Estimating the Cost of Invasive Species on U.S. Agriculture: The U.S. Soybean Market

Soybean production ranks among the largest agricultural cash crops in the U.S., second only to corn. U.S. soybean production topped 3 billion bushels in 2005 with sales of $17 billion. Approximately 58% of U.S. soybeans are grown in Iowa, Illinois, Minnesota, Indiana, and Nebraska. A small percentage of the U.S. soybean crop, 2%, goes to human consumption in the form of whole beans, soybean oil, and soybean meal products. A third of the crop, 1 billion bushels per year is exported annually to China, EU, Mexico, Japan, and Taiwan, and other countries. Most of the crop, 2 billion bushels, goes to the U.S. livestock industry to feed poultry, hogs, and cattle. Variations in the supply of soybeans thus directly impact livestock production. In recent years, soybean prices have exceeded the $5 per bushel U.S. loan rate fluctuating from $5 to over $7 per bushel. Continued success of this crop is threatened by the introduction of two new invasive species, soybean rust and soybean aphid. Soybean aphid (Aphis glycines), an insect pest, thrives on plants in the North and Midwest. Soybean aphids were first detected in Wisconsin in 1995, but confirmation of the pest did not occur until five years later in 2000. The delay in confirmation may have enabled the pest's dissemination. Spreading at the rate of 600 miles per year, by 2003 soybean aphid's had infested crops in 21 states (North Central Soybean Research Program, 2004). Because the soybean aphid's wintering host (buckton) is not found outside the Midwest and Northern plains, the extent of aphid damage may be limited to these regions. Furthermore, studies have shown the insect to be intolerant to temperatures above 95F further precluding widespread infestation in the South. Soybean rust (Phakopsora pachyrhizi), is an established disease in Australia, Africa, Asia, India, and South America. First detected in Louisiana in 2004, soybean rust rapidly spread through the South. By 2005, soybean rust had spread to crops in Alabama, Florida, Georgia, Mississippi, and South Carolina (Bissonnette, 2005). The fungus is most damaging to cultivated soybean, but documentation shows it can reproduce on 95 other plant species including peas, beans, and kudzu, a widespread, invasive plant. Soybean rust spores are disseminated naturally by wind. Constructed windbreaks can provide a first level of defense against spore deposition. Complete protection, however, is impossible. This paper offers projections of national damages from two recently introduced agricultural pests. To allow for multiple heterogeneous producing regions, variable price, domestic demand inelasticity, and export demand, a market equilibrium approach was used. Within the model, the reduction in soybean output due to crop damages from two pests contribute to a rise in soybean market prices tempering overall producer loss. The rise in domestic price in turn causes export quantities to fall, thereby stabilizing domestic consumption quantities and buffering consumer losses. The dynamic elements of the model simulate the spatial spread of the introduced pests over time and the extent of future damages. Findings show the magnitude of the damages and further reveal the importance of modeling the impacts of the two pests concurrently. Examining the pests separately may underestimate the long term fate of the industry. Considering the impacts of both pests independently and summing the impact may result in underestimating the rise in price, underestimating production in the intermediate term, overestimating production in the long term, overestimating welfare loss in the middle term, and underestimating welfare loss in the long term.