1. When do Resistance Management Practices Pay for the Farmer and Society: The Case of Western Corn Rootworm John Miranowski and Katherine Lacy

2. Introduction Bt corn, is engineered to express a toxin derived from a bacterium Bacillus thuringiensis (Bt) that is toxic to insects. One of the most problematic corn pests is WCR. Larvae feed on roots of corn plant, which interferes with the uptake of water and nitrogen, and causes structural damage to the plant. The adult WCR are usually late summer, the CRW lay eggs that overwinter and emerge during spring. When farmers use a crop rotation, the larvae hatch on a non-host crop so the WCR larvae do not survive.

3. Percentage of Corn Acres planted to specific seed type Corn with stacked traits contains both Bt traits and herbicide tolerant traits. By 2014, 93% of corn acres planted were GM, 76% contained both HT and Bt traits, 13% having only HT trait, and 4% only Bt trait.

4. Pounds of insecticide used on Corn Corn insecticide use has decreased significantly since the release of Bt corn in 1996 and especially following the introduction of WCR resistant corn in 2003. In 1996, a total of 14 million pounds of insecticide were used on corn in the US and less than 1.6 million pounds of insecticide by 2010.

5. Modeling Farmer’s Decision Initially, each pesticide is endowed with a stock of efficacy that is gradually depleted with the level and frequency of use (Miranowski & Carlson, 1986). Monopoly versus multi-product monopolist with licensing. In the longer run, the farmer faces increasing pest control costs as efficacy is depleted. If resistance management practices (RMPs) are adopted early in the process, the profitability of pest control may be maintained. If the pest is mobile (e.g., WCR beetles) and moves between farms e.g., by flight, wind, transport on farm equipment, pest becomes a common property problem for neighboring farmers. Normally, adult beetles move about 40 m/day. Under average conditions, limited movement per year but drought and storms create uncertainty.

6. Net Return Analysis

7. How do we control resistance? Initial attempt at framing a resistance management problem. When the farmer uses a CS rotation the WCR does not survive with soybean plants so there is no resistance build-up from year to year. Similarly, with the CCS rotation and use of Bt corn, the resistant pest population does not increase enough to damage crops before soybeans are planted. Both of these rotations are considered a practice to manage pest resistance. CC rotation without RMPs results in selection pressure for resistant pests to develop and the population of these pests to increase rapidly. If a farmer realizes the problem and starts using an insecticide to control the pests, yields increase but are not restored to previous level.

8. Net Returns for Different Rotations

9. Profitability of RMPs Before resistance causes a decrease in yields with a CC rotation the net returns are $493/acre/year. During the two years of CS rotation, the net return is $498/acre. When pest resistance damages CC and the farmer uses insecticides, the net returns per year decrease to $418/acre. Now the CS rotation is $80/acre more profitable than a CC rotation.

10. Net Present Value (NPV) Comparing the net present value (NPV) for each rotation over 20 years at a 5% discount Rate: CS rotation – $6642 CCS rotation – $6489 CC rotation without RMP – $5258 CC rotation with a RMP – $5548 Sensitivity to relative output prices and discount rates. Ignoring the common pool resource problem, use CS rotation to increase net returns and to decrease the resistants.

11. Common Property Resource Game Assume we have 2 farmers who face the same costs and CRW density and their farms are identical. Both farmers use Bt corn and have the option of using RMPs (such as insecticides with different modes of action or planting refugees). The RMPs may be costly to the farmer but have future benefits of less resistance buildup on their farm. Using a single insecticide or Bt trait may have immediate benefits but higher future costs associated with faster resistance buildup.

12. CPR Game (cont.) We will assume both farmers are using a CC rotation and have the option of using a RMP or not. Since the WCR are mobile, a farmer’s payoff depends on what the other farmer chooses to do. If farmer 1 is using a RMP but farmer 2 is not, the resistant pests from farmer 2 can travel onto farmer 1 field causing farmer 1’s yield to decrease. At the same time, the non-resistant pests from farmer 1 could travel onto farmer 2’s field decreasing resistance buildup and providing farmer 2 with a yield bump. The payoffs in the game are NPV over 20 periods using a discount rate of 5%.

13. CPR Game Solution If farmer 1 chooses to use a RMP then farmer 2 can choose to use a RMP and receive 5548 or not use a RMP and receive 5607. Farmer 2 will choose not to use a RMP. If farmer 1 chooses to not use a RMP then farmer 2 can choose to use a RMP and receive 5200 or not use a RMP and receive 5258. Farmer 2 will choose to not use a RMP. Farmer 2 has a dominant strategy to not use a RMP. Since the game is symmetrical, farmer 1 also has a dominant strategy to not use a RMP. Farmer 2 RMPNo RMP Farmer 1 RMP 55485200 55485607 No RMP 56075258 52005248

14. Subsidy For a RMP subsidy to work must increase NPV over not using RMP. Net returns per acre for each individual period after the 6 th period is displayed in the matrix below: If farmer 1 uses RMP, then farmer 2 can use RMP and receive $418/acre or not use a RMP and receive $425.50/acre. Farmer 2 will not use RMP and receive $425.50 unless subsidy greater than $7.50/acre. If farmer 1 does not use RMP and farmer 2 does use RMP and receives $373/acre versus receiving $380.50/acre. With subsidy greater than $7.50/acre, farmer 2 will use RMP as dominant strategy regardless of what farmer 1 does. Since the game is symmetric, farmer 1 has a dominant strategy to use a RMP with a subsidy of $7.50/acre as well. Farmer 2 RMPNo RMP Farmer 1 RMP 418373 418425.50 No RMP 425.50380.50 373380.50

15. Policy Implications EPA and state pesticide agencies have a potential regulatory role to address resistance development and management under FIFRA. For conventional pesticides, some pesticide labels include advisory language for resistance management. Could require enforceable labeling. For Bt traits, EPA has required resistance management practices (e.g., refuges) through conditions of registration. EPA recently requested public comment on proposed WCR relabeling requirements (e.g., crop rotations). Results indicate that case for additional regulatory intervention would not be useful unless increased WCR mobility between farms and over space and time develops. Farmer RMPs pay.

16. Conclusions Crop enterprise results indicate that CS and CCS rotations (RMPs) dominate other WCR pest control options. Farmers may have other behavioral motives than solely crop enterprise profitability, e.g., risk management, biosecurity, simplicity. If farmers substitute chemical controls in the CC rotation after resistance to a particular Bt allele is recognized, this strategy remains less profitable than CS and CCS rotations, e.g., yield bump, biomass harvest. Crop insurance and premium discounts further complicate these decisions.

17. Summary of WCR Resistance Management Payoffs and Sensitivity to Discount Rates and CPR Problems NPV 0%3%5% Both Farmers using RMP 898066375548 Both Farmers not using RMP 841862635258 Other farmer not using RMP while I use RMP (yield loss) 2 bu loss884665485479 5 bu loss864364135374 10 bu loss830661885200 Other farmer using RMP while I do not (yield gain) 2 bu gain855363535328 5 bu gain875664885432 10 bu gain909367135607

18. Impacts of using Different Price Ratios for Corn-Soy and Corn-Corn-Soy Rotations NPV 0%3%5% Corn-Corn No RMP841862635258 Corn-Corn RMP898166385548 Corn-Soy1054477426442 Corn-Corn-Soy1057277856489 Different price Ratio 2.5 Corn to Soybean ($4.50 Corn and $11.25 Soybean) CS1054477426442 CCS1057277856489 2.25 Corn to Soybean ($4.50 Corn and $10.125 Soybean) CS992572886066 CCS1013974776237 2.0 Corn to Soybean ($4.50 Corn and $9.00 Soybean) CS930768355690 CCS970671685986