Economics of Aflatoxin Risk Management in Corn in Texas

Atoxigenics and crop insurance are available to producers to reduce economic loss from aflatoxin contamination in corn. Atoxigenics have shown in both test and practice to reduce aflatoxin contamination in corn. There have been a few studies on the economic feasibility of atoxigenics. This study expands a previous study that analyzed the economics of using atoxigenics for aflatoxin control in Bell County, Texas. The current study expands the previous study to other major corn producing districts in Texas. The current study also implements the One Sample Strategy aflatoxin testing method. The objective of this study is to perform an economic analysis on the decision to use atoxigenic treatments on a corn crop and to evaluate the economic outcomes at different crop insurance coverage levels for corn production in Texas. The study used a risk based partial budget simulation model combined with an aflatoxin contamination simulation model to complete a risk analysis on the decision to use atoxigenics in various agricultural districts in Texas. Field-level data for aflatoxin contamination comes from Bell County, Texas. The aflatoxin distributions for the Blacklands were adjusted to reflect the relative mean and variance indicated by Isakeit’s ranking of aflatoxin incidence for the remaining districts. Net incomes of a representative farm of 500 acres were simulated with and without atoxigenic treatments. Each scenario was simulated across a range of crop insurance options available to corn producers in their respective agricultural districts in Texas. A total of 882 scenarios were simulated and compared based on net income. Results show that, prior to crop insurance, atoxigenics provide financial benefits for seven of the nine Texas agricultural districts in the study. The treated non-insured net incomes of the Blacklands, Coastal Bend, Edwards Plateau, Lower Valley, South Central, South Texas, and Upper Coast districts were $10/acre to $40/acre higher than the untreated non-insured net incomes of the same districts. The Northern High Plains and Southern High Plains districts’ results show that it is not cost effective to use atoxigenics. The treated non-insured net incomes from the Northern High Plains and Southern High Plains were $4.07/acre and $7.43/acre lower, respectively, than the untreated non-insured net incomes from the same districts. When crop insurance was incorporated into the model, the results show that six of the nine agricultural districts have financial incentives to use atoxigenics for aflatoxin control. The Blacklands, Coastal Bend, Edwards Plateau, Lower Valley, South Central, and Upper Coast districts had higher net incomes for treated scenarios than non-treated scenarios. The South Texas, Northern High Plains, and Southern High Plains had higher net incomes for non-treated scenarios than treated scenarios