Bt cotton boosts the gross margin of small-scale cotton producers in South Africa. Morse, S., Bennett, R. and Ismael, Y. Stephen Morse is a Reader in ...
Bt cotton boosts the gross margin of small-scale cotton producers in South Africa
Morse, S., Bennett, R. and Ismael, Y.
Stephen Morse is a Reader in Development Studies in the Department of Geography, University of Reading, Reading, Berkshire RG6 6AB, UK. Tel. +44 118 9318736. Email: [email protected]
Richard Bennett is a Senior Lecturer in Agricultural Economics and Director of the Agricultural Economics and Policy Research Group in the Department of Agricultural and Food Economics, University of Reading, Reading, Berkshire, RG6 6AR, UK. Tel. +44 118 9316478. Email: [email protected]
Yousouf Ismael is a researcher in the Department of Agricultural and Food Economics, University of Reading, Reading, Berkshire, RG6 6AR, UK. Tel. +44 118 9318971. Email: [email protected]
Abstract
This paper explores some of the issues involved in the genetic modification (GM) debate by focusing on one crop that has been modified for pest resistance, cotton (Gossypium hirsutum), and commercially released to small-scale farmers in the Makhathini Flats, KwaZulu Natal, the Republic of South Africa. This was the first commercial release of a GM variety (Bt cotton) in Sub-Saharan Africa, and thus provides valuable and timely insights into some of the potential benefits and disadvantages of the technology for small-scale farmers in Africa. Even though there are wider concerns regarding the vulnerability of small-scale farmers in the area, our survey results suggests that Bt cotton generated higher yields and gross margins than non-Bt cotton. In addition, Bt cotton signficantly reduced use of pesticide with consequent potential benefits to human health and the environment.
Keywords: Bt, cotton, sustainability, South Africa
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COTTON – A MICROCOSM OF THE GM DIVIDE
There are broadly two forms of GM application in cotton: herbicide resistance (mostly to glyphosate but also to bromoxynil) and insect resistance based on a number of related genes from the bacterium Bacillus thuringiensis (Bt) that code for proteins toxic to Lepidoptera (e.g. the bollworm complex) and some Coleoptera. The most common form of the later is the use of a gene which codes for the protein Cry1Ac, although efforts are now underway to stack this with a second gene which codes for the related protein Cry2Ab. There is much scope for flexibility here as many forms of this endotoxin exist [1]. Such stacking is important as with examples of conventionally-bred plant resistance it is possible that pests could overcome resistance based on single genes [2, 3, 4]. Given that genes allowing the pests to overcome the Bt resistance are typically recessive, refugia (areas of non-Bt cotton planted alongside Bt varieties) have been promoted as a means of reducing the onset of pests overcoming plant resistance [5, 6]. Whether the Bt-based resistance can be sustained using these various techniques is a question still awaiting an answer, but there are large-scale initiatives to test the management options [7]. Evidence to date suggests that the Bt resistance is durable, with varieties appearing to be more durable than expected.
It should also be noted that the use of the Bt endotoxin does not provide protection against other insect pests such as sap feeders (aphids and jassids), and the levels of endotoxin in the plant do decline with age so some spraying of insecticide against bollworm may be necessary in later stages of crop growth. However, given that cotton receives some 20% of all global insecticides
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applied each year [8] with farmers having to apply insecticide up to 12 times a season, anything which reduces this toxic load is beneficial to public health and the environment.
Cotton is, of course, not consumed so there is no risk to human health from this perspective. In turn, the potential risk to biological diversity probably needs to be further explored. There are 46 species in the genus Gossypium and some of these are indigenous to Africa (e.g. G. arboreum). In the US Bt cotton cannot be grown in parts of Florida so as to avoid cross pollination with nonBt cotton growing wild. The risks in an African context are less well understood.
GM cotton could also generate socio-economic benefits. Bt cotton would require less insecticide so costs should decline, and this in turn could generate higher gross margins (revenue – variable costs) [9]. There is growing evidence from a number of countries that this is indeed the case [10, 11, 12, 13, 14]. There is also evidence that Bt cotton has higher yields per se than non Bt cotton receiving a full insecticide application, suggesting that the protection afforded by the Bt gene is very effective [13, 15, 16]. Similarly, herbicide resistant cotton would allow smallholders dependent upon manual labour to reduce time, energy or even cash spent on weeding. At the very least this could free up time for other activities and could again help improve the gross margin. But would all farmers benefit equally? For example, experience with conventionally bred high-yielding varieties in the Asian Green Revolution has suggested that adoption tends to be socially differentiated with the better-off farmers adopting first and hence gaining an advantage over others and leading to a widening of the gap between those who can afford the technology and those who cannot [17]. Although there is a dispute whether this assumption can also be extended to the wide adoption of genetically modified crops [18], they are nevertheless
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used in the controversy over the impact of GM crops on resource-poor farmers in Sub-Saharan Africa [19].
The production of GM crops is largely under the control of large multi-national companies, and they invest substantial resources into research and marketing. Even though new market entries of pest-resistant cotton varieties are now report from China and India, the cotton business may nevertheless make small-scale farmers vulnerable to reckless behaviour in agribusiness. If credit is wrapped up within the input supply/output delivery contract then some maintain that vulnerability could increase [8]. If the Bt cotton crop ‘crashes’ because of decreasing prices for the product or because of pests overcoming the resistance then farmers dependent on credit could default and hence not receive any credit the following season. But this is a risk that applies to agribusiness in general and is not particularly related to Bt cotton.
This paper explores some of the issues involved in the GM debate by focusing on one crop that has been genetically modified for pest resistance, cotton (Gossypium hirsutum), and commercially released to small-scale farmers in the Makhathini Flats, KwaZulu Natal, the Republic of South Africa. This was the first commercial release of a GM variety in Sub-Saharan Africa, and thus could provide valuable and timely insights into some of the potential benefits and disadvantages of the technology with regard to small-scale farmers in sub-Saharan Africa.
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BACKGROUND
The study described in this paper was carried out in the Makhathini Flats, North Eastern Province of KwaZulu Natal, Republic of South Africa (Figure 1). The Makhathini Flats occupies an area of 1,800 km2 north of Durban on the Republic of South Africa’s eastern coast (27° East and 32° South). Out of the nine provinces in South Africa KwaZulu Natal is perhaps the least developed and has the lowest Human Development Index [20]. With an annual rainfall of 630 mm, the Pongola River, which used to flow through Makhathini, was dammed in 1974 with the objective of controlling floods and the provision of water for irrigation. The construction of the Jozini Dam left behind a vast flat and fertile area with reduced flooding incidence in the region.
Agriculture is an important source of income in Makhathini, and over 95% of the household are involved in some form of agricultural production [21]. However 90% are considered to be deficit farmers, as they do not produce sufficient to meet the household food requirement. The major crops in the area are beans (mostly Phaseolus sp.) and maize (Zea mays) for local consumption and cotton grown as a commercial crop. Yields are generally low. Farming is practised on smallscale farms, typically between 1 and 3 ha, and cotton usually occupies most of the farm. Cultivation is largely carried out by hand although there is some limited use of tractors for land preparation. Knapsack sprayers are usually hired for the application of insecticides. The family is the main provider of agricultural labour in the region, although labour is hired for certain tasks such as ploughing the land, spraying and harvesting.
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Insect pests are a major cause of yield loss in cotton in Makhathini, and prior to the introduction of Bt cotton there was no alternative other than to apply insecticides. The bollworm complex in the area comprises the American bollworm (Helicoverpa armigera), Red bollworm (Diparopsis castenea) and Spiny bollworm (Erias biplaga, E. insulana). Larvae of these insects feed on the developing buds, squares, flowers and cotton bolls with consequent reduction in yield. Cotton aphids (Aphis gossypii) are found on young shoots, leaves and growing tissue, where they feed on the plant sap. Jassids (Jacobellia fasciallis), also known as leafhoppers, are sap feeders that remove the sap from cotton leaves. Farmers can spay their fields up to 12 times during each season depending upon the severity of pest attack, and the most common insecticides are Monocrotophos, Cypermethrin, Deltamethrin (Decamethrin) and Thiamethoxam. Farmers wear little protection when spraying their fields, and there are also important concerns regarding the storage of pesticide (mostly in the compounds where the household lives) and disposal of empty containers in the field or near water.
Lack of working capital is a major hindrance for farmers in Makhathini. However, a local company, Vunisa Cotton, does supply seed and pesticide on credit to farmers in the region. Landbank of South Africa provides the finance and Vunisa acts as the local agent. All the farmers deliver their cotton to Vunisa who weigh and grade the product before paying the farmers the balance after the credit is repaid. Credit is generally given out in kind (i.e. as seed or pesticide) but cash can also be provided for tractor hire and labour. In addition Vunisa provides an extension service (five personnel) that also acts as a mediator between growers and the company in terms of credit worthiness. This is largely based on a farmer’s experience (typically
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related to age), assets (area of land owned, amount of livestock etc.), past history of credit repayment and receipt of a reference from the chief or head of the relevant Farmers’ Association agreeing to act as guarantors.
Therefore, while in many ways farmers in Makhathini face the same sort of problems common in rainfed smallholder agriculture throughout most of Sub-Saharan Africa the dominance of a single crop in the agricultural system does raise issues of potential vulnerability in much the same way as Ellis et al. [22] describe for maize in Malawi.
SURVEY DESIGN
Computerised records were obtained from Vunisa which detail the area of cotton sown, the variety, inputs purchased and yield for every individual farmer growing cotton in Makhathini over the three seasons, 1998/99 (first release of Bt cotton), 1999/00 and 2000/2001. However, over this 3 year period there had been some organizational change within Vunisa and hence the number of records available did vary between seasons. Thus while some 1283 clean records representing 89% all cotton growers in the Makhathini area were obtained for the 1998/99 season only 441 (32% of all growers) were available for the 1999/2000 season and 499 (33% of all growers) for the 2000/2001 season. Therefore, the term ‘sample’ in this context refers to the number of records that were included in the analysis once the Vunisa data had been checked and verified. However, one consequence of this is that the data reflect the Bt promotion policy of Vunisa in that the company especially targeted the larger cotton growers in the first season of
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release. As of 1999/00 the promotion was more uniform across the whole of the Makhathini growers. Nevertheless, beyond the targeting of the 1998/99 season there did not seem to be any systematic bias to the samples and there was no evidence to suggest that Vunisa (or anyone else) had attempted to affect record selection in order to bias results.
RESULTS
(a) Adoption of Bt cotton
Adoption of the Bt cotton variety has increased dramatically over the seasons since the first commercial release in 1998/99 (Figure 2). Adoption rates increased from 10% (1998/99) to 90% (2001/02). Farmers adopting Bt cotton in 1998/99 and 1999/00 continued using the variety in the subsequent season(s) suggesting that they were satisfied with it. Although no data are presented here, it is noteworthy that in the first season the main adopters were the ‘larger’ farmers (defined as those having more than 1 ha of cotton). Vunisa staff clearly wished to promote the technology, and the larger cotton growers were clear targets in 1998/99. They would also be the most credit worthy. In following seasons the promotion campaign extended to all farmers, no doubt aided by farmer-farmer communication and Vunisa publicity.
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(b) Economic performance of Bt cotton
The economic performance of the Bt variety relative to the conventional variety is illustrated by the various components of gross margin (profit) as set out in Figures 3 to 5. These figures present the mean performance of conventional (bars on the left hand side) and Bt varieties (bars on the right) in each season along with the 95% confidence interval.
Figure 3a is the yield/ha of cotton and Figure 3b (total revenue/ha) is simply the result of multiplying yield by the monetary value of the cotton. In both there is a clear yield and hence revenue benefit for Bt growers relative to the conventional cotton. In the 1998/99 and 2000/01 seasons Bt adopted had an average yield advantage over non-adopters of 63% and 56% respectively. Note that yields are low in the 1999/2000 season due to poor growing conditions (high rainfall), but even here Bt adopters had an 85% yield advantage over non-adopters.
Figures 3c and 3d show two of the main input costs: planting material and pesticide. Given that Bt cotton seed is more expensive than the conventional variety it is no surprise to see that Bt growers have higher seed costs/ha than non-Bt growers (101, 117 and 48% over the three seasons). Seed costs per hectare are generally quite stable across the three seasons, and the surge in Bt seed cost/ha in 1999/2000 is due to higher seed rates as smaller and more intensive farmers begin to buy the variety. It is possible, of course, that Bt seed prices will increase in the future. By way of contrast, pesticide costs for non-Bt growers shows a gradual increase over the three seasons as prices of the product rise with inflation, and in all seasons these producers spent more on pesticide than they did on seed. For Bt growers the situation is reversed with a much greater
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spend on seed than pesticide. Bt adopters spent between 53 and 63% less on pesticide than nonadopters.
Figure 4 presents the monetary value of another major input for cotton production in Makhathini - labour. Only three of these are provided here: spray labour, weeding labour and harvesting labour. Of these expenditure on harvesting tends to be higher than the others, and mirrors the yield of cotton so that more yield results in more expenditure on harvesting. Expenditure on weeding can vary a great deal between years depending upon the weed pressure, and for some reason the expenditure on weeding labour was higher for Bt growers in 2000/2001 than for nonBt growers (Figure 4b). No explanation was forthcoming from the farmers as to why this should be so, and in 1998/99 (the only other season for which data were available) there was no significant difference between Bt and non-Bt in terms of weeding costs. The pattern for spray labour shows a consistent trend of lower values for Bt growers compared with non-Bt, clearly mirroring the reduction in use of pesticide product highlighted in Figure 3d.
Figure 4d shows the gross margin/ha calculated as:
The overall picture is one of higher gross margin per hectare for the Bt variety compared with the conventional for all three seasons. The gross margin advantage (per hectare) for Bt adopters was SAR 531, 387 and 742 for the seasons 1998/99, 1999/2000 and 2000/01 (equivalent to US$86 to 93), and these are high relative to a typical daily wage of SAR 10 in South Africa. The reasons for this advantage are readily apparent. Farmers growing Bt have higher yields and much lower pesticide costs (i.e. cost of product and labour for spraying) than those growing conventional cotton. This is balanced against higher seed costs and labour for harvesting. Gains from the better yield and reduced pesticide are greater than the additional costs of seed and labour for harvesting. It is also noteworthy that in the bad season of 1999/2000 when yields were low the conventional variety performed particularly badly.
Finally, Figure 5 provides a breakdown of pesticide use between non-Bt and Bt growers. The cost of using bollworm pesticides (product plus labour for spraying) has predictably increased over the three seasons with inflation. While Bt growers spent more on bollworm pesticide in the first season relative to the other two, perhaps a reflection of lack of familiarity with the characteristics of the Bt variety, the values were much lower than for non-Bt growers. For the non-bollworm insecticides (i.e. those targeted at foliar and sap feeders) the pattern is more complex. As Bt cotton provides no protection against other insect pests then one should expect to see no difference in use of non-bollworm insecticide between Bt growers and non-Bt growers, yet in all three seasons Bt growers spend significantly less per hectare on non-bollworm insecticide than do the non-Bt growers. It is almost as if they expect the variety to provide some
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protection against such pests and reduce the use of non-bollworm insecticide as a result. Clearly there are problems here with communication of Bt characteristics. Yet at the same time these graphs illustrate the importance of the bollworm complex in terms of yield, as a reduction in non-bollworm insecticide by Bt growers still resulted in better yields relative to non-Bt growers. In Makhathini targeting pests that damage the bolls with plant resistance has a greater yield benefit than spraying foliar and sap feeders, and the saving made on non-bollworm sprays obviously helps with obtaining a favourable gross margin.
DISCUSSION
The economic results obtained on the farm level from the Makhathini flats shows that Bt cotton can provide important benefits in terms of gross margin, and this in turn provides more resource for farmers to invest in agriculture or other activities. A benefit of SAR 742 per hectare for Bt growers relative to non-adopters is significant, and with a daily rate of SAR 10 for paid labour is equivalent to 3.5 months work. In addition, a drop in the use of insecticide must be beneficial in health terms for the farmer, the environment and for society as a whole [23, 24]. There is little firm research on this as yet, but Bennett et al. [10] have data that are suggestive of a decline in hospital admissions as a result of pesticide use following the introduction of Bt cotton. There are also a number of comments from farmers that biodiversity is increasing in Bt plots as less
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pesticide is used. These all point towards a positive contribution from Bt varieties towards the sustainability of cotton production in Makhathini.
However, balanced against this is the real concern that the potential break down of pestresistance could reduce the gains significantly, although it is debateable whether the situation would be any worse than with the use of conventionally bred plant resistance. An advantage of GM technology, compared to conventional breeding, is that a number of resistance genes operating in different ways can be ‘stacked’, in effect creating a multiple-gene based resistance that can be more durable. To date, there is no evidence of a breakdown in Bt-based resistance in cotton, but if Bt resistance breaks down in Makhathini the suppliers need to be adaptable.
What about the alternatives to Bt cotton and the intensive use of pesticide? Some promote the adoption of organic methods of production with integrated pest management (IPM) as the best way of keeping pest damage within tolerable levels [8]. Ironically it has been argued that GM crops provide a valuable tool that can be applied within an IPM context [25]. But are IPM-based systems of crop protection sustainable? After all IPM also has costs, such as labour, and can require a great deal of skill and experience to implement successfully, and some have questioned the applicability of labour and knowledge-intensive forms of IPM for resource-poor farmers in Africa and elsewhere [26, 27]. Indeed, it is interesting how proponents of IPM often tend to gloss over these costs in much the same way as proponents of GM tend to make bullish claims as to the benefits of the technology and minimise potential problems [26]. Without a substantial investment in training and support for IPM it is most likely that if Bt cotton would fail in Makhathini then farmers would want to revert to the intensive use of insecticide.
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Discussions over the sustainability of Bt cotton in Makhathini need to be broadened to consider not just the crop production process and pest problems that may arise, and not even farm scale economics, but wider dimensions of livelihood. There are high levels of livelihood insecurity in KwaZulu Natal with poor access to job opportunities [20]. Perhaps unsurprisingly, given that commercial GM release in Africa is so recent, there are no studies of impact on farmer livelihood or upstream and downstream organisations, although there have been various initiatives focused on rural livelihoods throughout sub-Saharan Africa, such as LADDER (Livelihoods and Diversification Directions Explored by Research) [22, 28, 29]. A common denominator in all of these has been the importance of livelihood options open to farmers and their families. However, at the time of writing alternative sources of livelihood to the growing of cotton are severely limited in Makhathini, although there is new hope with increasing investment in the area for initiatives such as fish farming (an estimated investment of SAR275 million), essential oil and perfume production (SAR40 million), cut flower industry (SAR40 million) and even plans for a biodiesel project (Sunday Times, 14th April 2002). Bt cotton is but one component within this complex change, and while higher gross margins provide additional options for enhancing livelihood it is clear that much more research is needed to explore its impact on sustainability within the wider context of development in Makhathini.
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CONCLUSION
The survey showed that there are yield, cost and gross margin benefits for smallholders of growing Bt cotton compared to the conventional alternatives, especially for the smallest producers, and this has important implications for livelihoods. Moreover, the associated environmental and human health benefits are significant. More research is required to look at the impact Bt cotton on livelihood within Makhathini to elicit the nature of the options available and how Bt cotton is making a contribution.
ACKNOWLEDGEMENTS
The research that forms the basis for this paper was funded by a University of Reading studentship. We would like to especially thank Vunisa Cotton, particularly Mr Frans Gray, for allowing us access to their data. We would also like to thank Mr Charles Matalou of Monsanto for local help and support, Chief TJ Buthelezi for help with access to farmers and Dr Philipp Aerni for suggestions regarding the improvement of this paper.
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Figure 1. Makhathini Flats, Republic of South Africa.
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Adoption rate (%)
Figure 2. Adoption of Bt cotton in the Makhathini Flats between 1998/99 and 2001/02.
100 90 80 70 60 50 40 30 20 10 0 1998/99
1999/00
2000/01
Growing season
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2001/02
Figure 3. Yield, revenue and expenditure on seed and pesticide over 3 growing seasons for adopters (right) and non-adopters (left) of Bt cotton in Makhathini. Bars represent means and 95% confidence limits. Results of a t-test are presented as * P
