Potential Effects of FQPA on South Carolina Farmers

Request from South Carolina Farm Bureau > >

Clemson University Response to SC Farm Bureau Request for the Impact of the FQPA on South Carolina Farmers > >

What is the expected economic impacts on South Carolina, if all organophosphates and carbamates pesticides are banned in 1999? > >

What would be the expected effects of such a ban on the price of major food items? > >

What would be the expected effects of such a ban on the price of major food items? > >

Request from South Carolina Farm Bureau President David M. Winkles to Vice-President John Kelly, Clemson University Public Service & Agriculture

Dear Dr. Kelly:

We need to gather objective, defensible information that will stand up to close scrutiny. We need information that is based on available technology, not speculative technology. We also need information based on conditions on a typical commercial farm, not just a test plot.

To help strengthen our case, we need you and the best minds at Clemson to address the following questions:

  1. What is the expected economic impacts on South Carolina, if all organophosphates and carbamates pesticides are banned in 1999?
  2. What would be the expected effects of such a ban on the price of major food items?
  3. What would be the health risk trade-offs associated with such a ban? Would the risk of alflatoxin and mycotoxins in food increase? Would shifts in diets from fruits and vegetables due to escalating prices have a negative impact on the quality of South Carolinians diets, particularly children? Would the nutritional value of diets decline?

Unfortunately time is not on our side. It would be extremely helpful if we could have the answers to these questions by November 1, 1998.

In closing, let me thank you and the Clemson faculty for your interest and help in this very important issue. With your help we can put some reason and science back into the FQPA implementation process.

Sincerely,
David M. Winkles, President, South Carolina Farm Bureau

Response from Vice-President John Kelly, Clemson University Public Service & Agriculture to South Carolina Farm Bureau President David M. Winkles

November 2, 1998

Mr. David M. Winkles
President, SC Farm Bureau
724 Knox Abbott Drive
Columbia, SC 29033

Dear David:

I am pleased to enclose the following answers to three submitted questions on the impact for South Carolina on the cancellation of organophosphates and carbamate pesticides by EPA under the Food Quality Protection Act (FQPA). We have also evaluated two major non-food crops as well as several major food crops. With some non-food crops information is included. Non-food crops are covered despite the word, "Food" in the Act, because the total amount of pesticide used is critical under this Act (i.e., the "risk cup" concept). Lastly, we have included crop loss information, economic impact and human health information.

Twenty-two of our faculty and two employees from DHEC were involved in answering the three questions. A large amount of time, effort and coordination went into this effort. Significant efforts were made by Bob Bellinger (Pesticide Technical Coordinator), Mark Henry and Jim Rathwell (Agricultural Economists), Jay Chapin (Field Crops), Walker Miller and Clyde Gorsuch (Fruit Crops), Tony Keinath, Randy Griffin and Powell Smith (Vegetable Crops), Neil Ogg and Calvin Schoulties (Administration). The two employees from DHEC are Pat Wright (Vector Control) and Sue Ferguson (Richland County Environmental Health Services). I am quite pleased by everyone's efforts and cooperation. All contributors are listed below and are herewith copied.

I must be candid with you that the crop loss information is largely drawn from a strong knowledge base coupled with many years of experience and much less from faculty data files. To obtain reliable data of the kind needed for this study, one would have to withhold the pesticides under consideration on each crop and compare to a pesticide-applied crop in multiple locations for several years running. This type of information is simply not available. The economic analysis (based upon 1996 statistical data and our loss estimates) is limited not only by our loss estimates but also by assumptions in the model used to calculate economic effects. The economic assumptions are detailed within the report. Despite the technical and economic limitations, I submit that the information developed by our faculty is reliable.

Two alarming features of the report bear mentioning: 1) while most crops will be adversely affected, it is the small and large fruit crops that will be most devastated by uncontrolled pests and that will be economically unfeasible to grow and maintain; and 2) since plant pests rarely become resistant to organophosphate and carbamate pesticides, we will have to rely on pesticide alternatives whose target pests and pathogens rapidly develop resistance to the alternative pesticides.

I trust that this responds appropriately to your questions. This letter and answered questions are first being sent electronically and then by express mail. The express mail package will contain supplemental comments from faculty. If you have questions and concerns, please free to call.

Sincerely,

John Kelly
Vice-President for Public Service and Agriculture

Clemson University Response to SC Farm Bureau Request for the Impact of the FQPA on South Carolina Farmers:

Question #1) What is the expected economic impacts on South Carolina, if all organophosphates and carbamates pesticides are banned in 1999?

The 1996 Food Quality Protection Act (FQPA) will dramatically affect the re-registration of pesticides by imposing significant new requirements in establishing food tolerances. These new conditions of registration will likely mean the wholesale loss of many important pesticide active ingredients, active ingredients from which hundreds, if not thousands, of products are made. These loses will affect our ability to control pests and ultimately lead to crop yield losses. These yield losses immediately affect grower revenues, but will also have farther reaching effects on the economy. South Carolina stands to be impacted by crop yield loses and sustain economic impacts beyond the agricultural sector.

We made an economic impact analysis of the effect of the loss of the pesticide active ingredients now considered most at risk under the FQPA: the organophosphates (almost entirely insecticides), the carbamates (again, largely insecticides), and the B1 and B2 carcinogens (mostly fungicides, but also some insecticides, at least one miticide, and a few herbicides) on selected South Carolina crops. In this economic impact analysis we used crop production, yield and revenues from the South Carolina Agricultural Statistics Office and our best estimates of yield, obtained from a number of Clemson University Extension specialists and researchers. The model we used took into account only simple annual yield loss due to the requirement of using alternative chemistries if available. This loss was modeled across the South Carolina economy to determine the effects of the "ripples in the pond".

From one standpoint the analysis provides a worst case scenario. For instance, the underlying assumption to this entire outlook is that all organophosphates, all carbamates, and all B1 and B2 carcinogens will be lost. In the end, we sincerely hope that we do not lose all of these active ingredients because of the new rules of the game, or rather new game, presented to us under the FQPA, but it seems clear that many are at risk.. Of any chemicals that are not lost we will likely lose many uses now on product labels. It must be realized that if we do, in fact, retain some active ingredients and some of their current site uses, we will not use these tools in the future as we do now. At the very least, new lower tolerances under the FQPA mean lower application rates, fewer allowable applications, seasonal total amount used limits, and longer pre-harvest intervals. Such use conditions may, in the end, could make even retained uses useless for current crop protection needs.

On the economic side the model also makes some other assumptions that are perhaps unrealistic: that growers continue to grow crops for the five year run used, even when annual crop losses would likely, in reality, prevent them from doing this; that when suffering losses a grower would not shift to another cropping system; that if a crop is no longer grown that the land remains unproductive; that if individuals in the public sector lose employment that they do not become re-employed elsewhere in the economy; that if business income is lost, other sources of income are not obtained.

However, while the major agricultural crops and some minor crops were considered, a number of minor crops were not included. These crops would likely be impacted as well, but various data values could not be obtained or reasonably estimated for these crops to be considered. In the crops used, in most cases we could only address yield losses to major pests. In some cases only insect or only disease losses were considered.

Additionally, in this analysis we have addressed pesticide use losses only in the traditional agricultural sector, especially food uses (but also tobacco and cotton). However, some active ingredients are used in agriculture and/or other application situations. These uses can be significant. For instance, the organophosphate insecticide malathion, while used less in agriculture than in years past, is the single pesticide used in the multi-year, multi-million dollar boll weevil eradication project. (We did not include this use of malathion in the cotton portion of the model, only losses due to several other organophosphates, because this is a special program.) This effort has allowed the increases in cotton acreage in South Carolina, and across the South, that were not previously possible because of the devastating effects of the boll weevil. A quick picture of the economic impact of the loss of this single use may be to take the value of cotton production prior to the beginning of the boll weevil program, and what the value of this production is now, adjusted by the cost of the eradication program, but also by the reduced costs due to reduced pesticide applications for controlling the weevil that were incurred prior to the eradication program. (Note that the cost of the boll weevil eradication program in South Carolina is now for monitoring for the boll weevil and not application of pesticides!) It is clear the economic impact of the loss of malathion on cotton must be considered to be enormous. (Outside of South Carolina malathion is being used to eradicate the boll weevil in other states and to eradicate the Mediterranean fruit fly from California and Florida.)

Consider that malathion is also the mainstay adulticide (Fyfanon), of mosquito abatement in South Carolina and many other states. While most of us consider mosquitoes a nuisance, increases in mosquito populations are usually accompanied by increases in the number of cases of mosquito vectored diseases, such as equine encephalitis viruses. Mosquitoes vector a number of serious diseases fortunately not known or familiar to modern South Carolinians. Potentially this includes malaria. Also note that what is now the principle alternative to malathion for mosquito control is naled (Dibrom). While naled is also used in some mosquito abatement programs, it has some drawbacks to its use (for one, it is corrosive to equipment), and so malathion is still the overall material of choice. But naled is also on the "hit list". Further consider that one of the only two remaining potential altenatives for mosquito control is resmethrin. Neither resmethrin nor the final alternative chemical provide reliable control of salt marsh mosquito in coastal areas. Additionally, there is some insect resistance to resmethrin. But resmethrin is a pyrethroid is also on the B1, B2 carcinogen list. Thus, the top three mosquito adulticides are slated for possible loss. It would be extremely difficult to estimate the economic impact of the loss of our ability to control mosquitoes, such as we can, in South Carolina, but such an estimate must not only include the loss of portions of income sources such as tourism, but necessarily incurred human and animal health costs, and potentially the loss of human life.

&Another insecticide, chlorypyrifos (Lorsban, Dursban), is used in agriculture, but is also widely used in turf and ornamental plant production (and also in controlling pests for maintaining turf and ornamental plants), and in structural pest control where it is an important termiticide. Termite damage to homes and other structures costs South Carolinians millions of dollars every year. While alternative pesticides exist and are used, and new technologies are coming onto the market, chlorpyrifos has been a chemical of choice in termite control since the loss of chlordane ten years ago. A third example is the fungicide chlorothalonil. It is used extensively in agriculture and is probably the single most used fungicide in turf and ornamentals plant production. In each area it is important both for the number of plant diseases it prevents and for its use as a critical rotational chemical for resistance management.

These three pesticides share some common features that account for their wide use. They are effective. They provide the desired, needed, levels of pest control and do this with relatively low acute toxicities, reduced persistence in the environment, little pesticide resistence, and at an affordable price. These are notable examples, but not the only examples. And there are active ingredients that may be lost that do not have significant agricultural uses but have non-agricultural uses.

In most crops we used, using alternative pesticides, if available, will incur costs of alternative material, especially in newer and long patent life products, higher costs due to the need for additional applications because of lesser efficacy or the need to use multiple products (in some cases the use of materials with higher toxicities), the rise of new minor pests, and the increase of importance of current secondary pest, such as mites. Mites are one pest of particular concern because there are few miticides are available and most of these have total seasonal use or other limitations. At least one miticide, propargite, is on the B1, B2 carcinogen list.

Other factors not included in the model are the increase in status of what are now secondary pests to primary pest status when other chemistries or alternative management practices must be relied upon. Although some of these pests are already identifiable, the economic impact is not discernable. The future status and cost of other potential pests is unknown.

And yet another factor not included in the yield loss model comes into play. Loss of pesticide resistance management is a theme common to most of the crops considered. Pesticide resistance now becomes a two-fold problem. First, with the potential loss of the organophosphates and carbamates, two of the three major groups of the synthetic insecticides are taken out of the resistance management "tool box". Little resistance existed in the pesticides in these two groups, especially in the organophosphates. Secondly, the remaining major group, the pyrethroids, is already a chemistry of concern because of resistance. Thus, the majority of future pest management needs to be handled with materials where the development of pesticide resistance is considered imminent, while simultaneously losing efficacious alternate rotational chemistries needed for resistance management.

The model results regarding the South Carolina fruit industry echo our belief that this agricultural sector will be hardest hit by the FQPA. Elsewhere in this report Dr. R. Walker Miller makes an important point regarding the South Carolina fruit industry:

"It is important to realize that there are two perspectives; the existing industry and future industry that would be possible if appropriate plant pharmaceutical [pesticide] tools are available. The structure of South Carolina Agriculture is changing rapidly from a large volume commercial packed fruits and vegetable economy to a high value return per acre crops. In the fruit and vegetable industry this is associated with changing market structure. Future fruit markets will be niche markets including direct marketing associated with recreation and fruits and vegetables that have short shelf life and therefore will not face competition from distant markets."

While annual yield loss was estimated for peaches and apples, two crops important to South Carolina (in most years South Carolina is the second largest peach producing state behind only California), an additional loss occurs in these crops that do not fit into the annual yield loss model. Peaches and apples are perennial crops and the loss of trees affects not only the current annual yield, but future orchard yield and thus income. Replanted trees take several years to bear fruit, and longer to reach the point of commercial harvest. But replanted trees have high mortality rates, and survivors often never reach the yield potential of other trees in the orchard. Because of this an additional analysis was conducted on tree loss in peaches and in apples.

Thus, while the yield loss model shows substantial economic impact on the South Carolina economy, the full picture is more complex, and much more costly.

Some Economic Impacts from Reduced Use of Selected Chemicals on South Carolina Farms

Introduction.

The purpose of this brief paper is to summarize the assumptions and procedures used to estimate the economic impacts of reduced use of selected chemicals (organophosphates and carbamate pesticides) on food and non-food crops in SC. The time horizon is the five-year span from 1999 to 2003. The state of South Carolina is the impact region.

Procedures.

Estimates of reduced crop yields for fifteen crops in SC were made by scientists at Clemson University under the assumption that organophosphates and carbamate pesticides would be banned starting in the year 1999. In some cases these estimates reflect the reduced yield when alternative chemicals that are more costly and/or less effective than the banned chemicals. In other cases, reduced yields reflect the fact that there are no viable alternatives. No accounting is made of the possible net change in costs of substituting chemicals for the banned group and the corresponding change in net farm income. Accounting is only carried out for the expected loss in revenues from lower yields on existing acreage.

The first step in the impact analysis was to estimate the dollar value of the expected reductions in crop yields. We assumed that the 1996 acreage for each crop and the average yearly price for1996 (most recently available) are constant throughout the 1999 to 2003 period. This means that SC producers are price takers in each commodity market and that real prices (in 1995 dollars) are constant throughout this period at the 1996 level. At this juncture, the annual expected percentage losses in yields per acre without the use of organophosphates and carbamate pesticides are used to estimate the losses in cash receipts from marketings. These losses are estimated using 1996 cash receipts (1995 for peaches) and the projected yield reductions for each crop by year 1999-2003. (See Table 1A for these projections).

Step two in the impact analysis was to construct a vector of loss sales to final demand (for example, exports) for use in the Impact Model for Planning (IMPLAN) for South Carolina maintained at Clemson University (see Table 2A for the summary measures of the aggregated IMPLAN model used in this paper). The fifteen categories of crop losses from Table 1A are combined into the eight IMPLAN sectors affected. This assumes that average input requirements are the same across the commodities grouped into a given IMPLAN sector. The eight IMPLAN categories affected by reduced final demand sales are cotton, feed grains (corn), food grains (wheat), tobacco, fruits, tree nuts (pecans), vegetables (sweet potatoes), and oil crops (soybeans and peanuts). The reductions in final demand sales are show in Table 3A for each year 1999 to 2003.

Step three in the impact analysis is to convert the final demand sales in Table 3A to 1995 prices (the year of the most recent IMPLAN model). Next, the five vectors (one for each year 1999 to 2003) of reduced final demand sales are used to shock the SC economy through the matrix of interindustry linkages (closed Leontief model). The results for Output, Value added and Employment are listed in Tables 4, 5 and 6 respectively. The Direct column is the reduction in final demand sales from lower crop yields in Table 4 and the corresponding reductions in value added (wages, profits, rental type income, and indirect business taxes) in Table 5 and employment in Table 6. The Indirect column reflects the reduction in economic activity by input suppliers to both farmers and other sectors. The Induced column reveals the reductions in household income and spending by farmers, input suppliers and others in SC. Finally, in Table 1 the Total column is the sum of the Direct, Indirect and Induced columns. Output (Sales) reductions from the pesticide ban rises from about $145 million in 1999 to $228 million in 2003 (in 1995 dollars). Value added falls by $110 million by 2003. Finally, employment falls by about 2,600 in 1999 and 4,200 in 2003.

Cautions in interpreting the IMPLAN results.

The results in Tables 4, 5 and 6 reflect various assumptions in addition to those mentioned above. First, these are probably the upper limit to the possible downside to the ban of organophosphates and carbamate pesticides in SC. The working assumption is that labor, land and capital resources that are released by farmers that exit farming as yields decline are lost to the SC economy. Land is not used for alternative crops or livestock production that does not require the banned chemicals to maintain profitability. In some regions of the state this is highly unlikely while in others land could remain idle for a period of time. Similarly, farmers and farm labor are assumed not to seek other employment in South Carolina to offset revenue losses in selected crop production. Again the actual response by farmers will vary within SC with the age and education of farmers and the conditions of the regional labor market. Further, no allowance is made for technical advances over the time period that will provide feasible substitutes for the banned chemicals or for more general substitution in production practices that ameliorate the yield reductions associated with the banning organophosphates and carbamate pesticides in SC.

In sum, the estimates in this paper are short run, five year projections of the economic impacts of reduced yields for selected crops in SC without substitution of alternative crops, livestock or off-farm sources of revenues. In the longer run, technical advances might enable SC producers to compete with other regions that have less reliance on organophosphates and carbamate pesticides. However, over the five year period considered here, it can be expected that production of selected crops will shift more toward regions that can derive a cost of production advantage over SC producers that currently rely on organophosphates and carbamate pesticides.

Table 1: Summary of Impacts

IMPACT 1999 2000 2001 2002 2003
Output Impact
Direct Losses $81,874,387 $91,915,215 $107,593,288 $116,932,020 $129,758,749
Indirect Losses $35,307,241 $41,475,443 $44,794,354 $47,961,317 $52,581,336
Induced Losses $27,591,965 $33,587,824 $37,351,049 $40,995,201 $45,915,435
Total Losses $144,773,592 $172,978,481 $189,738,693 $205,888,541 $228,255,522
Total Value Added Impact
Direct Losses $30,424,248 $37,458,575 $42,252,490 $46,926,915 $52,998,905
Indirect Losses $20,093,281 $23,568,727 $25,448,119 $27,242,396 $29,859,549
Induced Losses $16,614,046 $20,224,354 $22,490,317 $24,684,583 $27,647,222
Total Losses $67,131,575 $81,251,656 $90,190,927 $98,853,895 $110,505,676
Employment Impact (Jobs lost)
Direct Losses 1,672.5 2,046.0 2,252.6 2,450.3 2,737.9
Indirect Losses 534.9 630.6 679.5 726.3 795.7
Induced Losses 417.8 508.8 565.8 621.1 695.6
Total Losses 2,625.2 3,185.5 3,497.9 3,797.7 4,229.3

Tree Fruit Tree Losses

In addition to the effects of reduced annual yields analyzed in the main impact analysis, there are additional losses in crops such as peaches and apples due to loss of trees. Lost trees immediately reduce income in the year of tree loss. However, their loss results in lost income in subsequent years. If trees are not replanted the loss of tree income is total loss for the life of the orchard. If trees are replanted it takes several years for these trees to bear and then come into commercial harvest. These trees then incur input costs to the grower. However, these trees will never approach the yields of other trees in the orchard. Additionally, these replacement trees themselves have an increased mortality rate.

The table below indicates the income value of individual South Carolina peach and apple trees.

Table A: Value of South Carolina Peach and Apple Trees.

  Mean Gross Receipt per Tree Number of Trees Total Gross Receipts Impact on State
Peaches $13.84 2,000,000 $26,680,000 $53,360,000
Apples $ 8.16 666,000 $5,385,600 $10,771,200
Total     $32,065,600 $64,131,200

A separate analysis was made to determine the impact of the loss of individual South Carolina peach and apple trees beyond immediate initial year reduced yields. The following table provides the results of the analysis.

Table B: Impacts of Loss of FQPA Pesticides on South Carolina Peach and Apple Trees.

  Number of Trees Lost per Year Gross Receipts Lost to Growers per Year Statewide Economic Impact of Tree Losses
Peaches (1.8% loss rate) 36,000 $468,000 $936,000
Apples (4% loss rate) 26,000 $213,000 $416,000
Total   $681,000 $1,352,000

In this model the statewide economic impact is estimated to be 2x the gross receipts lost to growers. These results may still underestimate the impact of tree loss. This analysis used single tree replacement, that is, when a tree dies it is, in fact, replaced, but if it dies it does not increase the loss rate and itself is not replaced (in the model). In practice it is difficult to estimate how often multiple tree replacements may occur. Depending on the age of the orchard and a number of other factors, dead trees may not be replaced, thus maximizing loss.

Question #2) What would be the expected effects of such a ban on the price of major food items?

We do not have the data to calculate a predictable change in food prices. There would likely be an increase in prices especially with perishable fruits and vegetables. Prices would also likely rise because of increased imports (which, in turn, would be loss income for our producers because of less competition in the market place.

Question #3) What would be the health risk trade-offs associated with such a ban?

There are two health risks apparent: higher mosquito populations and aflatoxins. If the three most efficacious mosquito abatement pesticides (including malathion) are banned, there would very likely be an increase in mosquito populations that could vector the equine encephalitis virions which cause potentially fatal diseases in humans as well as horses. Aflatoxins in peanuts would become a serious problem as an indirect consequence of the loss of pesticides to control the lesser cornstock borer in peanuts. Increased levels of aflatoxins, which are potent carcinogens, would pose a significant health risk to those who consumed these aflatoxin-harboring peanuts. Aflatoxins in field corn is not expected to be a problem with cancellation of these pesticides.

Would shifts in diet from fruits and vegetables due to escalating prices have a negative impact on the quality of South Carolinians diets, particularly children? We have no data that indicates at what price various consumers will cease to buy fruits and vegetables. However, we do know that the population that relies on food stamps to purchase food will be directly impacted. Sixty percent of households receiving food stamps include children under 18 years of age. Because the food stamp allotment is based on income rather than food cost, this population would be negatively impacted with an increase in the cost of fruits and vegetables.