December 9, 2005

Report Finds Only Modest Gains for Farmers Who Grow Genetically Engineered Pharmaceutical Crops
Companies Overstate Economic Benefits to Rural Communities

WASHINGTON, Dec. 9—States like Missouri and Iowa are lining up to grow crops genetically engineered to produce pharmaceuticals and industrial chemicals, in large part because proponents have touted the crops as an engine of rural economic development and farmer prosperity. But a new report by a leading agricultural economist finds that while some drug and biotechnology companies may profit from these "pharma crops," aggregate farmer benefits are likely to be small and rural community benefits may be much more modest than often portrayed.

"Proponents of pharmaceutical crops have inflated the rewards and downplayed the risks," said Dr. Jane Rissler, deputy director of the Food and Environment Program at the Union of Concerned Scientists, which commissioned the study. "State officials, farmers and rural communities should be wary of rosily optimistic claims."

The new report, The Economics of Pharmaceutical Crops: Potential Benefits and Risks for Farmers and Rural Communities, was written by Dr. Robert Wisner, University Professor in the Department of Economics at Iowa State University. The report is the first analysis by a land-grant university economist of potential economic benefits and risks of pharma crops to farmers and rural America.

The major benefits of a successful pharma crop industry would be expected to go to companies in the form of reduced production costs. If the companies pass cost savings along to consumers, society may benefit from cheaper drugs. The net savings in production costs will be at least partially offset by the costs of containment needed to protect the food supply from pharma crop commingling. Contamination from open-air production is considered likely because most drug-producing crops are food crops such as corn, rice, and soybeans, and most pharma crop production occurs in areas where food versions of the crops are grown.

"Those looking at pharma crops as a boon to rural America view increased farm income as a key benefit," said Dr. Wisner. "However, in the end, economic principles dictate that only a small part of the pharma crops' value would be expected to go to growers."

Farmers are unlikely to benefit in a big way because they will be unable to negotiate with pharma crop companies from a position of strength. Market forces, including potential foreign competition, will drive farmer compensation down to the lowest levels that pharma crop companies can achieve. Moreover, the acreage likely required if the pharma crop industry meets its expectations is so small that only a few growers would be needed. Rural communities, then, are likely to benefit in a substantial way only if a drug-processing company locates in their town or a local university or private businesses win large research contracts.

In addition, those growers who produce food and feed versions of the pharma crop could be put at risk because of the potential for contamination. For example, Missouri rice farmers worry that they may lose domestic and foreign markets out of fears that their rice is contaminated with drugs.

With the release of this report, UCS is renewing its call to the U.S. Department of Agriculture (USDA) to ban the outdoor production of genetically engineered pharma crops because of threats to the integrity of the food supply. UCS urges the USDA to lead a major campaign to encourage and fund genetically engineered alternatives to food and feed crops for the production of drugs and industrial chemicals.