Cost Benefit Analysis of Transgenic Cotton Containing cry1ac and cry2ab2 Genes and HART 89M: Evidence from

Confined Field Trials in Kenya *Muthoka, N.M., Miriti L.C., Waturu C.N., Wessels W. and Njinju S.M. KARI-THIKA, P.O Box 220, 01000 THIKA. *Corresponding author Email: nmunyiva@yahoo.com, karithika@africaonline.co.ke ABSTRACT Cotton production in the country has been characterized by low returns per unit area due to the high cost of pesticides and the low yields. One of the critical constraints in production is pests, the main pest being the African boll worm. It is with this background, that the Kenya Agricultural Research Institute (KARI) embarked on trials to introduce transgenic cotton. This cotton is derived through genetic modification involving cry1ac and cry2ab2 genes has the potential to improve productivity. Commercial production of transgenic cotton was introduced in 1996 and has been grown in different regions of the world. In Africa, the cotton is commercially grown in South Africa and Burkina Faso. However, in Kenya transgenic cotton is still under Confined Field Trials at research Centers of the Kenya Agricultural Research Institute. Bollgard II which carries two genes cry1ac and cry2ab2 encoding for 2 toxic proteins, was imported and experiments set up in 2006/2007, repeated in 2007/2008 and in 2008/2009 growing seasons. The cotton varieties were, BGII 06Z604D, Isoline 99M03 and a domestic variety HART 89M, with a control plot for both BGII 06Z604D and HART 89M. Experiments comprised three different treatments (treatment for sucking pest (six sprays) and treatment for all pests (six sprays) and no treatment for any pest) replicated four times. Data were collected on cost of production (labour, and pesticide use) and the yield (boll count and weight of the bolls). Seasonal data indicated that yields of the Bt varieties were significantly higher than those of the HART 89M. Transgenic cotton requires lesser pesticides relative to HART 89M and ensures that the fruiting structures are not damaged by the bollworms thus resulting in higher productivity. The significant reduction in pesticide use has the potential to reduce environmental poisoning thus preserving the ecosystem. The study therefore recommends further investigation of transgenic cotton in farmer managed trials, which will allow for more accurate estimation across different regions,

Keywords: Cost benefits, Bt-cotton, Confined field trials

INTRODUCTION Cotton is grown in five of the country's eight provinces. It does well in the arid and semi-arid lands which make up 80 percent of Kenya According to the Cotton Board of Kenya, and the Ministry of Agriculture statistics (2009), about 350,000 hectares in the country are suitable for cotton production and have the potential to yield an estimated 260,000 bales of lint annually. However, cotton is only being cultivated on 37,000 hectares at present, with an annual lint production of 40,000 bales
1

(Insert Figure 1 here). Hectarage has increased from 1963 to 1980s, after which there was a period on intermittent production and decline, explained by influx of second hand clothes mitumba and cheap clothing from competing countries. However, since 2003 there has been a gradual increase in area under production due to concerted government efforts and the production of lint has followed a similar trend. Cotton production has the potential to reduce poverty, increase employment, rural development and generation of increased incomes. The cotton industry has been experiencing challenges including high cost of production, low purchase price, low returns on investments, and shortage of ginneries. Ginneries were formerly owned by the government but many closed down on the onset of liberalisation . Currently there are about 24 privately owned ginneries out of which 14 are operational at below optimal production levels (Wakhungu et al., 2005). Farmers have tried to mitigate the high production costs by reducing the use of pesticides which account for 40 percent of the cotton production costs (Ikiara et al., 2003). This, in turn, has resulted in low yields. The current production levels are way below the optimal, experts attribute this to recycled cotton seeds and high incidences of pests and diseases. The most destructive pest is the African bollworm (Helicoverpa armigera) which can cause up to 100% yield loss (Waturu, 2007). To mitigate this problem insect resistant cotton developed through genetic modification, commonly referred to as Bt-cotton, produces an insecticidal protein from the naturally occurring soil bacterium Bacillus thuringiensis (Bt). Transgenic cotton reduces pesticide use, while ensuring that all the bolls from the crop are harvested due to reduced pest damage which in turn results to higher returns in terms of yield and income for the farmers. Global adoption of Bt-cotton has risen dramatically from 800,000 hectares in its year of introduction in 1996 to an estimated 18 million hectares (alone and stacked with herbicidetolerant cotton) in 2009 (James, 2010). Bt-cotton is grown commercially in the United States, Mexico, Argentina, China, India, Australia, and Indonesia just to mention but a few. In Africa, the cotton is commercially grown in South Africa and Burkina Faso. However, in Kenya transgenic cotton is still under Confined Field Trials at research Centers of the Kenya Agricultural Research Institute (KARI). The Institute (KARI) embarked on trials to introduce transgenic cotton, which have been running annually from the year 2005. This paper reports on the costs and benefits of the transgenic cotton (BGII 06Z604D) compared to the Isoline 99M03 and commercial variety

(HART 89M) for three 2006/07, 2007/08 and 2008/09 season crop. This study was superimposed on biophysical experiments to give some initial indication on the cost and benefits of this technology. Our research contributes to the existing literature by analyzing the experimental level economic effects of Bt-cotton over the three seasons.
Material and Methods

The process of introducing Bt-cotton in Kenya was initiated through an application by KARIInstitutional Biosafety Committee (IBC) to the National Bio-safety Committee (NBC) to import and test transgenic in Kenya in February 2001. An approval was issued by the National Council for Science and Technology (NCST) in February 2003. Bollgard II which carries two genes cry1ac and cry2ab2 encoding for 2 toxic proteins, was imported and experiments set up in 2006/2007, repeated in 2007/2008 and in 2008/2009 growing seasons. The cotton varieties were, BGII 06Z604D, Isoline 99M03 and a commercial variety HART 89M , a control plot for both BGII 06Z604D and HART 89M was also grown. The experiments comprised three different treatments focused on entomological tests (treatment for sucking pest (six sprays) and treatment for all pests (six sprays) and no treatment for any pest replicated four times. Data were collected on cost of production (labour, and pesticide use) and the yield (boll count and weight of the bolls). For the yield, 20 plants were randomly selected per plot and the bolls harvested and counted. The weight was an average of the weight of 3 bolls collected from the top, centre, and bottom of 10 plants from each plot. The data were then extrapolated to a hectare to facilitate calculation based on the assumption that boll count is usually uniform through out the farm. Results and Discussions Yields for the different types of cotton (Insert Table 1.here) For the three seasons, there were marked seasonal effects, the yield for each of the experiments was different from the previous one, and this can be attributed in part to off-season production for all the three seasons, hence making it difficult to establish a trend in the output for these experiments. However when the average yield is taken across seasons, it is clear that BGII 06Z604D (1,600 kg/Ha) gave higher yields per hectare than the Isoline and HART 89M (900 kg/Ha). For the control experiments, the yield for BGII 06Z604D (1,900 kg/Ha) was higher than that of HART 89M (683kg/Ha) (Insert Figure 2 here).
Costs and returns

(Insert Annex 1 here) The annex 1 provides comparative information on the cost of production and the returns accrued from the production of the different varieties of cotton. It is important to note that this data is extrapolated from a confined field trial, therefore there are no differences in the cost of the inputs applied on all the treatments. The difference in inputs only arise from the labour and pesticide used for the plots that were treated for sucking and for all pest. The cost of seed is critical, however at this stage it will not be useful in contributing to additional information. From the table therefore, it is clear that blanket treatments are not a necessary expense in cotton production. The routine application of pesticide only increases cost of production relative to the income, for BGII 06Z604D it is about 50% and in the case of HART 89M it is estimated at 80%. When the control experiments are taken into account, for BGII 06Z604D it is 23% and HART 89M is 65% of the revenue. Other studies carried out in South Africa, China and India have shown that Bt has
the potential to reduce the cost of production and increase net benefits (Bennet, 2003; Ishmael et al., 2003 and Pray, et.al., 2001, 2000). This means that future experiments should take into account

integrated pest management (IPM) strategies so that more accurate recommendations may be generated. For instance, researchers at Burkina Faso's National Agricultural Research Institute (INERA) have been experimenting with biotech cotton since 2003. Their research shows that biotech cotton requires only two pesticide applications per year compared to six to eight for non-biotech cotton. Pesticide use is reduced by at least by 60%. Pesticides account for about 30 % of the cost of growing cotton, and lower use will result in savings of $35 per acre. The INERA trials show per acre yields 30 % higher because of better control of insect pests (Vitale, et.al., 2008). Revenue and Gross margin As a result of the higher yields, average gross margin per hectare (value of output minus the cost of labour and pesticide) for the Bt cotton crop was higher than for the non-Bt. A similar price was used for both the Bt and non-Bt cotton, where 85% of the total yield was consider AR (Ksh 30/kg) and 15% considered BR (Ksh 15/kg) grades. The result is a much higher gross margin for BGII 06Z604D Ksh (39,939 for not sprayed and 22,606 sprayed for sucking pests), Isoline 99M03 Ksh (17,505 for not sprayed and 5,764 sprayed for sucking pests) compared to HART 89M Ksh (21,406 for unsprayed and 4,421 sprayed for sucking pests and 6,538 sprayed for all pests). However, the control showed significantly positive gross margins BGII 06Z604D Ksh 40, 639 and Ksh 6,722 for HART 89M. These results are

corroborated by studies carried out using experimental data (Qaim, 2003) (Insert Figure 3 here). Limitations of the study Due to the fact that this study was superimposed from entomological experiments, the study did not measure other benefits such as environmental cost and benefits. It was not possible to get the cost of transgenic seed which is critical and significant. Overally it was not possible to accurately estimate other economic and financial indicators. Suggestions for Further Research Taking into account the results of this experiment, it may be important to carry out an experiment where the different varieties of cotton are sprayed only when necessary (Integrated Pest Management - IPM). This will be useful in providing information on how much less pesticide is used especially in relation to transgenic cotton and as a result provide a saving on labour/ pesticides and assure increased yield. In addition, there should be an evaluation of the costs and benefits across different regions, for different varieties of transgenic cotton and production years in farmer managed trials, this will allow for more accurate estimations. Further research to measure and document the potential reduction in pesticide poisoning thus ensuring preservation of the ecosystem this should be done. Acknowledgements The authors wish to acknowledge this project funding by Monsanto Kenya and the Kenya Agricultural Research Institute (KARI). We also thank the Centre Director KARI-MWEA for facilitation. REFERENCES Bennett, R., Buthelezi, T.J., Ismael, Y., & Morse, S. (2003). Bt cotton, pesticides labour and health: A case study of smallholder farmers in the Makhathini Flats, Republic of South Africa. Outlook on Agriculture, 32(2), 123-128. Ishmael, Y., Bennett, R., & Morse, S. (2002). Farm-level economic impact of biotechnology: Smallholder Bt cotton farmers in South Africa. Outlook on Agriculture, 31(2), 107-111. Ikiara, M. and Ndirangu, L. (2003) Developing a revival strategy for Kenyas cotton-textile industry: a value chain approach. WP No. 8, 2003: ISBN 9966 949 39 9 James, C. (2003). Global status of commercialized transgenic crops: 2002 (ISAAA Brief No. 30-2003). Ithaca, NY: International Service for the Acquisition of Agri-biotech Applications. James, Clive. (2010). Global Status of Commercialized Biotech/GM Crops: 2009. ISAAA Brief No. 41. ISAAA: Ithaca, NY. 978-1-892456-48-6

Pray, C.E. Ma, D., Huang, J., & Qiao, F. (2001). Impact of Bt cotton in China. World Development, 29(5), 813-825. Pray, C.E., Ma, D., Huang, J., & Qiao, F. (2000). Impact of Bt cotton in China. Paper presented at the Agricultural Economics Society Annual Conference, Manchester, UK. Qaim, M. (2003). Bt cotton in India: Field trial results and economic projections. World Development, 31(12), 2115-2127. Vitale,J., Glick, H., Greenplate, j., Traore, O. (2008)The economic impacts of second generation Bt cotton in West Africa: empirical evidence from Burkina Faso International Journal of Biotechnology 2008 - Vol. 10, No.2/3 pp. 167 - 183 Wakhungu, J. and Wafula, D. (2005). Introducing BT Cotton: Policy Lessons for Smallholder farmers in Kenya. Nairobi: Kenya. Waturu CN. (2001). Role of KARI in enhancing cotton production in Kenya through biotechnology. Opportunities for reviving cotton industry in East Africa through biotechnology. Proceedings of the stakeholders meeting held at the Grand Regency Hotel, Nairobi, Kenya. 27 April 2001. Waturu, C. N. (2007). Role of KARI in enhancing cotton production in Kenya through biotechnology. Proceedings of a stakeholders meeting by the African Biotechnology Stakeholders Forum KARI. Nairobi: Kenya

Figure 1. Cotton production in Hectares and Lint production in Bales

120,000
Source: MoA, 2008 Table 1. Yields and change in output for the different Cotton types per treatment
Cotton type Treatments Yield % change Kg/Ha in Output 2,450 468 -20 1,400 9 2,660 327 -23 1,775 14 2,665 350 -23 2,081 17 n/a 514 747 2 n/a 294 1,667 14 n/a 279 1,906 16 1,480 218 -13 617 4 1,800 154 -16 842 7 2,400 108 -23 981 9

Not sprayed BGII 06Z604D

100,000

Sprayed for sucking pests Sprayed for all pests Not sprayed

ISO 99M03

Sprayed for sucking pests Sprayed for all pests Not sprayed

80,000

HART 89M

Sprayed for all pests Source: Authors calculation

a (Ha)

Sprayed for sucking pests

Season 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3

60,000
7

Figure 2. Average Yields for BGII 06Z604D, Isoline 99M03, and HART89M
2000

1500

Kg/Ha

1000

500

0 sprayed Sprayed for Sprayed sprayed Sprayed for Sprayed for Sprayed sprayed Sprayed 06Z604D HA RT 06Z604D HA RT for all Not for all Not for all BGII Not 89M

BGII 06Z604D

ISO 99M03

HA RT 89M

Control

Treatments

Source: Authors calculation

Figure 3. Average total revenue and gross margin for BGII 06Z604D, Isoline 99M03, and HART89M

60,000 50,000 Kenya shillings 40,000 30,000 20,000 10,000 0 sprayed Sprayed sprayed Sprayed sprayed Sprayed for Sprayed for Sprayed for Sprayed for all Not for all Not for all BGII Not 89M Total Revenue Gross margin

BGII 06Z604D

ISO 99M03

HA RT 89M

Control

Source: Authors calculation

ANNEX 1. Revenue and cost of pesticide and labour

Cotton type

Treatment

Total Yield

Average Yield 1,439 1,587 1,699 631 980 1,092

Total Revenue

Pesticid e Cost 0 17,040 20,680 0 17,040 20,680 0 17,040 20,680 10,040 10,040

Labour Cost

Pesticide and Labour Cost 0

BGII 06Z604D

ISO 99M03

HART 89M

CONTROL

Unsprayed Sprayed for sucking pests Sprayed for all pests Unsprayed Sprayed for sucking pests Sprayed for all pests Unsprayed Sprayed for sucking pests Sprayed for all pests Bt-Cotton HART89M

4,318 4,762 5,096 1,262 1,961 2,185 2,314 2,796 3,488

39,939 44,046 47,134 17,505 27,204

% pesticide and labour cost on revenue 0 49 55 0 79 85 0 83 80 23 65

4,400 5,050 4,400 5,050 4,400 5,050 2,200 2,200

21,440 25,730 0 21,440 25,730 0 21,440 25,730 12,240 12,240

771 932 1,163 1,906 683

30,310 21,406 25,861 32,268 52,879 18,962

Source: Authors calculation