Transcript No Slide Title

World Markets & GMO Grain
7/10/02
• By Dr. Robert Wisner
• University Professor of Economics
• Iowa State University
GMO World Marketing Issues
• Issue is not “Are GMO Crops Safe?”
• Real Issue: “What do our customers
think of GMO food? Do they want
it?”
• In most industries, the consumer
determines what is produced
• GMO vs. Transgenic
Background of Foreign
Consumer Food Concerns
• BSE in Europe & Japan
• FMD in Europe, Japan, China,
Korea, Taiwan, other areas
• Chemical contamination of feed
• Mistrust of government regulatory
agencies + science as evolving
• Movement to Iso9000 & food
traceability
New GMO Developments
• On 7/3/02: EU Parliament (1st.
Reading) tightens GMO labeling
standard to 0.5% (vs. current 1.0%
tolerance)
• 7/1/02:Japan’s Ministry of
Agriculture, Forestry, and Fisheries
(MAFF) plans compulsory testing
of GMO livestock feeds, effective
4/1/03. (Japan Agrinfo Newsletter, vol. 19. No. 11, July 2002
New GMO Developments, II
• U. of Georgia study: GMO canola --- neighboring fields (63 of them)
up to 1.8 miles away
• Herbicide resistance spread to 63 %
of fields
• Percent of GMO in crop fields
subject to drift: 0.2% to .03%
• Conclusion: Not significant, no
cause for concern?
New GMO Developments, III
Australia study published in Science:
• GMO canola cross pollinates up to
1.86 miles away
• Amount of cross pollination did not
appear to diminish over this
distance
• Max. distance for isolation not known
(pharmaceuticals concern)
• Science, Vol. 296, p. 2386. American
Academy for Adv. Of Sci.
New GMO Developments, III
• Senior VP., General Mills:
• Food Mfgrs. receive no marketing
advantage from GMOs.
• Instead, food makers have had to
deal with one controversy after
another surrounding genetically
engineered corn and soybeans.
• Des Moines Register, 6/30/02
Non Labeling
Areas of Foreign concern
• U.S. regulatory procedures:
Industry, not govt.. develops the test
data. Regulated/regulator
relationship
• Lack of long-term health &
environmental safety studies
• Insertion of foreign gene: create
toxins or other unexpected results?
• Liability--if something goes wrong
• StarLink® example
Areas of foreign concern
• Herbicide-resistant weeds
• Insect resistance to Bt crops
• Impact on beneficial insects &
species that feed on them
• Widely used antibiotic-resistant
marker gene
• Highly concentrated global seed
industry
• Concept of traceability in food
Future GMO Labeling
• 13 future EU entrants
• Philippines
• New Zealand
• Thailand
• Malaysia (Jan. 1, 2003)
• Taiwan (Jan. 1, 2003)
Expected total 40
Potential New EU Entrants
• Poland
Hungary
Czech Republic
Slovakia
Cyprus
Bulgaria
Turkey
Romania
Latvia
Lithuania
Estonia
Bulgaria
• Poland
All will be required to adopt EU laws
EU GMO Developments
• De facto moratorium on new GMO
varieties
• All member nations + EU govt.
must approve new GMOs
• Reason: goods can be freely shipped
within EU
• EU approval of new GMO crops
highly uncertain
EU GMO Developments
• Major food chains label GMOs, use
non-GMO for store brands + other
brands (Products directly from grain)
• Some offer non-GMO livestock
products
• Tolerances: 1% on food, 0.5% on
self-pollinating seed, 0.3% on cross
pollinating seed
• Feed ingredient labeling proposed
EU Bans
Unapproved GMOs
U.S. Corn Exports To South
Korea
350
300
Mil. Bu.
250
200
150
100
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Processors go non-GMO
China GMO Developments
• Two agencies involved. Ministry of
Health: processed grain products
• Ministry of Agriculture: raw grain
• Tolerance for GMO labeling: zero
• China a competitor with non-GMO
corn. Is doing research on GMO
food crops
• Halted imports of U.S. soybeans for
approx.. 3 months
World Production of GMO
Crops
• Current GMO Crops: corn, soybeans,
cotton, potatoes, canola, tomatoes,
Sugar Beets, tobacco
• Over 90% of World Production est. to
be in: --U.S.
-- Canada
-- Argentina
GMO Crops, Continued
Countries with restrictions on GMO
planting:
–Brazil
–EU
–China--food crops (but may change)
–Slovenia
–Ukraine
–Yugoslavia
–Switzerland
• Australia: currently GMO free
• New Zealand: to Oct. 2003
International Biosafety
Protocol Treaty, Sec. 2
4. Nothing in this Protocol shall be
interpreted as restricting the right of a
Party to take action that is more
protective of the conservation and
sustainable use of biological diversity
than that called for in this Protocol,
provided that such action is consistent
with the objective and the provisions of
this Protocol and is in accordance with
its other obligations under
international law..
Global Biosafety Protocol
Treaty
• Requires permission from
importing country before GMOs
can be exported to it.
• Precautionary: Countries may ban
GMO imports for safety &
environmental reasons, without
complete certainty of risk
Unanticipated GMO
Consequences
• StarLinktm ---FDA Approved for feed
but not food or export: Channeling
approach failed
--Cross pollination problems
--Processing plants closed down
--12 or more lawsuits
--U.S. corn exports to Japan down, Sorghum up
• Swine Conception Problems ---source
tm
Unanticipated Consequences,
Cont.
• Soybean gene fragment --- reported to
be non-harmful
• Cancer resistance from GMO
Tomato, at Purdue Univ..---A positive
development
Recap of StarLinktm Developments
• StarLinktm or Cry9C: A stacked trait with
herbicide & insect resistance
• Was grown in 1999 & 2000
• Approved for domes. feed & non-food
industrial use only, by EPA
• Has risk of possible allergenic
reactions
• Carryover stocks are co-mingled
• Taken off seed market for 2001
StarLinktm Developments, Cont.
• Discovered in Taco shells in late
Sept. 2000
• Over 22 retail chains recalled
taco shells, several cereal, taco,
and corn milling plants were
shut down (Large Cost)
• Japan: Illegal to use StarLink in
food or feed, has jail penalties
Instructions to have
tm
accompanied sales of StarLink
• Max. population 40,000/A.
• Buffer distance 660 feet to protect against cross
pollenation. Corn in buffer area not approved for
food or export
• Structured refuge of at least 20% of Starlink
acres of non-Bt corn required
• Instructions for seed disposal
• Original plan: targeting seed sales to livestock
areas
StarLinktm--Crisis in the
Corn Market? Jan. 2001
• U.S. Corn Exports and outstanding
expt. Sales by country:
–Japan
-16%
–South Korea
-62%
–Taiwan
-4%
–W. Hemisphere -0.4%
–All destinations -12%
–Pre-StarLink Proj.
+12-17%
tm
StarLink --Crisis
in the Corn
Market? 2000-01 Mkt. yr.
• U.S. Corn Exports and outstanding
expt. Sales by country:
–Japan
-8.0%
–South Korea
+1.7%
–Taiwan
+0.001%
–W. Hemisphere +12.9%
–All destinations -2.1%
–Pre-StarLink Proj.
+12-17%
StarLinktm--Crisis in the
CornMarket? 2001-02 Myr.
• U.S. Corn Exports and outstanding
expt. Sales by country (6/23/02):
–Japan
-1.5%
--Sorghum
+41.2% (Non-GMO)
–South Korea
-50.2%
–Taiwan
-8.7%
–W. Hemisphere +6.7%
–All destinations +1.5%
tm
StarLink :
Elevator Impacts
• Added costs of testing, segregating
• Lenders unwilling to finance full value of No. 2
inventory
• Could not sell to food processors
• Jan. 2001 example, N. Iowa if rejected @ ADM,
next market is feed exports
– Non-StarLink bid to elevator$.36 under March
– StarLink bid: $.50 under if open river can be found
– Earlier, poultry mkt. in Arkansas was ok, but
became saturated
– Local feed mill: best outlet if enough demand
– Source: Dr. Marty McVey , Agri-Industries, Des Moines, IA
1/12/01
Corn Refiners Assoc. Release 10/9/00
• Ethanol is produced by CRA members concurrent
with & in same facilities with food production
• Directing StarLinktm to their facilities violates
U.S. govt. registration for the product
• Also, gluten feed goes to export markets
• Limited no. of dry-milling plants may be able to use
StarLinktm for ethanol, where by-products are used
only for feed
• Expect similar policy for root-worm resist. corn
Starlink, Cont. II
• EPA Panel: Non-EPA scientists,
veterinarians, Medical Drs., Ag. Engr.,
Ag. Economist
• Panel recommended Starlink not be
used for food
• Protein was found in blood stream of
Norway rats, with immunologic response
• Medical panelists believed some had
experienced allergenic reactions
Industry/USDA Efforts to Deal With
the Problem
• Work with producers, Aventis, elevators to
isolate supplies
• Food export certification program
• Feed export certification program
• Sampling problem: Japan & Korea found
Starlink
• Contamination low on avg. : fraction of a %
• Three-year problem
Companies with Starlink seed in 2000
•
•
•
•
•
•
•
•
•
•
•
•
AgriBio Tech, Inc.
AgriPro Seeds, Inc.
Bo-Jac Seed Company
Cenex/Croplan Genetics
Curry Seed Co.
Fred Gutwein & Sons, Inc.
Garst
Hoegemeyer Hybrids, Inc.
Legend Seeds, Inc.
NC+ Hybrids
Sieben Hybrids
Source: National Corn Growers Association
Future Implications
• EU-unapproved varieties: another
StarLinktm waiting to happen?
• ADM and Staley caution farmers: plant
only varieties approved world/wide
• 1/12/01 Illinois Dept. of Ag. requests seed
companies not to sell EU unapproved
varieties in Ill.
• At stake: the EU gluten mkt. (About 60%
of output)
• Some companies plan to target sales only to
approved mkts. (Similar strategy to
StarLink)
Other GMO Developments
• Pharmaceutical GMO corn
•
--Small amount grown in Iowa
--High risk if cross pollinated or co-mingled
Root-worm resistant corn--some varieties are
stacked
--Japan & U.S. regulatory approval given
--EU not approved
--Requires “Channeling”
Channeling Conclusions
• Some segregation is being done
• Farmers will segregate more with price incentive
• Process is major challenge for elevators at
harvest
• Some elevators may require new investments
• Volume is critical: low volume=high cost
• Dependable markets are critical
• Segregation will be done in the future, in E.
Corn Belt-- but low tolerances make it difficult
Summary of Risks with GMO
Hard Red Spring & Durum
Wheat
• Primary risk: export markets
• About 80% of HRS export market & 2/3 for
Durum has or soon will have GMO
labeling: reason = consumer concern
• Possible worst case?: loss of half of export
market, cutting price of HRS to feed wheat
price (currently about 1/3 lower price),
Durum price down about 1/3
Summary of Risks with GMO
Hard Red Spring Wheat
• Much uncertainty in foreign mkt. acceptance
• Japanese, Korean govt. approval likely
– but doesn’t guarantee consumer approval
• EU approval doubtful
• EU, Far East consumer attitudes not seen
quickly changing
• Chinese approval w/o labeling unlikely
Will other states & countries
grow GMO wheat?
• Which is greater: Catch-up risk, or risk of
consumer rejection & supply system
contamination?
• Two Iowa State University reports indicate
gains from input-trait GMOs are quickly
passed on to seed suppliers (Through Tech
fees)
Seed Industry Concentration
& GMO Crops
• Greatly increased in last decade.
• 6 major biotech firms
• Fewer firms expected in future
• Terminator gene
•
--Makes seed sterile, forcing purchases
through the biotech companies
Concern for developing-world farmers
(& some in U.S.) who normally raise
own seed.
Conclusions Dr. Mike Duffy, ISU
- Returns to herbicide tolerant soybeans
and non-tolerant are essentially equal;
lower yields, higher seed costs but lower
herbicide and weed management costs
- Returns to Bt corn and non-Bt corn are
essentially equal; higher yields but higher
costs
- Primary beneficiaries of first generation
biotech crops are the seed companies
with some benefits to the chemical
companies
- Producer benefits come in ease of
production and ability to cover more
acres, not in increased profits per acre
Conclusions
• Foreign Wheat Market Risk
is Substantial
• Which is Greater Risk:
Risk of Market Loss or
Risk of Delaying Farmer
Gains From GMOs?
• How Big are the Gains?