Seed technology and production system comparisons South African subsistence / smallholder farmers

Seed technology and production system comparisons South African subsistence / smallholder farmers An internal report to the University of Missouri led Creating a Community of Practise in KwaZulu-Natal a Templeton Foundation supported project By Marnus Gouse Department of Agricultural Economics, Extension and Rural Development, University of Pretoria August 2014 1

1 Background South African maize farmers have been planting genetically modified insect resistant (Bt) yellow maize since 1998 and Bt white maize since 2001. Herbicide tolerant (HT) maize was released in 2003/04 and Stacked seed (with both Bt and HT, locally known as BR seed) for the 2007/08 production season. When Bt white maize was commercially released in 2001 the technology was introduced to smallholder farmers and South Africa became the first country in the world where a GM subsistence crop (maize) is produced by actual subsistence farmers. Though adoption of GM maize by South African large-scale commercial farmers has been remarkable (in 2013 85% of SA s maize area was planted to GM maize), adoption of GM maize by smallholder farmers is still limited. Gouse, Kirsten and Van Der Walt (2008), based on seed company information, seed sales and assumptions regarding seed quantity, bag sizes and seeding rates found that approximately 10 500 smallholder maize farmers or approximately 23% of the estimated 46 500 smallholder farmers that regularly buy hybrid seed from the three largest maize seed companies, planted GM maize seed in 2007/08. Though it is believed that adoption has increased somewhat since 2008, in a country with an estimated 240 000 small-scale farmers (surplus producing) and close to 2 million subsistence farmers, it is clear that the majority of smallholders are not planting GM maize. It can be expected that with the current commercialised GM technologies, insect resistance and herbicide tolerance, and due to smallholder farmers maize production motivations - more focussed on subsistence, taste and quality (Gouse, 2012b), GM maize adoption levels by smallholders will not reach those observed for commercial farmers. With cognisance of the fact that the current GM technologies do not appeal to or is needed by all smallholder farmers in South Africa, it is however believed that with improved support services, more SA smallholder farmers can benefit from the advantages (see Gouse, Piesse & Thirtle, 2006; Gouse, Piesse, Thirtle & Poulton, 2009; and Gouse, 2012a) of the current GM technologies. This paper compares and quantifies the farm-level impacts of GM maize adoption by smallholder farmers by comparing seed type and production system specific production budgets and farm-level profitability. 2 Data and methodology The study draws on smallholder data collected from mainly farmers in the Hlabisa and Simdlangentsha areas of KwaZulu-Natal (KZN), for the 2005/06, 2006/07, 2007/08 and 2009/10 maize production seasons. Gouse (2012b) compiled maize enterprise production budgets for farmers planting a range of seed types, including conventional hybrid and GM maize seed for these four seasons (see first Gouse report to Templeton project). Even though it is possible to identify certain costs and advantages of the different seed/technology types from these seasonal budgets, relatively small seed specific sample sizes, considerable variation within seed specific sub-sample groups as well as variation in a number of other variables / inputs, result in some blurring of these technology specific effects. For this reason, and in order to clearly present and compare the differences in the costs and returns of different seed types, one set of standardised maize production budgets are compiled based on the comprehensive production data collected for the mentioned four seasons as well as research in the preceding four seasons (2001/02 to 2004/05) and industry data. 2

3 Assumptions and discussion The standardised seed type and production system specific budgets are presented in Table 2. Production practises and their resulting expenditure requirements (inputs) and outputs (yield) are compared for: Farm-saved seed with minimal inputs Older conventional hybrid seed with increased inputs New conventional hybrid seed with increased inputs but not herbicide, i.e. manual weeding Bt seed with manual weeding New conventional hybrid seed with a selective herbicide Bt seed with a selective herbicide HT seed with broad spectrum herbicide Stacked (BR) seed with broad spectrum herbicide The individual inputs and their technology and production system specific quantities and costs are discussed next. 3.1 Seed Farm-saved, also known as traditional seed in the South African smallholder context, can be any seed that has not been bought. It can be grain saved from previous years bought hybrid maize, open pollinated varieties, grain from maize seed distributed by government or grain selected for colour or taste by the farmer or other members of the community. For the financial comparison, saved seed is priced at the theoretical price the farmer would have been able to sell the quantity of grain for. A seeding rate of 18 kg per hectare is assumed for all seed types based on survey data as well as KZN Department of Agriculture extension officer recommendations. This is quite high for dryland maize production but in line with commercial farmer seed use in the higher rainfall dryland maize production areas of Mpumalanga and KZN. Seed prices are compared to the newer conventional hybrid as the benchmark in Table 1. PAN 6043 is an older fairly drought tolerant conventional variety still planted by smallholder farmers in KZN and Swaziland. Monsanto s CRN 3505 is a newer conventional hybrid which is also the isoline for DKC 7815 Bt, DKC 7835 HT and DKC 7845 BR (stacked). From Table 1 it clear that the older conventional hybrid seed is considerably less expensive than the newer conventional hybrid and the price for BR is close to the price sum of Bt and HT seed. 3

Table 1: Seed price in ZAR per 1 000 seeds (2007/08) Old conventional hybrid (PAN 6043) New conventional hybrid (CRN 3505) Bt (DKC 7815) HT (DKC 7835) BR (DKC 7845) Seed price 9.93 16.02 20.59 20.73 25.87 Price difference to new conventional hybrid Source: Industry published seed prices (Gouse, 2012b) -38% 0% 29% 29% 61% Over the seven year period 2003/04 to 2009/10, Bt maize has been between 25 and 30 percent more expensive than the conventional isoline. For the six years 2004/05 to 2009/10, HT seed was 33% more expensive for the first three years, 29% more expensive for 2007 and 2008 and 24% for 2009/10. BR maize was 61, 54 and 45 percent more expensive than the conventional isoline hybrid for 2007/08 to 2009/10. 3.2 Fertiliser The vast majority of smallholders surveyed in the Hlabisa area used considerably less fertiliser than what is required or recommended and in the nine year study period, very few even mentioned lime application. Though some farmers in Simdlangentsha also do apply a limited quantity of topdressing later in the season, farmers in Hlabisa only apply basal fertiliser. For this comparison the average fertiliser quantity for the 2007/08 season is used for hybrid maize while farmers used little (if any) chemical fertiliser on saved seed plots. Some farmers do make use of kraal manure. 3.3 Herbicide The use of herbicide by smallholder farmers is still minimal and before HT seed was released, and farmers trained in the use of herbicides on demonstration plots planted by Monsanto, few actually knew how to use herbicides. There are however regions in South Africa where the Agricultural Research Council has made great progress in teaching farmers about selective herbicides. In these areas farmers do make use of herbicides albeit not always in an optimal manner. The production practise comparisons present a conventional hybrid and Bt maize with and without herbicide scenario. While HT and BR farmers make use of a single post emergent broad spectrum herbicide (glyphosate) application, the conventional and Bt maize planting farmers who do use herbicide, make use of two selective herbicide applications. For this comparison it is assumed that the two selective herbicide applications control weeds just as effective as the single post-emergent glyphosate application and no additional manual weeding is required. This is however in contrast with findings in Simdlangentsha where conventional maize planting smallholders using selective herbicides have to do some additional manual weeding in order to control mainly perennial grasses. 4

3.4 Insecticide Gouse (2012b) showed that the insecticide saving benefit of Bt maize for smallholder farmers in KZN is minimal in seasons with limited borer infestations. While it can be expected that farmers will purchase and apply more insecticide in seasons with higher stem borer pressure, the use of insecticides by smallholders on maize is considerably lower than that for instance observed in cotton production. Some farmers also indicated that if they do observe borer and borer damage on conventional maize, they make use of ash or washing detergents instead of insecticide granules or sprays. For this comparison, an average to slightly higher than average borer infestation level is assumed and non-bt and higher input using farmers make use of one pyrethroid application to control borers, as was observed in the Simdlangentsha area. 3.5 Family labour In order to determine the impact of Bt and HT maize adoption on labour use, Gouse (2012b) collected detailed maize production activity specific labour data for the 2005/06 to 2007/08 and 2009/10 seasons. It is clear from the above discussion on insecticide application that Bt adoption had very little impact on saving on insecticides and for the standardised per hectare budget comparisons only a single day of insecticide application for two people is assumed (based on farmer data). Over the four seasons some farmers made use of mechanised land preparation but the vast majority of farmers in both Hlabisa and Simdlangentsha made use of manual family labour for maize production activities. There has been some variation over the four seasons in the way farmers did land preparation with farmer decisions influenced by the availability of government tractors or oxen teams. It also seemed as if, with the new HT technology, farmers searched for the best (cost and labour effective) land preparation and planting method. Starting in 2003, Monsanto presented farmers days and demonstrations of minimum or no-till practises known as planting-without-ploughing (PWP). These practises had already previously been introduced in smallholder production areas by the Agricultural Research Council in order to limit tillage related soil erosion (Gouse, Piesse and Thirtle, 2006), but had not widely been adopted due to its labour intensive nature (compared with animal traction and tractor ploughing), because farmers generally struggle to afford and use selective herbicides and (more recently) partly due to government s mechanisation programmes. However, with the use of HT technology with a post emergent broad-spectrum herbicide it appears farmers have decided that the most cost and labour effective way to plant is to just open plant and close a planting station using a hoe and no ploughing or furrow opening is done. This is in line with the PWP practises (Ukutshala ungalimanga) recommended by the Agricultural Research Council. Similar to the other maize production inputs a standardised labour use budget was compiled for the different seed technologies and production approaches based on the labour use findings of the four study seasons. Family labour was priced at R40 / day which is considerably lower than the South African minimum wage but based on actual hired labour payments in 2007/08. For these comparisons it is assumed that all the maize production labour is performed manually by family members and or hired labour and there is no mechanised land preparation. 5

Based on the detailed data collected over the four season period, a number of other labour assumptions are made for the standardised comparisons: While saved seed, HT and BR farmers make use of PWP, other hybrid maize and Bt seed planting farmers make use of a combination of ploughing with an animal drawn implement to control weeds and / or preparing a seed bed and then planting by hand or animal drawn planter. Herbicide application requires two people for two days per hectare for spraying and fetching water Insecticide application requires two people for one day per hectare Farmers who apply herbicides do not do manual weeding One hectare of maize requires 22 (7 hour) person days for weeding One person harvests maize cobs equal to 218 kg of grain per day. 3.6 Yields Production levels per hectare were assumed to fall in the range observed in the 2007/08 season when a reasonable rainfall quantity and seasonal distribution was enjoyed. Observed yields in the three other seasons were lower due to adverse rainfall conditions. Bt maize, compared to the conventional isoline with same production system, is assumed to have a 12% yield advantage (borer damage limitation) based on the six season average reported by Gouse (2012a). Maize produced with the use of herbicide is assumed to have a 10% yield advantage (weed damage limitation) over varieties where weeds are controlled by hand. 3.7 Grain price Due to adverse rainfall conditions in especially 2005/06 and 2006/07 few farmers sold any grain but with better rainfall and resulting higher yields in 2007/08 and 2009/10 (to some extent) most farmers sold a couple of bags of grain in Hlabisa and Simdlangentsha. The main point of sale is either at pension days, when Government welfare grants are paid out for old age pension and child and disability grants, or just in the community to people who do not produce maize. The recorded grain price for maize sold in the community is at R3 000 / ton considerably higher than the commercial farmer price which for this analysis is take as the average of the South African Futures Exchange (SAFEX) price for 2007/08 minus the transport differential to the closest SAFEX delivery point which was assumed to be Paulpietersburg (R1 800 R264 = R1536). The higher community grain price is linked to the fact that the grain is available close to home (not necessary to travel to town and carry maize meal to home), cash is available due to the pension days, the community is buying from one another and also the perception that maize meal made from locally bought grain is more healthy. The is considerable truth in this perception as commercially milled maize meal contains less oils and proteins as the germ is removed to, amongst others, increase the shelve-life of the maize meal. 6

The main problem of the local market is however that it is limited and insufficient and ineffective storage facilities result in disparity in demand and supply through the season. 4 Findings The standardised production budgets are presented in Table 2 and the results are largely selfexplanatory. It is quite clear that when only direct inputs are considered the increased cost of Bt, HT and especially BR seed coupled with expenditure on herbicide, result in a higher per hectare input expenditure requirement, i.e. cash input. However, when the opportunity cost of family and or possible expenditure on hired labour is taken into consideration, BR and HT maize has a cost saving advantage in that substantially less labour is required for land preparation and planting as well as for weed control. In rural areas like Hlabisa in KZN where the majority of households are headed by female farmers due to migration of males to urban areas in search of employment and where a large percentage of household heads are elderly with little education, there is substantial pressure on labour supply. This situation is exacerbated by a tragically high HIV/Aids prevalence. Many elderly farmers planting conventional maize indicated that they cannot effectively control weeds due to time and energy constraints. 7

Table 2: Comparison of standardised seed and production practise specific maize production budgets Conventional Old hybrid Bt Saved seed hybrid (Pan 6043) (DKC 7815) Unit (CRN 3505) Conventional hybrid (CRN 3505) Bt (DKC 7815) HT (DKC 7835) BR (DKC 7845) Herbicide use no no no no yes yes yes yes Inputs Seed quantity kg 18 18 18 18 18 18 18 18 Seed exp. ZAR 54 486 836 1 058 836 1 058 1 075 1 290 Fertiliser quantity kg 100 185 185 185 185 185 185 185 Fertiliser exp. ZAR 370 685 685 685 685 685 685 685 Herbicide exp. ZAR - - - - 210 210 121 121 Insecticide exp. ZAR - - 120 120 120 Hired services ZAR - - - - - - - - Total value of family labour applied @ R40 / day ZAR 1 344 1 791 1 907 1 871 1 384 1 348 924 888 Land preparation and planting ZAR 280 580 580 580 580 580 280 280 Herbicide application ZAR - - - - 320 320 160 160 Insecticide application ZAR - - 80-80 - 80 - Manual weeding ZAR 880 880 880 880 - - - - Harvesting ZAR 184 331 367 411 404 448 404 448 A: Total exp. on inputs ZAR 1 768 2 962 3 548 3 615 3 234 3 301 2 925 2 984 B: Total exp. without family labour ZAR 424 1 171 1 640 1 743 1 850 1 953 2 000 2 096 Output Output quantity kg 800 1 800 2 000 2 240 2 200 2 440 2 200 2 440 Value of output at community sales price of R150/50kg ZAR 2 400 5 400 6 000 6 720 6 600 7 320 6 600 7 320 Value of output at commercial price of R90/50kg minus transport diff. ZAR 1 176 2 976 3 336 3 768 3 696 4 128 3 696 4 128 Gross margins A: Including all expenditures @ community price ZAR 632 2 438 2 452 3 105 3 366 4 019 3 675 4 336 B: Excluding family labour @ community price ZAR 1 976 4 229 4 360 4 977 4 750 5 367 4 600 5 224 Including all expenditures @ commercial grain price ZAR -592 14-212 153 462 827 771 1 144 8

Figure 1 visually presents the main outcomes from the comparison: Despite higher input expenditure BR and Bt maize with herbicide are the most profitable even when family labour is not included as a cost due to the yield benefit of improved pest (borer and weed) management Labour demand for land preparation and weeding is substantially lower for farmers making use of no-till practises (PWP) and herbicide. Labour productivity (kg grain produced per labour day) is substantially higher for BR but also for HT compared to Bt with herbicide (that has a higher gross margin) due to the labour saving impact of PWP in combination with a broad spectrum herbicide. 9

5 Conclusion This assessment drew on data collected over a four season period from smallholder farmers in the Hlabisa and Simdlangentsha regions of KwaZulu-Natal, to compile standardised production budgets for different seed technologies and production practises. Though this approach in a sense assumes a perfect world where only the quantity and price levels of inputs of interest vary, it is useful to clearly identify and compare the potential farm-level impacts of GM maize under typical smallholder production conditions. The comparisons show that HT and BR maize produced under a minimum / no-till production system with a broad spectrum herbicide holds great potential for smallholder farmers due to improved weed control and especially its labour saving advantage. It seems as if smallholder farmers have also observed the advantages of the HT technology, compared to Bt alone, as in 2012 50% of GM seed sold to smallholders in KwaZulu-Natal, Mpumalanga and the Eastern Cape was HT and 42% was BR. A plethora of researchers studying African agriculture have, over the last forty to fifty years identified the labour demand bottleneck during the crucial land preparation, planting and weeding time as a crippling hindrance to crop yield and production expansion. This seasonal labour shortage is exacerbated by more recent out-migration to cities in search of employment and a substantial share of Sub-Saharan Africa s high potential agricultural land is lying fallow. A technology that can result in labour saving during the crucial labour demand period, can result in increased time spent on other food and cash crops and / or expansion of the crop area. It is argued that herbicide tolerance holds substantial potential for African farmers due to the labour saving impact combined with the yield improvement that can be expected when weeds are controlled effectively. However, adoption of herbicides by African smallholders has been notoriously low due to a number of reasons including issues of affordability, timely and predictable availability and support through training and information dissemination. It can be expected that these same factors will limit the adoption and thus the substantial benefits of HT crops. Development and sustainment of functioning input and output markets require political will and longterm investment in infrastructure and support services. References Chimbindi, N.Z., Herbst, K., Tint, K.S. & Newell, M. (2010). Socio-demographic determinants of condom use among sexually active young adults in rural KwaZulu-Natal, South Africa. AIDS, Vol. 4, 88-95. Gouse, M. (2012a). GM maize as subsistence crop: The South African smallholder experience. AgBioForum, 15(2): 163-174. Gouse, M. (2012b). Farm-level and socio-economic impacts of a genetically modified subsistence crop: The case of smallholder farmers in KwaZulu-Natal, South Africa. Submitted in partial fulfilment of the degree PhD in Agricultural Economics, University of Pretoria, South Africa. Gouse, M., Kirsten, J.F. & Van Der Walt, W.J. (2008). Bt Cotton and Bt Maize: An Evaluation of the Direct and Indirect Impact on the Cotton and Maize Farming Sectors in South Africa. A commissioned report to the Department of Agriculture: Directorate BioSafety. 10

Gouse, M., Pray, C., Schimmelpfennig, D. & Kirsten, J. (2006a). Three Seasons of Subsistence Insect- Resistant Maize in South Africa: Have smallholders benefited? AgbioForum, Vol. 9(1): 15-22. Gouse, M., Piesse, J. & Thirtle, C. (2006b). Output and labour effects of GM maize and minimum tillage in a communal area of KwaZulu Natal. Journal of Development Perspectives. Vol. 2(2), 192-207, December. Gouse, M, Piesse, J., Thirtle, C. & Poulton, C. (2009). Assessing the performance of GM maize in KwaZulu Natal, South Africa. AgbioForum, Vol. 12(1): 78-89. 11