Potential changes in the competitiveness of maize growers in Central Chile through the use of transgenic seed ( Bt and RR )

A number of studies have shown that the use of transgenic seed increases productivity, reduces the quantities of pesticide required to protect crops, and cuts down the labour involved in cultivation. Besides saving time, this reduces manpower requirements and the use of farm machinery, and the use of such seed has had an important economic (and environmental) impact on the production of certain crops. These advantages translate into reduced production costs-particularly so for a number of crops whose international market price has fallen steadily over the last ten years. Current Chilean legislation, however, only allows the multiplication of genetically modified plants whose final product is destined for export. The aim of this work was to compare the production costs associated with conventional and transgenic Bt and RR maize, and therefore to highlight the potential economic benefits to Chile of opening the market to genetically modified seed.


Introduction
Over the years, advances in technology have spurred the development of agriculture.The industrial revolution brought improved agricultural productivity through the intensive use of the soil and the incorporation of mechanical, chemical and biological inputs.Later, the «green revolution» led to the wholesale use of many kinds of technology.More recently (since the late 1980s) our growing knowledge of molecular bio-logy and ever-improving biotechnological processes have generated new plant varieties that today are cultivated in most industrialised countries.One such product is genetically modified (GM) or transgenic maize (Dunwell, 2000).Two types of GM maize are available, one resistant to insect infestation, the other tolerant to herbicides.
reduced use of conventional pesticides, and to reduce the number of cultivation procedures required (with consequent reductions in necessary manpower, the use of farm machinery and fuel, and the saving of time).Such benefits could have positive repercussions for the traditional agriculture of Chile, especially in the production of grain maize, a crop that has suffered from a sustained reduction in its market value.Reduced production costs would benefit Chilean growers and contribute towards the sector's improvement.
The present work was performed with the conviction that the solution to the controversy surrounding the use of GM organisms (GMOs) lies in research and in the publication of sound scientific arguments on the pros and cons of this new technology.

Aims of genetic manipulation
Transgenic plants and other biotechnological products fall into three main categories depending on the objectives of the genetic manipulation undertaken (Dunwell, 1999;Schaper, 2001).The first category concerns the incorporation of resistance to insects and tolerance to specific herbicides such as Roundup.In soybean this type of modification has reduced the labour involved in cultivation, increased the efficiency of weeding, reduced the use of herbicides, and has brought direct production costs down by 25% (Izquierdo, 2001).The second category concerns improvements in nutritional value through changes in protein, starch, fatty acid, vitamin and micronutrient composition.This has involved an area of major impact in biotechnology, for example, the production of rice crops containing provitamin A (Ye et al., 2000), plants with greater lipid contents (Broun et al., 1999), and plants containing xenogenic proteins (Hood and Jilka, 1999).The third category concerns plants and other products with medical or pharmaceutical applications, e.g., in the production of vaccines (Walmsley and Arentzen, 2000), antibodies (Zeitlin et al., 1998;Verch et al., 1998), enzymes or industrial proteins (Hood et al., 1997).

Public controversy surrounding genetically modified crops
The controversy over genetic modification includes ethical, economic, environmental and social concerns (Kok and Kuiper, 2003;König, 2003).
A lack of information and poor dissemination of news regarding biotechnological advances in the field of transgenic plants and GM food are both to blame for the general public's low opinion of this technology (Aldhous, 2003;Kalaitzandonakes and Bijman, 2003).Its creators and defenders have failed to inform the public sufficiently well about the benefits of transgenic products while its opponents have successfully raised concerns and fears.Governments, meanwhile, have failed to provide a consistent framework of principles for discussion and public analysis.Nonetheless, reports are available that discuss the accumulated data of several years' worth of field trials (Andow, 2003;Wilkinson et al., 2003).

Current Chilean legislation regarding genetically modified organisms
Current Chilean legislation regarding GMOs is covered by Resolution No. 1523 of the Agriculture and Livestock Department (SAG, 2001), which came into force in August 2001.The first article of the Resolution recognises a number of innovations in the field including biosafety, modern biotechnology, and the evaluation of the risks associated with releasing live GMOs into the environment.
All decisions regarding the introduction of GMOs to Chile and their release into the environment rest with the SAG.For such decisions to be taken, the SAG demands an analysis of the risks involved -whether the material involved be Chilean or foreign in origin.With respect to imported materials, the competent authorities of the country of origin must provide a favourable report stating that the release of the organism into the environment will have no adverse effects.For Chilean material, as well as a risk analysis, a report is required from the SAG indicating that tests performed prior to introduction suggest there to be no negative side effects.All cases are reviewed on an individual basis.A further requirement is that an abstract should be published in the Diario Oficial (State Bulletin) making public the request to release a GMO.A phase of public debate can them proceed.With respect to seeds, the multiplication of GM plants must follow the Decreto Ley N°1764 (DO, 1977) which states the norms for research, production and marketing.This decreto establishes that a seed species or variety may be imported as long as all conditions regarding plant health, as well as any imposed by the Ministry of Agriculture, are met.Currently, the trading of GMOs on the Chilean market is prohibited.The law permits, however, that GM plants can be raised as long as their final product -their seeds-are exported.

Current situation regarding genetically modified crops
The area given over to GM crops worldwide increased from 1.7 million ha at the time of their introduction in 1996, to 52.6 million ha in 2001.
A review of the distribution of GM crops in 2000 and 2001 shows that the USA, Argentina, Canada and China are the main producers, with 68%, 22%, 6% and 3% of the total planted area respectively.This distribution is the same as seen for the 1999/2000 season.In 2001, transgenic crops were also produced in ten other countries, including Mexico, Australia, Germany, France, Bulgaria and Rumania (James, 2001), although the planted areas were much smaller.

Impact on crop production costs
Transgenic crops that are resistant to herbicides, insects and disease allows growers to increase their profits; such crops require fewer agrochemical agents and potential yield per ha is improved since losses to insects are reduced and the ability to compete with weeds is increased (Riley et al., 1998;James, 1997;Hillyer, 1999).Crop management is also made easier, the use of herbicides and pesticides is simplified, the amounts that have to be used are less, and less time has to be spent inspecting for pests (Krattiger, 1998;Riley et al., 1998;Carpenter and Gianessi, 1999).The potential of genetic modification in agriculture is well known (Ferber, 1999).The mean profitability of GM crops is greater than that of conventional varieties (James, 1997;Riley et al., 1998) due to the cost of the seed, the quantities of agrochemicals required, the level of pest and weed infestation, and the market price that can be demanded.Any advantages provided by nontransgenic plants are usually compensated by the reduced outlay in agrochemicals and the yield associated with GM varieties.This difference varies directly depending on the pests and weeds affecting productivity (Schaper, 2001).

Transgenic soybean
Studies performed in Argentina with soybean resistant to glyphosate (a systemic herbicide with a wide action spectrum) have allowed growers to reduce production costs by 15-20% compared to crops raised form non-GM seed.GM crop yields were up by 2.4 t ha -1 in the 1997/8 season, and by 2.6 t ha -1 in 2000/2001; costs were also reduced (Arentsen, 2002).In 1998, the cost of treating conventional soybean with herbicides was approximately 62 US$ ha -1 compared to only 41 US$ for glyphosate treatments of GM crops.Therefore, if weed control can be achieved with a single application of glyphosate, the savings associated with transgenic soybean can be considerable (OECD, 2000).
Also in Argentina, Ablin et al. (2000) compared the costs and gross profits associated with soybean and maize raised from conventional seed and from RR and Bt transgenic seed.Analysis of the total direct costs for soybean showed a slight advantage of 0.2 U$S ha -1 in favour of the transgenic seed.However, the authors suggest that a series of non-quantifiable advantages should also be taken into account, such as the reduction in the number of applications of herbicide, the effectiveness of weed control, the simplification of tasks, and the time saved by the use of the GM crop.This translates into better performance -a product of the reduced care and labour required.
The difference in gross profits between conventional and transgenic soybean for Argentinean farmers was calculated considering a 50% better yield obtained from American farmers (USDA, 1999).According to the data considered a favourable differences up to 42 US$ and 44 US$ per ha was calculated, which largely explains the preference of Argentine growers for RR soybean.

Transgenic maize
The cost of transgenic maize cultivation, as for any crop, is of absolute importance since it has a major effect on profits.A synthesis of the changes in the cost of seed and agrochemical agents in the US$ corn belt was presented by Benbrook (1999).An increase in the price of seed between 1980 and 1996 was observed, related to the incorporation of Bt maize and the research and development costs incurred by seed companies.It is interesting to note the increase in the cost of seed and agrochemicals as a proportion of gross profit.
Comparisons between conventional and Bt transgenic maize made by Ablin et al. (2000) consider the latter to have a 5% better yield [as shown by studies performed by the OECD (2000)].Under similar agricultural management, the gross profit obtained with Bt maize is higher, the greater yield obtained through effective control of the army cutworm being responsible.
Tomas (2001) (cited by Arentsen, 2002) compared the total costs and gross profits associated with RR soybean and Bt maize and their corresponding conventional crops.The results were clearly in favour of the transgenic soybean but only a rather moderate advantage was provided by the transgenic maize.
Several studies report increases in the mean yield of Bt maize over conventional maize to the order of 0.73 t ha -1 in 1997 and 0.26 t ha -1 in 1998, i.e., an improvement of between 3% and 9% in favour of the GM crop.These studies also estimate figures of between 7-40 US$ per ha in additional economic benefits (considering a mean maize price of 86.6 US$ t -1 ) (OECD, 2000).
Studies performed by the OECD in 2000 indicate an additional cost for Bt seed over conventional seed of approximately 25 US$ ha -1 in 1997 and 20 US$ ha -1 in 1998.Bt maize, however, offers resistance to lepidopteron insects, especially the European corn weevil (Ostrinia nubilalis), which causes worldwide harvest losses of 15-20% (OECD, 2000).
The sugarcane borer (Diatraea saccharalis) annually causes serious damage to sugar cane, rice, sorghum and maize crops.The damage inflicted depends on the size of the pest population and the phenological stage of the plant when the attack occurs.In maize, losses of between 10-25% have been recorded -even 50% in some extreme cases.This damage usually worsens as sowing date is delayed (Vallone et al., 2000).The latter authors compared the performance of non-transgenic and transgenic (Bt) maize seeds under similar agricultural management but sown at different times, and recorded greater profits with the transgenic maize.The gross profits were calculated by multiplying the mean yield obtained with each treatment by the price of maize, and then subtracting the operating costs.The results gave no apparent reason for abandoning the use of Bt maize since the profitability of even the latest-sown crop was 8.5 times that of the gross labour capital invested (Vallone et al., 2000).

Aims
The aims of the present work were to: -Produce and compare technical profiles for maize grown from conventional seed, from seed containing a gene from Bacillus thuringiensis (Bt) providing resistance to insects, and from transgenic Roundup Ready (RR) seed with herbicide tolerance.
-Construct potential economic scenarios for Chile if the market were open to such modified maize.

Material and Methods
Data for comparing the production costs associated with cultivating transgenic and conventional maize were collected in a questionnaire completed by the main maize seed companies from Central Chile.All belonged to the Asociación Nacional de Productores de Semillas (ANPROS, 2003) (National Seed Producers' Association).Ten out of 17 possible companies provided the requested information.These data provided real production costs per company; from them, technical prof iles on transgenic and conventional seed production were created.Data were processed using a Microsoft Excel spreadsheet.
The following activities were undertaken: -Determination of the study area.A general questionnaire revealed the area in which the main Chilean seed companies produce their seed.
-Selection of companies and completion of the questionnaire.Companies were contacted and presented with two questionnaires.The first covered general questions about the company while the second focused on agricultural topics such as the preparation of the soil, the workforce required, the different activities performed during cultivation, inputs, etc.
The data obtained were gathered under the following headings: -Soil preparation. -Sowing.
-Products and inputs.

Cultivation costs
Technical profiles were produced for each company using the information provided and by employing the equation: [1] where VC = variable costs associated with the crop ($ * ha -1 ) Qi = quantity or number of items (labour, input dose, etc.) (unit * ha -1 ) Pr = price of labour or input ($ * labour -1 ) The costs of mechanised labour, manual labour and inputs, etc., were provided by the different companies.However, if not properly provided, the values used were the market prices published in the October 2002 issue of the journal Revista del Campo (ODEPA, 2003).

Gross income from the crop
The gross income is the difference between the yield per ha and the price of exportable seed for each variety: GI = YIELD * Pr [2] where GI = gross income from the crop ($ * ha -1 ) YIELD = Yield per ha processed (qqm * ha -1 ) (1qqm = 100 kg) Pr = Seed price according to variety ($ * qqm)

Determination of the gross profit for the crop
The gross profit is the difference between the gross income and the variable costs associated with the crops: where GP = gross profit ($ * ha -1 ) GI = gross income for the crop ($ * ha -1 ) VC = variable costs associated with the crop ($ * ha -1 ).

Sensitivity analysis
The gross profits of the companies were compared to see whether there were any economic differences between raising transgenic and conventional crops.A technical profile was then produced based on international experience data concerning the production of grain maize using transgenic seed, which is not used by Chilean growers.These data were compared with those of a similar profile for high technology growers using conventional maize seed.This provided a means of examining the potential economic benefits offered by transgenic seed in a hypothetical scenario in which growers could buy seed with the Bt and RR modifications on the Chilean market.

General background
Currently, the VII Región Del Maule is the area of Chile with the highest concentration of maize seed producers -greater than the Región Metropolitana and even greater than the VI Región, traditionally the area of greatest maize production.Some companies produce seed in both the VI and VII Región.
These companies face the problem of isolating their crops from other commercial or traditional seed crops, but also from crops whose parentals have undergone genetic modification (i.e., GM plants).The most important companies raising GM plants in Chile are located in the VI Región (where there are six), the VII Región (with 5) and the Región Metropolitana (with 1).But more or less the same distribution is seen for GMO-free seed, with seven companies in the VI Región, six in the VII Región and one in the Región Metropolitana.
The questionnaire showed that the majority of companies working with GM maize take precautions to reduce the possibility of contamination, and that they comply with the norms imposed by the SAG and the Biosafety Protocol, and meet the demands of their foreign clients in terms of genetic and varietal purity.The main differences in production concern the greater isolation of GM plants, the separation of GM from GMO-free crops, the recording of global positioning system (GPS) data where cultivation occurs, compliance with SAG resolutions, separate harvesting and processing, and the cleansing required of sowing, harvesting and processing machinery.
Most of the companies surveyed do not take full advantage of the genetic modifications of the maizes they produce.Despite these crops being resistant to insects and herbicides, these companies still use pre-and postemergence insecticides and herbicides.This is mainly because the males and females of the varieties multiplied do not always show the same genetic modifications.This is more important with respect to herbicide resistance since no machinery exists that can apply herbicides without damaging the line lacking the resistance modification.Only two companies have developed a way to make such applications to their seed reserves and thus take advantage of the genetic modifications made; in so doing, they have considerably reduced their costs.

Production costs associated with modified and conventional maize seed
To honour confidentiality, and given the strong rivalry in the seed business, the names of the responding companies are not mentioned.Two companies whose costs represented the mean of national companies operating in the sector were then compared, one producing GM maize, the other traditional maize.Table 1 shows the production costs per ha for these two companies.
The main differences between them were: a) Soil preparation: The costs of the company dealing with GM maize showed costs in this area 8.75% below those of the company dealing with conventional maize.The latter company undertook more activities in this area, which increased its costs.This might have been due to location and grower technological level.
b) Sowing: The company dealing with transgenic seed had greater sowing costs (11.7% higher), since, inexplicably, very expensive furrowing was performed.c) Other activities: Great differences were found between the two growers, but not because of the seed.Rather, these were the result of company practices and cultivation costs.For example, as well as banking up the crop, the company using traditional seed undertook two additional harrowings, applied of an acaricide, and employed harvest practices costing around twice as much those used by the transgenic seed company.This resulted in mechanical costs some 62.2% higher.
d) Manpower: The costs for the GM-seed company were 12.4% lower than those of the traditional seed company, mainly because the former undertook no hand-hoeing; glyphosate herbicide adequately controlled all weeds.
e) Inputs: The difference here was some 252.25 US$, the GM-seed company showing 51.5% lower costs.However, although the outlay for post-emergence insecticides and herbicides was lower for the GM crop company, the bulk of this difference was actually due to the company's policy of not applying acaricides or fungicides and its use of lower doses of maize mix and urea (see Table 1).It is important to note that these differences do not, therefore, have anything to do with the transgenic nature of the seed; they are all due to cultivation practices.

Hypothetical scenarios involving market access for GM crops in Chile
Using data from international experience in transgenic maize seed production, a technical profile was produced for comparison with a similar profile prepared for traditional seed maize grown in the Talca region (using mean national data).The following assumptions were made: 1.That the grain yield corresponded to the mean national yield for 2001-2002(SAGA, 2003)), and that this reached 102 qqm ha -1 .In agreement with that described by Tomas (2001), it was assumed that the use of Bt transgenic seed would increase total income by 5%.Therefore if the price per qqm (100 kg) do not vary, then the variation in price can be attributed to the yield.
3. That the cost of maize corresponded to the mean wholesale price for the months of January 2001-June 2003 as published by the ODEPA ( 2003).Table 2 shows the costs per ha for conventional and transgenic maize seed in a scenario where GM seed has free access to the Chilean market.
In such a scenario for Bt and RR seed, some factors would not change such as soil leasing and soil preparation, banking up, and the application of herbicides and insecticides.With respect to total manpower costs, those associated with transgenic maize would be 32% lower than those associated with conventional seed.This is because glyphosate removes the need of hoeing by hand.
The use of inputs might be thought to have a major influence on production costs, but these would be higher for conventional maize by only 2% (7.23 US$ per ha).Although the transgenic crops would cost less in insecticides and herbicides, the greater cost of the seed (24% extra) would make the final difference of little importance.
The harvest costs for the transgenic maize would be 3% higher (5.03 US$ per ha) than the conventional crop: the greater yield of the transgenic crop would increase the cost of transporting and drying.In general, the total production costs for GM maize would be 1,149.40US$ per ha, while for conventional grain the figure would be 1,216.45US$ per ha.Therefore, switching to GM maize would reduce costs by 63.87 US$ per ha (6%) and would have a strong impact on final gross income.
Total income -the product of the maize price multiplied by the yield obtained-would be 3% higher with GM maize.This would mainly be due to the greater yield obtained with transgenic crops.This is surely a reflection of the better pest and weed control achieved.
Economic analysis shows that because of these greater returns and lower production costs, the gross profit associated with GM maize would 77% or 136.70 US$ per ha higher than with conventional crops.

Analysis of the above scenario
The only GM seed allowed into Chile is that whose product is destined for export.Table 3 shows hypothetical scenarios in which transgenic seed is allowed access to the market, and reveals the benefits that such technology could bring to traditional agriculture.The use of RR maize throughout the country (Scenario  Annex 1) would generate an use of glyphosate of more than 270,000 L, and an income for the companies marketing this product of some thousand million Chilean pesos.With respect to Bt maize, the differences with respect to insecticide use would lie in the non-use of pyrethroids: some 22,514 L would no longer be needed for maize cultivation.If Scenario 2 (Annex 2) were to disappear, the national demand for glyphosate would increase but there would be a corresponding fall in the sale of post-emergence herbicides such as atrazine and bentazon to the order of some two thousand million pesos.
The marketing of transgenic seed in Chile will certainly give rise to much debate.Until now controversy has only been centred on ecological and environmental issues, but much remains to be discussed with regard to its effects on the marketing of inputs.

Conclusions
-The total direct cost of multiplying GM maize seed is 8.75% lower than that associated with conventional seed.This is owed to a reduction in the number of cultivation practices required.With respect to input costs, these may fall by 72% of those associated with raising conventional maize seed, mainly because of the reduced use of agrochemical agents.The use of herbicides with transgenic RR crops would reduce labour costs by 14.2%.
-The use of GM seed maize would increase the competitiveness of the sector due to reduced production costs and increased income through higher yields.If RR maize were used, production costs would fall by 5.11% if weeding were manual -a 27.61% increase in gross profit per ha.If Bt seed were used, the increased yield obtained would greatly outweigh the 0.37% increase in production costs; gross profit would rise by 30.1% above that obtained with conventional seed.
-The gross profit from maize production with GM seed would be further increased if manual weeding were replaced by the use of a post-emergence herbicide (atrazine plus mineral oil).Bt seed would give the best results, the gross profit reaching 47.9% above that obtained with conventional seed.However, this would not be wise if RR maize were used; gross profit would fall from 27.61% extra to 12.98% extra.
-Owing to its particular agroecological characteristics, the area that would experience the greatest positive impact of freely available GMO seed would be from Maule river towards the south.Rainfall increases towards the south of Chile and sowing is delayed until around the second half of October or thereafter.This exposes the crop to severe attack from army cutworm and corn earworm (Heliothis zea).The use of Bt seed would lead to a strong reduction in the use of insecticides, reducing the associated costs and therefore increasing gross profit.
-Free production of grain maize based on the use of GM seed could be detrimental to the seed-producing industry since it would pose a contamination problem.Seed multipliers must isolate their lands to avoid contamination and ensure genetic homogeneity.It is clear that these companies would oppose the free commercial use of GMO in Chile.This should be taken into account by the agricultural authorities.National producers of maize grain would also have to compete with imported maize strongly supported by large subsidies in its different countries of origin.
Annex 1. Costs (Chilean pesos $) per hectare for conventional and transgenic maize (RR and Bt).Scenario with manual weeding and no use of post-emergence herbicide

Table 2 .
Costs per hectare for conventional and transgenic maize

Table 3 .
Costs (Chilean pesos $) and consumption comparison of herbicides and insecticides for scenarios with conventional and transgenic maize Scenario with post-emergence herbicide application (2) and no manual hoeing