  SEQ CHAPTER \h \r 1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON D.C., 20460



  SEQ CHAPTER \h \r 1 

OFFICE OF

PREVENTION, PESTICIDES AND TOXIC SUBSTANCES

MEMORANDUM

SUBJECT:	Assessment of the Benefits of Soil Fumigation with Chloropicrin
and Metam Sodium in Pome Fruit Production (DP#337490)

FROM:	T J Wyatt, Agricultural Economist

		Economic Analysis Branch

		Leonard Yourman, Plant Pathologist

		Biological Analysis Branch

		Biological and Economic Analysis Division (7503P)

THRU:	Timothy Kiely, Chief

		Economic Analysis Branch

		Arnet Jones, Chief 

		Biological Analysis Branch 

		Biological and Economic Analysis Division (7503P)

TO:		Steve Weiss, Chemical Review Manager

		Special Review Branch

		

		Nathan Mottl, Chemical Review Manager

		Reregistration Branch 1

		Veronique LaCapra, Chemical Review Manager

		Registration Branch 2

		John Leahy, Senior Policy Advisor

	Special Review and Reregistration Division  (7508P)

Product Review Panel:  April 16, 2007

Summary

Chloropicrin, alone or in conjunction with 1,3-dichloropropene, provides
substantial benefits to apple and pear producers in the Pacific
Northwest, who fumigate orchards prior to replanting.  Fumigation
targets a broad suite of soil pests, including nematodes and soil
pathogens.  Metam sodium is also used, where soil conditions are
amenable and nematodes are less of a problem.  In other production
regions, nematodes appear to be the main soil pest and growers rely on
1,3-dichloropropene.  Fumigation improves the survival rate of young
trees, increases growth and leads to more rapid maturation, and
increases yields throughout the life of the orchard.

The benefits of chloropicrin in improved yields eventually extend to
about 80% of the bearing acreage in the Pacific Northwest and are valued
at around $46.8 million annually.  This is in comparison to a control
regime of 1,3-dichloropropene followed by metam sodium.  Metam sodium is
less effective on many acres because it does not penetrate certain soils
or under certain conditions as well as chloropicrin.  However, the
ability to obtain some control over soil pathogens with metam sodium
would be worth an additional $92.8 million/year over the use of
1,3-dichloropropene alone.  These figures do not include the benefits of
greater survivability and rapid maturation, which may have a significant
effect on the decision to invest in a pome fruit orchard or not.  Higher
future returns because of fumigation can, in some situations, make the
high cost of orchard establishment justifiable, leading to an overall
increase in bearing acreage.  The overall increase in production may not
have a sizable effect on consumer prices, but some portion of the
estimated benefits are passed along to consumers.

Background

As part of the Reregistration Eligibility Decision (RED) process, EPA is
assessing the risks and benefits of the use of several soil fumigants
(basamid, chloropicrin, metam potassium, metam sodium, and methyl
bromide).  This document presents the assessment of the benefits
provided by the soil fumigants in the production of pome fruit (apple,
and pear).  Conceptually, the benefits of a pesticide like a soil
fumigant are the improvements in production and/or reductions in cost
resulting from the pesticide’s use.  The benefits of a pesticide are
shared between the users of the pesticide, e.g., fruit producers, and
consumers of fresh and processed fruit.  Consumers benefit because
higher production and/or lower costs translate into a cheaper and more
abundant supply of fruit.

This document is an assessment of the benefits of soil fumigants.  As
such, it compares the current situation in which fumigants are available
for use, subject to existing label restrictions, to the situation that
is estimated to occur were the fumigants not available.  This is
somewhat different from an assessment of the impacts of regulation, as
no specific regulatory scheme is considered.

Pome Fruit

Pome fruit, especially apple, are cultivated throughout the U.S., but
there are several important regions of commercial production.  The
Pacific Northwest produces almost 60% of the nation’s apples and
nearly 70% of the pears (USDA NASS, 2002-2006).  Apples are generally a
more northern crop; other major production areas are in the upper
Midwest and the Northeast and Atlantic coast.  California is the other
main producer of pears.  Table 1 presents a summary of acreage,
production, and value for select regions.

Table 1.  Pome fruit acreage, production and value, 2001-2005 average.

Region	Bearing Acres	Production

(1000 tons)	% U.S. Production	Yield

(tons/acre)	Value

($1000)	Price

($/ton)

Apple

PNW 1	165,620	2,778.3	59.9	16.8	1,100,040	400

Atlantic 2	100,020	999.6	21.5	10.0	262,670	260

Midwest 3	69,950	513.0	11.1	7.3	167,110	330

California	27,400	210.0	4.5	7.7	75,370	360

US	391,570	4,641.0

11.9	1,678,260	360

Pear

PNW 1	42,720	614.1	68.2	14.4	191,270	310

California	17,340	264.8	29.4	15.3	76,440	290

US	63,880	900.7

14.1	285,230	320

Source:  USDA NASS (2002-2006b).

1	Idaho, Oregon and Washington.

2	Maryland, New Jersey, New York, North Carolina, Pennsylvania,
Virginia, and West Virginia.

3	Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Ohio,
Tennessee, and Wisconsin.

Fumigant Use

Apple and pear orchards require periodic replacement.  Orchards are
replanted when the natural productive life of orchard trees ends or when
the economic situation changes such that customer demand for new
varieties or new crop price projections warrants replacing existing
orchards.  Because a typical orchard may be productive for 10-25 years
or longer, plantings may represent a small fraction of bearing acreage,
but small changes in plantings will have large impacts on production in
later years.

Data on both plantings and fumigant use are sparse.  A major difficulty
of both public and private data sources is the sporadic nature of use. 
Because a grower may not replant a portion of his or her orchard every
year and what is planted is small compared to bearing acreage, surveys
may overlook relatively important use of soil fumigants.  The following
tables present BEAD’s best estimates, which combine a number of
sources including USDA and state reports, reports of trade associations
and EPA proprietary data.

Table 2 presents estimated use of methyl bromide, compared to acres
planted.  Use of methyl bromide is not common in pome fruit and has
largely been phased out under the Montreal Protocol by 2005.  Some
methyl bromide use may continue, using existing stocks.

Table 2.  Annual methyl bromide usage on pome fruit, 2001-2005.

State/Region	Planted Acres 1	Acres Treated	% Acres Treated	lb Applied
Rate 2

(lb/acre/year)

Apple

Pacific Northwest 3	5,630	380	6.8	180,000	473.9

Atlantic 4	1,980	no reports

Midwest 5	490	no reports

California 6	1,250	10	0.6	1,000	178.4

Pear

Pacific Northwest 3	560	no reports

California 6	800	10	0.8	1,000	112.6

Source:	NCACSS, 2002; MI?; USDA NASS 2006a/b, 2002a/b; WV?; and EPA
proprietary data.

1	Acres planted are for calendar year following fumigation.

2	Effective or broadcast-equivalent rate.

3	Oregon and Washington.  Recent data are not available for Idaho.

4	New York, North Carolina, Pennsylvania, and West Virginia only.

5	Michigan only.

6	Planted acres assumed to be 1/20 of 2005 acreage, i.e., enough to
maintain acreage assuming a 20-year lifespan.

Chloropicrin use is presented in Table 3.  The shift away from methyl
bromide has resulted in a recent increase in the use of chloropicrin,
either alone or in combination with 1,3-dichloropropene (1,3-D) in the
Pacific Northwest (Northwest Horticultural Council, 2007).  There are
few reports of chloropicrin use in the California Pesticide Use Reports
(2002-2006), but this likely reflects underreporting.  Methyl bromide is
currently only available in formulation with chloropicrin, but
chloropicrin acreage is sometimes less than that reported for methyl
bromide.  Many 1,3-D products are also formulated with chloropicrin.  It
may be that some pesticide use reports do not distinguish between
products and/or only report the primary fumigant used.  BEAD has
attempted to correct for this, but the estimated acres treated could
still be biased downward.  The North Central IPM Center reports very
little fumigation of orchards in that region (Jess, personal
communication, 2007).  EPA proprietary data indicate substantial use in
New York, but only in a single year and for acreage far beyond reported
plantings.  This is symptomatic of the problems with extrapolating use
for sporadic occurrences from survey data.

Table 3.  Annual chloropicrin usage on pome fruit, 2001-2005.

State/Region	Planted Acres 1	Acres Treated	% Acres Treated	lb Applied
Rate 2

(lb/acre/year)

Apple

Pacific Northwest 3	5,630	4,500	80.0	225,000	50.0

Atlantic 4	1,980	reported use in New York

Midwest 5	490	no reports

California 6	1,250	10	0.9	1,000	107.9

Pear

Pacific Northwest 3	560	450	80.0	22,000	50.0

California 6	800	10	0.8	1,000	112.6

Source:	NCACSS, 2002; MAS, 2004; USDA NASS 2006a/b, 2002a/b; WV?;
Northwest Horticultural Council, 2007; and EPA proprietary data.

1	Acres planted are for calendar year following fumigation.

2	Effective or broadcast-equivalent rate.

3	Oregon and Washington.  Recent data are not available for Idaho.

4	New York, North Carolina, Pennsylvania, and West Virginia only.

5	Michigan only.

6	Planted acres assumed to be 1/20 of 2005 acreage, i.e., enough to
maintain acreage assuming a 20-year lifespan.

Table 4 presents the best available information on the use of metam
sodium.  Data are very sparse, but it seems that some acreage is treated
in the Pacific Northwest.  California data do not indicate use of metam
sodium, but substantial acreage denoted simply as “uncultivated” is
fumigated with metam and some acreage may be pome fruit orchards.

Table 4.  Annual metam sodium usage on pome fruit, 2001-2005.

State/Region	Planted Acres 1	Acres Treated	% Acres Treated	lb Applied
Rate 2

(lb/acre/year)

Apple

Pacific Northwest 3	5,630	300	4.9	75,000	250.0

Atlantic 4	1,980	no reports

Midwest 5	490	scattered usage

California 6	1,250	no reports

Pear

Pacific Northwest 3	560	60	10.8	8,000	130.0

California 6	800	no reports

Source:	NCACSS, 2002; MI?; USDA NASS 2006a/b, 2002a/b; WV?; Northwest
Horticultural Council, 2007; and EPA proprietary data.

1	Acres planted are for calendar year following fumigation.

2	Effective or broadcast-equivalent rate.

3	Oregon and Washington.  Recent data are not available for Idaho.

4	New York, North Carolina, Pennsylvania, and West Virginia only.

5	Michigan only.

6	Planted acres assumed to be 1/20 of 2005 acreage, i.e., enough to
maintain acreage assuming a 20-year lifespan.

Table 5 presents data on use of 1,3-D.  Available data probably under
represents the extent of use, particularly in the Pacific Northwest
where it is combined with chloropicrin.

Table 5.  Annual 1,3-dichloropropene usage on pome fruit, 2001-2005.

State/Region	Planted Acres 1	Acres Treated	% Acres Treated	lb Applied
Rate 2

(lb/acre/year)

Apple

Pacific Northwest 3	5,630	300	5.3	68,000	225.0

Atlantic 4	1,980	reported use in New York

Midwest 5	490	scattered usage

California 6	1,250	20	1.4	5,000	307.0

Pear

Pacific Northwest 3	560	30	5.3	7,000	225.0

California 6	800	rare

Source:	NCACSS, 2002; MI?; USDA NASS 2006a/b, 2002a/b; WV?; and EPA
proprietary data.

1	Acres planted are for calendar year following fumigation.

2	Effective or broadcast-equivalent rate.

3	Oregon and Washington.  Recent data are not available for Idaho.

4	New York, North Carolina, Pennsylvania, and West Virginia only.

5	Michigan only.

6	Planted acres assumed to be 1/20 of 2005 acreage, i.e., enough to
maintain acreage assuming a 20-year lifespan.

Given the data on use patterns, this analysis will mainly focus on the
use of chloropicrin in the Pacific Northwest.

Target Pests for Fumigants

The primary reason for fumigation is to establish healthy stock into
soils with minimal pest infestation.  In many orchard sites, soil-borne
nematodes and/or pathogens, and a poorly understood disease complex
called orchard replant “problem” or “disorder” are threats to
establishing healthy, long-bearing orchards.  

Table 6 indicates the key pests associated with apple and pear fruit
crops in major production areas in the U.S.  There are some key
distinctions between the regions.  Growers in Washington, and the rest
of the Pacific Northwest, are primarily faced with fungal pathogens. 
Nematodes are a factor in some locations.  In contrast, in states like
New York along the Atlantic coast and Michigan in the Midwest, the
primary pests are nematodes rather than pathogens.  California
production areas also appear to be host to nematodes rather than fungal
pathogens.  Replant problems in the South are not well defined, but may
be a result of disease and fungal pathogens rather than nematodes.  Data
do not indicate fumigation of apples in this area, but the region is not
a major producer of apples.  It may be that our data sources miss
fumigation practices for these states.

Table 6.  Target pests for fumigants in pome fruit production.

State	Key Pests

Washington1	Apple replant disorder (disease complex): Replant disease is
characterized by uneven growth of young trees.  Symptoms include severe
stunting, shortened internodes, rosetted leaves, small root systems,
decayed or discolored roots, and reduced productivity.  Implicated
primary pests involved in replant disorder are fungal pathogens
Cylindrocarpon destructans, Pythium spp., Phytophthora cactorum, and
Rhizoctonia solani.  In addition, the lesion nematode Pratylenchus
penetrans may be a factor in some locations.  Pests vary depending on
location of orchards.

New York2	Apple replant disorder (disease complex); Nematodes: Lesion
(Pratylenchus penetrans); dagger (Xiphenema americanum

Michigan3	Apple replant disorder (disease complex): Populations of
plant-parasitic nematodes can be reduced below fruit-crop injury levels
through fallowing, use of cover crops and application of fumigant or
non-fumigant nematicides.  Soil fumigation or use of a non-fumigant
nematicide prior to planting in old fruit sites is often essential for
development of healthy and productive orchards.

Root-Lesion Nematode: All life cycle stages of this nematode overwinter
in Michigan. Root-lesion nematodes cause more damage and build to higher
densities in sandy soils than in heavier soils. P. penetrans is the most
common root lesion-nematode found in Michigan. 

Lance Nematode: Lance nematode is a relatively large nematode that is
known to be a problem in a few orchards in Michigan. The only species
known to exist in Michigan is Hoplolaimus galeatus. 

Dagger Nematode: Several species of dagger nematodes are found in
Michigan; the most common is Xiphinema americanum. The dagger nematode
is a vector for tomato ringspot virus which causes brown ring union
necrosis of apples and plums. 

Ring Nematode: The ring nematode is frequently recovered from Michigan
orchards. Criconemella xenoplax is the most common species. High
population densities of this nematode can inhibit normal growth and
development of roots. 

Stubby-Root Nematode: The stubby-root nematodes Trichodorus spp. and
Paratrichodorus spp. occur in high population densities in a number of
Michigan orchards. Root feeding causes stimulation of secondary feeder
roots which become short and stubby. 

Root-Knot Nematode: Northern root-know nematodes (Meloidogyne hapla)
form galls on the roots of fruit trees and other hosts. This nematode
can be introduced into orchard sites in infested nursery stock. 

Needle Nematode: The only species known to exist in Michigan orchards is
Longidorus elongatus. It is found in a small number of Michigan
orchards. It is known to be a vector of a number of important viruses
but is not known to be of significance as a virus vector in Michigan
orchards

California4	Nematodes:  Pratylenchus vulnus and P. penetrans ;
Meloidogyne incognita, M. javanica, and M. arenaria occur throughout the
warmer apple growing regions, with M. incognita having the most common
occurrence.  Xiphinema americanum (dagger nematodes) occurs throughout
the state probably more common in northern California. 

Pathogen: Some sites may have Armillaria mellea (Armillaria root rot;
oak root fungus), a slow growing fungal pathogen that can cause decline
in growth of pears, although the disease is generally not a problem. 
Use of solid set sprinklers may keep soils wet for an extended period
causing greater disease severity.

Southern U.S.5	Apple replant disorder (disease complex): One of the
potential problems with apple production lies in replanting sites after
orchard removal.  Frequently, orchards replanted in previous orchard
sites fail to thrive, never reaching a profitable level.  This problem
is referred to as apple replant disease.  Rotation with a non-orchard
crop such as wheat for several seasons is strongly encouraged… Good
site preparation is essential to minimizing the replant problem.
Practices to reduce the severity of the disease include fertilizing and
liming, fallowing for at least 2 years, and rotating to non-orchard
crops for at least 2 years. The performance of new rootstocks is being
evaluated in replant sites.  Nematodes: not commonly a problem but
sampling is recommended. 

1 	Mazzola, 1998.

2 	NYSAES, 2006; Leinfelder and Merwin, 2006.

3  	Crop Profile for Apples in Michigan, 2004.

4  	UC Pest Management Guidelines—Apple Nematodes, 2006; UC Pest
Management Guidelines—Pears. 2007.

5  	Crop Profile for Apples in North Carolina, 2004; Crop Profile for
Apples in Virginia, 2000.

Orchards with replant problem have several visible effects—the first
and most apparent is poor tree growth during the early years of
establishment (rejection component), and in some cases, a slow and
detrimental decline in root health and plant growth caused primarily by
pathogenic nematodes and fungi, which can lead to premature tree death. 
The etiology of replant disease remains unclear and probably varies
according to location of orchard sites (Mazzola, 1998).  Orchards with
unmanaged replant disease can ultimately experience yield losses of
20-50% (OSUE, 2006).  Interactions with environmental features such as
soil composition, damage from insects, nutrient deficiency or wind
blow-down are less well documented, but anything that limits early root
growth can predispose the trees to greater damage from subsequent agents

The replant disorder can be of varying severity depending on pest
pressure, orchard location, type of crop, soil texture, soil moisture,
pH, or other factors.  Planting nematode-tolerant rootstock is an
important management tool that is available for apple and pear fruit
trees.  However, rootstocks are generally only tolerant to one type of
nematode while orchards may harbor other species (e.g., UC Pest
Management Guidelines—Apple nematodes. 2006).  In orchards with
several nematode species at high population concentrations, fumigation
may be necessary.  Replant disorder effects can sometimes be reduced by
planting a few years of cover crops (such as wheat), but the delayed
productivity may not be economically feasible for some growers. 
Generally, it is desirable to establish orchards on land previously
planted with different crops (e.g., planting pome fruit trees after a
stone fruit) to avoid severe replant problems, although economic
considerations, availability of land, and agronomic conditions may
conflict with this recommendation.

Orchard Replant Practices for Pome Fruit

The potential long life of a productive orchard necessitates a long-term
approach to orchard management.  Typically, the first step in the
establishment of an orchard on land previously planted to orchard crops
is “ripping” the soil followed by a fallow period or cover crop,
then fumigation.  Fumigation kills or reduces pests and remnant roots of
previous plantings, especially for deep-rooted trees, that harbor pests.

In the Pacific Northwest, methyl bromide with chloropicrin was the
standard for sites requiring fumigation.  Recently, growers have
transitioned from use of methyl bromide to chloropicrin alone or with
1,3-D.  According to a recent survey by the Northwest Horticultural
Council (Carter, 2007), about 80% of replanted fruit orchards are
fumigated with chloropicrin.  The typical application rate is about 50
lb active ingredient (a.i.) per acre with a maximum rate of 195 lb
a.i./acre.  Application of chloropicrin products is shanked without
tarping to depths of 16-20 inches.  Because the chloropicrin moves only
6-9 inches from the point of injection, it must be applied with
equipment that places the product in numerous bands along and at various
depths in the treated row.  The soil is sealed after application with a
disc/cultipacker.  The shanking depth depends on soil type and moisture.

Text Box 2.  Chloropicrin Characteristics, Pacific Northwest Pome Fruit.

Rate:	50 lb a.i./acre, effective broadcast rate; 195 lb/treated acre

Method of Application:  Shank injection, 16-20 inches in depth.

Fumigation Period:  Early to late spring (Feb – June) or early to late
fall (Sept – Dec)

Surface Sealing:  Soil compaction

Field Size:	unknown

Area Treated/Day:  5 acres/tractor

Alternative Control Measures

Only three treatments have so far shown long-term growth and yield
benefits in Washington orchard trials: methyl bromide, metam sodium (or
metam potassium), and fumigants containing chloropicrin (Crop Profile
for Sweet Cherries in Washington, 2003).  Methyl bromide can only be
used under a Critical Use Exemption (CUE) from the Montreal Protocol,
which has not been granted to fruit producers in the Pacific Northwest.

Metam sodium or metam potassium use rate for treatment of replant
disorder is 104 pounds a.i./acre (Crop Profile for Sweet Cherries in
Washington, 2003).  The entire orchard surface may be treated or, most
often, the products are banded on about 40-50% of the orchard soil
surface.  The rate of water carrier is adjusted to keep the product in
the surface 2-3 ft of soil.  This product is the most practical for
treatment of relatively small replant areas or in very rocky soils that
cannot easily be treated by the shank injectors necessary with the other
fumigants.  Water to move the material into the soil must be available.
If conditions are optimal, metam-sodium can be as effective as other
fumigants for the control of replant disorder.  In heavier soils, metam
sodium may not provide the same level control of pathogens as
chloropicrin.

Text Box 3.  Metam Sodium Characteristics, Pacific Northwest Pome Fruit.

Rate:	250 lb a.i./acre, effective broadcast rate (see Table 4)

Method of Application:  Shank or chemigation.

Fumigation Period:  Early to late spring (Feb – June) or early to late
fall (Sept – Dec)

Surface Sealing:  Soil compaction or water seal

Field Size:	unknown

Area Treated/Day:  unknown

Cultural Control Measures

Before fumigating, old trunks and large roots are brought up by ripping
(UC Pest Management Guidelines—Cherry Nematodes, 2006).  A period of
fallow or green manure cover crop is instituted for 1 to 2 years (3 to 4
years if lesion nematodes are present).  Certified nematode-free
rootstocks or seedlings are used to establish new orchards.  When the
orchard is developed, procedures that improve soil tilth and drainage
are used to help reduce nematode damage.  This protocol may not be
effective in replant sites with high pest pressure or in areas where
fungal pathogens are a problem.  A longer fallow period, which allows
remaining roots to decay and eliminate the pathogens’ host, may help. 
However, long periods of fallow are rarely economical.

It should also be noted that organic production does not preclude the
use of fumigation to establish an orchard.  Organic production typically
requires three years without use of synthetic chemicals, including
fertilizers and pesticides, prior to obtaining certification.  This
allows organic growers to fumigate at planting to improve establishment
and then transition to organic production during the non-bearing period
of growth.

Benefits of Fumigation

Planting orchards with apple and pear trees requires a large investment
of resources as well as numerous choices to establish a long-bearing and
productive orchard.  Fumigation is primarily used in areas where pome
fruit trees are replacing pome fruit trees.  Rootstock selection is an
important tool to manage replant disorder and nematodes.  Fumigation
choices depend on soil type, climatic region, availability and cost of
orchard land, availability of resistant rootstock to specific key pests,
and local regulatory restrictions of some fumigants.  In general, when
fumigation is deemed necessary, few choices are available to the orchard
manager.

The benefits of fumigation for orchard replant can be measured by future
yields (orchard crops require several years to bear fruit) when fruit
production may be adversely affected by poor tree growth and high pest
populations.  In addition, fumigant treatments result in healthier young
trees.  The effects of orchard replant problem and nematode damage to
young seedlings are experienced within the first three years of orchard
establishment and are commonly observed within the first year.  Costs
associated with individual tree replacement include delayed fruit
production as newly replanted trees lag behind previously planted ones. 
In more severe cases, when replant disorder or high nematode populations
are not properly managed at the time of orchard establishment, the
entire orchard of trees might be lost.  Because of the long life of an
orchard, optimal soil preparation, along with appropriate rootstocks, is
a priority for successful fruit production.

BEAD typically uses a partial budget analysis to estimate the impacts of
changes in production practices.  That is, we evaluate the consequences
on a typical acre of the crop grown, rather than attempt to assess the
impacts in the context of a whole enterprise, which could include
multiple crops under cultivation.  This approach allows the Agency to
compare estimated losses to net operating revenue, which is defined as
the difference between gross revenue and variable operating costs, on a
per-acre basis.  The analysis ignores fixed costs, which are highly
dependent on land ownership and the size and diversity of the grower’s
operation, and therefore difficult to define on a per-acre basis.  As
such, this analysis may understate the benefits of a pesticide as a
percentage of the grower’s income.

An analysis of a single year, however, does not capture the full benefit
of fumigation.  Establishing an orchard involves considerable costs,
including the maintenance of the orchard during the non-bearing years. 
This investment literally bears fruit in the future.  Therefore, another
approach to evaluating the benefits fumigation is to calculate the net
present value of the orchard under different streams of costs and
returns.  Net present value (NPV) is a way of comparing different
investments by summing the discounted costs and returns over time to
calculate the value of the investment.  The formula for NPV is:

 

where t is the time period (year), T is the last year the orchard is in
production and r is the discount rate.  This analysis uses a rate of 7%
to represent a private discount rate.  Since revenues and costs are not
adjusted for future inflation, all measures are in real terms.

Since the choice of discount rate is somewhat arbitrary, BEAD also
presents the internal rate of return (IRR), which is the discount rate
that makes NPV = 0.  One interpretation of this value is that it
represents the maximum rate of return on an investment that an
individual must be willing to accept before the investment would be
considered.  That is, if the IRR is 5%, only individuals willing to
accept a rate of return less than 5% would find the investment
worthwhile.

Apple, Pacific Northwest

The current practice for apple replant is to fumigate with chloropicrin,
alone or in combination with 1,3-D.  An advantage of chloropicrin, in
comparison to metam sodium, is that it penetrates heavier soils better. 
Because of this, chloropicrin provides better control of plant pathogens
resulting in greater survival of young trees, better growth and earlier
production, and improved yields for the lifespan of the orchard.  If
used with 1,3-D for nematode control, metam sodium must be applied
separately, which may increase costs.  Comparing this alternative to
current practice will allow BEAD to evaluate the benefits of
chloropicrin.  We also consider fumigation with 1,3-D alone to evaluate
the benefits of fumigation for control of soil pathogens more generally.
 For sites with sandy soils and sites that were formerly planted to
non-Prunus crops, 1,3-D alone may be sufficient, but that is presumably
not the case for growers currently relying on chlorpicrin.

In a recent survey conducted in the Pacific Northwest (Carter, 2007),
growers of apples and pears (as well as cherries) estimated that without
the use of chloropicrin (usually with1,3-D), there could be a 15-25%
yield loss with a 12% reduction in monetary returns.  BEAD assumes that
replacing chloropicrin with metam sodium would result in an intermediate
yield loss of 5-10%.  Yield losses are due to soil pathogens that infect
the trees at an early age, stunting their growth.

Table 7 presents a partial budget analysis for full production years,
comparing fumigation with 1,3-D and chloropicrin, 1,3-D followed by
metam sodium, and 1,3-D alone.  Yield for the 1,3-D and chloropicrin
treatments are assumed to be the observed average for the Pacific
Northwest (USDA NASS, 2002-2006).  Price per ton is also the 2002-2006
average (see Table 1).  Production costs are derived from Seabert, et
al. (2003).  During full production years, soil fumigation does not
affect operating costs.  Harvest costs, however, are assumed to be less
when less fruit is produced.  The analysis suggests that chloropicrin
provides substantial benefits as a proportion of net operating revenue. 
Revenue is almost 30% less when using 1,3-D alone and nearly 10% less if
metam sodium does not provide equivalent control of soil pathogens at
establishment.  Compared to 1,3-D alone, however, metam sodium provides
considerable benefits:  over $560/acre annually.  Note that this
analysis assumes yield differences at the low end of the estimated
ranges.

Table 7.  Gross revenue, operating costs, and net operating revenues,
Oregon apple orchard at full production.

	1,3-D + chloropicrin	1,3-D + metam sodium	% Change 1	1,3-D alone	%
Change 1

Yield (ton/acre)	16.8	16.0	-5.0	14.3	-15.0

Price  ($/ton)	400	400

400

	Gross Revenue  ($/acre)	6,720	6,384	-5.0	5,712	-15.0

Operating Costs  ($/acre)	2,570	2,570

2,570

	Harvest Costs  ($/acre)	1,092	1,037	-5.0	928	-15.0

Net Operating Revenue  ($/acre)	3,058	2,777	-9.2	2,214	-27.6

Source:  Seavert et al. (2003), USDA NASS (2002-2006), BEAD
calculations.  Figures may not sum due to rounding.

1	Percent change in comparison to 1,3-D and chloropicrin.

The analysis in Table 7 does not consider the investment producers must
make in establishing an orchard and maintaining it through several
non-bearing years.  Table 8 presents the information on net operating
revenue, NPV, and IRR.  Field preparation costs are similar for any type
of fumigation, but fumigation costs differ according to the mix of
chemicals and the cost of application.  Chemical costs are average
per-acre cost of products, which incorporates typical application rates.
 Chloropicrin can be applied with 1,3-D, but use of metam sodium
requires two applications, which makes it substantially more expensive. 
Trees are planted the following spring and costs are identical
regardless of fumigant.  BEAD assumes that some trees must be replanted
the following year.  We assume that 2% are replanted following
fumigation with 1,3-D and chloropicrin; 3% are replanted under the 1,3-D
and metam sodium regime; and 5% are replanted if 1,3-D alone is used. 
This represents the lower survival rate if nematodes are controlled but
soil pathogens are not.  Trees begin to produce in the third year,
initially at 25% of production, climbing to full production in the sixth
year (Seavert et al., 2003).  However, orchards fumigated with 1,3-D
alone do not begin production until the fourth year, representing
delayed maturity due to pathogens that weaken the young tree.  Returns
during full production are shown in Table 7.  Finally, orchards
fumigated with 1,3-D alone are assumed to last one year less than those
fumigated with chloropicrin or metam sodium.

Table 8.  Net operating revenue, net present value (NPV), and internal
rate of return (IRR) of an apple orchard.

Year	Stage	1,3-D + chloropicrin	1,3-D + metam sodium	1,3-D alone

0	Field Preparation	-1,631	-1,631	-1,631

	Fumigation 1	-605	-1,095	-593

1	Establishment	-7,749	-7,749	-7,749

2	Non-bearing 2	-1,122	-1,158	-1,230

3	Initial production 3	178	94	-1,049

4	Partial production 4	996	855	-75

5	Partial production 5	2,251	2,026	574

6	Full production 6	3,058	2,777	1,576

7-25	Full production 7	3,058	2,777	2,214

NPV (7% discount rate)	14,160	11,371	4,527

IRR	16.8%	14.8%	10.3%

Source:  Seavert et al. (2003), and BEAD calculations.  Cash flow
represents undiscounted net operating revenue where negative numbers
represent costs greater than income.  Net present value is calculated
assuming 7% discount rate.

1	Fumigation costs include chemical costs and application costs.  1,3-D
and chloropicrin can be applied as a single product, but 1,3-D and metam
sodium must be applies separately.

2	In addition to operating costs, non-bearing costs include replanting
trees.

3	Initial production is 25% of full production.  On-set of production is
delayed one year if 1,3-D is used alone.

4	Partial production is 50% of full.  Production is 25% of full
production with 1,3-D alone.

5	Partial production is 75% of full.  Production is 50% of full
production with 1,3-D alone.

6	Production is 75% of full production with 1,3-D alone.

7	Production ceases one year earlier with 1,3-D alone.

This analysis also demonstrates the value of chloropicrin, relative to
metam sodium, and the value of fumigation for control of soil pathogens,
in general.  The NPV of an orchard fumigated with 1,3-D and chloropicrin
is almost $2,800 more than one fumigated with 1,3-D and metam sodium. 
Compared to an orchard fumigated with 1,3-D alone, chloropicrin
increases the value of the investment $9,600.  The IRR for an orchard
treated with 1,3-D alone is about 10% while that for the chloropicrin
treatment is about 17%.  This means that, if an alternative investment
were available that paid a 10% return (e.g., the stock market or another
crop) apples would be a reasonable investment if chloropicrin were
available, but apples would be much less attractive investment if
neither chloropicrin nor metam sodium were available.  However, without
knowing what alternatives are available to apple growers, BEAD cannot
evaluate whether the availability of fumigants to control soil pathogens
makes apple production a viable activity.  One consideration is that
apple replacement has become more frequent due to shifting demand for
different apple varieties.  Growers may not anticipate a 25-year life
span.  If new trees are planted after only 15 years, the IRR for an
orchard established with chloropicrin is about 14.4%, while the IRR for
one established with 1,3-D alone falls to 6.6%.

This analysis considers an apple orchard, but is probably reflective of
pear production in the Pacific Northwest as well.  It suggests that the
benefits of chloropicrin are substantial.  If chloropicrin is used on
about 80% of planted acres, benefits ultimately accrue to about 80% of
bearing acres, or about 165,700 acres.  With increased production worth
about $280/acre, the benefits of chloropicrin to the Pacific Northwest
amounts to about $46.8 million annually.  This figure may understate the
full value, because it does not include the fact that, without
fumigation, some investments in pome fruit orchards would not be made.

The estimated value of chloropicrin assumes that metam sodium is
available.  Compared to 1,3-D alone, metam sodium increases production
worth about $560/acre or $92.8 million/year in a $1.2 billion industry. 
The total benefits of controlling plant pathogens at the establishment
of a pome fruit orchard may be around $139.6 million each year.

The Pacific Northwest supplies about 60% of total U.S. production of
pome fruit.  Thus, a 5% increase in output on 80% of acres in the
Pacific Northwest would lead to an overall increase in U.S. production
of 2-3%.  An increase of this magnitude would probably not have a
substantial impact on prices, but some portion of the estimated benefits
would accrue to consumers.

Other regions

Fumigation for soil pathogens appears much less critical for other pome
fruit production regions.  Hence, the benefits of fumigation are low for
these areas.

New York

Fumigants do not play a critical role in the establishment of orchards
in New York, the largest apple growing state in the eastern U.S. and a
significant producer of pears.  Many sites use fallow, rotation crops,
and new land for orchard plantings and fumigants are generally not
required in these cases.  Where land is replanted from pome fruit to
pome fruit, 1,3-D appears to control most pests.  Chloropicrin and metam
sodium probably provide some benefits for sites with greater pathogen
pressure.

Michigan

In general, pome fruit producers in Michigan appear not to rely on
fumigants when establishing orchards.  Nematodes are not usually
problems and rootstock selection is considered the most important
management tool for nematode problems.  For cases where nematode
populations are known to be high, treating with1,3-D is usually
sufficient.  Metam sodium and chloropicrin may be useful where soilborne
pathogens are present.  Metam sodium can also be useful in helping to
kill remnant roots of previous plantings, which reduces feeding sites
for nematodes.

California

Fumigants do not appear to be crucial to production of pears or apples
in California.  The large pear industry relies on rootstock selection
and choice of sites (optimal soils) to avoid pest problems, including
Armillaria root rot, although metam sodium is sometimes used on sites
with significant Armillaria root rot incidence.  Benefits, however,
appear relatively small.

Southern U.S.

The major apple production areas in the southeastern U.S. primarily rely
on 1,3-D for nematode control.  Soil-borne pathogens appear to be a
relatively minor problem, but on some marginal lands, producers benefit
from the availability of fumigants with efficacy over a broader suite of
pests than 1,3-D alone.

Conclusions

Soil fumigation with chloropicrin when pome fruit orchards are replanted
provides significant benefits to growers in the Pacific Northwest. 
Fumigation is needed to address the orchard replant ‘disorder,’ a
combination of soil pathogens and nematodes.  While the problem is
spread through all apple producing regions, the mix and severity of
pests varies significantly.  Outside the Pacific Northwest, nematodes
may be the more common problem and can be treated with 1,3-D.  In the
Pacific Northwest, however, use of chlorpicrin leads to greater survival
of young trees, improved growth and faster maturity, and increased
productivity through the life of the orchard.

BEAD estimates that the increased productivity due to fumigation with
chloropicrin is worth about $46.8 million annually to apple and pear
producers in the Pacific Northwest.  This is in comparison to fumigation
with metam sodium.  The value of fumigation for control of soil
pathogens in general, is worth nearly $140 million each year.  This
figure does not include the benefits from higher survival and faster
maturity in establishing an orchard, benefits which may make the
investment in growing pome fruit viable.

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 The Office of Management and Budget suggests using a 3% and 7% rate
when evaluating the cost and benefits of government regulation, where 7%
is an estimate of the before-tax rate of return to private capital (OMB,
2003).

 Seavert et al. (2003) assume that two trees are replaced each year
after establishment, even during full production, i.e., 50 trees over
the lifespan of the orchard.  It seems unlikely that growers would
continue to replace trees in an older orchard.  Instead, we assume that
the 10-12 stunted trees, approximately 2% of the 558 trees planted in a
medium-density orchard, are replaced the second year.  This is
consistent with analyses of other orchard replant situations.

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