Entomology

The Economic Impact of hesperus in California Production

Principal Investigator Dr. Timothy A. Delbridge Agribusiness Department California Polytechnic State University 1 Grand Avenue San Luis Obispo, CA 805-756-5020 [email protected]

Collaborator

Dr. Peter Shearer Cal Poly Strawberry Center 1 Grand Avenue San Luis Obispo, CA

Summary The lygus bug () is a damaging pest in the California strawberry industry. The insect damages the immature fruit on which it feeds, causing the berry to become misshapen and unmarketable. Lygus bug populations fluctuate over the course of the strawberry growing season and vary based on environmental conditions and other factors, causing yield losses in all major production areas in California.

Although lygus bug has been a focus of strawberry pest management programs for many years, there have been no rigorous analyses of the pest’s economic impact on the California strawberry industry. This study conducts such an analysis, combining estimates of revenue losses with the costs of chemical and mechanical pest management activities targeting lygus bug, and accounting for market price responses to depressed fruit supply. We estimate average losses by week for each of the three major strawberry production regions in California and report a total economic impact estimate for the state. We estimate that lygus bug causes more than $100 million of economic losses to the California strawberry industry annually.

99 2018 RESEARCH PROJECTS Introduction The California strawberry industry produces approximately $3 billion in farmgate sales annually, representing roughly 90% of the total US production (USDA-NASS, 2018). As the consumption of in the US has increased over the last several decades, advances in breeding and supply chain efficiencies have led to greater concentration of production in California. Despite the success of the California strawberry industry, growers face significant challenges in the form of pest and disease pressure amidst a tightening regulatory environment. The lygus bug, also known as the Western (L. hesperus), feeds on developing strawberries and makes the fruit unsuitable for the fresh market, is the most significant insect pest of California strawberries.

Control of lygus bug is difficult for several reasons. Several pesticides have either been removed from use through regulation (Anonymous, 2006), are no longer effective because of insecticide resistance (Dara, 2016), or are disruptive to integrated pest management (IPM) programs (Joseph and Bolda, 2016). While it is widely understood that lygus bug negatively impacts California strawberry growers through reduced yields and increased pest management expenses, there has yet to be a rigorous study aimed at estimating the economic cost of lygus on this industry, as a whole. In the absence of reliable damage estimates, it is difficult to justify investment in research and development efforts to better control lygus, and policy makers may not be able to accurately weigh the costs and benefits of pesticide allowances for products targeting lygus bugs.

This paper estimates the industry-wide damages caused by lygus bug and explores the regional distribution of these damages across the main strawberry growing areas in California. We estimate the aggregate costs of mechanical and chemical lygus bug-control efforts, the losses resulting from lost yields and the indirect, positive, effects on strawberry prices that follow from supply reductions when lygus bug damage becomes significant. The goal of this paper is to provide a better understanding of the severity of the lygus bug problem and serve as a basis for future study into cost effective chemical and mechanical control methods for the strawberry industry.

While there are no existing studies that focus on the economic damages of the lygus bug in California strawberry production, this paper adds to an extensive literature on the economic impacts of insect pests, technological innovations and policy changes on agricultural commodity producers. Goodhue et al., (2011) analyzed the potential revenue losses and pest control costs related to spotted wing drosophila (Drosophila suzukii). Taking a similar approach, as we do here, the authors found that the costs of control were far outweighed by the potential revenue lost to fruit damage. As federal regulations regarding the use of methyl bromide were set to be phased in for California strawberry producers, Carter et al., (2005) estimated the economic losses that were likely to accrue to the industry as a whole. They found that total production was likely to fall significantly but that it would be offset by increased prices for strawberries. The degree to which increased prices would mitigate the revenue impacts of lost production varied by production region and the potential for international competition. Fournier, Ellsworth and Barkley, (2007) focused on the damages caused by lygus bugs, though in the case of Arizona cotton production. These authors constructed loss estimates based on state-level pesticide use data and surveys of Pest Control Advisors’ (PCA) perceptions of losses due to lygus bug.

This paper uses a combination of analytical tools used in the aforementioned studies to provide a comprehensive assessment of the economic impact of the lygus bug on the California strawberry industry. We use several years of weekly lygus population data from commercial strawberry operations in the three major growing regions of California and field level data on actual pesticide applications. Weekly market price and production volume data allow for estimation of the region-specific price response and an assessment of the regional disparities in lygus damages.

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The paper proceeds as follows: first, we describe the method by which we estimate the net revenue lost to lygus damage in the California strawberry industry, second, we outline the process and data sets used to tabulate industry wide chemical and mechanical lygus-control costs, third, we present the economic impact results and, finally, we close with a discussion of the suggested next steps for researchers and growers within the California strawberry industry.

Materials and Methods Lygus bugs feed on strawberry achenes and fruit causing fruit cat-facing damage, which is a general term for misshapen fruit, which renders fresh berries unmarketable. Although there is little up-to-date information on rates of yield loss to L. hesperus among strawberries in California, previous studies in other regions and other lygus species give some idea of the scale of the problem. In an early study, Schaefers (1980) found that when left untreated, Lygus lineolaris in NY caused damage to up to 81% of the total berries in an experimental trial, but damaged 5% or less when treated with insecticides that were available at the time. These estimates were based on a model of fruit damage as a quadratic function of densities of lygus nymphs per blossom cluster. In an experiment in Quebec, Mailloux and Bostanian (1988) introduced L. lineolaris to strawberry plots at different densities and evaluated rates of cat-facing. The authors also found that the percentage of injured berries has a non-linear relationship with the number of nymphs per blossom cluster, the marginal fruit damage decreasing as lygus densities increase. European studies have found results similar to those in the North American studies. Labanowska (2007), evaluated populations and fruit damage sampled from 20 cultivars over the course of three years in Poland and found damage rates that were variable, but were as high as 40% for some cultivars when not treating with insecticides. Jay, Cross, and Burgess (2004), estimated lower damage rates of L. rugulipennis and concluded that two bugs in a 40 plant beat sample would result in an average of 1% fruit damage. No recent studies have directly focused on the yield response to lygus bug populations in California strawberries, but Thomas et al., (2014) estimated a simple linear relationship between densities of total lygus bug (adults and nymphs) and rates of cat-faced fruit as part of a larger study, and estimated that growers in California could be losing 10 to 20% of fruit to lygus damage.

Estimating Yield-loss Percentage

The largest individual component of the economic damages caused by lygus on the California strawberry industry is the direct loss of unmarketable fruit. To estimate the annual percentage of fruit damaged we use five years of lygus sampling data collected by the California Strawberry Commission (CSC) from 2012 to 2016, and a subset of that dataset from 2013 that includes examination and categorization of unmarketable fruit. Throughout the five-year period of data collection, lygus bug populations were sampled weekly via beatbox method at commercial strawberry farms in Oxnard, Santa Maria, and Salinas/Watsonville. A total of 53 farms were sampled over this period, though not all farms and not all regions were sampled in each year. Table 1 presents the summary information on the number of farms from each production district sampled in each year. Each observation used in this analysis reflects the average number of small nymphs, large nymphs, and adults collected across a minimum of five samples of 20 plants each. The rows from which samples were taken were varied each week to achieve a more complete representation of each farm’s total populations.

101 2018 RESEARCH PROJECTS Table 1. Total number of farms sampled per growing region per year.

Although lygus bug populations varied by farm, even within a growing region, there are clear seasonal patterns. Lygus bugs are more active and reproduce faster during warm months, and populations increase as the growing season progresses in each of the three growing regions. Populations increase first in Oxnard, the southernmost region, then spike in Santa Maria, and lastly in Salinas/Watsonville, the northernmost major production region in California. Figure 1 shows the total lygus populations (nymphs and adults combined) by week, in each growing region, averaged across sampled farms and years. Although Figure 1 shows that the highest average lygus bug populations were observed in Oxnard, this does not imply that Oxnard faces the highest total economic losses, as the length of the growing season and the total number of acres vary by region.

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Figure 1. Average number of total lygus bugs observed per 20 plant sample in each production region from 2012 to 2016.

As explained in the previous section, there has been little research into the rate of losses experienced by California strawberry producers under different levels of lygus bug pressure. The damage models estimated by Schaefers (1980) and Mailloux and Bostanian (1988) assumed a quadratic function form and were based on the number of nymphs per blossom cluster. The more recent work by Thomas et al., (2014) assumes a linear relationship between damage and total lygus bugs per 20 plant sample. As our lygus population data are in the form of lygus bugs per 20 plant sample, rather than per blossom cluster, we are unable to apply the exact specifications estimated by the earlier researchers. However, we acknowledge the possibility that the fruit damage has a non-linear relationship with lygus bug densities, particularly nymphs, and we estimate two distinct damage functions. Our first loss scenario follows the quadratic specification proposed by Schaefers (1980), with the coefficients estimated using the subset of the CSC data on lygus bug nymphs per 20 plant sample that also includes information on yields and fruit damage. The quadratic equation with coefficient estimates is:

103 2018 RESEARCH PROJECTS where Y is the percent of fruit that is cat-faced and X_S is the number of small nymphs per 20 plant sample in the same field three weeks prior. The second loss scenario is based on a linear relationship between total lygus bugs per sample and percentage yield loss. The linear equation with coefficient estimates is:

where Y is the percent of fruit that is cat-faced and X_T is the number of total lygus bugs per 20 plant sample in the same field three weeks prior. These damage functions, and the lygus bug data used to estimate them, are shown graphically in Figure 2, with regression results presented in Table 2.

Figure 2. Linear and quadratic damage functions, estimated using small nymph and total lygus populations, per 20 plant sample.

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Table 2. Regression results for linear and quadratic lygus bug damage functions.

A casual glance at these loss functions will reveal that there are vertical intercepts in both models above 10% yield loss. That is, even with zero lygus found in the sampling procedure, these models predict substantial lygus damage. There are two possible causes for this. First, the fruit damage data used in the estimation of these damage functions record all cat-faced fruit as lygus bug damage. As cat-facing can also be caused by poor pollination or other insect pests, it is possible that these data overstate the degree of damage that the recorded lygus bug populations cause. Second, the lygus bug sampling procedures are not infallible and there are likely lygus that are present in the field but are not caught in the beat box. Indeed, Zalom et al., (1993) found that a beating tray only captured slightly more than 50% of total lygus bugs present in an individual strawberry plant. It is possible that the cat-facing identified was caused by lygus bug, but lygus bugs were not captured in the beat box sample. A more careful analysis of rates of cat-facing as a function of lygus bug densities in California strawberry production is an important area of future research.

The linear loss function fits the lygus bug damage data better than the quadratic function, and provides a more conservative estimate of yield losses, therefore, from this point forward we will apply the linear loss function in all economic loss estimates. The linear loss function is applied to each observation within the five years of lygus bug sampling data to calculate the corresponding predicted value of percentage fruit loss. The fruit loss percentages were then averaged over farms and years to obtain a weekly estimate of average percentage fruit lost to lygus bug damage over the course of the growing season in each region. Weeks for which fewer than five observations were recorded for a region were omitted to avoid the influence of outliers on yield-loss percentages. These weeks, along with weeks for which we have no data, generally fall during low production periods, and are considered to have lygus bug populations of zero bugs per 20 plant sample. Finally, to obtain total yield losses in terms of the industry standard tray of eight 1-lb clamshells, the percentage loss estimates are multiplied by the weekly yield data for each growing region (CSC, 2019). These estimates of total fruit loss are shown in Figure 3.

105 2018 RESEARCH PROJECTS Figure 3. Estimates of fruit lost to lygus bug damage by week in each production region, based on 2018 production values and linear yield loss function.

Dollar value of yield loss and the indirect price response

There are two components to the net revenue lost to lygus bug damage that are considered in this analysis. The first is the application of market prices for fresh strawberries, less the cost of packaging materials, to the yield loss estimates that are presented in Figure 3. The weekly FOB price for a tray of eight 1-lb clamshells for each week in each region is applied to the yield loss estimates under both the linear and quadratic loss functions. A $1.68 cost per tray, taken from the “Sample Costs to Produce Strawberries in the Central Coast Region” (Bolda et al., 2016), is deducted from the market prices to reflect packaging costs that are not incurred for lygus bug-culled fruit. Because the market prices tend to be much higher during the winter months than during the summer months, the economic damages caused by lygus bug do not necessarily follow the same patterns as lygus bug populations and yields. That is, a tray lost to lygus bug damage in Oxnard in February may be two to three times more harmful to the industry, in terms of economic losses, than a tray lost in Watsonville in June.

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The second component in the calculation of net lost revenue is the price response to changes in fruit supply. An increase in the supply of a commodity will decrease the market clearing price of that commodity, as consumers must be motivated by lower prices to increase consumption. Because of the perishable nature of fresh market strawberries and seasonal shifts in production in competing regions (i.e., Mexico and Florida), the degree to which increases or decreases in production volumes in California impact the market price of fresh strawberries depends on the time of the year. This relationship, between the price of a good and the volume consumed by the market, is referred to by economists as an “own-price elasticity”. Carter et al., (2005) estimate own-price demand elasticities for California strawberry production in their analysis of the economic impact of the methyl bromide ban. We use these elasticity estimates, which fluctuate over the course of the growing season, to estimate the degree to which price increases resulting from lygus bug-depressed yields mitigate the economic losses faced by California strawberry growers. These elasticities, which are presented in Table 3, can be interpreted as percentage changes in quantity demanded that can be expected for a one percent increase in price. The inverse of this value can be used to show the effect on prices that can be expected to result from an increase in supply. The own-price elasticity for stage III in Table 3 is -2.7, meaning that a 1% increase in strawberry price would cause demand to fall by 2.7%. A 1% decrease in supply (due to lygus bug damage or some other reason) would then cause the market clearing price to rise by 1/2.7 = 0.37%. A higher elasticity in the high production months of May through early July relative to the rest of the year means, that during this time, lygus bug losses will not be offset by higher prices to the same degree that they will in other periods. The estimated revenue losses are presented in Figure 4 and are compared to the estimate that would be derived if one were to ignore the price response to changes in the quantity of strawberries produced.

Table 3. Own-price elasticities for California fresh market strawberries by stage of year.

107 2018 RESEARCH PROJECTS Figure 4. Estimates of net revenue losses experience by California strawberry industry with and without consideration of price response to lygus bug-reduced yields.

Expenses Associated with Lygus Bug Control

In addition to yield loss, strawberry growers incur significant expenses in attempts to manage lygus populations through mechanical and chemical means

Mechanical Control

In recent years, the use of vacuums has become increasingly common in the California strawberry industry. The tractor-driven bug vacuums are designed to suck lygus bug nymphs and adults off the strawberry plants and through the fan blades, thus, killing them. These vacuums have been shown to be effective in reducing lygus bug populations and have been widely adopted throughout the California strawberry industry (Pickel et al., 1995; Thomas et al., 2014). Based on consultation with entomologists and engineers with the CSC and in accordance with existing cost of production studies, we assume an annual mechanical lygus bug control cost of $1,100 per acre (Bolda et al., 2016) on 80% of planted strawberry acres in the state.

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Chemical Control

While some of the pesticides that have shown to be most effective for the control of lygus bug have been deregistered in California, chemical insecticide applications remain the primary tool in conventional strawberry growers’ lygus bug management strategies. We estimate the expenses that strawberry growers incur in their efforts to chemically control lygus bug using pesticide application data from the California Department of Pesticide Regulation’s Pesticide Use Reporting (PUR) database and pesticide price lists from local dealers.

The cost of chemical control can be divided into product cost and the cost of product application. An average product cost is estimated by applying 2018 prices for lygus bug approved insecticides to reported application volumes in the PUR database from 2012 to 2016. The average per-acre application cost of lygus bug approved insecticides is estimated using the observed pesticide applications from the PUR database and values for expense per spray used by Bolda et al., (2016). Bolda et al., (2016) assume a cost of $44 per acre for more complex tank mixes and a cost of $22 per acre to apply less complex mixes. We make the same assumption, attributing expense to lygus bug control in proportion to the lygus bug-targeted insecticide’s share of the tank mix. For example, if the PUR shows that a grower applied four distinct products on a field in the same day and one was targeting lygus bugs, we attribute a cost of $44 ÷ 4 = $11 to lygus bug control. The estimated total expenditure on chemical control of lygus bug for each region, and the California state total, from 2012 to 2016 is presented in Figure 5. The average regional values are also included in Table 4. Note that chemical costs and insecticide application costs vary significantly by region. These figures repre- sent the actual pesticide application reports made to the California Department of Pesticide Regulation and show that growers in different regions have applied, on average, different amounts of lygus-targeted insecticides per acre. For example, a shorter production period in Oxnard, and a shorter period during which lygus is a serious issue for growers in this region, result in lower lygus management expenses there.

109 2018 RESEARCH PROJECTS Figure 5. Total estimated expenditure on lygus bug-targeted pesticide applications in each major production region from 2012 to 2016.

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Table 4. Economic Impacts of Lygus Bugs for each Production Region (2018 Dollars).

Results The total estimated economic impact of L. hesperus on California strawberry growers is $102 million per year (Table 4). In terms of the regional distribution of these economic damages, Salinas/Watsonville faces the largest losses, with Santa Maria and Oxnard following, in that order. The Salinas/Watsonville area faces larger damages than the other two growing regions because the total acreage is higher in Salinas/Watsonville and because the season is longer there, allowing for higher damages per acre as weekly lygus bug culls and control costs accumulate over the course of the season.

If we divide the economic damages by the number of acres cultivated in each region, we see that the per-acre impact of lygus bug is between $2,500 (Oxnard) and $3,300 (Salinas/Watsonville). This represents approximately 5% to 6% of average gross sales according to 2018 market price and volume data (CSC, 2019), and more than 100% of the net income per acre projected by the most recent UC Cost and Return study enterprise budgets for coastal strawberry production (Bolda et al., 2016). Note that these figures account for the lower market prices that would be observed if the supply of fresh market strawberries were not reduced by lygus bug damage (referred to as the “Indirect Price Impact” in Table 4) and subtract the packaging costs that are not incurred by growers for lygus-damaged fruit that is not packed and shipped (referred to as “Less harvest costs not incurred” in Table 4). The “Net Economic Damages from Lygus” values in Table 4 can then be thought of as the increases in operating income that would be achieved by growers if lygus bug did not exist in strawberry fields.

111 2018 RESEARCH PROJECTS Discussion There are a couple of limitations of this study that must be acknowledged. The most significant limitation is the uncertainty regarding the relationship between lygus bug populations and rate of fruit loss to cat-facing. There has been little rigorous research on the relationship between L. hesperus populations in California strawberry and damage rates, and this study relies on a small dataset from a single year to estimate a loss function. This is certainly an opportunity for future research that would clarify this relationship, and which could have a significant impact on the economic loss estimates presented here.

A second potential limitation is the reliance on own-price elasticity estimates for fresh market strawberries that are now becoming dated. The evolution of strawberry production in Florida, California, and Mexico over the past two decades, along with consumer preferences and increased options for fresh fruit throughout the year may have impacted the degree to which changes in California strawberry production volumes impact fresh market prices. An updated estimate of price elasticities for fresh market strawberries would add confidence to the revenue loss estimate but is beyond the scope of this project.

Finally, a limitation arises necessarily from the extension of the lygus bug population data to a state-wide loss estimate. Observed lygus bug populations are a result of complex systems and are impacted by the proximity and types of neighboring crops, the pest management decisions of neighboring farmers and fluctuations in temperature and other environmental variables. The data set of five years of lygus bug populations across three growing regions in California is the most robust data that exists, but by extending these to create estimates by region we assume that our data are representative of the types of fields and management decisions taken in the region as a whole.

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