In recent years, soybean rust has reduced yields and raised production costs for soybeans in every major production region of the world except the United States. The recent and rapid spread of the pathogen in South America prompted the Economic Research Service (ERS), in April 2004, to publish a study of the economic and policy impacts of its windborne entry into the United States.
This analysis demonstrates that, while soybean producers and consumers do realize some new costs as a result of soybean rust, the U.S. agricultural sector as a whole is minimally affected after adjusting to the presence of this new pest. Such resilience, seen in response to past shocks to the agricultural system, is explained by the availability of substitute crops (in production) and commodities (in consumption), as well as the technological savvy to mitigate pest losses.
In the first year of SBR infestation, assuming that U.S. producers are able to treat with fungicides upon SBR detection, the expected value of losses (given that a rust outbreak occurs) across all U.S. agricultural producers and consumers would range from $640 million to $1,341 million, depending on the severity of infestation. These losses, which represent less than 1 percent of net economic benefits derived from agricultural activity, demonstrate the flexibility and resilience of the U.S. agricultural system as a whole.
In the medium term, for all the yield loss scenarios:
- Soybean acreage declines in the most susceptible, higher cost soybean production regions, and is supplanted by alternative crops (largely cotton in Southern regions).
- Soybean acreage increases in regions less susceptible to SBR (Southern Plains, Northern Plains and Lake States).
- Acreage increases do not offset acreage declines; U.S. soybean acreage declines and U.S. soybean prices increase.
This information has been extracted from the "Soybean rust economic assessment" (USDA-ERS). To read the entire assessment, click here.