Welfare Impacts of Introducing Drought-Tolerant Soybeans

Soybean farmers continue to face a number of challenges, including a constant environmental threat brought about by prolonged periods of drought. Among the immediate consequences is a diminished crop growth or yield production. Previous experiences of major droughts in the U.S. also resulted in livestock deaths and transformation of fertile land into desserts. Increasing focus is being given to create and develop soybean varieties that are more drought-resistant. The introduction of more drought-resistant soybeans have the potential to provide farmers with improvements in productivity either through improvement in yield, reductions in costs, or both. This would eventually translate into changes in the value of soybeans as well as a response in acreage planted of both the new drought-resistant varieties as well conventional types of varieties. Equally impacted are product derivatives of soybeans as well as other related markets. Given the potential gains and losses to different markets and industries from introducing more drought-resistant soybeans, it is important to evaluate how welfare impacts are distributed through the soybean value chain due to the introduction of such new soybean seed technology. We apply comparative static analyses using a multi-market equilibrium displacement model that takes a value chain approach to estimate the economic implications of introducing more drought-resistant soybean seeds into the marketplace.