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Economic Impact of USWBSI’s Scab Initiative to Reduce FHB

William W. Wilson, Greg McKee, William Nganje, Bruce Dahl and Dean Bangsund

No 264672, Agribusiness & Applied Economics Report from North Dakota State University, Department of Agribusiness and Applied Economics

Abstract: Fusarium Head Blight (FHB) has led to major economic losses for wheat and barley producers. Deoxynivalenol (DON) is a mycotoxin associated with FHB. Grain products and feed grain contaminated with DON (commonly known as vomitoxin) are subject to FDA advisory limits and as a result, end-users place restrictions on their use. This has led to steep price discounts, as well as higher risks for producers and grain merchandisers. Varietal research has led to the development of varieties that are resistant to moderately resistant to FHB. Also, studies indicate combinations of genetic resistance, fungicides, and some management practices (combine settings, tillage practices, etc.) can be used to decrease losses due to FHB. These approaches were developed beginning in 1997, with the introduction of the United States Wheat and Barley Scab Initiative (USWBSI). However, the detailed economic impact of the initiative (combined genetic resistance, fungicide uses, and some management practices) are yet to be estimated. The purpose of this study was to estimate the economic impact of reducing FHB on cereal producers, traders and handlers, and processors. To do so we developed a number of economic models, analyzed extensive data, and conducted surveys of wheat flour millers, barley maltsters, and grain handlers. Taken together these procedures allow us to make an assessment of 1) the cost to these industries of FHB; 2) the impact of mitigating strategies on yields and DON levels; 3) the marketing practices of the supply chain; 4) the impact of the Scab Initiative on reducing yield losses; 5) the return on investment of the Scab Initiative; and 6) the secondary impact of the initiative. In general, the results indicate some important findings regarding the Scab Initiative can be deduced from this study. One is that the DON problem has improved. However, it has not been eliminated and remains a temporally and spatially sporadic problem. Second, while there are a number of risk mitigation tools, and all of these prospectively have impacts of reducing the impact of DON, two are particularly important. One is fungicide use, which has increased from virtually nil in the 1990s’ to being applied to 70-80% of the cereals planted. This is substantial, and at a high cost, but, also is effective though not perfect. The second is the development and adoption of resistant varieties. The statistical analysis reported here documents the importance of these, though the effect varies across classes. 1 Funding source for this project was the USDA/ARS SCAB Initiative, and titled Economic Impact of USWBI’s Impact on Reducing FHB. 2 Authorship is shared viii This study estimates the return on investment to the research expenditures of the Scab Initiative which has spent $76 million over its life, including in-kind contributions. For both wheat and barley, the NPV of net savings from reduced production loss ranges from $5.3 - 5.4 billion over the period 1993-2014. For every $1 invested, plus in-kind and fungicide costs, there are $71 in benefits. This is significant and compares very favorably to other studies on agriculture research. The return on investment for expenditures on the Scab Initiative (including in-kind costs) was approximately 34%, which is substantial. DON has a devastating impact on producers and the supply chain. It imposes substantial costs throughout the marketing system and increases risk to all participants. The returns and net savings from funding the Scab Initiative have been substantial and have contributed to reducing the impacts of the disease. There are a number of further challenges and several technologies are showing further prospects toward mitigating these problems.

Keywords: Crop Production/Industries; Demand and Price Analysis; Farm Management; Production Economics (search for similar items in EconPapers)
Date: 2017-10-31
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DOI: 10.22004/ag.econ.264672

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