Regulatory Impact on Corn Farming: Transatlantic Agriculture & Regulation Working Paper Series: No. 5

Corn production
by Daniel R. Pérez, Aryamala Prasad, & Zhoudan Xie
October 24, 2017

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Abstract

As part of a cooperative agreement with the United States Department of Agriculture (USDA), the George Washington University Regulatory Studies Center produced a five-chapter report on regulatory differences between the United States (U.S.) and the European Union (EU) and their effects on agricultural production and productivity. Those chapters are published here as a working paper series with five parts. This chapter examines the impact of environmental and food safety regulations on corn production in the U.S. and EU. We provide quantitative estimates for differences in farm-level outcomes that result from different regulatory requirements between jurisdictions. The chapter begins by identifying and discussing regulations affecting corn production and proceeds to estimate the economic impact of each regulation at the farm level. We selected France and Spain as case studies to illustrate the differences that result from EU member states’ translation and implementation of agricultural regulations at the country level. Our use of a typical farm approach is meant to demonstrate relative differences in outcomes for farms among different jurisdictions rather than provide an exhaustive list of the costs facing a representative corn farm within any particular geographic region.

This chapter does not include a detailed discussion of either the effects of regulation on agriculture or the institutional differences in regulatory systems between the U.S. and EU. These aspects are addressed in Chapter 2: Agricultural Productivity and the Impact of Regulation and Chapter 3: Translantic Approaches to Agriculture Policy.

Background

Corn is a major crop grown in the U.S., Spain, and France. In 2014, overall production in the U.S. was 397 million tons compared to 84 million tons in the EU.[1],[2] At the country level, France produced 20 million tons compared to 5 million tons produced in Spain.[3] Although the EU produces less corn than the U.S., both jurisdictions have similar yields per acre. Figure 1 below illustrates yields in each country between 2004 and 2014. As of 2014, the yield per acre was 171 bushels in the U.S., 160 bushels in France and 182 bushels in Spain.

France and Spain are selected because the two neighboring countries are among the highest corn producing countries in the EU (Figure 2),[4] while having distinct biotechnology regulations and agri-environmental measures. France is opposed to cultivation of genetically modified (GM) crops and closely regulates many agri-environmental practices. The intensive use of pesticides in France is an exception, although it is worth noting that France is currently implementing a comprehensive plan aimed at reducing its pesticide use by 2018. Interestingly, Spain is the EU’s top grower of GM corn, with approximately 30% of its corn cultivation area planted with Bacillus thuringiensis (Bt) corn[5] in 2013.[6] Most other member states, including France, have banned GM crop cultivation. See Chapter 3 of this report for an extensive overview of regulatory practices in the U.S. and EU.

Figure one, corn yieldEU member states corn

The rest of this chapter proceeds as follows: it begins by detailing the scope and methodology used in this study with an emphasis on describing the steps we took to estimate the impact of regulations on corn production. It explains our focus on a typical farm approach[7] for calculating the regulatory impact for each farm. It then presents a list of the relevant regulations within each country and looks at their operational requirements at the farm level. Based on that, regulatory impacts are quantified in terms of private costs and benefits that result from the identified regulations on corn farms. Finally, estimated regulatory costs are compared across the three countries to assess the regulatory burden in each country.

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[1]    All European units are converted to U.S. units in this chapter. The following conversions are used throughout this chapter: 1 hectare = 2.47 acres; 1 tonne = 1.1023 ton = 39.368 bushels; €1 = $1.3350 (2011-2013 average exchange rate).

[2]    FAOSTAT. Food and Agriculture Organization of the United Nations. June 13, 2016. http://www.fao.org/faostat/en/#data/GT (accessed December 9, 2016).

[3]    Ibid

[4]    Ibid

[5]    A type of genetically modified corn that is resistant to certain insect pests.

[6]    USDA FAS. EU-28 Grain and Feed Annual 2015. GAIN Report, Washington, DC: USDA Foreign Agricultural Service, 2015.

[7]    Centro Ricerche Produzioni Animali. “Assessing farmers' cost of compliance with EU legislation in the fields of environment, animal welfare and food safety.” European Commission. 2011. http://ec.europa.eu/agriculture/sites/agriculture/files/external-studies/2014/farmer-costs/fulltext_en.pdf (accessed December 30, 2016); Ian Craven & Meyers Norris Penny. Environmental and Economic Impact Assessments of Environmental Regulations for the Agriculture Sector: A Case Study of Potato Farming. Agriculture and Agri-Food Canada, 2006.