Brazil

Operational costs differentials GM – conventional

(Important reduction in labor)

-8.00%

-7.00%

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

MNR-GOFirst harvest

MNR Second harvest, 0.76 m.

Campo Novo dos Parecis

Page 12: Determinants of  the GM cotton adoption: evidences for Brazil

Profitability comparison

MNR MNR CNPAlgodão Safra Algodão 2ᵃ safra 0,76 m

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

54.0

% 64.9

%

68.1

%

47.2

%

54.7

% 64.4

%

OGM Convencional

Page 13: Determinants of  the GM cotton adoption: evidences for Brazil

Final remarks: Brazil main production areas

• GM cotton is a labor saving technology.• Labor will be released from cotton to other

economic activities, with beneficial effects under full employment.

• Regions that do not adopt the GM technology will tend to reduce production.

Page 14: Determinants of  the GM cotton adoption: evidences for Brazil

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Spatial Distribution of Cotton• Where are the small holders?

Figure 1 - Spatial distribution of the quantity produced (circles, in tons) and productivity

(colors, in tons/ hectare) of cotton - Brazil, 2010

Source: IBGE - Municipal Agricultural Production Elaborated with Phicarto. Available http://philcarto.free.fr/.

Page 15: Determinants of  the GM cotton adoption: evidences for Brazil

Cotton in Brazil: small holders share in 2006

Less than 100 ha 11 997 41 971 40 915 36 696 36 821

% of the total 90 2 2 1 5

Categories Number of properties

Quantity produced (ton)

Quantity Sold (ton)

Value ( 1000 R$ 2006)

Harvested area (ha)

Page 16: Determinants of  the GM cotton adoption: evidences for Brazil

Review of literature

Papers on seed adoption

• HUBBELL et al 2001; Bt cotton in US: revealed and declared preferences;

• FERNANDEZ-CORNEJO et al, 2001): Bt and Precison Farming;

• QAIM e de JANVRY, 2003 Bt cotton in Argentina (Willingness to pay; even commercial growers would like to pay half a royalty value. They conclude that profits would be higher if the firm reduce seed prices);

• KOLADY e LESSER, 2006;- Bt eggplants (Hybrid and open pollinated varieties, imperfect substitutes): production systems conditioning adoption;

• BREUSTEDT et al, 2008; Colza GM (two types) and a conventional variety,( probit multinomial, ex-ante);

Page 17: Determinants of  the GM cotton adoption: evidences for Brazil

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Survey details• Sample: 175 small producers (aprox. 1,5% of the population)

• Coverage: States of Bahia, Paraíba, Rio Grande do Norte, Minas Gerais and Goiás;

Page 18: Determinants of  the GM cotton adoption: evidences for Brazil

This is a “first year” analysis

Typology• Descriptive analysis:

Multiple Correspondence Analysis (ACM) in order to identify patterns of association among types of cotton and farmers’ characteristics.

What is the preference for cotton varieties?

• Ex-post analysis: Conjoint Analysis in order to estimate utilities for each characteristics of cotton production.

Page 19: Determinants of  the GM cotton adoption: evidences for Brazil

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Multiple Correspondence Analysis

Dimension 1(16% of the total variability)

Negative Values

Positive Values

Area up to 1 ha Absence of boll weevil

Organic Cotton

Dimension 2(9% of the total variability)

Dimension 3(8% of the total variability)

Bt cottonArea between 2 – 5 ha

Pink BollwormLow use of pesticide

HT CottonSilverleaf

No mechanization

Area over 5 ha Mechanization

Area up to 1 ha Permanent Employee

White Cotton

Access to credit

Page 20: Determinants of  the GM cotton adoption: evidences for Brazil

ACM: methodology• From a contingency list with multiple combinations of qualitative categories, MCA

determines the number of relevant dimensions to understand the structure of associations among the categories of analysis (GREENACRE, 1984).

• The MCA is based on the technique of principal components to simplify the data structure, (CUADRA, 1981).

• The technique decomposes the structure of the distances between the categories of interest (distances c2) in (i) eigenvalues representing the partial contributions of each dimension to the total variability, and (ii) eigenvectors representing geometric projection planes of the sub-populations characteristics (GREENACRE & HASTIE, 1987).

• The total inertia represents the average degree of separation of the multiple combinations of frequencies in relation to the average behavior of the population. The K eigenvalues l1, ...,lK resulted from the decomposition of the total inertia are called main inertia and correspond to the partial contributions of the respective dimensions.

• The geometric dispersion of the categories in the space defined by the dimensions of correspondence analysis shows the nature of associations between qualitative variables of the problem.

• Groups of categories close together reveal similarities in the patterns of associations, while groups far apart mean repulsion between the categories (HOFFMANN & FRANKE, 1986).

Page 21: Determinants of  the GM cotton adoption: evidences for Brazil

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Multiple Correspondance Analysis

Figure 2 - Distribution of categories in the three main dimensions of the MCA

Source: Research data

• Pattern 1: Organic + small area + low education + no credit;• Pattern 2: Colored + no mechanization + no employee;• Pattern 3: White + higher education + mechanization + employee;• Pattern 4: Bt + area 2-5 ha + credit + lower use of pesticide;• Pattern 5: HT + Budworm + Silverleaf whitefly;

Page 22: Determinants of  the GM cotton adoption: evidences for Brazil

Table 2 – Utilities based on the non-metric conjoint analysis of the ordered-rank evaluations

Variable ̂ ̂S ˆ

ˆ S

Intercept 2,336 0,051 45,681

Bt Pirate -0,179 0,115 -1,555

Bt R$20/ha 0,328 0,138 2,370

Bt R$55/ha -0,298 0,313 -0,950

Bt R$90/ha -0,533 0,121 -4,418

RR Pirate 0,154 0,145 1,064

RR R$20/ha -0,102 0,174 -0,587

RR R$55/ha 0,044 0,169 0,261

RR R$90/ha -0,473 0,129 -3,661

Organic 0,987 0,102 9,634

White conventional 0,028 0,127 0,221

Colored 0,043 0,140 0,311 Source: Research data

Page 23: Determinants of  the GM cotton adoption: evidences for Brazil

C.A. methodology• Data were collected by asking farmers about their preferences

for different characteristics of cotton systems. • The CA decomposed rank-ordered evaluation judgments of

cotton systems into components based on qualitative cotton characteristics.

• For each characteristic of interest, a numerical "part-worth utility" value was computed. The sum of the part-worth utilities for each product is an estimate of its utility.

• The aim is to compute part-worth utilities in such a way that the product utilities are as similar as possible to the original rank ordering.

Page 24: Determinants of  the GM cotton adoption: evidences for Brazil

The methodology applied• Two attributes of interest were considered: type of cotton and price (Table 1). • The type of cotton represents the five most usual productions in Brazil: GM Bt, BM

RR, white conventional, organic and colored. • Since there were no expressive differences between the sales prices of these seeds

in Brazil, the attribute price expressed the payment of royalties for GM seeds. • Thus, no prices were presented for white conventional, organic and colored

cotton. Based on a range of values practiced in Brazil, three values of royalties were considered: R$ 20 / ha, R$ 55 / ha and R$ 90 / ha. We also considered the option for a pirate GM seed (with no royalty payments).

• Such design would imply a total of 11 possible alternatives (4 prices of GM Bt + 4 prices of GM RR + 1 choice of white conventional + 1 choice of organic + 1 choice of colored cotton), which were randomly distributed in sets of four alternatives for each interviewed.

Page 25: Determinants of  the GM cotton adoption: evidences for Brazil

Since all cotton characteristics are nominal, the CA can be similarly represented by a main-effect ANOVA, where the attributes are the independent variables and a function of the rank order comprise the dependent variable (KUHFELD, 2010):

ijjijy )(

0 j

where

The yij represent the stated preference of farmer i for a cotton production with characteristics j and designates its monotonic transformation. Analyses were done using TRANSREG procedure of SAS System (SAS, 2012) and non-metric conjoint analysis models were fit using an alternating least squares algorithm (Young, 1981; Gifi, 1990).

Page 26: Determinants of  the GM cotton adoption: evidences for Brazil

Cotton characteristics of valuation in the contingent ranking

Type Price

Bt Pirate (zero)R$ 20 / haR$ 55 / haR$ 90 / ha

RR Pirate (zero)R$ 20 / haR$ 55 / haR$ 90 / ha

Organic -White Conventional -Naturally Colored -

Page 27: Determinants of  the GM cotton adoption: evidences for Brazil

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Conjoint Analysis

• Organic cotton has the higher utility;

• Bt cotton in second place, with low royalties (R$ 20/ha);

• High rates of royalties imply negative utility in comparison with other choices;

Page 28: Determinants of  the GM cotton adoption: evidences for Brazil

Agroecological networkThe existence of a complex network established in order to support market access for cotton growers in the semi-arid areas, where most actors do not obtain direct financial returns and many do not aim to.;

This goal has been achieved thanks to collective work, which entails organizational, technical and relational issues. It can therefore be concluded that the collective actions performed by the Network are driven by various motivations in addition to economic goals.;

These motivations are not easy to identify or measure. However, where actions geared to equality, justice and solidarity are concerned, subjective values are necessarily present.

Page 29: Determinants of  the GM cotton adoption: evidences for Brazil

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Next Steps• Multinomial logit model (MLM) in order to estimate the

main determinantes of the producer’s revealed choices;• Based on the MLM results, to apply propensity score (PS)

approach in order to indentify groups of producers with similar socioeonomic characteristics and different revealed choices for cotton seeds (Bt, RR, white conventional, colored and organic);

• Based on the PS results, to apply a new conjoint anlysis for selected farmers (relatively similars) in order to estimate stated preferences for cotton seeds with no selection bias.

Page 30: Determinants of  the GM cotton adoption: evidences for Brazil

Final Remarks• Diffusion process of GM cotton crops is still under way: is

depends crucially of the quality of the varieties;• Impacts in Brazil of Bt cotton and even stacked varieties is

not as high as in other countries, like China and India;• There is limit to accept the payment of royalties in cotton

by small grower. However, the case of Catuti shows that Bt cotton could be important in certain situations;

• Agro-ecological networks are complex, demanding a huge effort by different types of stakeholders, part of them not directly involved in profit seeking activities.