||There has been concern in Mexico in recent years about the impact of the disease Kamal bunt (KB) on the wheat industry; however, to date no comprehensive information has been available on the economic impact of the disease. Kamal bunt first appeared in Mexico in 1970, but caused liUle economic loss until the early 19805, when the level of infestation increased sharply in some years. Initially found in southern Sonora, by 1983 the disease had spread south into the neighboring state of Sinaloa. It has now spread to Baja California Sur (BCS), although not to northern Sonora or to Baja California Norte. The purpose of this report is to estimate the costs to Mexico associated with KB in northwestern Mexico in an average year, based on the experience of recent years. The estimated costs can then be used for assessing: I) the priority that should be given to KB in allocating wheat research resources, and 2) the appropriate level of investment in measures to prevent its spread to other wheat-growing areas of Mexico. The economic costs caused by KB can be divided into direct and indirect costs. Direct costs include yield and quality losses and the loss of seed export markets following the presence of KB in Mexico. Indirect costs are those associated with measures aimed to prevent the spread of KB and to reduce its severity. The estimates prepared in this study represent the first attempt to quantify the economic costs of KB. As such, they are based on often inadequate information and would benefit from more precise data. However, the data used are the best available, considering the paucity of information on many aspects of KB. Costs of Kamal Bunt in Northwestern Mexico Direct costs--Direct costs result from yield losses, quality losses, and seed export losses. Kamal bunt has a relatively minor effect on yield: the only yield loss is caused by the weight loss in infected grains. The estimated average loss of yield in the areas of northwestern Mexico affected by KB (southern Sonora, Sinaloa, and BCS) was 0.12% per year, and the value of the yield loss was 1,08S million Mexican pesos ($MN) per year. The price farmers receive for grain infected with KB depends upon the percentage of infected grains found. Growers receive a J % price discount for each I% of infected grain up to 3%. These discounts are a cost to farmers but do not necessarily rel1ect the true cost to Mexico of infected grain. since grain with less than 3% infection can be easily and cheaply blended with sound wheat without any penalty in end use. Loads with greater than 3 % of infected grain are accepted at the price of grain for livestock feed, with a discount of 20 % from the price for food wheat. For the purposes of this report, the estimated losses to Mexico are taken as those losses relating to heavily infected grain (>3%), and we assume that grain with less than 3% infection can be processed without affecting the quality of the end product. On this basis, an average total discount in northwestern Mexico of $MN 6,103 million (0.69% of the value of the crop in infected areas) accrued to grain with more than 3% infection. Prior to the outbreak of KB in 1982, southern Sonora exported wheat seed to a number of countries. Following the KB infestation in northwestern Mexico. wheat seed exports from Sonora fell sharply. Since 1984. seed exports from southern Sonora have remained at zero, although some seed was exported from northern Sonora in 1987 and 1988. The estimated loss of seed exports is highly uncertain, because of major changes in the world supply and demand for wheat seed. For the estimates of losses in this report, the volume of lost seed exports is estimated at J2,000 t/yr. On the basis of a value added by seed exports of $MN 220,000/t, the average annual value of losses in seed export sales is an estimated $MN 2,640 million (0.30% of the value of production). This loss will not necessarily continue as a long-term loss to Mexico, provided that other areas free from KB take up the role of exporting seed. Indirect costs--Various measures have been taken to prevent the spread or to reduce the severity of KB. These include quarantine restrictions on planting in KB-infected areas, grain fumigation. and restrictions on the use of KB-infected seed. It is not known to what extent these measures lead to savings in subsequent harvests. Quarantine restrictions on planting were imposed on farmers' fields in southern Sonora in 1983/84, following the heavy infestation of KB in 1982/83. If grain delivered to receival depots has an infection level of more than 2 %, the farmer is restricted from growing wheat for the following three years. If the level of infection is 1-2 %, the farmer can sow only durum wheat, while if the level is less than 1% there is no restriction. When farmers are prevented from sowing bread wheat, they suffer a loss of income as bread wheat is more profitable than the alternatives. Between 1984 and 1989 in southern Sonora, an annual average of 7,357 ha were restricted to “no wheat," and 38,601 ha were restricted 10 "durum only." Although quarantine regulations have been in existence in Sinaloa since 1986. they have been largely ineffective and are assumed to have caused no losses to date. The total estimated losses for farmers from the quarantine restrictions are based on I) data from the relative losses from producing durum wheat or other crops rather than bread wheat and 2) data on the areas affected. The annual losses in southern Sonora have averaged $MN 4,826 million (0.96% of the value of production). Most of the loss came from land on which farmers were restricted from growing wheat. Sanidad Vegetal has incurred additional costs associated with sampling and testing for KB and with meetings held in relation to KB. The total additional costs for Sanidad Vegetal are estimated at $MN 409 million in southern Sonora and Sinaloa, representing 0.05% of the value of production. The estimated costs are higher in Sinaloa because sampling for KB is done in farmers' fields rather than at the grain receival depot. Since KB can be spread by infected seed, the acceptance of infected seed for certified seed is regulated. Farmers incur losses when wheat seed crops that have received extra inputs are rejected as unsuitable. The average value of the losses incurred in southern Sonora and Sinaloa by seed producers whose crops are rejected because of KB is $MN 108 million (0.01 % of the value of production). To ensure a supply of KB-free seed, seed production has also shifted away from the KB-infected areas since KB became a problem in northwestern Mexico. The shift of seed production to other areas has resulted in extra costs in transporting seed to the KB-infected areas. In southern Sonora and Sinaloa, these costs are estimated at $MN 1,377 millon (0. J7% of the value of production) per year. Although seed treatment is only partly effective against KB, seed from the quarantined areas of northwestern Mexico has been treated with the fungicide PCNB since 1983 to give some control of the level of KB spread in the seed. The use of PeNB is more costly than the seed treatment that would have been used in the absence of KB. In southern Sonora and Sinaloa, the average annual additional costs were $MN 143 million, or 0.02% of the value of production. Thus the total costs (direct and indirect) of KB in northwestern Mexico are estimated to average $MN 16,852 million ($US 7.02 million) per year (see Table). The major components of costs are the loss in quality of infected crops (37% of total costs), the losses from restrictions on planting (29%), the loss of wheat seed exports (16%), the additional costs of transporting seed (8 %), and yield losses (6%). In terms of the distribution between states, 61 % of the total losses are incurred in Sonora, 38% in Sinaloa, and I % in BCS. The estimated total costs represent 2.1 % of the value of production in southern Sonora. 2.0% in Sinaloa, and 0.3% in BCS.