Risk and Reward

Genetic engineering and economic risk in varietal selection of potatoes

Published online: Jun 02, 2018 Seed Potatoes Kate Fuller, Gary Brester & Michael Boland
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Genetic engineering, or the direct manipulation of an organism’s genome, has been a source of debate ever since the 1970s when scientists developed the first genetically modified organisms. In 2017, commercial production of three new genetically engineered (GE) potato varieties was approved by the USDA. The new varieties, licensed by Simplot under the trademark Innate, have potential human health benefits over other potato varieties, and resist bruising and late blight.

But these are not the first GE potato varieties to have been introduced. Monsanto developed and introduced a variety resistant to the Colorado potato beetle in 1995 when genetic engineering of crops was in its infancy, but market resistance was fierce. Monsanto discontinued the variety six years later. However, GE crop use has grown substantially since that time. In 2017, between 92 and 96 of corn, cotton and soybeans planted in the U.S. were GE varieties, per the USDA’s Economic Research Service (ERS).

Advances in technology have changed some of the discussion surrounding genetic engineering itself. In the past, genetic engineering has largely meant introducing genes across genomes. Newer technologies, however, allow gene editing and suppression within a genome. CRISPR is one such technique that can be used to edit, rather than add to, existing gene structures.

The Innate varieties were developed over more than a decade. Simplot used RNA interference technology (RNAi), which controls the expression of certain genes. The use of this particular technology was no accident; Simplot specifically used it to distinguish the breeding process from other types of genetic engineering. Similar to advances made with CRISPR, Innate potatoes contain only potato genes. Because of their late blight resistance, Simplot has estimated its new varieties will require substantially fewer fungicide applications than conventional varieties. Because of their resistance to bruising, they may also reduce food waste. Additionally, the new varieties are low in acrylamide, which creates the browning effect in fried potatoes and has been linked to cancer (Alvarez and Shelman, 2014). It is now up to advertising teams to convey these health and environmental attributes. 

But some groups also have voiced concerns about the new varieties. Many of these concerns focus on wanting regulation and/or more research conducted on gene editing. Market resistance remains an issue, and McDonald’s and Frito-Lay, among others, have stated that they will not use Innate potatoes in their products.

Varietal selection is an important decision, but can be complicated because of uncertainty regarding markets, disease, yield performance, and supply chain logistics, among other things. While much seed is contracted in advance, the decision to adopt a new variety often involves considerations over multiple years that include investments and learning related to adopting the new variety, as well as potential impacts on buyer/seller relationships. This is particularly true for seed growers, who may grow several generations of seed and for whom relationships with seed buyers often last many years.

A producer might consider whether to grow a GE variety—perhaps one of the new Innate varieties—if a buyer requests it. The decision must account for both market and production risks. In the case of the currently available Simplot varieties, a grower must consider both reductions in disease risk as well as increased market risk—the possibility of price differences from market resistance to GE products. (Contracting can mitigate some of the price risk, at least for the term of the contract.)

Regardless of whether the Innate potato is successful, other GE varieties and farm management decisions surrounding them are likely to follow. To explore how commercial and seed potato producers viewed the risks involved in such a decision, we conducted an experiment at the Montana Seed Potato Seminar in November 2016. A group of 83 seed and commercial potato growers completed a risk-tolerance assessment and were then asked to choose between a more expensive seed selection with a relatively low disease risk and a less expensive option with more disease risk. While, on average, growers with lower risk tolerance scores were willing to pay more for the less-risky option, the results were not statistically significant. Overall, surveyed growers selected the more expensive, less risky option approximately 75 percent of the time among all choices. When asked if their selection would change if one of the options were genetically engineered, most stated it either would not change or “would depend” on other factors; there was willingness to try a GE variety among this group.

As a part of the same experiment, growers reported the relative importance of a series of traits in determining which seed to grow. Disease risk played an important role and, in fact, was the No. 2 determinant in seed selection. But the relationship between the seed buyer and seller was by far the most important characteristic. This finding underscores both the importance of trust in variety or technology adoption and market development.

References:

Alvarez, J.B. and M. Shelman. 2014. “Simplot Plant Sciences: Designing a Better Potato.” Harvard Business Review Case Study No. 9-515-042.

USDA Economic Research Service (ERS).  2018.  “Adoption of Genetically Engineered Crops in the U.S.”  Available from https://www.ers.usda.gov/data-products/adoption-of-genetically-engineered-crops-in-the-us.aspx

 

*Kate Fuller and Gary Brester are agicultural economists with Montana State University Extension. Michael Boland is an agricultural economist with the University of Minnesota.