Financial losses due to fumonisin contamination in the Texas High Plains maize

Fumonisins are one of the main problems affecting maize production in the Texas High Plains (THP), where its agroclimatic conditions make it a perennial hotspot for mycotoxin contamination. In 2017, a fumonisin outbreak in the THP maize motivated stakeholders' request to repeal a subsection of the Texas Administrative Code, §61.61(a)(7) (Fumonisin Rule), and its related Texas Feed Industry Memorandum (Memo 5-20), which previously permitted the blending of maize containing high fumonisin levels with maize containing ≥ 5 mg/kg under state authority, and pivot to FDA fumonisin guidance. Shortly after, the USDA Risk Management Agency (RMA's) reintroduced Discount Factors (DFs) in annual Special Provisions (SP) that outline price reductions related to fumonisin contamination in maize. In this research, we estimate the potential economic burden posed by these changes through a two-part approach. In part one, we construct a decision model that explores the final disposition of fumonisin-contaminated maize based on blending permissions, fumonisin levels, and crop insurance status. In part two, we estimate the economic impact by inserting output values of the decision model into financial equations that consider testing costs, transportation fees, and discounts from crop insurance and grain elevators when applicable. Our economic analysis projects that the financial losses during a THP crop year with high fumonisin levels could range from $15.1 to $135.5 million without the option to blend under conditions of the revised RMA discount schedule. Findings further highlight crop insurance as the most promising risk management strategy for farmers in areas susceptible to fumonisin contamination.