Publications: ISAAA Briefs

No. 13 - 1999

The Economic Effects of Genetically Modified Orphan Commodities: Projections for Sweetpotato in Kenya

Matin Qaim
Agricultural Economist, Center for Development Research (ZEF)


Published by: The International Service for the Acquisition of Agri-biotech Applications (ISAAA). Ithaca, New York and Center for Development Research (ZEF), Bonn
Copyright: (1999) International Service for the Acquisition of Agri-biotech Applications (ISAAA) and Center for Development Research (ZEF).
Reproduction of this publication for educational or other noncommercial purposes is authorized without prior permission from the copyright holder, provided the source is properly acknowledged.
Reproduction for resale or other commercial purposes is prohibited without the prior written permission from the copyright holder.
Correct Citation: Qaim, M. 1999. The Economic Effects of Genetically Modified Orphan Commodities: Projections for Sweetpotato in Kenya. ISAAA Briefs No. 13. ISAAA: Ithaca, NY and ZEF: Bonn
ISBN: 1-892456-17-6
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Executive Summary

List of Tables

List of Figures

List of Abbreviations and Acronyms


1. Introduction

1.1 Conceptual Framework

1.2 Study Over view

2. The Kenyan Sweetpotato Sector

2.1 Regional Production Aspects

2.2 Sweetpotato Farming Systems

2.3 Cost and Income Calculations

2.4 Sweetpotato Marketing and Consumption

2.5 Phytosanitary Problems

3 . The Transgenic Resistance Technologies

3.1 The Biotechnology Research Projects

3.1.1 Virus Resistance

3.1.2 Weevil Resistance

3.2 Agronomic Technology Potentials

3.3 Technology-Inherent Risks

4. Potential Technology Benefits and Costs

4.1 Methodology

4.1.1 The Model

4.1.2 The Data

4.2 Cost and Income Effects at the Farm Level

4.3 Technology Adoption

4.4 Projected Welfare Effects

4.5 Benefit-Cost Analysis

4.6 Sensitivity Analysis

5. Conclusions and Policy Implications





Executive Summary

Biotechnology has the potential to boost global agricultural productivity in a sustainable way. The prospects are particularly bright for the developing world, where the need for new farm technologies is most pronounced. Biotechnology advances, however, are predominantly taking place in the industrialized world. The research capacity in many developing countries is limited, and so these countries will have to import biotechnology in order to be able to use it. But technological requirements differ across countries, and some fear that the needs of the South will be bypassed by biotechnological research programs that are dominated by the private sector in the North. For the so-called "orphan commodities," those food crops that have minor international appeal but that are of great importance to semi-subsistent farmers in developing countries, this could especially prove true. In this study, however, we examine innovative undertakings that have been jointly launched by the public and private sector to develop recombinant sweetpotato technologies for use in Africa. The economic impacts of the resulting transgenic sweetpotato varieties for Kenya are scrutinized using an ex ante analytical framework. The study seeks to improve the empirical evidence about the repercussions of biotechnology in the small-farm sector of developing countries. It also seeks to enrich the knowledge base needed for formulating policies that include the poor in the biotechnology revolution.

In Kenya, as in other countries of sub-Saharan Africa, sweetpotato is mainly grown by resource-poor women farmers. Sweetpotato provides an important security function for the producing households because—under adverse climatic conditions and low-input regimes—it yields higher amounts of food energy and micronutrients per unit area than any other crop. The amount of land used for sweetpotato production in Kenya has grown substantially in recent decades due to population pressure. Today, Kenyan farmers cultivate the crop on about 75,000 hectares that are spread over various agroecological zones. In the farming systems of Kenya, sweetpotato is usually part of a diversified cropping pattern. A farm˘s average sweetpotato holding is 0.45 acres (0.18 hectares), and some 40 percent of the harvest is kept for household consumption. In spite of the crop's robustness, farmers suffer significant yield losses caused by pests and diseases, notably sweetpotato viruses and weevils. Efficient methods to control these pathogens are not available, and compared to other sweetpotato-producing regions in the world, the yield levels obtained in Kenya are low. This problem is exacerbated by the neglect of national and international agricultural research on sweetpotato.

A research project to advance nonconventional virus resistance in sweetpotato, however, was launched in 1991/92 by the private company Monsanto and the Kenya Agricultural Research Institute (KARI). Apart from funds Monsanto provided, the first phase of the initiative was cosponsored by the US Agency for International Development (USAID). The University of Missouri also assisted with coordination efforts. Basic research components of the project—such as the development of suitable biotransformation and plant regeneration protocols—have been carried out in Monsanto's US laboratories in collaboration with KARI scientists. The transfer of the recombinant sweetpotato technology from the USA to Kenya is scheduled for 1999. A royalty-free licensing agreement has been signed, which allows KARI to use the technology and to share it with other African countries in the future. Monsanto's contribution, therefore, can be looked upon as development aid. The next project phase, beginning in 1999, is sponsored by the Agricultural Research Fund (ARF), which is being administered by the World Bank. This new phase is institutionally supported by Monsanto, the International Service for the Acquisition of Agri-biotech Applications (ISAAA), and the International Potato Center (CIP). During this phase, virus-resistant sweetpotatoes will be field-tested in Kenya and transgenic varieties will subsequently be released. This technology is Kenya's first experience with bioengineered crops, and so capacity building for biosafety is an integral part of the project's activities. Kenya˘s farmers could receive the new transgenic varieties as early as 2002. In the meantime, KARI will transform additional varieties for virus resistance in its newly refurbished biotechnology laboratory. Given the heterogeneous varietal preferences among sweetpotato producers, this is important for promoting widespread technology adoption.

Other research undertakings have recently begun with the objective of developing transgenic weevil resistance in sweetpotato for use in Africa. These undertakings involve different public organizations, although the work is also partly based on proprietary technology patented by the private sector. Given the experience of the Monsanto/KARI project, Kenya will probably be one of the first countries to deploy the weevil resistance technology in sweetpotato, possibly as early as 2004.

This study investigates the potential impacts of both virus and weevil resistance in the Kenyan sweetpotato sector. Interview surveys conducted in 1998 of researchers, extension workers, and farmers, constitute the data basis for the quantitative analysis. First, the likely effects are analyzed at the level of the individual farm. It is expected that by using transgenic virus-resistant varieties farmers will be able to increase their sweetpotato yields by 18 percent. Due to spatially divergent virus pressures, productivity increases will be somewhat higher in the moist, western part of Kenya than in the drier central and eastern regions. The potential yield gains for weevil-resistant varieties are even higher: 25 percent, with no significant regional differences. Farmers will easily be able to integrate both resistance technologies into their traditional cropping systems without additional costs. The projected sweetpotato income gains at the farm level are sizable. Under the simplified assumption of constant output prices, the relative income increase would be 28 and 39 percent for virus and weevil resistance technology, respectively. Rising cash revenues as well as the greater availability of sweetpotato for subsistence consumption will contribute significantly to improved food security for rural households.

he potential effects of transgenic technologies are also analyzed for the Kenyan sweetpotato market as a whole. For this purpose, an economic surplus model with technological progress is employed. In addition to the agronomic technology potentials, innovation adoption rates are important model parameters. Given the widespread informal exchange of sweetpotato planting material among farmers, a fairly quick dissemination is anticipated if the resistance mechanisms are incorporated into varieties acceptable to farmers. The model simulations show that the virus-resistant varieties would produce an aggregate annual benefit of 324 million Kenyan Shillings (KSh) (5.4 million US$), whereas the weevil resistance technology could create welfare gains of 593 million KSh (9.9 million US$) per year. For both technologies, about 26 percent of the overall surplus will be captured by food consumers, since the growth in productivity will cause the sweetpotato market price to decline.

Juxtaposing the benefits to the costs of research and development (R&D), the virus resistance technology produces an internal rate of return (IRR) of 26 percent. The research on sweetpotato weevil resistance is at a much earlier stage, so no reliable R&D cost figures could be assembled for this technology. But assuming the same investments as for the virus research project, the weevil resistance technology creates an IRR of 33 percent. It should be noted, however, that a direct comparison of the IRR figures could be misleading because it neglects the positive dynamic effects of capacity-building, which are difficult to quantify. The implementation of the weevil resistance technology in Kenya will profit from the knowledge and experience acquired from the virus resistance project. In the longer run, it is likely that varieties with both resistance mechanisms incorporated will also become available. Furthermore, it needs to be stressed that the stated benefit-cost ratios grossly underestimate the actual social returns on research investments. Eventually, the innovations will also be used in other African countries, so it is inappropriate to impose the whole cost of basic research in an analysis confined to Kenya. Taking into account only the more applied research components and the cost of local capacity building, the IRR for the virus resistance technology is 60 percent, and for the weevil resistance technology it is 77 percent.

The examples clearly show that modern biotechnology can offer promising solutions to the problems of resource-poor farmers in developing countries if their specific needs are explicitly taken into account in biotechnology research. Moreover, the international collaborative R&D projects demonstrate the viability of successful partnerships between the public and the private sectors. As most of the basic biotechnology tools available to date are patented by private companies, which often do not have enough market incentives to develop end-technologies designed to serve resource-poor farmers in the South, more interactions of this kind are needed. Firms are particularly inclined to donate proprietary technology (e.g., certain genes) for use in public sector research on orphan commodities, such as sweetpotato. The reason for this is that these crops do not conflict with the private sector's commercial interests. Donor organizations should make more funds available for innovative public-private partnerships and biotechnology transfers so that developing countries can gain access to the benefits of biotechnology.

List of Tables
Table 1 Sweetpotato production statistics for the Kenyan provinces (1996-1998 averages)
Table 2 Characteristics of sweetpotato farms, by region
Table 3 Average sweetpotato production cost, by region (per acre and season)
Table 4 Average sweetpotato enterprise budgets, by region (per acre and season)
Table 5 Potential yield gains of sweetpotato virus and weevil resistance technologies, by region (percent)
Table 6 Potential cost and income effects of sweetpotato virus and weevil resistance technologies at the farm level, by region (per acre)
Table 7 Projected welfare effects of virus and weevil resistance technologies
Table 8 IRRs of virus and weevil resistance projects under different assumptions for R&D costs and benefits (percent)
Table A1 Technology shift factor K for virus and weevil resistance technologies
Table A2 Technology-induced changes in producer and consumer surplus (in thousand 1998 KSh)
Table A3 Financial cost of the virus resistance research project by involved organizations (in thousand 1998 KSh)

List of Figures

Figure 1 Development of sweetpotato production in Kenya (1962-1998)
Figure 2 Average food energy yields of different food crops in Africa
Figure 3 Map of Kenyan provinces
Figure 4 Estimated adoption profiles of sweetpotato virus and weevil resistance technologies, by region
Figure 5 Development of IRRs under the assumption of extended research lags