Gregory K. Regier, Timothy J. Dalton, and Jeffery R. Williams
Kansas State University
This research adds to previous literature by examining the impact of genetically modified (GM) maize on net return risk for smallholders in South Africa. Producers of GM maize pay 35% more for seed but 42% less per hectare for labor than non-GM maize producers. Stochastic dominance reveals that net returns of Roundup Ready® (RR) maize are second-degree stochastically dominant to all other varieties in one region, while no variety is stochastically dominant in the other region. Stochastic efficiency with respect to a function (SERF) indicates that RR maize is the preferred variety for producers over the entire range of risk preferences in both regions. While average gross returns for all maize plots are $713 per hectare, risk premiums between $18 and $221 per hectare must be paid to RR maize producers—depending on region and farmer risk preference— to persuade them to switch to the second-most preferred variety.
Key words: Genetically modified, maize, net returns, risk, SERF, South Africa, stochastic dominance.