WELFARE IMPLICATIONS OF INTRODUCING BIOTECH TRAITS IN A MARKET WITH SEGMENTS AND SEGREGATION COSTS: THE CASE OF ROUNDUP READY® WHEAT

Roundup Ready® Wheat (RRW) was one of the first genetically modified (GM) traits for the wheat sector and was under review by regulatory agencies in the United States and Canada when Monsanto withdrew it from further consideration. There are a multitude of issues associated with the ex ante evaluation of this decision. These include market acceptance and segregation, as well as the varying sources of cost savings and productivity gains. In this article, we develop a spatial partial equilibrium model of the higher-protein hard wheat market and assess the changes in the distribution of welfare associated with release and adoption of RRW. It incorporates segments for GM aversion in each market and segregation costs for each segment. Major conclusions indicate that in the most likely scenario, producer welfare increases by $301 million and consumer welfare increases by $252 million. Producers of hard red spring (HRS) wheat in the United States and Canada win, while hard red winter (HRW) wheat growers lose.