On the value of innovation and extension information: SCN-resistant soybean varieties

Abstract

This paper presents direct evidence on the impact of a specific extension program that is aimed at promoting the adoption of varieties resistant to the soybean cyst nematode (SCN), specifically the Iowa State University SCN-Resistant Soybean Variety Trials. We use two data sources: experimental data from these variety trials and a rich proprietary dataset on farmers’ seed purchases. Combining these data, we estimate the value of soybean cyst nematode-resistant variety availability, and the associated variety trials that provide information on their performance to farmers and seed companies. Given the scope and diffusion of this extension program, the focus of the analysis is on Iowa and northern Illinois over the period 2011–2016. Farmers’ seed choices are modeled in a discrete choice framework, specifically a one-level nested logit model. Using the estimated demand model, we find farmers’ marginal willingness to pay for soybean cyst nematode-resistant varieties, and for related extension information provided by the Iowa State University SCN-Resistant Soybean Variety Trials program, to be large. These results are confirmed by counterfactual analyses showing that, over the six-year period and region of the study, the total ex post welfare change associated with the existence of, and information about, SCN-resistant seeds is about $478 million. About one-third of this surplus is captured by seed suppliers, and two-thirds accrues to farmers.