Jose Falck Zepeda Presentation Cambridge University December 2014 FINAL on Biotechnology and...

Program for Biosafety Systems – http://pbs.ifpri.info/

“Biotechnology and Developing Countries”

José Falck ZepedaSenior Research Fellow / Leader PBS Policy Team

International Food Policy Research Institute - Program for Biosafety Systems (IFPRI - PBS)

Presentation made at Department of Politics and International Studies,

Cambridge University, UK, December 2014.


Content

1. Background and conceptual framework

2. Biotechnology as a tool

3. GM biotechnology as the regulated technology

4. Socioeconomic assessment experiences

5. Policy guidance


The challenge ahead

Feed 9 billion people by 2050

Would require increase in production

:

Higher demands on the

biomass production

system due to an

increasingly complex set

of supply and demand

drivers will need to rely on

Increase in productivity

rather than

land expansion


The role of agricultural technologies

http://www.ifpri.org/sites/defa

ult/files/publications/oc76.pdf

Key technology options to increase

cereal yields rapidly and sustainably

in the face of growing natural

resource scarcity and climate

change

Selected technologies and practices

have the potential to increase yields

while making better use of resources,

helping farmers adapt to a changing

climate, and reducing environmental

impacts by limiting pollution and

demands on ecosystem services


Technology Assessment Scope• No-Tillage

• Integrated Soil Fertility

Management

• Organic Agriculture

• Precision Agriculture

• Crop Protection

• Drip Irrigation

• Sprinkler Irrigation

• Water Harvesting

• Drought Tolerance

• Heat Tolerance

• Nitrogen Use Efficiency


Percent Change in Total Production, Developing

Countries: Maize, Rice, Wheat,

2050 with Technology vs. 2050 Baseline (IMPACT)

CT)


Food Security Effects of Technology

relative to 2050 Baseline

-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

Malnourished Children Pop. at-risk-of-hunger

No till Drought tolerance Heat tolerance

Nitrogen use efficiency Integrated soil fertility mgt Precision agriculture

Water harvesting Sprinkler irrigation Drip irrigation

Crop Protection - insects


Some conclusions

Rosegrant et al. 2014

• Adoption of this set of technologies significantly reduces projected food prices in 2050 compared to climate change baseline

• Number of people at risk of hunger could be reduced by 36% in 2050 compared to baseline with adoption of combined technologies under feasible adoption pathways

• Organic agriculture is not a preferred strategy for the 3 crops; has a role in niche high-value markets

Regulatory reform: Reduce hurdles to approval and release of new cultivars and technologies

• Remove impediments (e.g. restrictive “notified” crop lists, excessive testing and certification requirements, foreign investment barriers, ad hoc biosafety decision-making)


2. Biotechnology as a tool


What is biotechnology?

• Manipulation of living organisms for a useful purpose

• Definition that covers a broad range of techniques

– Traditional: Plant breeding, tissue culture, micro-propagation

– Modern: Marker assisted selection, Genetic Modifications. Genomics and other “Omics” , Gene editing…

• Only GM (transgenic or Living Modified Organisms) products are currently regulated for biosafety


Implications for developing country agriculture

• Majority expansion is in four crops and two traits (insect protection and herbicide tolerance) produced by industrialized countries for its agriculture

• Diffusion to developing has been a (fortunate) development

• Challenge now is meeting explicit needs of

– Developing countries

– Smallholder / resource poor farmers

– Crop / traits


R&D and innovation for and by developing countries

• Crops and traits of interest/value have been produced

• Capacity to develop GM crops and other biotechnologies

– Advanced => China, Brazil, Mexico, India, Argentina

– Medium- Advanced => Philippines, Thailand, Indonesia

• Next Harvest documented 270 technologies in 16 developing countries

Why aren’t these technologies in the hands of famers?


3. Biotechnology as a regulated R&D activity


Biosafety as a process…

Contained Use

Experiments

Confined

Field Trials

Deliberate

ReleasePost

ReleaseDeregulation

Regulatory decision points

Familiarity

Learning


R&D and product development life cycle

1 – 3 yrs. 1 – 3 yrs. 1 – 3 yrs.

Product Concept

Discovery Early Product Testing & Development

Integration & Product Selection

Product Ramp Up

Market Introduction

1 2 3 4 5 6

Confined Field Trials

Author: Ramaeker-Zahn


Regulatory processes, decision making and assessments

Environmental and Food/Feed

Safety Assessment

Socio-Economic

Assessments (plus others?)

Decision Making


Assessment FrameworksType International protocol / conceptual framework

Impacts on biodiversity and ecosystem services

- Biodiversity Indicators Partnership- Millenium Ecosystem Assessment- Convention on Biological Diversity 9(CBD)

Environmental biosafety Cartagena Protocol on Biosafety

Food/feed safety - CODEX ALIMENTARIUS- OECD Documentns

Socio-economicconsiderations

Some guidance documents and elements of best practice- International Association of Impact Assessments- CGIAR

Emerging conceptual frameworks- Sustainable Livelihoods- Value Chains analysis- Institutional analysis- Innovation Systems- Institutional Feasibility Studies


Model 1. A simplified “typical” biotechnology developer

• Typical biotech investor Phillips McDougall 2011)– Invests US$ 136 million in a new GM

crop

– Average time for regulatory approval of 48 months

• Financial implications of a 20% rate of return– Require a total Net Present Value (NPV)

of US$ 27.2 million

– Each year of delay represents a loss in NPV of US$ 22.7 million

Source: Smyth, McDonald and Falck-Zepeda, 2013


Marginal loss of net cash flow from delays in regulatory approval process (IRR = 20%)

0.0

10.0

20.0

30.0

40.0

50.0

1 2 3 4 5 6 7 8 9 10 11 12 13

Marginal Loss (%)

Years

Source: Smyth, McDonald and Falck-

Zepeda, 2013 Threshold

If IRR is 50% then

threshold closer to 4

years!!!


Issues and Implications

• Regulatory delays have a negative impact on returns to investments

• With a 20% rate of return, expect year 6 of regulatory delay to be the trigger point for suspending investment in new R&D projects

• Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached

Source: Smyth, McDonald and Falck-Zepeda, 2013


Impact of risk and uncertainty in the stream of benefits

• Investment returns become riskier over time for a well characterized recovery path

• What happens if developers forced to “forsake” the element of predictability?

– Ambiguity: Cannot make a determination due to lack of knowledge about parameters (e.g. completion of regulatory process)

– Uncertainty: Unexpected events

• Likelihood that an investment will not be made increases with increased uncertainty and ambiguity


Case study 2. Net benefits from the adoption of GM crops in the Philippines

Bt eggplant

MVR tomato Bt rice PRSV resistant papaya

Net Benefits baseline (NPV in US$)

20,466,196 16,748,347 220,373,603 90,765,793

Effect of increasing

cost or time of

compliance

Source: Bayer, Norton and Falck Zepeda (2008)


Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines

Notes: 1) Source: Bayer, Norton and Falck Zepeda (2008), 2) Baseline values for each technology expressed in millions US$ using a

discount rate for the estimation of Net Present Value = 5%, 3) Change in Net benefits defined as the total benefits estimated using the

economic surplus minus total regulatory costs.


Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines

Notes: 1) Source: Bayer, Norton and Falck Zepeda (2008), 2) Baseline values for each technology expressed in millions US$ using a

discount rate for the estimation of Net Present Value = 5%, 3) Change in Net benefits defined as the total benefits estimated using the

economic surplus minus total regulatory costs.


4. What do we know about the socio-economic impact of GE technologies?


What is socio-economic impact assessment?

• Different levels – Household, Farm, Communities,

Industry, Consumer, Trade

• May be done before or after adoption of the technology (ex ante or ex post)

• Compare effects of intervention against a counterfactual– Economics => monetary costs and

benefits

– Sociology /Anthropology => impact on people


What do we know from the economic impact assessment literature to date?

• A review of 187 peer reviewed studies

• Examined studies with a focus on:

– Farmers, household and community

– Industry and markets

– Consumers

– TradeCitation: Smale, Melinda; Zambrano, Patricia; Gruère, Guillaume; Falck-Zepeda, José; Matuschke, Ira; Horna, Daniela; Nagarajan, Latha;

Yerramareddy, Indira; Jones, Hannah. 2009. Measuring the economic impacts of transgenic crops in developing agriculture during the first

decade: Approaches, findings, and future directions. (Food policy review 10) Washington, D.C.: International Food Policy Research Institute

(IFPRI) 107 pages


Food Policy Review 10 conclusions

• On average LMO crops have a higher economic performance — but averages do not reflect the variability by agro-climate, host cultivar, trait, farmer

• Too few traits, too few cases/authors—generalizations should not be drawn yet...need more time to describe adoption

These conclusions are no different than those for most technologies released to date…


A meta-analysis paper by Areal, Riesgo and Rodriguez-Cerezo (2012)

“GM crops perform better than their conventional counterparts in agronomic and economic (gross margin) terms”

“GM crops tend to perform better in developing countries than in developed countries, with Bt cotton being the most profitable crop grown”


Black Sigatoka Resistant Bananas in Uganda

Consider irreversible and reversible cost and benefits by using the Real Option model

One year delay, forego potential annual (social) benefits of +/- US$200 million

A GM banana with tangible benefits to consumers increases their acceptance for 58% of the population

Photos credits: Kikulwe 2009 and Edmeades 2008

Kikulwe, E.M., E. Birol, J. Wesseler, J. Falck-Zepeda. A

latent class approach to investigating demand for genetically

modified banana in Uganda Agricultural Economics 2011.

http://www.gmo-compass.org/features/zoomimage.php?image=/data/imagescontent/grocery_shopping/017_banana-blacksigatoka_zoom.jpg&width=500&height=332

http://www.gmo-compass.org/features/zoomimage.php?image=/data/imagescontent/grocery_shopping/017_banana-blacksigatoka_zoom.jpg&width=500&height=332


Bt cotton in Uganda

Positive yield impacts and net benefits

Smaller rate of return probably explained due to low base yields Need to improve overall cotton

productivity

Probability of a negative return can be as high as 38% with a technology fee as charged elsewhere

Photos credit: © Horna 2009

Horna, et al. (2013) . “Economic Considerations in the Approval

Process of GM Cotton in Uganda: Designing an Ex-ante

Assessment to Support Decision-making. “IFPRI Monograph.


Bt maize in the Philippines

• Growing Bt maize significantly increases profits and yields

• Significant insecticide use reductions

• Adopters tend to be– Cultivate larger areas

– Use hired labor

– More educated

– have more positive perceptions of current and future status

Change in economic surplus

(mill pesos)

Producer Surplus 7906

Seed Innovator 703

Total Surplus 8609

Producer Share (%) 92

Innovator Share (%) 8

Bt maize studies in Philippines led by Dr. Jose

Yorobe Jr. with 466 farmers in 16 villages Isabela

Province, Luzon, South Cotabato Province,

Mindanao


Bt maize in Honduras

Excellent target pest control

Bt yield advantage 893-1136 Kg ha-1 yield (24-33%)

Bt maize yields preferred even by risk averse producers

100% higher seed cost than conventional hybrid

Institutional issues important

Photos credit: © Sanders and Trabanino 2008

“Small “Resource-Poor” Countries Taking Advantage of the New Bioeconomy

and Innovation: The Case of Insect Protected/Herbicide Tolerant Maize in

Honduras.” Jose Falck Zepeda, Arie Sanders, Rogelio Trabanino, Oswaldo

Medina and Rolando Batallas-Huacon. Paper presented at the 13th ICABR

Conference “The Emerging Bio-Economy”, Ravello, Italy June 17-20, 2009.


Example from seed adoption sector“Farmer preferences for Milpa diversity and genetically modified

maize in Mexico” (Birol, Villalobos and Smale 2007)

• “Milpa” is crop production system in Mexico and C. America– Private economic value: food security, diet quality and livelihoods

– Public economic value: conserving agrobiodiversity, especially that of maize landraces (potential to contribute unique traits for future plant breeding efforts

• Subject to multiple externalities which have a negative impact

• Farmer heterogeneity is an issue identified by the study– (i) Landrace Conservationists

– (ii) Milpa Diversity Managers

– iii) Marginalized Maize Producers

• Contrast results with the 2004 Commission for Environmental Cooperation report


Policy Guidance

• Biotechnology and GM Crops are only technologies– Similarities and differences with other technologies

– Actual and potential benefits from GM technology adoption…important tool to consider. Cannot disregard

• Developments in the public sector in developing countries

• Additional crops/traits of interest whose limitations can probably be only addressed through biotechnology means, will be available if we manage to resolve institutional and regulatory issues.

• Convergence between technology/innovation and institutional /contextual/structural and food security issues


Institutional Feasibility Studies (IFS) and the Global Value Chain

Level 1:Global Analysis

Level 2:Nation-State Analysis

Level 3:Local Analysis

Geopolitical Relations

Governance

Geography

Global Trade

Institutions

Human Agency

Technological Innovation &

Transfer

Foreign Investment

Foreign Aid

Regulatory Framework

Glo

ba

l V

alu

e C

ha

in

Developed Countries

Developing Countries


The value chain and knowledge/information flows

José Benjamin Falck-Zepeda, Ph.D.Senior Research Fellow / Leader Policy Team Program for

Biosafety SystemsIFPRI

2033 K Street NWWashington, DC 20006-1002

[email protected]

Brief bio/pubs: http://www.ifpri.org/staffprofile/jose-falck-zepedaBlog: http://socioeconomicbiosafety.wordpress.com/

Follow me on Twitter: @josefalck

mailto:[email protected]

http://www.ifpri.org/staffprofile/jose-falck-zepeda

http://socioeconomicbiosafety.wordpress.com/

The Green Revolution

• Transformation of agriculture during 1940s-1970s that lead to significant increases in yields

• Firmly based on:– Agricultural production needs to keep

pace with population growth

– Agricultural sciences philosophy of maximizing production per unit of land

– Plant breeding developments of the late 19th early 20th centuries

• Initially focused on a few crops (Wheat, rice, maize) but has been expanded

The Green Revolution: Frame of Mind

• Haiti Can’t- be-saved

• Egypt Can’t-be-saved

• The Gambia Walking Wounded

• Tunisia Should Receive Food

• Libya Walking Wounded

• India Can’t-be-saved

• Pakistan Should Receive Food

- Paul and William Paddock, 1967 book

“Famine 1975!”

Norman Bourlag: Father of the Green Revolution

• Developed the wheat program that later became CIMMYT in 1963

– Shuttle breeding– Incorporate short-stature genes into

wheat– Increased yield and rust resistance in

wheat

• Mexico:– 1948 self sufficient wheat producer– 1965 Net exporter

• Won Nobel Peace Prize in 1970 and World Food Prize

• Genesis of the Consultative Group of International Agricultural Research ( CGIAR)

How was the Green Revolution possible? An agronomist perspective on a technological triumph as an engineering feat…

• Incorporation of a dwarfing genes from natural populations into wheat and rice

• In maize: more vertical orientation of leaves, reduces self-shading while allowing planting of narrower rows and thus increases in densities

• Plants bred to dedicate a larger share of photosynthesis efforts to grain rather than to stems and leaves– Harvest index of older varieties was 20% whereas HYV around 50-55%

• Relatively insensitive to day length – can be planted in a wider range of latitudes

• Increased responsiveness to fertilizer and water

Green Revolution: Successes

• Significant increases in yields and production– From 1950 to 1992, the world’s grain output rose from 692 million tons

produced on 1.70 billion acres of cropland to 1.9 billion tons on 1.73 billion acres

– India: food production increased from 50 to 205 million tons during the last 5 decades

– But, barely happened in Sub-Saharan Africa

• Economic output per hectare increases significantly

• 30% increase in cereal and calorie availability per person

• Poverty reductions—some studies show this is attributed to GR raising farmers incomes

Green Revolution: Social and Economic Criticisms

• Does not address underlying social, cultural, ethnical and institutional constraints that create vulnerability and thus affect livelihoods– Is hunger and food insecurity a question of production or unequal

distribution of resources?

• Increased mechanization affected rural labor employment• Debt effects and credit institutions necessary• Technology not scale neutral

– Uneven adoption as larger/wealthier farmers adopted first capturing larger share of benefits

• Landowner/Landholder displacement• Dependence on pesticides and fertilizers

Green Revolution: Environmental/Ecological Criticisms

• Loss of agricultural biodiversity, not so clear effect on wild biodiversity– Focus on few crops => monocultures

• Increased used of pesticides and the pesticide treadmill

• Increased use of fertilizers• Irrigation

– Negative impacts of salinization, damage to soils, and lowering of water tables

– Need to build dams and irrigation systems

Lessons Learned• Increasing agricultural productivity is necessary but not

sufficient to guarantee food security• Scale neutral technologies• Knowledge transfer to/from farmers

• Need to consider agriculture within the social, political, economic, national/international context

• We can’t continue proposing “technology-only solutions” to complex problems....nevertheless technological responses are indeed critical to the “solution”

• Learn from mistakes and inexperience to come up with better alternatives => Policy options, strategies and outcomes

Why GM biotech?• Embodied technologies

• Address specific productivity constraints not easily addressed by conventional means

• Can be deployed in low resource use production systems

• Flexible – fit with other production systems

– GM and Integrated Pest Management

– GM and organic production methods (!!!)

• Impacts can be non-pecuniary, indirect, and scale neutral

• Scalable

Impacts on biodiversity• Which biodiversity?

Agricultural vs. Wild

• Agricultural biodiversity –intraspecific vs interspecific

• Tradeoffs between land use and the maintenance of the agricultural frontier and encroachment in protected and/or “wild” areas

• Biodiversity valuation issues and measuring taxonomic diversity and richness

• Ecosystem services

Environmental biosafety assessments: A Roadmap under review at the Cartagena Protocol on Biosafety

• Impacts on non-target organisms

• Gene flow• Impacts on

sexually compatible species– Increase in weed

behaviour– Competitive

advantage/fitness

How does a producer benefit? Insect resistance traitsThe case of Bt cotton

Producer Profit

Producer Surplus

Cost to Benefit

Additional

Cost of

Using the

Technology

Tech fee:

US$80/ha

0

+

-

Decrease

pesticide

application

cost

-Insecticide

-Machinery &

Equipment

Yield /

Reduction

in damage

-Timing

applications

-Reduced

damage bolls

Price change

due to increase

in supply

Additional

cost of

controlling

secondary

pests

Amenable to

IPM and/or

controlled

easily

Labor

Labor

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