Technology Adoption and Off-Farm Household Income: The Case of Herbicide-Tolerant Soybeans
Fernandez-Cornejo, Jorge, Hendricks, Chad, Mishra, Ashok, Journal of Agricultural and Applied Economics
We model the interaction of off-farm work and adoption of agricultural technologies and the impact of adopting these technologies on farm household income from on farm and off-farm sources after controlling for such interaction, and estimate the model for the case of adoption of herbicide-tolerant (HT) soybeans using a nationwide survey of soybean farms for 2000. We find that adoption of HT soybeans is positively and significantly related to off-farm household income for U.S. soybean farmers, after controlling for other factors. In addition, while on-farm household income is not significantly related to adoption, total household income increases significantly with adoption.
Key Words: agricultural household model, biotechnology, herbicide tolerant soybeans, off-farm income, technology adoption
JEL Classifications: O33, Q12.
Herbicide-tolerant (HT) crops contain traits that allow them to survive certain herbicides that previously would have destroyed the crop along with the targeted weeds.1 This allows farmers to use more effective postemergent herbicides, expanding weed-management options (Gianessi and Carpenter). Adoption of HT crops has risen dramatically, particularly for HT soybeans, since commercial availability in 1996. HT soybeans use rose quickly to about 17% of U.S. soybean acreage in 1997 and reached 81 % in 2003 (Fernandez-Cornejo and McBride; U.S. Department of Agriculture, National Agricultural Statistics Service).
A major element in assessing the farm-level impacts of HT crops is their microeconomic impact. Faced with reduced returns to crop production caused by low commodity prices, farmers were said to have viewed biotechnology as a potential means for reducing costs and/or increasing yields, thereby improving financial performance (Fernandez-Cornejo et al. 2002). In particular, rapid adoption of HT soybeans by U.S. farmers was seen as evidence that the perceived benefits of this technology outweighed the expected costs.
However, recent research showed no statistically significant differences between the net returns (both at the enterprise and whole-farm level) from using HT and conventional soybeans (Fernandez-Cornejo and McBride). This suggests that other considerations may be driving adoption. In particular, some researchers believe that adoption of HT soybeans is driven by the relative simplicity and flexibility of the weed-control program. HT programs allow growers to apply one herbicide product over the soybean crop at any stage of growth instead of using several herbicides to control a wide range of weeds "without sustaining crop injury" (Gianessi and Carpenter). In addition, using HT soybeans is said to make harvest "easier" (Duffy).
While difficult to measure, simplicity and flexibility translate into reduced management time employed to supervise production, freeing time for other uses (Fernandez-Cornejo and McBride). An obvious important alternative use of operators' time (and their spouses', if married) is off-farm employment. However, despite the likelihood of a strong interaction between adoption of management-saving agricultural technologies and off-farm employment by both the operator and his/her spouse, the role of off-farm activities has been largely neglected in studies of technology adoption in agriculture. Moreover, as Smith observed, standard measures of farm profitability, such as net returns (to management), give an incomplete picture of economic returns because they exclude the value of management time.
Using the appropriate measure of economic performance for farm households is essential, given the importance of off-farm income in U.S. agriculture. Made possible by alternative employment opportunities and facilitated by labor-saving technological progress, such as mechanization, off-farm work by farm operators and their spouses has risen steadily over the past decades, becoming the most important component of farm household income. …