It is not sufficient that farmers and consumers perceive net benefits from GM crop varieties

The GM varieties that have been developed and adopted extensively to date have not experienced significant price discounts because of buyer resistance. This can probably be attributed to the nature of the crops. For feed grains, the buyers are other farmers who are comfortable with the technology, and for fiber crops such as cotton the food safety concerns do not apply. For the major food grains, wheat and rice, even if the farm-production economics potential of GM varieties is as large as for feed grains,market acceptance may differ sufficiently to limit their adoption. Rather than an other farmer, the relevant buyer for these crops is a food processor, manufacturer or retailer who may be reluctant to risk negative publicity or to risk losing consumers who would prefer a biotech-free label or who may not be confident that the biotech and non-biotech grain can be segregated.The adoption of biotechnology must provide net benefits to other participants in the marketing chain, such as food processors and retailers. Pricing of the technology may be a critical factor. Even if the new technology is more cost-effective than the traditional alter native,macetas de plastico 25 litros monopolistic pricing could mean that the technology supplier retains a large share of the benefits.

The cost savings passed on to processors and consumers may be a small fraction of the total benefits, rendering incentives for processors, retailers and consumers to accept the technology comparatively small. Processors and retailers can effectively block a new technology if it does not clearly benefit them, even if there would be net benefits to the general public.The size of the market matters. The cost to develop a new variety is essentially the same whether it is adopted on one acre or a million acres, but the benefits are directly proportional to the number of acres on which the variety is adopted. This is why biotech companies have focused on developing technologies for more widely planted agronomic crops, especially feed-grain and fiber crops for which market barriers are lower. The technology developer must also obtain regulatory approvals. It is difficult to obtain precise information on costs of regulatory approval for biotech crops and chemical pesticides, but ac cording to available estimates, the total cost of R&D — from “discovery” to commercial release of a single new pesticide or herbicide product — exceeds $100 million, and regulatory approval alone costs more than $10 million. A new technology must generate enough revenue for the developer over its life time to cover these costs, and for some crops the total acreage is simply not sufficient. Given the large fixed costs associated with regulatory approvals for specific uses, agricultural chemical companies have concluded that the potential market is too small to warrant the development of pesticides for many of California’s specialty crops, which have become technological orphans.

It does not follow that the government should invest in developing new conventional or GM pest-control technologies for these orphan crops. If the current regulatory policy and process is appropriate and efficiently implemented then the high cost is not excessive; if a new technology cannot generate benefits sufficient to pay those costs, then it is simply not economical to develop that technology. The question for technology orphan crops is whether it is possible to reduce the costs of R&D and regulatory approval sufficiently to make it profitable for the nation and the private sector to change their orphan status.On the supply side, “horticulture” includes an enormous diversity of fruit and vegetable crops, but it also includes many nonfood species, such asornamentals, flowers and recreational turfgrass. Collectively these horticultural crops compare well with major agronomic crops in terms of total value in the United States. However, they use much less acreage, and the market size for some biotech products depends on both acreage and production value. In 2000, the United States produced fruits, nuts and vegetables with a total value of more than $28 billion, of which California contributed about $14 billion . In addition, horticulture includes a small number of larger-scale crops as well as a large number of smaller-scale crops . At current costs for R&D and regulatory approval, it is unlikely that biotechnology products will be developed and achieve market acceptance for many of these smaller-scale crops in the near future . Further, experimentation with perennials such as grapes, nuts and fruit trees is comparatively expensive , and it is costly to bring new acreage into production or replace an existing vineyard or orchard with a new variety. On the demand side, the market for horticultural products, especially fresh fruits and vegetables, is undergoing important changes associated with the changing structure of the global food industry.

Increasingly fewer and larger supermarket chains have been taking over the global market for fruits and vegetables, especially fresh produce, and changing the way these products are marketed. Be cause fresh produce is perishable and subject to fluctuations in availability, quality and price, it presents special problems for supermarket managers compared with packaged goods. Supply-chain management, and the increasing use of contracts that specify production parameters as well as char acteristics and price, is replacing spot markets for many fresh products. A desire for standardized products, regard less of where they are sourced around the world, could limit the development and adoption of products targeting smaller market segments, unless retailers perceive benefits and provide shelf space for diversified products — such as biotech and non-biotech varieties of particular fruits and vegetables. On the other hand, an increasingly wealthy and discriminating consuming public can be expected to continue to demand increasingly differentiated products — with an ever-evolving list of characteristics such as organic, low fat, low-carbohydrate and farm-fresh.Hence retailers will have to balance the cost savings and convenience associated with global standardization against the benefits from providing a greater range of products,vertical rack system which will include GM products when retailers be gin to perceive benefits from stocking them. Unlike other types of foods, fruits and vegetables are often consumed fresh and in clearly identifiable and recognizable form. This has implications for perceptions of quality and food safety that may influence consumer acceptance — perhaps favorably, for instance, if a genetically modified sweet-corn could be marketed as reduced-pesticide . Other elements of GM horticulture — such as nonfood products, ornamentals or turfgrass — have advantages in terms of potential market acceptance. GM trap crops, which provide pesticide protection for other crops, and GM sentinel crops, which signal the presence of pests or provide other agronomic indicators — may be used in food production without overcoming barriers of acceptability to market middlemen or consumers . Biotechnology products designed for home gardeners may be more readily accepted because the grower is the final consumer. Market acceptance in the United States is also linked to continued access to export markets, particularly in the European Union and Japan where restrictions have been applied to biotech foods. The relative importance of the domestic market could help to account for the success of the GM feed-grain technologies in the United States, and it may also help to account for the success of these and other GM technologies in China. China is comparatively important in horticultural biotechnology — its investment in agricultural biotechnology is second only to the United States, but with a different emphasis, including significant investment in horticultural biotechnology .

The technological potential for GM horticultural crops appears great, particularly when we look beyond the “in put” traits that have dominated commercial applications to date, to opportunities in “output” traits, such as pharmaceuticals and shelf-life enhancements. Because delays in socially beneficial technologies mean forgone benefits, there may be a legitimate role for the government in facilitating a faster rate of development and adoption of horticultural biotechnology products. For instance, the government could reform property-rights institutions to increase efficiency and reduce R&D costs. IPRs apply to research processes as well as products, and limited access to enabling technology or simply the high cost of identifying all of the relevant parties and negotiating with them, may be retarding some lines of research — a type of technological gridlock . Nottenburg et al. suggest a government role in improving access to enabling technologies. Similarly, the government could revise its regulations to increase efficiency and reduce costs for regulatory approvals. Instead of requiring a completely separate approval for each genetic transformation “event,” it may be feasible to approve classes of technologies with more modest specific requirements for individual varieties. The government could also reduce some barriers to adoption, especially market acceptance of biotech food products, by providing information about their food safety and environmental implications. The biotech industry and agriculture can have an influence here, too. The general education of consumers and market inter mediaries about biotech products may be facilitated in a process of learning by experience with products — such as nonfood applications, or home garden applications — that have good odds of near-term success because of low barriers to market acceptance and good total benefits.IF and when genetically engineered horticultural products be come more widely available and adopted, they will enter an expanding marketplace that is becoming globally integrated and more consolidated. Fewer, larger firms will control access to a rising share of the world’s population, including rapidly growing middle-income consumers in the developing world. Consumers everywhere will be increasingly focused on convenient, ready-to-eat and value-added products. In order to compete on a global scale, GE produce must meet the challenges of the quickly evolving market for fruits and vegetables. In the United States alone, the estimated final value of fresh produce sold through retail and food-service channels surpassed $81 billion in 2002. Eu rope-wide fresh produce sales through supermarket channels alone were estimated to exceed $73 billion in 2002, and total final sales to exceed $100 billion. Worldwide, consumption and cultivation of fruits and vegetables is in creasing. Between 1990 and 2002, global fruit and vegetable production grew from 0.89 billion tons to 1.3 billion tons, and percapita availability expanded from 342 pounds to 426 pounds . Much of this growth has occurred in China, which is aggressively pursuing agricultural biotechnology . The global fresh fruit-and-vegetable marketing system is increasingly focused on adding value and decreasing costs by streamlining distribution and understanding customer demands. In the United States and Europe this dynamic system has evolved toward predominantly direct sales from shippers to supermarket chains, reducing the use of intermediaries. Food-service channels are absorbing a growing share of total food volume and are also developing more direct buying practices. The year-round availability of fresh produce is now seen as a necessity by both food service and retail buyers. Product form and packaging are also changing as more firms introduce value-added products, such as fresh cut produce, salad greens and related products in consumer-ready packages. Estimated U.S. sales of fresh-cut produce were over $12 billion in 2002. Fresh-cut sales are even higher in Eu rope and beginning to develop in Latin America and Asia as well. The implications of this trend may become as important to the biotechnology industry as the changes in market structure, since fresh-cut processors are increasingly demanding specific varieties bred with attributes beneficial to processing quality.The streamlining of marketing channels poses both challenges and opportunities for horticultural biotechnology. A smaller number of larger firms, controlling more of world food volume, now act as food-safety gatekeepers for their consumers, reflecting the diversity of consumer preferences in their buying practices. Where consumers perceive products utilizing biotechnology to be beneficial, retail and food-service firms will provide them. Products with specialized input traits valued by consumers, such as unique color, flavor, size or ex tended shelf-life, are the most likely to succeed in today’s marketplace. While large food-service and retail buying firms and international traders may offer easy access to consumer markets, if major buyers adopt policies unfavorable to GE foods, distribution obstacles could become insurmount able. Such policies are common among European food retailers, reflecting strong consumer concern there over GE products. The challenge to supply seasonal, perishable products year-round has fa- 82 CALIFORNIA AGRICULTURE, VOLUME 58, NUMBER 2 vored imports, and increased horizontal and vertical coordination and integration among shippers regionally, nationally and internationally.