Production risk, pesticide use and GM crop technology in South Africa

Technology involving genetic modification of crops has the potential to make a contribution to rural poverty reduction in many developing countries. Thus far, pesticide-producing Bacillus thuringensis (Bt) varieties of cotton have been the main GM crops under cultivation in developing nations. Several studies have evaluated the farm-level performance of Bt varieties in comparison to conventional ones by estimating production technology, and have mostly found Bt technology to be very successful in raising output and/or reducing pesticide input. However, the production risk properties of this technology have not been studied, although they are likely to be important to risk-averse smallholders. This study investigates the output risk aspects of Bt technology by estimating two 'flexible risk' production function models allowing technology to independently affect the mean and higher moments of output. The first is the popular Just-Pope model and the second is a more general 'damage control' flexible risk model. The models are applied to cross-sectional data on South African smallholders, some of whom used Bt varieties. The results show no evidence that a 'risk-reduction' claim can be made for Bt technology. Indeed, there is some evidence to support the notion that the technology increases output risk, implying that simple (expected) profit computations used in past evaluations may overstate true benefits

The story of the moment: risk averse cypriot farmers respond to drought management

This article illustrates the importance of estimating risk preferences when evaluating water policy. Using agricultural production data from the Kiti region of Cyprus we estimate farmers' risk preferences a la Antle (Journal of Business and Economic Statistics, 1, 192-201, 1983, American Journal of Agricultural Economics, 69, 509-22, 1987) and show sensitivity to higher order moments of profit, such as skewness. We show that farmers in the Kiti region are risk averse with risk premiums in the region of 20% of expected profit. We use these estimates to analyse the impact of a water quota from the perspective of three policy-makers who differ only in their understanding of farmers' risk preferences. We show in the case of Kiti that policy-makers who model risk preferences incorrectly, that is, either; (a) assume risk neutrality or; (b) ignore down-side risk, wrongly predict the magnitude and direction of input responses and therefore the magnitude of welfare changes. This highlights the importance of accommodating preferences for higher order moments of profit in the evaluation of water policy.

Environmental sustainability and the food system

The food system and the natural environment are closely linked. Indeed, food production strongly relies on environmental resources and services, and releases outputs into the environment. This implies that food-related activities can create negative externalities for the environment, for example related to overexploitation and pollution, given that the market fails to deliver the socially optimum level of resource use and/or pollution. Given this market failure, public intervention is required to regulate such activities. Public intervention can take different forms, from no intervention to simple guidelines up to strict regulation. Indeed, regulation can follow either an approach that outlines general principles or that fixes specific standards, or that promotes information and education. The aim of this chapter is to highlight the issues of environmental sustainability in the context of the agri-food system and to discuss current public and private initiatives that regulate the market from an environmental perspective. Thus, in this chapter we firstly introduce the concept of sustainability, including all the three pillars (profit, people and planet) and then discuss the issues of environmental sustainability related to food. Moreover, we discuss the different forms of public intervention and then we present European regulation that relates to environmental sustainability within the food system, including public and private voluntary initiatives. Furthermore, we discuss the interest of consumers for environmental sustainability and their perception of the impact of food production on the environment. Moreover, we analyse synergies between environmental sustainability and health issues. Concluding remarks follo