The Econony and GMO: Who Makes the Money?


What kinds of changes have been made to our food and farm crops?

•GM crops in our fields today include apples, corn, and cotton that are resistant to insects, cantaloupes resistant to viruses, and herbicide tolerant corn, tomatoes, potatoes, and soybeans.


How do economic factors affect GMO development?

•Due to the costs associated with bringing GM agricultural technology to market, biotechnology companies have initially focused on developing profitable crops with readily apparent economic benefits. 

•These benefits have come in the form of lower average production costs (i.e., less need for herbicide or insecticide), or increase in revenue due to higher yield or quality of genetically engineered crops.  Traits conferring herbicide resistance as well as insect resistance (such as Bt toxin ) have been readily adopted by many US farmers.  These traits have the potential to reduce the average cost of production and simplify the process of pest management. 


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What are the economic concerns associated with GM technology?

•Some critics of biotechnology are concerned about the fact that monetary interests have been a driving factor in the development of GM technologies, and question whether a technology driven by profit margins will ever have the potential to be used for humanitarian applications. 


•Developing countries often have very different climates, soils, and agricultural practices than the locations in which GM crops were originally developed, and some people question whether GM crops could actually be profitable for third world agriculture.


•Some are concerned about the concentration of GM technology into a few large multinational companies.  They feel that biotech companies may monopolize agriculture, and thus pose a threat to the sustainability of rural communities. The patenting of biotechnology, such as Monsanto's near-monopoly on Bt corn, leads many to expect that companies will charge higher seed prices or a technology fee such that small farmers may find that the relative increase in yield will not offset the additional costs of licensing GM technologies. 


•In addition, some individuals worry about becoming dependent on biotech companies, particularly with the introduction of terminator technologies, or seeds that must be bought each year as opposed to sown from the previous year's harvest.  This has led to a black market in GMO sees in some countries.


•Internationally, many countries – in particular the European Union – have expressed a reluctance to accept GM food and feed grains, in contrast to the quick adoption of GM agriculture by US farmers.


•The result of this is some countries have been hesitant to use GM, knowing their customers may not by their products.


•Consumer groups have pressed to ban GM foods and grains, and lobbied for increased regulation and labeling of GM products.  Others argue that non-GM food marketers, especially organic food producers are looking for ways to justify charging more for their ‘GM-free’ products.


Further information:

Qaim, M and A. Janvry, Genetically Modified Crops, Corporate Pricing Strategies, and Farmers’ Adoption: The Case of BT Cotton in Argentina.  American Journal of Agricultural Economics 85(4), 814-828, 2003.


Far less scary than it used to be: Genetically modified crops will neither feed the world nor wreck the planet. So what's all the fuss about? The Economist, July 24, 2003.


News story: new Kenyan wheat ‘expected to boost economy’


The Economics of Non-GMO Segregation and Identity Preservation


Economics of GMO in Iowa study