An insurance or warranty method protects financial interests of
producers, such as farmers planting transgenic varieties of seed
as a primary asset, who use proper refuges of similar but non-transgenic,
secondary assets for maintaining a non-resistant pest population.
Refuge acre methods, now sometimes called "refugia", as
such are recently known in crop pest management, but producers have
had no effective incentive and much risk in using them. That is,
losses in the refuge from pests, as to corn from European Corn Borers
and others, are immediate and could be severe, whereas build-up
of resistance to the related control technique is a long-term problem.
Providing insurance as part of the cost of the primary production
input, or as an add-on "technology fee" or the like, for
protecting a set amount of the similar, secondary asset, removes
the risks from the pest in producing secondary assets in the refuge.
This method helps enforce refuge plan conditions such as size and
location of the refuge in relation to that of the primary asset.
This insurance or warranty method has broad application in pest
control technique management, to genetically modified crops such
as corn, soybeans, cotton, and the like and in animal husbandry
such as in fish and shellfish farms and disease control in livestock
management. It applies to other control techniques such as spraying
with insecticides, and to many pests such as European Corn Borer,
corn rootworm, corn ear worm, cotton boll weevil, Colorado potato
beetle, and the like. When a claim for damage to a secondary asset
in a refuge is to be adjusted, the insurance or warranty adjuster
may check first for refuge condition compliance (and also can assess
development of resistance of the pest species in the primary asset),
and will then assess damage from the pest to the secondary asset.
The decrease in yield times the crop price is determined and paid
to the producer in cash at harvest time, in seed the following season,
or in another agreeable fashion in accordance with the insurance
policy or warranty terms.
We claim as our invention:
1. A method of encouraging and facilitating producers assisting
in delaying the development in a pest species of resistance to a
bio-genetic control technique directed against that species in the
use of a primary asset employing that control technique, using refuges
set out by individual ones of the producers, each of the refuges
using a similar asset not employing that control technique and meeting
conditions specified for management of the primary asset in regard
to that pest species, the method comprising the steps of:
entering into a policy of indemnity insurance with each of a plurality
of producers on the yields of the similar asset in the refuges as
against any damage to be caused by the pest species therein;
facilitating the growing the primary asset in a first area and
the similar asset in a second, refuge area, the first and second
areas being laid out according to the conditions specified and the
sizes and locations of such areas facilitating interbreeding of
resistant and non-resistant members of the pest species;
inspecting, measuring, and testing each of the refuge areas for
compliance with the conditions specified, and, if the conditions
are complied with, also inspecting and testing the refuge asset
and then computing, accounting and paying to ones of said producers
meeting the conditions at least part of any estimated damage caused
by the pest species to the similar asset in compliant ones of the
thereby avoiding economic disincentive to the producers against
properly using refuges in management of the primary asset.
2. The method defined in claim 1, wherein the pest species is the
European Corn Borer.
3. The method defined in claim 1, wherein the pest species is a
4. The method defined in claim 1, wherein the pest species is a
5. The method defined in claim 1, wherein the pest species is a
cotton boll weevil.
6. The method defined in claim 1, wherein the pest species is a
Colorado potato beetle.
7. The method defined in any of claims 1 to 5, wherein the control
technique comprises genetic modification of the primary asset seed
to produce a substance harmful to members of the pest species.
8. The method defined in any of claims 1 to 5, wherein the control
technique comprises spraying the primary asset with a bacterial
toxin harmful to members of the pest species.
9. The method defined in any of claims 1 to 5, wherein the control
technique is spraying the primary asset with an insecticide.
10. The method defined in claim 2, wherein the primary asset is
11. The method defined in claim 5, wherein the primary asset is
12. The method defined in claim 6, wherein the primary asset is
13. The method defined in claim 1, wherein the primary asset is
14. The method defined in any of claims 1 to 4, wherein the secondary
asset is corn.
15. The method defined in any of claims 1 to 5, wherein the cost
of the policy of indemnity insurance is included in the purchase
price for seed for the primary asset.
16. The method defined in any of claims 1 to 5, wherein the cost
of the policy of indemnity insurance is added to the purchase price
for seed for the primary asset.
17. The method defined in any of claims 1 to 5, wherein the cost
of the policy of indemnity insurance is included in the purchase
price for an input to the primary asset.
18. The method defined in any of claims 1 to 5, wherein the cost
of the policy of indemnity insurance is included in the purchase
price for a post-emergence input to the primary asset.
19. The method defined in any of claims 1 to 5, including a further
step of assessing whether the refuge of at least one of the producers
making a claim under the insurance has met the conditions specified
for management, and wherein the payment is made if and only if the
conditions specified for the refuge were met by the one producer.
20. A method of managing and administering pest resistance in the
use of a genetically-modified asset using management criteria for
same, wherein a refuge is provided with a similar, non-modified
asset for maintaining a population of non-resistant pests, the method
comprising the steps of:
providing a legally-binding policy of indemnity insurance for the
yield of the nonmodified asset in the refuge sufficient to compensate
for any damage caused by the pests in the refuge;
inspecting, measuring, and testing the refuge in event of a claim
for pest damage and yield reduction and determining whether the
refuge meets management criteria for same; and
computing and providing payment for any estimated reduction in
the yield caused by the pest in the refuge, to provide a return
generally to the same extent as if the refuge had been provided
entirely with the genetically-modified asset, thereby removing any
disincentive from providing sufficient refuge space properly located
for the non-modified asset.
21. The pest resistance management method of claim 20, wherein
the primary asset is Bt corn, the pest is the European Corn Borer,
and the non-modified crop is a hybrid corn.
22. The pest resistance management method of claim 21, wherein
the refuge occupies at least about 15% of the area planted in corn
and is located adjacent the acreage planted in Bt corn.
23. The pest resistance management method of claim 21, wherein
the refuge occupies at least about 5% of the area planted in corn
and is located adjacent the acreage planted in Bt corn.
24. The pest resistance management method of claim 20, wherein
the insurance is provided and paid for as part of the purchase price
of the modified asset.
25. The pest resistance management method of claim 20, wherein
the insurance is provided and paid for by an add-on fee to the purchase
price of the modified asset.
26. The pest resistance management method of claim 20, wherein
the purchase price of the modified asset is raised to pay the premium
for yield reduction insurance on hybrid corn in a refuge of at least
about 20% of the area planted in the modified seed.
27. The pest resistance management method of claim 20, wherein
the purchase price of the modified asset is raised to pay the premium
for yield reduction insurance on hybrid corn in a refuge of at least
about 5% of the area planted in the modified seed.
28. The pest resistance management method of claim 24, wherein
a premium for the insurance is paid by the asset supply company
and the insurance policy is co-signed by the asset purchaser.
29. The pest resistance management method of claim 26, wherein
the determination of loss also includes specific assessment of the
level of resistance of individual ones of the pests in the modified
30. The pest resistance management method of claim 20, wherein
the insurance is provided by the seller of an input to the modified
asset and is added to the purchase price of the input.
31. The pest resistance management method of claim 30, wherein
the asset is a crop and the input is a spray applied to the crop
before its emergence from the ground.
32. The pest resistance management method of claim 30, wherein
the input is a spray applied to the crop during its emergence from
33. The pest resistance management method of claim 30, wherein
the input is a spray applied to the crop after its emergence from
34. The pest resistance management method of claim 20, further
comprising the step of specifying area and proximity conditions
for the refuge and wherein any payment for a loss to the primary
asset is made if and only if the refuge substantially complies with
the area and proximity conditions for the refuge.
35. A method of and system for delaying the development in a pest
species of resistance to a control technique in protecting a primary
asset from that pest species, by encouraging producers by economic
means to use refuge areas under conditions requiring placement adjacent
the areas for growing the primary asset and setting a minimum size
relation to the area for growing the primary asset, wherein the
refuge areas are occupied with a similar, secondary asset not protected
by that technique and under specified conditions as to at least
size and proximity to the primary asset, the method comprising the
providing a policy of liability insurance against loss from damage
to the similar asset from the pest upon each of the control technique
with the primary asset;
assessing through measurement, calculation, and testing the compliance
of each refuge area to the conditions of size and proximity to the
corresponding area of the controlled, primary asset; and
if a refuge substantially meets the conditions set, determining
through calculation the monetary damage to the corresponding similar
asset caused by the pest species and then paying at least a portion
of that damage to the producer.
36. The method of claim 35, wherein the primary asset is a crop.
37. The method of claim 35, wherein the primary asset is Bt corn.
38. The method of claim 35, wherein the primary asset is potatoes.
39. The method of claim 35, wherein the primary asset is soybeans.
40. The method of claim 35, wherein the primary asset is cotton.
41. The method of claim 35, wherein the insurance is provided to
the producer by the primary asset supplier.
42. The method of one of claims 37 to 40, wherein at least a portion
of the cost of the insurance is included in the price of the primary
asset for the benefit of each producer in proportion to the recommended
size of the refuge, whereby to encourage provision by the producer
of the correct size and location of the refuge for that similar
43. The method of claim 41, wherein the insurance is provided to
the producer by the owner of the pest control technology.
44. The method of claim 35, wherein applying additional treatment
to the refuge as against the pest species is rendered non-economical
to the producer.
45. The method of claim 35, wherein payment is denied if the refuge
does not meet any condition as to size and proximity of the refuge
to the primary crop in any season and combination of seasons.
46. Method for preserving through a relatively extended period
of time the effectiveness of a bio-genetic pest control technology,
the technology protecting one of two similar assets against damage
from most members of a pest species, the one asset being grown from
one of seed and eggs that are genetically modified to be toxic,
harmful, or distasteful to most members of the pest species and
the second asset having no such toxic, harmful, or distasteful property,
the method comprising the physical steps:
transferring possession of one of said seed and eggs for the one
asset from a technology provider only on conditions of (a) transfer
of consideration by a purchaser of an insurance premium for a policy
of protection of the purchaser from loss due to damage by the pest
species to the second asset and of (b) agreement by the producer
to conditions for growing or raising the second asset in relation
to the one asset;
observing, measuring, calculating, and confirming the use of the
second asset according to the growing or raising conditions set
upon the transfer of possession of the seed or eggs;
inspecting and testing the second asset for any damage caused by
calculating the total cash loss or damage to the second asset based
on the unit value of the one asset; and
paying at least a portion of the cash value of said damage in the
second asset to the purchaser of the one asset.
FIELD OF THE INVENTION
The present invention relates to methods of guiding behavior of
producers such as farmers to favor long-term rather than short-term
economic results, and particularly to providing economic protections
or incentives to producers to comply with best management practices.
It has particular and immediate application to the growing of crops
and other resources subject to damage from pests which develop resistance
to the control techniques used.
BACKGROUND OF THE ART
Most agricultural scientists believe there are benefits to growing
genetically-modified, transgenic crops with adjacent areas of non-modified
but similar crops in order to delay the development in pest species
of resistance to the modification. Such adjacent areas are known
as "refuges", and the practice or science is spoken of
as "refugia". This refuge system has applicability to
many pest and disease management techniques. A typical example is
Bt corn, which is hybrid field corn that is modified genetically
to express in the leaves and stem of the plant a toxin (a crystal-like
protein, which occurs naturally in the Bacillus thuringiensis) that
is generally fatal upon reaching the gut of the European Corn Borer
("ECB"), Ostrinia nubilalis Hubner, as the individual
larvae feed. A very small percentage of ECB individuals in the current
population, however, may have single or double genes for resistance
to Bt toxin. Those individuals which survive feeding on high-dose
Bt corn, believed to be normally only those with two resistant genes,
then mature and reproduce. If these resistant individuals mate chiefly
with other survivors also having two resistant genes, they pass
pairs of resistant genes to their offspring. Then the numbers and
percentages of resistant individuals in the pest population will
grow with each generation. If the resistant survivors mate principally
with ECB individuals not screened by the Bt corn toxin for survival,
however, as by their feeding solely on non-Bt corn, then Bt resistance
in the population will not grow so quickly. See, Ostlie, K. R.,
W. D Hutchinson, and R. L. Hellmich, 1997, "Bt Corn & European
Corn Borer: Long-Term Success through Resistance Management",
pp. 11-12, North Central Regional Extension Publication NCR 602,
University of Minnesota, St. Paul, Minn.
Providing refuges of non-Bt corn in areas of, or adjacent to, fields
of Bt corn, to sustain a population of non-resistant individuals,
is the recommended best management practice for delaying the development
in ECB of resistance to Bt toxins. Five to 30% of the acreage planted
in corn should be set aside for non-Bt corn, or 40% if the refuge
area is treated with an insecticide if an infestation of ECB occurs
during the growing season, according to such practices. Id., at
12. However, since on average the yield of non-Bt corn is 18% less
than that of Bt corn, and can vary from the same to half the yield
or less, farmers have significant short-term economic incentive
to plant 100% Bt corn or other modified primary crop, not just 60%
to 95%. They can and do violate label licenses and Federal Environmental
Protection Agency ("EPA") recommendations through various
techniques, such as buying their Bt seed requirements from different
suppliers to hide their non-use of non-Bt corn, or selling free
seed given to them along with the Bt corn seed purchased, and the
An important reason for maintaining non-resistant ECB is that Bt
toxin is a widely used organic pesticide, applied as a spray to
control ECB pests. Spraying of Bt toxin onto organic corn is a traditional
and irreplaceable use of Bt technology, which practice is threatened
by the development of resistance in the ECB through widespread use
of Bt corn.
Insurance products are just beginning to be used in agriculture
to reduce or avoid the economic risks of reducing other sorts of
inputs to crops. For instance, farm operators use commercial nitrogen
to ensure adequate soil fertility for crop growth. Determining optimal
nitrogen levels is difficult from one year to the next because of
variability in weather. Producers are unsure of the optimum level
of nitrogen needed at the time when they must apply the nitrogen.
Therefore, producers will often use supplemental nitrogen, such
as a double dose of nitrogen in the spring, to guard against any
inability, as due to summer rains creating muddy fields, to make
a second application of nitrogen if needed in July. This is a form
of self-help insurance, an expense incurred to protect against a
potentially greater loss of crop yield due to insufficient nitrogen.
Such overuse of nitrogen fertilizer is a recognized and growing
environmental pollution problem. Within the U.S. Congress and in
the EPA, initiatives are underway to restrict nitrogen use. Reductions
in nitrogen applications will aid in alleviating environmental problems
and potentially save on farm production expenses, but risk of crop
loss is increased. Prior to any such limitation on nitrogen use,
a plan needs to be in place to reduce the risk of having insufficient
nitrogen. Many practices have been developed and are recommended
by various researchers and universities, but each such practice
carries its own risk. Insurance products are now being proposed
that would compensate for reduced crop yield arising because of
insufficient nitrogen caused by following nitrogen reduction practices.
These insurance policies create new incentives to encourage producers
to limit nitrogen application, and the overuse of other chemicals,
to avoid environmental degradation and risks to public health.
For instance, one reason that farmers put extra nitrogen into the
soil in the spring is that rainfall may be such that a second nitrogen
application in mid-summer, to boost the levels when needed, cannot
timely be made. Insurance against excess rainfall costs less than
the incremental cost of a double dose of nitrogen in the spring,
and avoids the leaching of the nitrogen into ground and stream water
and/or its passing into the air, which are known to cause serious
environmental pollution. If more nitrogen is needed and can be applied
when needed, as in July, then the insurance premium paid is "lost".
If there is excess rainfall and nitrogen is needed but cannot be
applied, however, the decrease in crop yield is covered by an insurance
payment. In either event, the producer saves the extra cost of applying
excessive nitrogen in the spring. Insurance policies for such purposes
are being developed for testing in the spring of 1999.
No use of insurance to encourage use of refuges for delaying the
development of resistance in target pest species is known. Alternative
encouragement tactics of education, regulatory enforcement, license
restrictions, provision of free non-Bt seed, and the like are not
likely to prove effective even after several years' use. The EPA
has mandated a review of Bt corn practices in 2001, and may prohibit
its continued use if Bt corn effectiveness is then gone or greatly
A product warranty is a well-known form of insurance, usually provided
by a seller of a product or service to ensure the purchaser that
the product or service is not defective and will perform as stated.
Warranties can often be extended by purchase of additional insurance
from or through the seller or retailer, for instance. Warranties
can benefit a seller by reducing the risk to the purchaser of the
purchase, by providing information on the purchaser to the seller,
and the like. Again, no use of warranties to encourage or protect
refuges from non-use in agriculture for the above purposes is known.
SUMMARY OF THE INVENTION
An object of the present invention is to level the financial incentives
as between using 100% of a primary asset in an area having a protective
control technique and using in a sufficient portion of the area
a similar but unprotected secondary asset; Bt corn is an illustrative
example, used with non-Bt, hybrid corn as a secondary asset. Producers
such as farmers want to use best management practices ("BMP"),
but will tend strongly to maximize their short-term returns by planting
100% of the protected asset to avoid risks and losses, such as an
average 18% loss of yield in non-Bt corn assets. A premium for crop
insurance sufficient to cover damage to the yield of the secondary,
refuge asset as compared with the yield of the primary asset is
included in or is added to the purchase price of the asset, such
as Bt corn. Alternatively, a warranty can be provided by a seller
of Bt corn that hybrid corn from the same seller for planting in
a refuge area will have the same yield as the Bt corn as against
specific damages or loss of yield from ECB. Such financial methods
will encourage producers such as farmers to follow the BMP for the
primary asset, thus preserving the effectiveness of the protection
or control technique for many years. Incentives to spray insecticides
on the secondary asset when beginnings of infestations are seen
are also removed, reducing environmental pollution, and preserving
the effectiveness of the refuge strategy. Proper use of refuge acres
is also encouraged, as insurance or warranty payments for any reduced
yield may not be made if the refuge(s) used are insufficient in
area, are set in improper location(s), or are defeated by Bt spraying,
or the like.
According to the principles of this invention, a premium per acre
required to warrant the performance of the secondary asset, insure
a producer for potential yield losses on a secondary asset, is determined
by a participating seller or insurance carrier or underwriter. That
warranty or insurance may be sold to the supplier of the primary
asset, such as Bt seed corn, and the cost is either included directly
in the purchase price of the asset, is stated in a "technology
fee" paid with the purchase price, or the like. All such primary
assets (as, all Bt corn) should carry such a premium, so as to avoid
price competition between insured and uninsured (or warranted and
non-warranted) primary assets. Exceptions may perhaps be made in
certain defined "opt-out" categories. Price competition
may exist as among sellers or insurers practicing the invention,
assuring best prices in particular areas depending on past infestations,
percentage of crop planted in primary assets, and the like. Further,
insurance may be sold and certified to individual producers or types
of producers, who then can buy protected assets at an uninsured
price, possibly limiting their own insurance premiums through better
management practices than average or by agreement to some other
loss determination system, such as actual, meter-by-meter input
and yield measurements enabled by systems such as the Case ADVANCED
FARMING SYSTEM.RTM.. In either event, the producer will be the insured
or a co-insured on the policy of crop insurance for the refuge area,
or the protected party for a crop warranty.
The producer then will certify to the insurer or seller what areas
are to be planted in the primary asset and which are a refuge for
the secondary asset, as well as if needed the name and source designations
of the primary and secondary assets. The insurer or seller should
advise promptly if the plan does not comply with BMP and insurance
policy or warranty requirements, particularly if benefits were to
be denied in the first year on such grounds.
At an appropriate time, as in the middle of the growing season
and/or when an infestation has taken hold, the producer or an expert
will inspect the refuge for signs of pest infestation. A claim is
then made to the insurer or seller if appropriate. An adjuster from
the insurer or seller then inspects the refuge and may determine,
first, compliance of the refuge with the plan and with insurance
policy or warranty requirements. He or she then also if appropriate
determines, as by stalk-splitting for ECB or other sampling techniques,
the extent of the infestation and the amount of the damage to the
secondary asset by insured or protected causes. The adjuster also
preferably inspects the protected asset to determine the extent
if any of development of resistance by the pest species in these
areas. Damage and reduction in yield in the refuge area from ECB
is known on the basis of tunnel lengths, and can be estimated by
conventional techniques such as are used for hail and rootworm adjusting.
If damage from covered causes in excess of the deductible (which
generally will equal the cost of the Bt or like technology) is found,
the loss is adjusted to equate with primary asset yield and price
levels. Alternative manners and methods of adjusting for pest damage,
such as "sentinel sites" in an area, may be used at less
cost than individual field inspections, if found to be reliable.
Adjustment of damage may be in cash at harvest time, in new seed
corn for the following season, or the like.
Application of the method of the present invention will extend
the useful life of pest control techniques, particularly in transgenic
technologies, as against development of genetic resistance in the
target pests to those techniques, by reducing the frequency with
which resistant survivors mate with other resistant survivors. This
invention is applicable to Bt corn, cotton, soybean, and other Bt
crops, to potatoes, and to other plant and animal assets wherein
refuges of similar but unprotected assets are now or are later found
to be useful in protecting against longterm development of resistance
in target pest or disease species.
BRIEF DESCRIPTION OF THE DRAWINGS
FIGS. 1A and 1B show, respectively, correct and incorrect refuge
acre sizes and placements, as applied to an example of Bt corn as
a primary asset and hybrid corn as a secondary asset, with the European
Corn Borer as a target pest; and
FIG. 2 is a flow diagram showing method steps useful in and for
carrying out the present invention.
THE PREFERRED EMBODIMENTS
Pests and disease germs develop resistance to control techniques
through processes of natural selection. Only those organisms resistant
to a control technique such as a pesticide or able to avoid its
application survive to mate and reproduce. The offspring of resistant
parents may inherit the survival trait and if so may similarly avoid
or survive exposure and later reproduce again. Soon the effectiveness
of the control technique may be lessened, as discussed and shown
for instance in the Ostlie reference, pages 10-12. In Ostlie's parlance,
pests can be fully susceptible to a given toxin, with genes SS;
or fully resistant, with genes RR; or have intermediate resistance,
with genes SR or RS. If the control technique eliminates all pest
individuals with one or both susceptibility genes, then only pests
with RR genes will survive and reproduce. Mating of two RR individuals
will produce all-resistant offspring, thus enabling survival and
free reproduction of those selected by having high resistance to
the toxin. By enabling a supply of non-resistant individuals to
survive and mate, however, the rise of RR individuals and populations
will be greatly delayed, as for 15 to 20 years versus the 2-3 year
time for resistance to develop if all non-resistant individuals
were quickly eliminated.
The practice of using refuge acres in crop agriculture, wherein
populations of nonresistant pests are allowed to survive and to
breed with resistant pests, is well established in theory, but is
not fully implemented by farmers and other producers. In the example
of Bt corn, wherein corn seeds are injected with a gene that causes
European Corn Borers to die upon ingesting leaf or stalk material,
yields are typically $18 per acre greater for Bt corn than for identical
hybrids not so injected, on average. The sellers of Bt seed, under
patent and technology licenses, add about a $10 per acre technology
fee to their corn seed price, above the price of the normal hybrid
seed alone. Producers then are instructed by label license on the
Bt corn seed packages, required by EPA regulations, to reserve 5%
to 30% of their corn acreage for refuges of similar hybrid corn
to forestall the interbreeding of Bt-resistant, RR individuals in
the pest population. Earnest educational programs, providing free
hybrid seed for planting in refuges, and federal regulations are
possible encouragers of compliance, but these methods are destined
to fail more often than is desirable, due to the clear short-term
financial incentive to plant 100% Bt corn.
Where the yield benefit of Bt corn over hybrid corn averages $18
per acre, and its technology fee cost is $10, the net average benefit
to the producer is $8 per acre over normal hybrid corn. Where 20%
of the total corn acreage is required to be set aside for the hybrid
corn, that $8 benefit is lost on those 20% of the acres, reducing
the benefit to $6.40 per Bt corn acre when planting Bt corn. Allowing
for a $1 per corn acre administrative cost for compliance enforcement
and adjustment of losses, the net benefit of the new technology
is $5.40 per Bt corn acre from using Bt corn. Then, if the non-Bt,
hybrid corn were given an incentive on average of $5.40 per acre,
producers would be willing on average to comply with refuge requirements
in their Bt corn seed licenses. That is, for a payment on average
of $5.40 per Bt corn acre, the producer would be happy to adopt
best management practices and to set aside the required refuge acreage.
However, in some years infestations of ECB or other targeted pests
in the refuge acres will be worse than others. The producer may
not be willing to risk a bad year, and so still would plant all
Bt corn rather than risk a worse than average year, and guaranteeing
the offending producer the expected $5.40 net technology benefit
per acre. According to the invention, however, providing insurance
(or a product warranty, which is a type of insurance) for substantially
the actual loss experienced on the refuge acres compared to yield
in the primary crop acres, such as that planted in Bt corn, will
"level the field" in all conditions, with the insurer
or seller accepting the risk of bad years for ECB losses in the
refuge and the producer keeping the benefit of good, low-infestation
years. This is a classic and beneficial use for insurance, but insurance
and warranty principles have never been applied to this agricultural
industry practice or this risk, to our knowledge.
Continuing the above Bt corn example, the refuge insurance or warranty
could cost up to $12.60 per acre for 20 acres in refuge in a 100
acre corn crop, as in FIG. 1A, or $252. Assessing that cost across
just the 80 acres planted in Bt corn seed, the insurance cost for
the refuge per Bt acre is $3.15, or $7.56 per bag for a 2.4-acre
supply of Bt seed corn. This insurance or warranty would then provide
estimated full compensation, above the deductible cost of the technology
and administration, for losses from the designated pest to the refuge
acres crop, that is, for yield below that of the primary, Bt-corn
In use, in one form, the invention provides that an insurer writes
and offers to seed companies and/or technology suppliers or others
a policy of insurance against specific pest damage to a refuge area
crop, as at 10 in FIG. 2. A seed company or technology supplier
buys the policy as at 12 and passes the pro rata cost along with
the price of the seed or other input. The farmer or other producer
purchases the primary asset at 14, such as Bt corn, and pays the
cost of the seed, a required technology fee, and an insurance fee
(which may be included in the purchase price or the technology fee
or be stated separately) for the 80 acres, for instance, to be planted
on a farm or field as in FIG. 1A. The producer also signs a certificate
of insurance with a named insurer, provided by the seed supplier
and/or the technology source (e.g., Pioneer or Monsanto, respectively),
guaranteeing the producer the economic benefits of Bt corn in the
refuge area if that area is instead planted with a similar hybrid
and maintained with water, fertilizer, other insecticides, etc.
in the same way as the Bt corn crop.
The producer submits to the insurer a field plan such as FIG. 1A
for planting the Bt corn and the hybrid corn refuge, and identifies
the varieties planted in each location. That plan is reviewed by
the insurer, and the producer may be timely notified if the plan
is in any way deficient, as the FIG. 1B plan is deficient both in
placement (too remote from the Bt crop) and likely in size (less
than 20% of the total corn acreage is a reserve).
Because the crop yield in the refuge is protected against loss
from the ECB, the producer has no incentive to spray the field with
insecticide should that pest appear. Such spraying would cost the
producer money, add to pollution woes, and also reduce the crop
damage from the ECB, reducing the insurance pay-out to be received.
Further, a policy could provide that such spraying voids the insurance.
When the refuge crop is well grown, as between August 1 and harvest,
and at a time to discover damage caused by any ECB in the refuge,
the producer or his agent inspects the refuge area for signs of
pest infestation and resulting crop yield reduction, as at 16 in
FIG. 2. A claim is entered with the insurer if damage is preliminarily
found, and the insurer sends out an agent to re-inspect the refuge,
as at 18. The adjuster first checks the acreage of plantings of
Bt and hybrid corn in the primary and secondary fields and confirms
that the conditions for refuge planting were followed. If the planting
of the refuge is found deficient, the claim may be denied on that
basis, as at 20, or the deficiency may be used as a warning for
correction of the refuge for the following year, or the like. If
the refuge complies with BMP, as at 22, or a waiver is provided
for that year, the adjuster then checks the secondary asset for
damage, as by splitting stalks at random through the field in search
of ECB and their tunnels. If no damage is found, as at 24, the claim
is denied. If the infestation is found as at 26 to be low, for instance
1/5 to 11/2 inches of tunnel length per plant inspected, a loss
of 6.8 bushels per acre at the prevailing price, less the deductible,
would be adjusted. Infestation of about 5 inches of tunnel length
per plant would result in adjustment by a yield of 10.4 bushels
per acre, at the prevailing price and less the deductible, still
as at 26.
Other manners of estimating the loss if any can be devised, such
as using "sentinel" acres in various spots around a county,
each planted partly with Bt corn and partly with non-Bt hybrid corn.
The differences in yields would be measured and the value paid pro
rata to local farmers by the insurer(s). The adjustment would be
made in cash at harvest time, or in seed the following spring, or
at other times and manners such as on release of the crop from a
grain elevator, as the producer and insurer have agreed.
In another form of the invention, a technology supplier (as Monsanto)
or a supplier of both genetically-modified seed and hybrid, non-modified
seed (as Pioneer) warrants to a purchaser of both modified and non-modified
seed that the non-modified seed will have the same yield as the
modified seed, as against damage by a specified pest, when planted
in accord with refuge practices. That is, where a farmer buys transgenic
seed for 80 acres of primary farmland and normal hybrid seed for
a 20-acre refuge, the seller warrants to him or her (either as part
of the purchase price or as an add-on "technology fee"
or the like) that the refuge seed will provide a yield the same
per acre as the primary farmland as against damage by the specified
pest. If damage from the pest appears in the refuge, the farmer
makes a warranty claim, which is handled much the same as in the
insurance case, above. Alternatively, sellers could have their own
sentinel plots in various areas to measure damage from the pest
for adjusting automatically possible warranty claims by their purchasers.
By either such process and in similar methods according to the
invention, the producer has not been disadvantaged at all, either
short-term or long-term, by planting the normal hybrid as a refuge
rather than planting 100% of his or her corn land as Bt corn. For
example, a farmer violating the label licensing and planting 100%
Bt corn on 100 acres would net a benefit of $5.40 per acre in an
average year, or $540, from using the pest-resistant corn, after
paying the technology and insurance fees. A farmer planting 80 acres
in Bt corn and 20 acres in similar hybrid would net a benefit also
of $540, whether his refuge was not damaged at all by ECB, was damaged
just 10%, or was damaged 40% or more by ECB. In these latter two
instances the insurance would make up the difference between the
hybrid yield and the Bt corn yield. Bt corn and technology suppliers,
as well as the environment, are benefited by preservation of susceptibility
in the ECB population to the Bt toxin.
The same process and method of insuring or warranting refuge acre
yields against specific losses can be used for other crops and pests
and indeed for other agricultural and animal husbandry industries
(as fish and livestock farms) to maintain long-term benefits through
insurance products protecting against short-term risks of loss.
Control techniques for species such as western corn rootworm (Diabrotica
virgifera LeConte), northern corn rootworm (Diabrotica barberi Smith
and Lawrence), southwestern corn borer (Diatraea grandiosella Dyar),
common stalk borer (Papaiperna nebris Geunee), black cutworm (Agrotis
ipsilon Hufnagel), armyworm (Pseudaletia unipuncta Haworth), fall
armyworm (Spodoptera frugiperda J. E. Smith), corn earworm or cotton
boll worm (Helicoverpa zea Boddie), cotton boll weevil (Anthonomus
grandis Boh), and Colorado potato beetles (Leptinotarsa decemlineata
Say), for instance, can be prserved over a longer term through refuge
maintenance encouraged by insurance purchased with the seed or input
item (as spray) to assume risks of losses on each season's refuge
crop. Refuge maintenance techniques for such other crops and pests
will differ in known ways from those for Bt corn, due to differences
in the pests involved, such as their mobility, susceptibility traits,
reproduction frequencies, etc., but the insurance and warranty processes
will be substantially the same.
Many variations may be made in the methods shown and their manner
of use without departing from the principles of the invention as
pictured and described herein and claimed as our invention. "Insurance"
as used in these claims includes warranties. Such minor variations
will not avoid the use of the invention, which is defined solely
by each of the appended claims.