Document ID: EPA-HQ-OPP-2005-0123-0326
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2007-05-02T04:00Z

SEQ CHAPTER \h \r 1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON D.C., 20460

  SEQ CHAPTER \h \r 1 

OFFICE OF

PREVENTION, PESTICIDES AND TOXIC SUBSTANCES

MEMORANDUM

SUBJECT:	Assessment of the Benefits of Soil Fumigation with Methyl
Bromide, Chloropicrin, and Metam Sodium in Tree Nut Production
(DP#337490)

FROM:	Leonard Yourman, Plant Pathologist

	Biological Analysis Branch

	T J Wyatt, Agricultural Economist	

	Economic Analysis Branch

	Biological and Economic Analysis Division (7503P)

THRU:	Arnet Jones, Chief 	

	Biological Analysis Branch

	Timothy Kiely, Chief

	Economic Analysis Branch

	Biological and Economic Analysis Division (7503P)

TO:		Andrea Carone, Chemical Review Manager, 1,3-Dichloropropene

		Steve Weiss, Chemical Review Manager, Methyl Bromide

		Special Review Branch

		

		Nathan Mottl, Chemical Review Manager, Chloropicrin

		Reregistration Branch 1

		Veronique LaCapra, Chemical Review Manager, Metam Sodium

		Registration Branch 2

		John Leahy, Senior Policy Advisor

	Special Review and Reregistration Division  (7508P)

Product Review Panel:  April 16, 2007

Summary

Soil fumigation prior to replanting nut orchards, especially almond and
walnut orchards, provides significant benefits to California producers
and to the economy.  Over the life of an orchard, nematodes and other
soil pathogens build up in the soil resulting in a poor environment for
establishing young trees.  Fumigation increases the survival of young
trees, promotes growth and maturity, and results in higher productivity
throughout the life of the orchard.  Methyl bromide and chloropicrin are
crucial for the control of soil pathogens, while 1,3-dichloropropene can
be used to control nematodes on soils or under soil conditions where it
can penetrate efficiently.

BEAD estimates that fumigating less than 15,000 acres per year with
methyl bromide each year ultimately contributes about $63.3 million
annually in increased production on over 400,000 bearing acres.  The
value of chloropicrin, applied to nearly 16,000 acres per year, is about
$92.7 million annually, a figure which includes the value of methyl
bromide, since methyl bromide must be used in combination with
chloropicrin.  These values are in comparison to fumigation with
1,3-dichloropropene followed by an application of metam sodium.  If
metam sodium were not available as an alternative, the value of methyl
bromide and chloropicrin would nearly double.  That is, fumigation for
the control of soil pathogens and, to a lesser extent, nematodes, adds a
total of about $160.2 million in increased production.

These figures do not include the value added by fumigation in making
orchard establishment possible.  Establishing an orchard and maintaining
it through several non-bearing years is very costly.  Higher future
returns resulting from fumigation may make the large investment
worthwhile at many sites, which further contributes to overall
production and a thriving export market.

These figures also do not include the possibility that
1,3-dichloropropene may not be available to some growers because of
township caps, which restrict the total amount of 1,3-dichloropropene
that may be applied to a given area.

Background

As part of the Reregistration Eligibility Decision (RED) process, EPA is
assessing the risks and benefits of the use of several soil fumigants
(dazomet, chloropicrin, metam potassium, metam sodium, and methyl
bromide).  This document presents the assessment of the benefits
provided by the soil fumigants in the production of certain tree nuts
(almond, pistachio, and walnut).  Conceptually, the benefits of a
pesticide like a soil fumigant are the improvements in production and/or
reductions in cost resulting from the pesticide’s use.  The benefits
of a pesticide are shared between the users of the pesticide, e.g., nut
producers, and consumers of nuts and nut products.  Consumers benefit
because higher production and/or lower costs may translate into a
cheaper and more abundant supply of nuts.

This document is an assessment of the benefits of soil fumigants.  As
such, it compares the current situation in which fumigants are available
for use, subject to existing label restrictions, to the situation that
is estimated to occur were the fumigants not available.  This is
somewhat different from an assessment of the impacts of regulation, as
no specific regulatory scheme is considered.

Tree Nuts

California is the sole producer of almonds in the U.S. and accounts for
99% of walnuts and pistachios.  Table 1 presents a summary of acreage,
production, and value for these crops.

Table 1.  California nut acreage, production and value, 2001 – 2005
average.

Crop	Bearing Acres	Production

(1000 lb)	Yield

(lb/acre)	Value

($1000)	Price

($/lb)

Almond	555,000	976,000	1,760	1,613,400	1.65

Pistachio	89,400	242,600	2,710	336,680	1.40

Walnut	211,200	318,600	3,310	411,760	0.65

Source:  USDA NASS (2002-2006b).

California is the world’s largest producer of almonds, accounting for
nearly half of world production in 2004 (ERS, 2005a).  The next four top
producing countries, Iran, Italy, Spain and Syria, account for just over
25% of production.  California is also the leading exporter of almonds,
with about 60% of production sold overseas.  Western Europe remains the
largest market, but Asia accounts for about 25% of exports (Almond Board
of California, 2007).  There has been significant growth in almond
exports to India (ERS, 2005a).

The U.S. is also the world’s largest exporter of walnuts, averaging
about 35-40% of world trade (ERS, 2005b).  Exports account for about 45%
of U.S. production.  Mexico is the second largest exporter.  China is
the world’s largest producer, but only the fourth largest exporter.

Pistachio is a relatively recent crop, becoming a commercial industry in
the mid-1970’s (ERS, 2002).  The U.S. is the second largest producer
of pistachio, behind Iran.  Over 40% of production is exported, with the
majority going to Asia.

Fumigant Use

Orchards of nut crops, such almonds, pistachios, and walnuts, require
periodic replanting.  Orchards are replanted when the natural productive
life of orchard trees ends, or when the economic situation changes such
that customer demand for new varieties or new crop price projections
warrants replacing existing orchards.  Soils may be fumigated prior to
planting.  Because a typical orchard may be productive for 10-25 years
or longer, plantings may represent a small fraction of bearing acreage,
but small changes in plantings will have large impacts on production in
later years.

Data on both plantings and fumigant use are sparse.  A major difficulty
of both public and private data sources is the sporadic nature of use. 
Because a grower may not replant a portion of his or her orchard every
year and the amount planted is small compared to bearing acreage,
surveys may overlook relatively important use of soil fumigants.  The
following tables present BEAD’s best estimates, which combine a number
of sources including USDA and state reports, reports of trade
associations and EPA proprietary data.

Table 2 presents estimated use of methyl bromide, compared to acres
planted.  Fumigation with methyl bromide is substantial as a percentage
of planted acres, especially for walnut.  Little is used on pistachio,
but that may be due to the fact that it is a relatively new crop and
there has not been much replanting of orchards.

Table 2.  Annual methyl bromide usage on California nut crops,
2001-2005.

Crop	Planted Acres 1	Acres Treated 2	% Acres Treated	lb Applied	Rate 3

(lb/acre/year)

Almond	22,000	9,500	43.2	156,000	16.4

Pistachio	2,300	<10	0.2	80	23.5

Walnut	5,000	4,300	86.0	119,000	27.7

Source:	Cal DPR, 2000-2005.

1	Acres planted are for calendar year following fumigation, except for
walnut where fumigation and planting occur in the same year (2001-2004).

2	Acres treated for California may be underestimated.  Substantial
acreage is reported simply as “pre-plant fumigation” or
“uncultivated agricultural land,” some of which could be for orchard
crops.

3	Effective or broadcast-equivalent rate.

Table 3 presents estimated use of chloropicrin.  Estimating the use of
chloropicrin presents significant challenges because it is almost always
used in combination with methyl bromide or 1,3-dichloropropene (1,3-D). 
Methyl bromide, in fact, is only available in combination with
chloropicrin.  However, California data (Cal DPR, 2000-2005) does not
always reflect this, indicating substantial underreporting of
chloropicrin use.  It may be that some pesticide use reports do not
distinguish between products and/or only report the primary fumigant
used.  BEAD has attempted to correct for this, but the estimated acres
treated, around 16,000 acres annually, could still be biased downward. 
Application rates may similarly be biased downward.

Table 3.  Annual chloropicrin usage on California nut crops, 2001-2005.

Fumigant	Planted Acres 1	Acres Treated 2	% Acres Treated	lb Applied	Rate
3

(lb/acre/year)

Almond	22,000	10,800	49.0	62,000	5.8

Pistachio	2,300	30	1.4	<100	0.5

Walnut	5,000	5,000	100.0	44,000	7.7

Source:	Cal DPR, 2000-2005.

1	Acres planted are for calendar year following fumigation, except for
walnut where fumigation and planting occur in the same year (2001-2004).

2	Acres treated for California may be underestimated.  Substantial
acreage is reported simply as “pre-plant fumigation” or
“uncultivated agricultural land,” some of which could be for orchard
crops.  Further, methyl bromide is always mixed with chloropicrin and
1,3-D is often mixed with chloropicrin.  Cal DPR data (2000-2005),
however, often indicate fewer acres treated with chloropicrin than with
methyl bromide.

3	Effective or broadcast-equivalent rate.  Due to apparent
under-reporting of chloropicrin used in combination with other
fumigants, rates may be biased downward.

Estimates of metam sodium use are shown in Table 4.  For the most part,
metam sodium is not an important fumigant for nut crops, although it may
be used as a follow-up treatment to 1,3-D.  It primarily seems to be
used as a spot treatment, perhaps for replacing individual trees in a
recently planted orchard.

Table 4.  Annual metam sodium usage on California nut crops, 2001-2005.

Fumigant	Planted Acres 1	Acres Treated 2	% Acres Treated	lb Applied	Rate
3

(lb/acre/year)

Almond	22,000	120	0.5	19,700	167.9

Pistachio	2,300	spot treatment 4

Walnut	5,000	200	4.4	3,000	11.4

Source:	Cal DPR, 2000-2005.

1	Acres planted are for calendar year following fumigation, except for
walnut where fumigation and planting occur in the same year (2001-2004).

 2	Acres treated for California may be underestimated.  Substantial
acreage is reported simply as “pre-plant fumigation” or
“uncultivated agricultural land,” some of which could be for orchard
crops.

3	Effective or broadcast-equivalent rate.

4	One field reported treated at very low rate.

Table 5 presents usage information for 1,3-D on California nut crops. 
Use is relatively minor compared to methyl bromide and chloropicrin, but
is nonetheless substantial.  Taken together, about 60% of almond
orchards and essentially all walnut orchards are treated with some kind
soil fumigant prior to planting.

Table 5.  Annual 1,3-dichloropropene usage on California nut crops,
2001-2005 1.

Fumigant	Planted Acres 1	Acres Treated 2	% Acres Treated	lb Applied	Rate
3

(lb/acre/year)

Almond	22,000	2,050	9.3	532,000	259.4

Pistachio	2,300	30	1.4	2,000	55.7

Walnut	5,000	600	11.5	163,000	282.9

Source:	Cal DPR, 2000-2005.

1	Acres planted are for calendar year following fumigation, except for
walnut where fumigation and planting occur in the same year (2001-2004).

2	Acres treated for California may be underestimated.  Substantial
acreage is reported simply as “pre-plant fumigation” or
“uncultivated agricultural land,” some of which could be for orchard
crops.

3	Effective or broadcast-equivalent rate.

Given the use patterns, this analysis will focus primarily on the use of
methyl bromide and chloropicrin in California in walnut and almond. 
Metam sodium and 1,3-D will be considered in the context of potential
alternatives against which to measure the benefits of methyl bromide and
chloropicrin.  Currently, fumigation is not integral to pistachio
production.  This may be due to the fact that it is a relatively recent
crop and orchards have not been replaced yet.  As orchards age, however,
the replant disorder may become more common and fumigation more
necessary.

Target Pests

The primary reason for fumigation is to insure planting into soils with
minimal pest infestation.  In many orchard sites, soil-borne nematodes
and/or pathogens, and a poorly understood disease complex called orchard
replant “problem” or “disorder” are threats to establishing
healthy, long-bearing orchards (McKenry, 1999).  Table 6 indicates the
key pests associated with nut crops in California.

Table 6.  Target pests for fumigants in California almond and walnut
production.

Crop	Key Pests

Almond	Replant problem (affects ~25% of total growing area) is a
disorder caused by an interaction of pests (pathogens and nematodes) and
environmental factors.

Nematodes (affects 35-50% of total growing area): Meloidogyne incognita
(root knot), Pratylenchus vulnus (root lesion), Mesocriconema xenoplax
(ring), Xiphinema americanum (dagger)

Walnut	Replant problem is a disorder caused by an interaction of pests
(pathogens and nematodes) and environmental factors.

Nematodes: lesion (Pratylenchus vulnus), ring (Mesocriconema xenoplax),
root knot (Meloidogyne spp.)

Source:	Browne et al. (2006); Crop Profile for Almonds in California
(1999); Crop Profile for Walnuts in California (1998); McKenry (1999).

Orchards with replant problem have several visible effects—the first
and most apparent is poor tree growth during the early years of
establishment (rejection component), and in some cases, a slow and
detrimental decline in root health and plant growth caused primarily by
pathogenic nematodes and fungi, which can lead to premature tree death. 
Interactions with environmental features such as soil composition,
damage from insects, nutrient deficiency or wind blow-down are less well
documented, but anything that limits early root growth can predispose
the trees to greater damage from subsequent agents.  Recent research
(Browne et al., 2006) suggests that some replant problems may not be
primarily a result of high nematode populations, but due to abiotic and
biotic factors other than nematodes.

The replant disorder can be of varying severity depending on pest
pressure, orchard location, type of crop, soil texture, soil moisture,
pH, or other factors.  Planting nematode-tolerant rootstock is an
important management tool that is available for both almond and walnut
growers.  Despite resistant stock, however, in orchards with several
nematode species at high population concentrations, fumigation may be
necessary.  Replant disorder effects can sometimes be reduced by
planting a few years of cover crops (such as wheat), but the delayed
productivity may not be economically feasible for some growers. 
Generally, it is desirable to establish orchards on land previously
planted with different crops (e.g., planting nut trees after an apple
orchard) to avoid severe replant problems, although economic
considerations and availability of land may conflict with this
recommendation.

Orchard Replant Practices

Typically, the first steps in the re-establishment of an orchard are the
removal of old trees and “ripping” or deep tillage of the soil,
followed by a fallow period or cover crop.  The length of the fallow
depends on soils, climate, and past pest problems, but is typically one
to two years.  The practice reduces “orchard rejection”, a component
of the orchard replant problem when trees fail to survive due to an
unknown cause (Caprile and McKenry, 2006; McKenry, 1999).  Fallow is
generally not sufficient to reduce nematode infestation but improves
tree growth.  The ground is then fumigated.  Fumigation should kill or
reduce pests and remnant roots of previous plantings, especially for
deep-rooted trees, that harbor pests.

Methyl bromide in combination with chloropicrin is used on over 50% of
almond and walnut orchard replant sites (Table 2).  The replant
situation and need for fumigants is similar to that of California stone
fruit.  Growers have been granted use of methyl bromide for a portion of
replant acreage under a critical use exemption (CUE) for 2005-2008
growing seasons.  The use for 2009 is pending.  These are sites where
methyl bromide (with chloropicrin) is most useful because of heavier
soils, i.e., high clay content or low porosity that impede dispersion of
other fumigants, or locations where township caps on 1,3-D restrict its
use.

Methyl bromide (with chloropicrin) is applied to almonds as a strip
treatment (with 33-50% of the area treated) or broadcast or applied by
the hole for tree replacement.  In the past, methyl bromide:chloropicrin
(98:2) was applied at a broadcast rate of 300-400 lb methyl bromide/acre
(and 6-8 lb chloropicrin/acre), with a strip treatment rate of 90-120 lb
methyl bromide/acre (and 1.8-2.4 lb chloropicrin/acre).  Individual
holes were treated with 0.98 lb methyl bromide (and .02 lb
chloropicrin).  With the CUE process a yearly nomination, the rates have
been reduced.  The request for 2007 was 300 lb methyl bromide/acre.  For
walnuts, the rate for the 2007 use season is 250 lb methyl bromide/acre
(with 5 lb chloropicrin/acre).  Text Box 1 provides typical
characteristics of a methyl bromide/chloropicrin fumigation.

Text Box 1.  Methyl Bromide/Chloropicrin Fumigation Characteristics,
California Tree Nuts.

Rate:	15-30 lb a.i methyl bromide/acre (broadcast equivalent) [see Table
2]; 250-300 lb methyl bromide/treated area with 5-6 lb chloropicrin/acre

Method of Application:  Shank, deep injected, i.e., more than 20 inches;
strip treatment

Fumigation Period:  Almond:  Fall, for planting the following spring;
Walnuts: late summer for fall or spring planting

Surface Sealing:  Tarp

Field Size:	8 – 15 acres

Area Treated/Day:  8 – 15 acres

In lighter soils, growers may use 1,3-D with chloropicrin at 17 or 35%. 
Application rates depend on soil moisture and the product must be
applied to soils with a moist surface.  For soils with more than 12%
moisture, a strip application can be made at a rate of 350 lb 1,3-D/acre
and 191 lb chloropicrin/acre or the mixture can be applied by covered
drip line (Caprile and McKenry, 2006).  Tarps or soil seals are
generally used.  Text Box 2 summarizes this information.

Text Box 2.  1,3-Dichloropropene/Chloropicrin Fumigation
Characteristics, California Tree Nuts.

Rate:	5-10 lb chloropicrin/acre (broadcast equivalent) [see Table 2];
191 lb chloropicrin/treated area with 350 lb 1,3-D/acre

Method of Application:  Shank, deep injected, i.e., more than 20 inches
or via drip line; strip treatment

Fumigation Period:  Almond:  Fall, for planting the following spring;
Walnuts: late summer for fall or spring planting

Surface Sealing:  Tarp

Field Size:	8 – 15 acres

Area Treated/Day:  8 – 15 acres

Metam sodium or, rarely, metam potassium must be distributed into the
soil with water and is only accomplished in course-textured soils (i.e.,
this treatment will not be effective in clay soils) (Caprile and
McKenry, 2006).  Use is very low.  Metam sodium may be effective at
individual tree sites pre-plant to <0.01% of the acreage at an average
rate of 60 lb. active ingredient (a.i.) per acre as a surface treatment,
via incorporation or as a drench, following a 1,3-D application.

Alternative Control Measures

To some extent, the soil fumigants are interchangeable, although their
relative efficacy depends on soil conditions.  Where both nematodes and
soil pathogens are a problem, three treatments are possible:  methyl
bromide with chloropicrin, 1,3-D with chloropicrin, and 1,3-D with metam
sodium.  On the lightest soils, all will have similar efficacy.  On
heavier soils, however, metam sodium will not penetrate as well and
there will be less control of soil pathogens.  Similarly, on the
heaviest soils, the methyl bromide/chloropicrin combination is most
efficacious as it penetrates best.  Where nematodes are the primary
problem, 1,3-D alone is likely to be sufficient or growers can apply an
herbicide to kill roots, although sufficient fallow is needed to reduce
nematode populations.  Finally, where soil pathogens, but not nematodes,
are the problem, either chloropicrin, at 330 lb/acre, or metam sodium,
at 320 lb/acre, may be used.  Chloropicrin will be more efficacious on
heavier soils, however.

California has set township caps for 1,3-D, which impose a maximum
amount that can be used in a given area per year.  Tree nut producers
must compete with many other users for an allotment.

Besides fumigation, there are other approaches to controlling orchard
replant disease.  One method is to select land that has not recently
been planted in a nut crop or a related species, including some stone
fruit.  This is not often an option, however, due to limited land area
and agro-climatic conditions that tend to be conducive to limited tree
crops.

Research conducted to identify rootstocks that can withstand important
nematode species is ongoing (McKenry et al., 2006).  Rootstocks may be
resistant, which means they may be infested and damaged, but do not
allow nematode populations to increase, or immune, which means the
rootstocks are not attacked by nematodes.  Resistance or immunity may be
quite specific, which requires identifying the critical species and
selecting the appropriate stock based on the pest pressure at individual
orchard sites.  Generally, rootstocks show resistance or tolerance to
only one or two species, while an individual orchard site may contain
several pathogenic species.  Varieties with resistance to key soil
pathogens are not available.

It should be noted that organic production does not preclude the use of
fumigation to establish an orchard.  Organic production requires three
years without the use of synthetic chemicals, including fertilizers and
pesticides, prior to obtaining certification.  This allows organic
growers to fumigate at planting to improve establishment and then
transition to organic production during the non-bearing period of
growth.

Benefits of Fumigation

Planting orchards with nut crops requires a large investment of
resources as well as numerous choices to establish a long-bearing and
productive orchard.  Many of the pests associated with these crops and
fumigation requirements are similar from crop to crop and location to
location.  However, management of these pests differs depending on
particular crop, soil type, climatic region, availability and cost of
orchard land, availability of resistant rootstock to specific key pests,
and local regulatory restrictions of some fumigants.  In general, when
fumigation is deemed necessary, few choices are available to the orchard
manager.

BEAD assesses the benefits of fumigation with a particular chemical by
comparing production under alternative approaches for controlling
orchard replant disease.  We focus primarily on methyl bromide and
chloropicrin.  Walnut production forms the basis of a case study on
methyl bromide, used with chloropicrin, while almonds will be the case
study for chloropicrin in combination with 1,3-D.  Metam sodium is
rarely used in nut production, but it may be a viable alternative
against which to measure the benefits of the other two fumigants.

The benefits of fumigation for orchard replant can be measured by future
yields (orchard crops require several years to begin bearing) when nut
production may be adversely affected by poor tree growth and high pest
populations.  In addition, fumigant treatments result in healthier young
trees.  The effects of orchard replant problem and nematode damage to
young seedlings are experienced within the first three years of orchard
establishment, and are commonly observed within the first year.  Costs
associated with individual tree replacement include delayed production
as newly replanted trees lag behind previously planted ones.  In more
severe cases, when replant disorder or high nematode populations are not
properly managed at the time of orchard establishment, the entire
orchard of trees might be lost.  Because of the long life of an orchard,
optimal soil preparation, along with appropriate rootstocks, is a
priority for successful nut production.

BEAD typically uses a partial budget analysis to estimate the impacts of
changes in production practices.  That is, we evaluate the consequences
on a typical acre of the crop grown, rather than attempt to assess the
impacts in the context of a whole enterprise, which could include
multiple crops under cultivation.  This approach allows the Agency to
compare estimated losses to net operating revenue, which is defined as
the difference between gross revenue and variable operating costs, on a
per-acre basis.  The analysis ignores fixed costs, which are highly
dependent on land ownership and the size and diversity of the grower’s
operation, and therefore difficult to define on a per-acre basis.  As
such, this analysis may understate the impacts as a percentage of the
grower’s income.

An analysis of a single year, however, does not capture the full benefit
of fumigation.  Establishing an orchard involves considerable costs,
including the maintenance of the orchard during the non-bearing years. 
This investment bears fruit (literally, nuts) in the future.  Therefore,
another approach to evaluating the benefits fumigation is to calculate
the net present value of the orchard under different streams of costs
and returns.  Net present value (NPV) is a way of comparing different
investments by summing the discounted costs and returns over time to
calculate the value of the investment.  The formula for NPV is:

 

where t is the time period (year), T is the last year the orchard is in
production and r is the discount rate.  This analysis uses a rate of 7%
to represent a private discount rate or an individual’s trade-off of
money between time periods.  Since revenues and costs are not adjusted
for future inflation, all measures are in real terms.

Since the choice of discount rate is somewhat arbitrary, BEAD also
presents the internal rate of return (IRR), which is the discount rate
that makes NPV = 0.  One interpretation of this value is that it
represents the maximum rate of return on an investment that an
individual must be willing to accept before the investment would be
considered.  That is, if the IRR is 5%, only individuals willing to
accept a rate of return less than 5% would find the investment
worthwhile.

California Walnut

The current practice for walnut replant is to fumigate with methyl
bromide and chloropicrin.  An alternative is to use 1,3-D with
chloropicrin, but 1,3-D does not penetrate heavier soils as well as
methyl bromide and may not provide as effective control of nematodes and
soil pathogens.  Some growers may not be able to obtain permission to
use 1,3-D under California township caps, but BEAD will not consider
this possibility at this point.  Comparing methyl bromide and 1,3-D,
both with chloropicrin, for establishing an orchard will be the basis
for evaluating the benefits of methyl bromide.  A second alternative is
to fumigate with 1,3-D for nematode control followed by an application
of metam sodium for control of soil pathogens.  Metam sodium disperses
poorly in all but very coarse soils, which will further reduce efficacy.
 Comparing this alternative to current practice will allow BEAD to
evaluate the benefits of chloropicrin.  Finally, we consider fumigation
with 1,3-D alone to evaluate the benefits of fumigation more generally.

Replacing methyl bromide with 1,3-D, while maintaining the use of
chloropicrin, is estimated to result in a 4% decrease in yields during
production (Carpenter et al., 2000).  Other information suggests that
without the use of chloropicrin, i.e., 1,3-D alone, yield losses could
range from 15-25% in areas with high pathogen populations (Carter,
2007).  BEAD assumes that replacing chloropicrin with metam sodium would
result in an intermediate yield loss of 5-10%.  Yield losses are due to
soil pathogens that infect the trees at an early age, stunting their
growth.  Table 7 presents the expected differences in production and
revenue for California walnut, where operating costs are taken from
Buchner et al. (2002).  Elements of harvest costs are assumed to be
directly proportional to yield and BEAD adjusts costs accordingly.

Table 7.  Gross revenue, operating costs, and net operating revenues,
California walnuts orchard at full production.

	methyl bromide + chloropicrin	1,3-D + chloropicrin

(% change) 1	1,3-D + metam

(% change) 1	1,3-D alone

(% change) 1

Yield (lb/acre)	3,310	3,178

(-4.0%)	3,062

(-7.5%)	2,814

(-15%)

Price  ($/lb)	0.65	0.65	0.65	0.65

Gross Revenue  ($/acre)	2,152	2,065

(-4.0%)	1,990

(-7.5%)	1,829

(-15.0%)

Operating Costs  ($/acre)	568	568	568	568

Harvest Costs  ($/acre)	362	351

(-2.8%)	342

(-5.3%)	323

(-10.6%)

Net Operating Revenue  ($/acre)	1,222	1,077

(-11.9%)	1,011

(-17.3%)	868

(-28.9%)

Source:	USDA NASS (2002-2006), Buchner et al. (2002), BEAD calculations.
 Figures may not sum due to rounding.

1	Percent change in comparison to methyl bromide with chloropicrin.

The analysis in Table 7 indicates that even relatively minor changes in
yield can have large effects on net operating revenue.  A 4% change in
yield results in a 12% change in net operating revenue.  The analysis
suggests that methyl bromide is worth about $150/acre each year in terms
of improved yield during the lifespan of the walnut orchard. 
Chloropicrin is valued at over $200/acre each year of production, a
value which includes the value of methyl bromide, since methyl bromide
is only used in combination.  Finally, while metam sodium is not
currently used because alternatives provide more benefits, compared to
1,3-D alone, metam sodium adds over $140/acre of value.

The analysis in Table 7 does not consider the investment producers must
make in establishing an orchard and maintaining it through several
non-bearing years.  Table 8 presents the information on the net
operating revenues, NPV and IRR for a walnut orchard under the four
treatment options.  Field preparation costs are similar for any type of
fumigation, but fumigation costs differ according to the mix of
chemicals and the cost of application.  Chemical costs are average
per-acre cost of products, which incorporates typical application rates.
 Chloropicrin can be applied with methyl bromide and 1,3-D, but use of
metam sodium requires two applications, which makes it more expensive. 
Tree planting costs are identical regardless of fumigant.  BEAD assumes
that some trees must be replanted the following year.  We assume that
4%, or two trees, are replanted following fumigation with methyl bromide
and chloropicrin (Buchner et al., 2002); 6% are replanted with 1,3-D and
chloropicrin; 8% are replanted under the 1,3-D and metam sodium regime;
and 10% are replanted if 1,3-D alone is used.  The higher replant rates
represent the lower survival rate if nematodes are controlled but
orchard replant disorder or pathogens are not.  Trees begin to produce
in the fourth year, initially at 10% of production, climbing to full
production in the eighth year (Buchner et al., 2002).  However, orchards
fumigated with 1,3-D alone do not begin production until the fifth year,
representing delayed maturity due to pathogens that weaken the young
tree.  Returns during full production are shown in Table 7.  Finally,
orchards fumigated with 1,3-D alone are assumed to last one year less
than those fumigated with chloropicrin or metam sodium.

Table 8.  Net operating revenue, net present value (NPV), and internal
rate of return (IRR) of a walnut orchard.

Year	Stage	Methyl bromide + chloropicrin	1,3-D + chloropicrin	1,3-D +
metam sodium	1,3-D alone

1	Field Preparation	-237	-237	-237	-237

	Fumigation 1	-1,266	-751	-1,285	-794

	Establishment	-1,534	-1,534	-1,534	-1,534

2	Non-bearing 2	-396	-412	-429	-446

3	Non-bearing	-363	-363	-363	-363

4	Initial production 3	-258	-266	-272	-363

5	Partial production 5	-169	-185	-199	-287

6	Partial production 6	-43	-67	-88	-229

7	Partial production 6	539	491	449	-132

8	Full production 7	1,222	1,077	1,011	359

9-25	Full production 7	1,222	1,077	1,011	868

NPV (7% discount rate)	4,373	3,844	2,849	1,344

IRR	13.8%	13.9%	11.8%	9.6%

Source:  Buchner et al. (2002), and BEAD calculations.  Net operating
revenues are not discounted; negative numbers represent costs greater
than income.  Net present value is calculated assuming 7% discount rate.

1	Fumigation costs include chemical costs and application costs.  Methyl
bromide and 1,3-D can be applied with chloropicrin as a single product,
but 1,3-D and metam sodium must be applied separately.

2	In addition to operating costs, non-bearing costs include replanting
trees.

3	Initial production is 10% of full production.  On-set of production is
delayed one year if 1,3-D is used alone.

4	Production in the fifth year is 20% of full for combination
treatments.  Production is 10% of full production with 1,3-D alone.

5	Production in the sixth year is 30% of full for combination
treatments.  Production is 20% of full production with 1,3-D alone.

6	Production in the seventh year is 60% of full production for
combination treatments.  Production is 30% of full with 1,3-D alone.

7	Production ceases one year earlier with 1,3-D alone.

Assuming a 7% discount rate, establishing a walnut orchard, fumigating
with methyl bromide and chloropicrin, yields future returns valued at
over $4,300/acre today.  This is about $530 more per acre than an acre
treated with 1,3-D and chloropicrin, although the lower initial cost of
fumigating with 1,3-D and chloropicrin means that the internal rate of
return on the two investments are approximately equal.  Together, methyl
bromide and chloropicrin enhance the value of establishing a walnut
orchard by $1,000-1,500/acre compared to metam sodium.  While metam
sodium is not currently used to a great extent in walnut production,
compared with 1,3-D alone, metam sodium would increase the value of
establishing a walnut orchard by about $1,500/acre.  The IRR for an
orchard treated with 1,3-D alone is about 9.6% while that for
chloropicrin treatments is about 14%.  This means that, if an
alternative investment were available that paid a 10% return, e.g., the
stock market or another crop, walnuts would be a reasonable investment
if chloropicrin were available, but walnuts would not be a reasonable
investment if neither chloropicrin nor metam sodium were available. 
However, without knowing what alternatives are available to almond
growers, BEAD cannot evaluate whether the availability of fumigants to
control soil pathogens makes almond production a viable activity.

These results would also apply almonds grown on heavier soils.  BEAD
estimates that nearly 43% of almond acres planted and 86% of walnut
plantings are currently treated with methyl bromide (see Table 2).  The
benefits of methyl bromide would eventually accrue to almost 240,000
bearing acres of almonds and 182,000 acres of walnut.  At full
production, additional yield is valued at about $150/acre (Table 7),
therefore methyl bromide adds about $63.3 million annually to the value
of California nut production.  The value of chloropicrin is higher than
that of methyl bromide, about $84.4 million annually, in part because
without chloropicrin, methyl bromide could probably not be used either. 
Currently, metam sodium provides little benefit to producers on heavy
soils.  However, if chloropicrin and methyl bromide were not available,
control of soil pathogens would depend on metam sodium.  Despite a
relative lack of efficacy, metam sodium would still provide benefits of
over $59.1 million annually on these soils, compared to fumigation with
1,3-D alone.  Without these fumigations, some orchards would probably
not be established at all; thus these figures may understate the full
value of the fumigants.

California Almond

Where almonds are replanted after an existing almond orchard, poor
vegetative growth has been observed and tree mortality has been
estimated as high as 50% (Browne et al., 2006).  This would be the case
where no fumigant is used on replant sites.  With a one year fallow, but
no fumigant treatment, a 25-40% yield loss might be experienced
(depending on rootstock) with a 24-35% reduction compared to methyl
bromide treatment (Carpenter et al., 2000).

On lighter soils, 1,3-D with chloropicrin is an acceptable treatment for
replant disorder and nematode problems (Caprile and McKenry, 2006).  If
treated with metam-sodium alone, a yield loss of 10-30% could be
incurred (Carpenter et al., 2000).  Combining 1,3-D and metam sodium
would provide better efficacy; BEAD assumes a yield loss of 5%.  Using
1,3-D alone would be effective for locations with nematodes as key pests
and where a Prunus orchard had not previously been established. 
Therefore, additional losses would not be expected.  Where an almond or
other Prunus orchard had been previously established, replant disorder
could result in intermediate losses that are assumed to range from
5-20%, depending on the key pests.

Table 9 presents the expected differences in production and revenue for
California almond cultivated on lighter soils.  Yield and price are
averages for 2001-2005 (USDA NASS, 2002-2006), see Table 1.  Operating
costs are taken from Duncan et al. (2006).  According to Duncan et al.,
harvest costs consist of a per-acre labor cost and hauling and shelling
charges that are proportional to yield.

Table 9.  Gross revenue, operating costs, and net operating revenues,
California almond orchard at full production.

	1,3-D + chloropicrin

	1,3-D + metam

(% change) 1	1,3-D alone

(% change) 1

Yield (lb/acre, shelled)	1,760

	1,672

(-5.0%)	1,584

(-10.0%)

Price  ($/lb)	1.65	1.65	1.65

Gross Revenue  ($/acre)	2,904

	2,759

(-5.0%)	2,614

(-10.0%)

Operating Costs  ($/acre)	1,302	1,302	1,302

Harvest Costs  ($/acre)	440	437

(-0.7%)	434

(-1.3%)

Net Operating Revenue  ($/acre)	1,015	873

(-14.0%)	731

(-28.0%)

Source:	USDA NASS (2002-2006), Duncan et al. (2006), BEAD calculations. 
Figures may not sum due to rounding.

1	Percent change in comparison to 1,3-D with chloropicrin.

As in the case of walnut, chloropicrin provides substantial benefits to
almond producers in terms of greater yields during the productive life
of an orchard.  Yield improvements due to use of chloropicrin are worth
about $140/acre every year of production.  Compared to 1,3-D alone, the
benefits of chloropicrin are about $280/acre.  This is nearly a 40%
increase in net operating revenue.

Table 10 presents the analysis of cash flow, NPV and IRR for almond
production in California, following the same approach as with walnut
production.  Replant rates in Year 2 are 1% for 1,3-D and chloropicrin
(Duncan et al., 2006), 3% for 1,3-D followed by metam sodium, and 3-5%
for 1,3-D alone, depending on the pests.  As noted above, where an
almond or other Prunus orchard had been previously established, replant
disorder could result in a greater percent of individual trees requiring
replant.   Trees begin producing in the third year, except when 1,3-D
alone is used.  Lack of control over soil pathogens or replant disorder
is assumed to weaken the trees and delay maturity by one year.  This
carries through the next several years so that full production is not
reached until the eighth year, instead of the seventh.  The orchard is
assumed to last 25 years when treated with chloropicrin or metam sodium,
but 24 years when 1,3-D alone is used.

Table 10.  Net operating revenue, net present value (NPV), and internal
rate of return (IRR) of an almond orchard.

Year	Stage	1,3-D + chloropicrin	1,3-D + metam sodium	1,3-D alone

0	Field Preparation	-824	-824	-824

	Fumigation 1	-751	-1,285	-494

1	Establishment	-1,558	-1,558	-1,558

2	Non-bearing 2	-561	-584	-607

3	Initial production 3	-577	-599	-877

4	Partial production 4	-402	-460	-620

5	Partial production 5	697	583	-517

6	Partial production 6	943	815	469

7	Full production 7	1,015	873	686

8-25	Full production 8	1,015	873	731

NPV (7% discount rate)	3,568	1,922	19

IRR	13.5%	10.4%	7.0%

Source:  Duncan et al. (2006), and BEAD calculations.  Net operating
revenues are not discounted; negative numbers represent costs greater
than income.  Net present value is calculated assuming 7% discount rate.

1	Fumigation costs include chemical costs and application costs.  1,3-D
and chloropicrin can be applied as a single product, but 1,3-D and metam
sodium must be applied separately.

2	In addition to operating costs, non-bearing costs include replanting
trees.

3	Initial production is 15% of full production.  On-set of production is
delayed one year if 1,3-D is used alone.

4	Production in the fourth year is 40% of full for combination
treatments.  Production is 15% of full production with 1,3-D alone.

5	Production in the fifth year is 80% of full for combination
treatments.  Production is 40% of full production with 1,3-D alone.

6	Production in the sixth year is 90% of full production.  Production is
80% of full with 1,3-D alone.

7	Production is 90% of full with 1,3-D alone.

8	Production ceases one year earlier with 1,3-D alone.

When viewed over time, the value of chloropicrin is even more
substantial.  Compared to metam sodium, chloropicrin increases the value
of an investment in almonds by over $1,600/acre.  Although metam sodium
is not commonly used for replanting almond orchards, in the absence of
chloropicrin, it would provide about $1,900/acre in value compared to
1,3-D alone.  On replanted acreage, where the replant disorder can be
expected, if fumigation with 1,3-D were the only option, the orchard
would probably not present a viable investment.  At a 7% discount rate,
the present value of future production is near zero.

This result would also apply walnuts grown on lighter soils.  BEAD
estimates that at least 1,300 acres of almond and about 700 acres of
walnut are treated with chloropicrin and 1,3-D, or about 6% of almond
acres planted and 14% of walnut plantings.  The benefits of chloropicrin
would therefore accrue to almost 32,700 bearing acres of almonds and
26,600 acres of walnut, in addition to what was considered above.  At
about $140/acre, chloropicrin adds another $4.6 million annually to the
value of California almond production and $3.7 million in walnut
production.  This is in addition to the value of metam sodium, which
although rarely used, provides about $8.4 million in unobserved benefits
to producers who might otherwise have to rely on 1,3-D alone.  Benefits
might well be greater since the low rate of return without chloropicrin
or metam sodium may discourage some individuals from establishing an
orchard.

Conclusions

The California nut industry derives significant benefits from soil
fumigation with methyl bromide and chloropicrin.  Soils are fumigated to
control a poorly understood suite of pests, termed the ‘replant
disorder,’ which consists of various nematodes and soil pathogens that
build up over time in orchards and can severely weaken young trees when
the orchard is replanted.  Although 1,3-D provides good nematode control
soil pathogens would be a problem if not for methyl bromide and/or
chloropicrin.  The two chemicals are particularly valuable on some soils
because 1,3-D does not penetrate heavy and/or wet soils as well.

The benefits of soil fumigation are felt over the lifespan of an orchard
because weakened trees never reach full potential.  Methyl bromide
contributes about $63.3 million annually to almond and walnut
production, compared to fumigation with 1,3-D and chloropicrin.  The
total value of production is just over $2 billion annually.  Were it not
for chloropicrin, methyl bromide could not be used either and additional
acreage would be effected, so the value of chloropicrin is considerably
higher.  BEAD estimates that chloropicrin contributes about $92.7
million annually, compared to fumigation with 1,3-D followed by an
application of metam sodium.

These figures do not include the value of metam sodium, which is
currently not widely used because methyl bromide and chloropicrin are
more effective.  Without metam sodium, however, the value of methyl
bromide and chloropicrin, in comparison to 1,3-D, would nearly double. 
These figures also do not include the benefits of soil fumigation to the
decision to invest in establishing a nut orchard.  Soil fumigation may
make the cost of establishment a worthwhile investment due to increased
future returns.

These figures also do not include the possibility that 1,3-D would not
be available to some growers because of township caps, which restrict
the total amount of 1,3-D that can be used in a given area on all crops.

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 The Office of Management and Budget suggests using a 3% and 7% rate
when evaluating the cost and benefits of government regulation, where 7%
is an estimate of the before-tax rate of return to private capital (OMB,
2003).

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