Proposed Objectives of the Project:

1. Understand the feasibility of “genetically modified” (GM) labeling in agri-food value chains in developing countries.
2. Assess developing country consumers’ knowledge and familiarity with GM crops.
3. Measure consumers’ willingness to pay (WTP) for GM and non-GM varieties and whether this WTP is affected by GM information labels.

Summary of Results:
Because of the pandemic, we were not able to go to Bangladesh at the time. The original student (Carly Trachtman) who started the project, got paid for a year, and graduated after doing research because of the pandemic and then left. Instead, Hamza, Ahsan, and I analyzed the data that we obtained from Bangladesh. Ahsan got extra data, and we wrote a paper that

1. The yield, pesticide use, and cost effect of Bt Eggplant
2. This is the first study that shows Bt Eggplant get higher prices than non-Bt Eggplant (we collected data that we will use later. This data explains the differences in prices better).
3. We identified the factors that explain adoption

More importantly, we compared our results with two existing studies based on control trials. We show that yield and pesticide use are similar. They lack some of the other cost considerations and don’t have adoption results. Moreover, we show that actual field data can do what controlled experiments can do and provide much more information at lower research cost. The bottom line is that the highly regarded control trial is not the gold standard for empirical research in economics. Of course, they have an important role, but other studies using traditional econometrics and observed field data may be more appropriate in other situations.

The results will appear in European Review of Agricultural Economics in 2024. The paper was accepted.

Specific Objectives of the Project:

1. To expand a conceptual framework for a design of supply chains to include dynamic considerations and diffusion over space and time.
2. To develop a conceptual framework to understand the alternative route that is employed by researchers to produce cultured meats.
3. To develop a conceptual framework to assess the implications of different strategies on design of supply chains for production and distribution of the meat products and for procurement of feedstock.
4. To assess the potential economic and environmental impact of alternative cultured meats on various sectors of agriculture, consumers, as well as the environment. This analysis will be conceptual.
5. To consider how alternative policies may affect the evolution of the industry.
6. To numerically provide orders of magnitude estimates of the impacts under alternative scenarios.

Project Report/Summary of Results:
Innovations in food science have led to the emergence of plant-based substitutes for animal meat products. Our analysis overviewed some of the emergent products and analyzed the economic conditions that lead to their growths. We argue that plant-based meat substitutes increase the input use efficiency of grains but the technology is in earlier stages and will benefit from learning by doing and upscaling. We expect that the use may be gradual and dependent upon the technological improvements and consumer preferences. These products have the potential to reduce greenhouse gases and the environmental side effects of agriculture. We developed basic formulas to assess the condition for their expansion and growth but further research is required to quantify their impacts.

Plant-based meat is only in its infancy. If consumers will accept it as a close substitute for meat, its seemingly lower input requirements, and GHG emissions contributions, it will change the structure of agribusiness, the economics of food and agriculture and rural regions. We argue that it will reduce the livestock sector significantly and reduce footprint and the environmental impacts agriculture. It will have a significant distribution effect reducing the wellbeing of animal agriculture. However, the changes will take time and we expect significant efforts to stop the technology. The use of biotechnology and creative culinary efforts may affect the quality and economic of plant-based meat.

Specific Objectives:

1. To understand why the use of an expensive and environmentally problematic chemical has persisted for decades - and how its use patterns have adapted to regulations and have affected production patterns and land use. This will be done through:
   (a) A review of the history of methyl bromide through literature in agricultural and environmental sciences and economics. This review will allow for the development of a timeline of the technology and its patterns of use over time. This review will emphasize the dominance of methyl bromide in soil fumigation, its interaction with other practices, and how its introduction led to structural changes of California strawberry production. An important part of the analysis is the discovery of new data sources.
   • Initial analysis suggests that the introduction of methyl bromide, together with other fumigants, led to major increases in yield and major changes in crop rotation. We will continue to refine our analysis, obtain new data sources, and thus lay the foundation for our econometric analysis and simulations.
   (b) Econometric analysis of the impact of the introduction of methyl bromide and other fumigants on yield of strawberries (with possible expansion to other crops). This will use data on yield per acre, acreage, prices, fumigant use, and other variables at the county level over time, beginning in the 1950s.
   (c) Econometric analysis of the impact of fumigant changes on land use patterns using county level crop report data. We will also use data on prices and other economic variables to assess changes in land use patterns over time.
2. To develop an economic modeling framework that will enable simulation of the economic impact of changes caused by the introduction and use of methyl bromide fumigation over time.
   • Impacts on land use and crop rotation
   • Gains in terms of output and economic surplus due to reduced incidence of disease (root rot, Verticillium wilt)
   • Post-fumigation land value
   • Cultivar selection criteria
3. The analysis will assess how these impacts change in response to environmental regulations and technology modification.

Proposal Narrative:

Methyl bromide has been one of the most prominent agricultural chemicals in California since UC scientists discovered fumigation strategies using methyl bromide, in combination with other chemicals, in the 1950s. This discovery provided broad spectrum pest control and led to changes in land use and profitability increases in multiple crops. Strawberry growers in particular were able to avoid costly crop rotations, grow strawberries on the most suitable land, and increase both yield and quality.

Methyl bromide was scheduled to be completely phased out of soil fumigation in the US by 2005 because of its contribution to ozone depletion. Scientists have searched for pesticide substitutes for several decades, due to its (1) high cost and (2) environmental impact. In the absence of an effective substitute, California strawberries were provided critical use exemptions, which were renewed until 2016. Even after these ceased, substantial amounts of methyl bromide are still used to prepare plants, which are then transplanted to the field.

The economics of eliminating methyl bromide and the status of available alternatives have been discussed extensively. In contrast to the analysis of the impacts of phaseout, economists have paid scant attention to the introduction of methyl bromide and its history. Much of the research on the economics of pest control emphasized the cost of replacement of one technology with another. However, it has often neglected the environmental side effects of these potential alternatives.[9] We aim to show in this study that understanding the evolution of a pest control strategy and its impacts, via a multidisciplinary approach, is essential in assessing the impact of regulation in the present and design of future policies.

Our study will build on earlier investigations we conducted showing that the introduction of methyl bromide resulted in fundamental changes to the strawberry industry, and secondary effects in California agriculture as a whole. The replacement of earlier practices with fumigation allowed growers to (1) shift from multi-year planting schedules to annual ones, (2) improve fruit yield and quality, (3) reduce rotation among crops, and (4) generate positive externalities where lands, previously used to grow strawberries, remained relatively disease-free and would improve subsequent production. Furthermore, disease control reduced selection pressure for resistance traits in new strawberry cultivars, simplifying the breeding process.

Our project consists of several parts. We will expand our literature review of methyl bromide fumigation, which we have constructed over the past two years. The literature review provides us with familiarity with multiple data sources and will guide us in pursuing objective 1A. We aim to adapt models from pesticide economics (Waterfield and Zilberman, 2012; Samtani et al, 2012)[8][11] to incorporate some of the major features of this narrative. These models will provide the foundation of our econometric analysis and simulation. One of our challenges will be to use our model and data for the development of a counterfactual model to estimate acreage savings from cultural changes, including the shift away from migratory planting and the introduction of monocropping, as well as the impact of cultivar selection criteria emphasizing yield and quality over disease resistance.

Project Relevance:
This project will demonstrate the importance of incorporating historical analysis with standard econometric analysis, and will additionally demonstrate that understanding the importance of path dependency in assessing impacts of policies. It will also help to understand some of the challenges that are associated with replacing “undesirable” pest control strategies in agriculture, and the resulting direct and indirect implications. It will allow us to better assess the value of methyl bromide and why it continues to persist despite significant efforts to replace it. It may also provide better justification for more novel strategies, including more precise fumigation, use of biotechnology, and improved cultural practices.

Specific Objectives
1. To expand a conceptual framework for a design of supply chains to include dynamic considerations and diffusion over space and time.
2. To develop a conceptual framework to understand the alternative route that is employed by researchers to produce cultured meats.
3. To develop a conceptual framework to assess the implications of different strategies on design of supply chains for production and distribution of the meat products and for procurement of feedstock.
4. To assess the potential economic and environmental impact of alternative cultured meats on various sectors of agriculture, consumers, as well as the environment. This analysis will be conceptual.
5. To consider how alternative policies may affect the evolution of the industry.
6. To numerically provide orders of magnitude estimates of the impacts under alternative scenarios.

Proposal Narrative
Agrifood systems consist of multiple processes where feedstock (agricultural products) are transformed to final products. Modern agriculture is characterized by new technological innovations that lead to development of new supply chains, that may result in new or modified product or services and specialized trading arrangements – for example, modern livestock processing technologies resulted in transition towards contracting or vertical integration (Zilberman et al. 2017). Du et al. (2016) develop a static conceptual framework to determine the capacity of the supply chain in terms of total output as well as the reliance on vertical integration and contracting under uncertainty. Zilberman et al. (2017) present direction to expansion of the analysis to incorporate multi-processes supply chains and credit considerations. Better understanding of supply chains requires analysis of its dynamic, evolution of investment in processing versus feedstock production, and spread over space and time. The first element of the proposal will provide this expansion, using an optimal control framework that recognizes variation over space and time (see for example Xabadia et al. 2006). We are interested in assessing the conditions that will determine investment in establishment of the original technology versus investment in building the feedstock capacity, and expanding the marketing network over time.

The main effort in this project is to use this framework to understand and to compare the evolution of an alternative approach to produce animal-free meat. There are different approaches to production of these meat products. For example, Memphis Meats Inc. is developing technology to grow meat from self-reproducing animal cells. On the other hand, Impossible Foods is based on patents of formulating plant-derived protein into a meat substitute product based on capacity to convert plant-based materials into a meat-like protein texture. Other companies produce egg white proteins (Clara Foods) and dairy proteins made through fermentation (Perfect Day). Working with Lichun Huang, we identified more than 30 companies working in this space with research support in the hundreds of millions of dollars. Interviews with Pat Brown, from Impossible Foods and others suggest that the basic premise of the industry is that alternative strategies will produce products equivalent to traditional meat products (beefs, poultry, pork, etc.) in terms of taste, texture, and nutritional content in an environmentally sustainable manner. In principle, these products are likely to have higher input use efficiency in converting feedstock to a final product and reduce greenhouse gases (because they wouldn’t require the energy of all the life activities of the animals). However, the diffusion will be gradual and they will result in specific requirements for feedstocks that will be grains, beans, vegetables, spices, etc. Farming, food processing, and cooking will be more integrated. We will develop a report on all the potential avenues of the evolution of the industry and then a conceptual framework to assess some of the implications. Under different assumptions, we will look at the potential supply chains that will be involved, the potential markets, and demand for agricultural feedstock in different locations and different conditions.

In our analysis, we intend to also consider some of the policy issues. Regulations of biotechnology can affect the speed of the evolution of the industry, as well as regulation of climate change. Food safety regulation and animal welfare regulations may play a major role in the future of the industry, as well as a variety of protective measures by different countries with strong livestock sectors. We envision conceptual analysis on some of the major implications that would allow quantification based on the data available from the industry as well as from scientists at UC Davis as well as other locations. But this is a first effort that will attempt to identify alternative scenarios that will be shaped by policies.

Project Relevance
The movement towards cultured meats is in the nexus of modern biotechnology and logistics, and concerns about climate change, food security, and animal welfare. Much of the research and development in this area will be done in California. Once this sector evolves, it will have a significant impact on the California livestock sector. This sector may change the structure of agriculture and the agri-food sector, and it’s important to understand the possible evolutionary path of the structure of agri-business and their implications. Policymakers and the academic community have been challenged to understand and analyze the growing role of contracts and vertical integration in agriculture, and understanding this evolution, especially in the context of culture meat, is important. Identifying some of the positive and negative side effects of cultured meat and assessing policies to address them is another important challenge.

Specific Objectives of the Project

1. To develop a conceptual framework for assessing the value of geoengineering techniques, in this case modifying weather on the level of a tree crop, to adapt to the effects of climate change.
2. To apply the use of kaolin clay to enhance the chill portions necessary for adequate bloom out, which ultimately drives yield.
3. Conduct a literature review and interview Farm Advisors to obtain quantitative parameters for current technology practices and allocation of inputs in response to shorter chill portions.
4. To assess the economic benefit of this technology under various climate scenarios in the Central Valley of California.

Summary of Results

Climate change is likely to increase temperatures in California in a manner that will affect crop productivity. Already we have seen increases in winter temperatures that reduce chill factor, which is essential for blooming of fruits and nuts. Insufficient chill can result in drastic impacts on yield. One approach to deal with it is through micro-climate engineering, namely lowering the temperature around the tree during its dormancy before blooming. Farmers and extension developed a technique where they spray orchards with a clay-like substance (kaolin) to reduce solar radiation. This micro-climate engineering technique is estimated to reduce losses.

Our project developed a methodology to predict the impact of this adaptation technique applied to the case of pistachios. One of the challenges is that temperature throughout a season is a random variable and varies over space and location. Working with agronomists, we obtained estimates of the costs and impacts of kaolin application under different scenarios, and then estimated the future expected discounted gains from application of kaolin to pistachios over various time periods. Our analysis takes into account the growth, demand and supply of pistachios, and possible changes in acreage as part of adaptation to climate change.

Our results suggest that in 2030, expected annualized profit gains from micro-climate engineering in California pistachios is between $214 to 612 million, depending on the growth in demand and the extent of adaptation. But consumers gain much more, $643 million to $1.84 billion, through lower prices and increased consumption. These impacts are significant given that the revenue of the industry is between $1 to $2 billion annually. Expected gains are higher if variability is increasing, and the early results suggest that micro-climate engineering may benefit other crops and address other sources of losses as well.

Specific Objectives of the Project
Objective 1: Conduct 4 surveys on California institutions and how the drought changed their behavior:
1) A survey at the water district level on sources of water (surface, ground, and purchased), pricing and allocation of water, and water use by farmers in the three years prior to the drought and during the drought;
2) A survey at the county/farm level on farmers’ technology choice and adoption and their changes in practices in response to the drought;
3) A survey obtaining data from the Department of Water Resources (DWR) and the Bureau of Reclamation on allocation of water to different projects and activities;
4) A survey obtaining data from the State on production and earnings of different crops in different counties.

Objective 2: Expand the conceptual framework on optimal management and utilization of water under climate change to interpret possible outcomes of the drought as described below.

Objective 3: Analyze the data to assess how the drought affected crop production and water use patterns within and between sectors, and obtain estimates of the economic impact of the drought.

Objective 4: Using the expanded conceptual framework and the empirical estimates, analyze policy implications for the California water system to adapt to climate change.

Objective 5: Produce an outreach program to disseminate findings.

Project Report/Summary of Results
California agriculture experienced high profits during the drought period, reaching record earnings. The main driver was high output prices and in some cases higher yields, especially in crops irrigated with subsurface drip irrigation (with the drought, weeds couldn’t survive). California farmers adapted to the drought by fallowing close to 1 million acres of land (out of close to 10 million of acres total).

However, the drought was a period of transition where the acreage associated with high value crops increased, while the acreage of lower value crops, like cotton and grains, declined. The high earnings of agricultural production were also associated with water transfers at very high prices (up to $1,000 per acre foot in some regions). Another response to the drought was a significant increase in groundwater use, which have threatened the long-term viability of some groundwater aquifers.

A third mechanism of adaptation was a further increase in use of drip irrigation and other conservation technologies as well as increased reliance on irrigation scheduling and automated and optimized irrigation systems. Forty percent of the agricultural land in California uses drip irrigation and a significant percentage of this use is subsurface drip systems. We estimate that the use of water conservation technologies increases gross and net income of California agriculture by 2.6-7.4%.

Our research suggests that to maintain sustainability of California’s water supply, groundwater use must be regulated based on sound economic and hydrological principles. Further, the use of recycled water can increase supply by up to 3 million acre feet of water, out of a current total use of 44 million acre feet per year. The challenge is to develop a sound conveyance system. In addition, the use of desalination is warranted. Finally, there is much more room to improve water pricing.

Specific Objectives of the Project
Understanding factors that affect voting for the labeling of pesticides or the banning of pesticides in California.

Project Summary
This project developed a theory explaining consumer choices regarding the labeling of genetically modified (GM) food and applied it to Proposition 37. Proposition 37 originated from an attempt to stall the advances of GM food and biotechnology in the California, drawing on the perception that there is significant public suspicion against the technology and rising awareness and concern about food safety. The initial survey of the public mood in this study suggested that there was potential for proponents of the proposition to succeed. Furthermore, there is a large body of literature in economics and other fields that suggests that some consumers may be willing to pay significant premiums for non-GM food. However, in the end, the proposition failed. Two main issues seemed to carry the outcome of the vote: (1) Flaws in the writing of the proposition created suspicion of its intent. (2) More important, the claim that implementation would raise food prices for Californians by $400/year per household caught people’s attention. To some extent, this was a real experiment on willingness to pay (WTP) to avoid GM. This experiment showed that, among the majority of the populace, the WTP was low. That is, while some perceived objections are widely held, they do not run deep. Once the public realized the cost of restricting GM, they lost enthusiasm, suggesting that increased education on the benefits of GM and, more important, the cost of blocking its use might bear fruit and help to relax the policies that regulate and restrict GM in other markets.

If the public faces a serious trade-off and is exposed to sound argumentation as to why a regulatory requirement is excessive, people will vote against restrictions. This bodes well for the future of GM if its proponents can make a strong case for it, given that California has tended to support environmental causes. For example, California is one of few states that has implemented climate-change policies. Another lesson might be simply that money talks, and large contributions to political causes may sway the public, possibly even against sound policy. But the elections in 2012 demonstrated that large spending does not always guarantee a win.

The financial crisis originated from a large volume of defaults of real-estate owners. These defaults devastated the financial institutions that owned the mortgages or provided insurance against defaults. But what caused these defaults? While there is a consensus that low interest rates and easy credit fueled the crisis, we argue that the high energy prices ignited it. Using data from California, we show that individuals in communities located farther from employment centers have much higher rates of defaults than those closer to centers and, on average, have low incomes. Thus, the doubling of energy prices during 2005-2008 caused many individuals in commuting com munities to default on mortgages as the housing-price bubble burst and they hit their budgetary constraints.

Genetically modified (GM) varieties were introduced in the mid-1990s, mostly for pest control, and have been adopted widely for corn, soybeans, cotton, and canola. Using data on acreage with and without this technology as well as on output at the national level over a period of 20 years in 125 countries, we were able to isolate the impacts of technology, changes over time, and differences in productivity among countries. We have found that the adoption of GM technology has increased the per-acre yield of cotton more than 100 percent in developing countries and by more than 20 percent in developed countries. The per-acre yield of corn increased by 50 percent in developing countries and by 15 percent in developed countries. The acreage of soybeans more than doubled. Thus, GM technologies have contributed significantly to the reduction in food prices and have enabled growing food demands to be met.