Proceedings of 6th International Fruit Fly Symposium 6–10 May 2002, Stellenbosch, pp. 189–193

Economic analysis of area-wide fruit fly management

J.D. Mumford Imperial College of Science, Technology and Medicine, Silwood Park, Ascot, Berkshire SL5 7PY, United Kingdom. E-mail: [email protected]

Decisions on the management of fruit flies, either through eradication or suppression, should be based on economic analyses that take into account the ecological,commercial and regulatory aspects of the problem and the available options for control. Examples from the eastern Mediterranean, South Africa, Portugal and Australia illustrate the concepts and techniques employed for fruit flies. Methods have evolved to include geographical, climatic and host-based ecological potential as an indication of pest threat. Economic models can provide a framework for financial time profiles for control projects, which simulate uncertainty and the distribution of costs and benefits amongst the sectors involved.Financial modelling is particularly important where efforts to encour- age private investment in the provision of area-wide control are being made. It is also important in the political process of setting practical cost recovery targets and deciding efficient mechanisms for payment in such programmes. Current methods have included control performance and direct cost savings. The uncertainties related to adding environmental and market benefit variables for controlling Mediterranean fruit fly (Medfly, Ceratitis capitata) by the sterile insect technique (SIT) in South Africa are demonstrated. Further refinement of estimates for these variables would give a better estimate of overall benefits and the relative distribution of public and private returns from SIT.

INTRODUCTION determined in such analyses and further efforts Economic analyses of fruit fly eradication and should be made to include and refine these. suppression have aimed to provide a consistent, Values from the 1997 cost–benefit analysis for flexible and objective approach to supporting Mediterranean fruit fly (Medfly, Ceratitis capitata) decisions on area-wide management (Enkerlin & suppression in South Africa (Mumford 1997) are Mumford 1997; Mumford 1997; Mumford et al. re-examined with environmental and market 2001; Mumford & Larcher-Carvalho 2001; Larcher- benefits included to illustrate the importance of Carvalho & Mumford 2002).These analyses predict these variables, along with a brief discussion of and evaluate the expected outcomes, and in more environmental benefits. recent analyses indicate frequency distributions of these outcomes (for example, Larcher-Carvalho & DISCUSSION Mumford 2002).They can also be used as a guide to The 1997 cost–benefit analysis for Medfly sup- decisions on cost recovery in area-wide control pression in the (Mumford 1997) pre- programmes (Mumford 2000; Mumford 2002). sented individual net benefits for 19 fruit growing Several factors are important in making estimates regions in the Western of South of costs and benefits, amongst them improved Africa. This identified several regions in which SIT control performance, reduced costs of conven- suppression would give high returns, and one tional control, environmental benefits and market region,the Hex River Valley,was chosen as an initial access and development. Costs of using the sterile Medfly control location. This project has been insect technique (SIT), whether for eradication or underway since 1999 on approximately 10 000 ha suppression, are becoming more clearly defined of table grapes in this isolated region.The analyses as the number of SIT projects around the world for the regions did not include environmental increases. SIT is expected to provide either benefits or market access benefits, arising from pest-free or virtually pest-free status for the target reduced residues or pest-free status. Suppression species, and to reduce the losses from secondary is unlikely to result in improvements sufficient pests (for example, Larcher-Carvalho & Mumford to warrant pest-free status, but it would greatly 2002). Savings on conventional control depend on reduce pesticide residues and so could be the pest threat in an area, which can be related to expected to improve retention of discriminating climatic risk potential (Mumford et al. 2001; markets. Mumford & Larcher-Carvalho 2002) for the pest in Most South African export fruit goes to the a given region. However, the environmental and European Union. Increasing standards on pesti- market benefits of SIT have not been sufficiently cide residues have recently been imposed in 190 Proceedings of the 6th International Fruit Fly Symposium

Table 1. Estimated year 2000 control costs, losses (despite current control) and average gross value of export fruit (US$/ha/yr), ratio of export to local price and treatment areas by region.

District Treatment cost Residual loss Total Value* Price Hectares to treat** (cover+bait) $ per ha $ per ha $ per ha Avg $/ha Avg ratio Fruit Fruit+town Incl. wtd avg wtd avg export fruit export/local area non-host

Hex Valley 159 19 178 11 753 2.07 3 397 4 376 9 784 Wellington 130 29 159 8 416 2.05 975 1 770 6 008 Elgin 51 49 100 7 306 1.51 6 143 8 572 17 327 Vyeboom 56 48 104 6 990 1.46 3 065 4 278 8 409 Piketberg 109 34 143 6 455 1.84 2 865 3 468 9 406 Greyton 111 30 141 4 344 1.87 280 936 1 856 111 30 141 4 344 1.87 4 400 6 480 13 080 Villiersdorp 61 46 108 6 561 1.50 2 316 3 379 7 247 Ceres, Koue Bokkeveld 66 48 114 5 803 1.36 3 987 5 084 15 850 Somerset West 73 49 121 6 621 1.60 424 6 509 31 345 Ceres, Warm Bokkeveld 80 44 124 4 736 1.30 3 988 5 386 16 090 Ladysmith, Klein Karoo 38 8 45 1 376 1.51 4 073 7 288 24 720 Paarl 21 5 26 1 969 1.15 16 274 22 529 62 570 Montagu-Robertson 39 11 50 1 336 1.24 15 297 20 756 68 607 Franschhoek 16 10 26 1 727 1.13 2 995 4 194 11 566 Tulbagh-Wolsely 91 38 129 2 046 0.99 2 045 3 654 9 110 Stellenbosch 11 5 16 1 348 1.10 11 337 16 604 51 289 Worcester 13 4 16 1 136 1.03 14 282 20 138 54 295 Malmesbury 0 0 0 694 1.00 10 065 13 278 29 375 Total 108 208 158 680 447 935

*Average export fruit value is dependent on the type of fruit in the region and the proportion of the fruit that goes into the export market, which differs from region to region (calculated from total export value per region divided by total fruit hectares per region). **SIT would need to treat fruit, town and some additional surrounding non-host areas to achieve complete area-wide coverage. Europe and many supermarkets are going beyond additional benefits would accrue from this market these regulations. Marks and Spencer, a leading retention if SIT suppression were practised. quality supermarket in the United Kingdom,has is- In addition to saving the cost of pesticide applica- sued a list of 79 pesticides,including common fruit tions replaced with SIT suppression there is also a fly control products such as malathion,which it will reduction in residual losses from imperfectly not allow suppliers to use in a phased programme controlled Medfly damage and damage from from 1 January 2002 (Marks and Spencer, Pro- secondary pests. Estimates of this cost and loss by hibited pesticides and residue targets,2002).Marks region in the Western Cape are shown in Table 1. and Spencer intend to have 60% of their fruit These figures are based on extrapolation from entirely free of pesticide residue, and other super- 1995 data to the year 2000, increasing values by markets may follow to remain competitive 25% in line with cost inflation over the period. The (Sainsbury, another British supermarket leader, for residual loss estimate for an area may underesti- example, has indicated its intention to demand all mate the actual benefits from SIT when produce overseas suppliers adopt integrated crop manage- reaches the export-quality fruit market,since entire ment during 2002; http://www.sainsbury.co.uk). cartons of fruit are rejected on the basis of a few This puts increasing pressure on South African damaged fruits. Rejections of cartons of table produce to compete with low-residue producers grapes in the Hex Valley fell by 50% (2000/01 and such as New Zealand and Chile,which do not have 2001/02 seasons) after introduction of SIT to con- Medfly. It is reasonable to expect that some trol Medfly,reducing losses by US$150 000 (unpubl. proportion of fruit with residues from conventional IAEA Technical Cooperation Project (SAF/5/002) pesticide control could not continue to be exported Report, 2002). to Europe or other high-value markets in this new Assuming a cost of US$40 per ha per year for SIT market regime, and this would be sold at lower suppression (applied to all host areas in the region, prices on the domestic South African market. So, not just fruiting areas) only three of the 19 regions Mumford: Economic analysis of area-wide fruit fly management 191

Table 2. Estimated cost and benefit values by region* in the Western Cape (for year 2000) (based on Mumford 1997), assuming an SIT suppression cost of $US40/treated ha/yr, $0.7 environmental impact per $ of pesticide expenditure (including labour) and assuming that reduced residue problems due to SIT suppression replacing pesticides maintains 20% of current export markets that might otherwise be lost.

(US$ million) +environ Cost ($/yr) Benefits ($/yr) +environ +access Pesticides + environ + access B/C B/C

Hex Valley 0.391 0.603 0.980 5.112 2.5 13.1 Wellington 0.240 0.155 0.244 1.085 1.0 4.5 Elgin 0.693 0.614 0.835 3.852 1.2 5.6 Vyeboom 0.336 0.318 0.439 1.781 1.3 5.3 Piketberg 0.376 0.408 0.626 2.310 1.7 6.1 Greyton 0.074 0.040 0.061 0.175 0.8 2.4 Citrusdal 0.523 0.622 0.964 2.742 1.8 5.2 Villiersdorp 0.290 0.249 0.348 1.360 1.2 4.7 Ceres, Koue Bokkeveld 0.634 0.454 0.638 1.875 1.0 3.0 Somerset West 1.254 0.051 0.073 0.283 0.1 0.2 Ceres, Warm Bokkeveld 0.644 0.494 0.717 1.591 1.1 2.5 Ladysmith, Klein Karoo 0.989 0.183 0.290 0.667 0.3 0.7 Paarl 2.503 0.427 0.669 1.512 0.3 0.6 Montagu-Robertson 2.744 0.765 1.180 1.966 0.4 0.7 Franschhoek 0.463 0.079 0.113 0.231 0.2 0.5 Tulbagh-Wolsely 0.364 0.263 0.394 0.384 1.1 1.1 Stellenbosch 2.052 0.184 0.274 0.543 0.1 0.3 Worcester 2.172 0.232 0.357 0.458 0.2 0.2 Malmesbury 1.175 0.000 0.000 0.000 0.0 0.0 Total 17.917 6.140 9.202 27.926

*Costs and benefits are given in US$ millions per region. Benefits are in terms of pesticide (and residual loss) savings alone (‘pesticides’), pesticide plus environmental benefits (‘+environ’), and pesticide plus environmental plus export market retention from reduced residues (‘+access’). B/C ratios are total benefits (pesticides + environmental; pesticides + environmental + access) divided by cost on an annual basis. have an annual net benefit from SIT against pesticide cost. Approximately 70% of the total cost pesticide and secondary pest loss alone (Table 2, of pesticide use is for chemical (the rest for applica- Hex Valley, Piketberg and Citrusdal). tion) this would equate to around $0.70 of environ- Various attempts have been made to put mental cost per $1 of total pesticide related absolute or relative values on pesticide use in terms expenditure. Table 2 shows the sum of this value of environmental and social costs (Pimentel et al. per region added to the value of savings on pesti- 1993; Kovach et al. 1992; Reus & Leendertse 2000). cide and residual losses (column ‘+environ’). Pimentel et al. (1993) estimated an overall cost of Adding environmental benefits at this level indi- US$2 for each $1 in pesticide cost (excluding appli- cates SIT suppression would be economically cation costs) in the United States, based on addi- viable in 10 of the 19 regions on an annual basis. tion of a wide range of estimated losses to wildlife, An important issue in considering economic natural flora, and short- and long-term human valuation of environmental benefits is how the health. The other two systems propose relative benefits are captured. Do those who pay for the rankings for individual pesticides and uses. Mala- control also receive the environmental benefits, thion, commonly used for Medfly control, has a and so recoup their investment? Individual growers relative rank which is approximately half that of only benefit directly to the level of the pesticide the average for insecticides used in horticulture in costs and residual losses saved, the other environ- the system proposed by Kovach et al. (1992). mental benefits accrue to society more broadly. Since South African fruit is mainly export-market This may be an argument for social payments, oriented it would be fair to price its environmental which subsidize grower contributions to environ- impacts in the same market, and with malathion mentally friendly control using SIT. given a relative value half that of the average, to Market retention adds another direct benefit to value environmental costs around $1 per $1 of growers from controls that do not result in residues, 192 Proceedings of the 6th International Fruit Fly Symposium

Fig. 1. Overall net benefits estimated for SIT suppression of Medfly in the Western Cape for the year 2000 with varying levels of environmental impact (US$ per $ spent on pesticide, excluding application) and the proportion of the current level of regional export value retained through achieving low pesticide residues (based on updated figures from Mumford 1997). such as SIT. Table 2 shows the added value of was intended to identify suitable regions for pilot retaining 20% of the current export value for each controls that could be profitably supported by region through the potential adoption of area- grower contributions. This demonstrated that wide SIT for Medfly.As a result,11 of the 19 regions Medfly SIT was feasible in several regions in the would show net benefit from area-wide Medfly SIT. province. Since 1997 the export market has Higher levels of market retention, due to stricter changed rapidly and is expected to continue to market demands for low residues in Europe,would demand more and more crops with demonstrable increase the net benefits, but even at 50% export environmental value and showing no pesticide market retention only 14 of the 19 regions would residues. Environmental and market retention show net benefits from regional SIT. Some regions values, which we are not yet able to estimate with have very high proportions of fruit entering the the same level of certainty as control performance lower-value domestic markets at present, use and pesticide cost replacement, are becoming relatively low rates of pesticides and would have increasingly important in the overall estimation of high SIT costs due to dispersed orchards and/or benefits. A range of likely values for these two relatively large urban areas. Such regions cannot variables in the cost–benefit analysis produces adopt area-wide SIT economically and may need to results in which three to 14 of the 19 regions in the consider more localized alternatives to remain Western Cape would benefit from area-wide competitive with neighbouring regions. Medfly SIT. A ‘best guess’ value suggests 11 of the Figure 1 illustrates the relative sensitivity for SIT 19 would be net beneficiaries, if cost sharing suppression in the whole of the Western Cape to appropriately reflects the private and public nature assumptions about the values of environmental of the various benefits. Further effort to predict benefits for each US$1 of pesticide reduced per ha these variables with more certainty is essential to per year and the proportion of the current export refine the analysis. value per region that could be retained due to low residues arising from SIT. Market retention values REFERENCES are more significant than environmental benefits ENKERLIN, W. & MUMFORD, J.D. 1997. Economic evalua- in adding value to the returns of SIT in these tion of three alternative control methods of the Medi- circumstances. terranean fruit fly (Diptera: Tephritidae) in Israel, Palestine and Jordan. JournalofEconomicEntomology CONCLUSIONS 90: 1066–1072. KOVACH, J., PETZOLDT, C., DEGNI, J. & TETTE, J. 1992. A Conservative estimates of benefits from regional method to measure the environmental impact of area-wide Medfly SIT in the Western Cape in 1997 pesticides. New York’s Food and Life Sciences Bulle- focused on direct farm-level benefits.That analysis tin, Number 139. New York State Agricultural Experi- Mumford: Economic analysis of area-wide fruit fly management 193

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