ICABR Conference Ravello , Italy June 19-21, 2013

1. ICABR ConferenceRavello, ItalyJune 19-21, 2013 Managing for Co-Existence By Wallace E. Huffman Distinguished Professor of Agriculture and Economics, Iowa State University whuffman@iastate.edu

2. I. Introduction * Over past 16 years, a dramatic increase in production of food using organic and genetically modified (GM) methods -1996: GM corn, soybean and cotton varieties released with new HT and IR traits -2002: AMS implemented a new national organic standard •For the first time, the US had a uniform set of organic standards -- farmers must have an approved organic production plan following the NOP • Strictly process based standard – easy to lose site of • Only USDA certified organic production plans and farms can display the USDA’s organic seal

3. *Objective: To shed new light on the economics of coexistence between GM and organic agriculture in the US with implications for trade. - Brief review of organic and GM farming - Likely economic Impacts of GM agr on organic agr including adventitious presence; segregation, coordination and identity preservation; inter-farm effects and legal issues, insurance, local initiatives to legislate production systems - Conclusions

4. II. Organic Standards and Requirements A. The Great Divide So-called ‘Organic Farming’ is a post-WWII phenomena • a few farmers resisted the rapid increase in use of chemical/synthetic fertilizers and pesticides • alternatively, choosing nitrogen fixing plants, livestock manures and compost of other organic materials as a source of nutrients for other plants; natural methods to control pests, including crop rotation and mechanical cultivation Other farmers choose to adopt profitable new farming technologies developed by chemical, pharma, seed, machinery and building-trades industries

5. •Disparate institutions started to provide organic certification in the US in 1970s -CA Certified Organic Farmers 1973 -Oregon Tilth 1980s -State of TX 1988 -State of CA 1992 • The Organic Foods Production Act 1990 with goal of establishing a unified set of standards • EU, Japan and Canada require organic foods to be made of 95% organic ingredients Recent the EU agreed to accept USDA certified organic food as equivalent to the EU organic standard

6. B. National Organic Standards -After a long comment period, the new national organic standards went into effect in Oct. ’02 for crop and livestock production, processing and handling • A long list of permitted substances and prohibited substances/methods including GMOs, sewage sludge, irradiation, synthetic/chemical fertilizers and pesticides • Required a production plan that is certified by a USDA accredited group • Plan must detail practices to prevent comingling and prevent contact with prohibited substances • Adventitious presence of GMOs or other non-allowable substances does not constitute a violation of the NOP

7. -Organic Labeling and the USDA’s organic seal National Organic Standards permit labels as - “100 organic” ingredients (can use USDA’s seal) - “Organic,” meaning 95% organic ingredients (carry seal) - “Made with organic ingredients,” meaning 70% organic ingredients (not carry USDA’s organic seal) - “Claim that product has some organic ingredients,” meaning product contains less than 70% organic ingredients (not carry USDA’s organic seal) The Certified Organic farming operations incur significant additional costs relative to conventional agr In the US, the dominant organic type is “organic,” 100% organic is very difficult biologically and expensive to produce, for example, organic honey is imported from NZ

8. C. Trends in Organic Agriculture - USDA estimates on quantity of farmland under organic agr mgt increased from 1.3 mil acres in 1997 to • 7.0 mil acres in 2008, increasing 14% per year --accounting for 5.3% of all agr land (2008) • # of US organic farms expanded - 5,021 to 8,493 (1997-2008) -Special 2008 Organic Production Survey (USDA) identified a larger number of certified organic and exempt farm – 14,540 -Relative importance of organic differs by crop and by livestock enterprise • CA, WI and IA have the largest number of certified organic farms • Organic products cost roughly 50% more -In 1997, consumers’ purchases of organic fruits and vegetables dominate, but since more diverse set now

12. Fig. 3. No. by State and Rank by Certified Organic Farming Operations, TotalOrganic Acres, and Share of Organic Acres in Cropland, 2008

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14. D. What Can Consumers Conclude about USDA Certified Organic Products? - Production processes meet the NOP - Cannot conclude that products are “pesticide free,” “GM free, or “environmentally friendly” • Organic producers can and do use pesticides, but a different set than GM farmers • GMO content can occur due to adventitious presence • Must control pests and diseases, and not all are environmentally friendly (reduce yields) -Not necessarily produced on small farms or locally; farm size growing, imports growing (41%) - Given higher prices for organic, the nutrient content is is not necessarily different than conventional foods

15. E. Consumer demand for Organic Foods *Demand determined by price, but also by freshness, appearance and taste/texture -organic produce does not necessary taste better – results are mixed -organic agr must rely on livestock manure and nitrogen fixing plants (alfalfa, clovers, beans) for N but difficult to met plant needs for large product -when there is weak pest control, product appearance deteriorates leading to discount on organic fruit, e.g., apples

16. III. Genetically Engineering and Agr Biotechnology A. With background of key scientific discoveries, gene splicing techniques were successfully applied to field crops in mid 1990s -IR was of high priority to control corn borer plant modified to produce target-insect control Environmentally friendly relative to earlier pesticides -HT was of 2nd interest; to control weeds – plants are resistant to a particular herbicide, e.g., Roundup, broad spectrum post- emergent grass and broadleaf weed quickly breaks down in the soil and has low human health risks

17. B. Regulation of Release and Labeling of GM Traits *Key US regulations: (1) approval to release in the environment or distribute to farmers and (2) labeling of food products as being safe for consumption -In 1986, US gov choose to use existing health and safety laws to regulate ag biotech, i.e., Coordinated Framework for Regulation of Agr Biotech -USDA, EPA and FDA share responsibilities for regulation • USDA-APHIS regulates testing and release of GM plants and vet biologics • EPA regulates pesticides (IR), FDA regulates for food safety -“Substantial Equivalent”- If substances added to food by GM are significantly different from substances currently in food, they must be labeled as containing a food additive However, all commercialized GMOs are SE Labeling: Is voluntary

18. From 1985-2010, APHIS approved over 13,000 field trials of GM crops; with over 20,000 phenotypic traits, mostly HT & IR *Regulation of GMOs in Europe: • 1997 – Novel Foods Act implemented mandatory labeling, if GMOs could be detected in the final product • 2004 – Required labeling if GMOs used in any stage of production of product permitted adventitious presence of 0.9% GM • 2007 – Threshold dropped to zero • 2011 – New threshold for AP set at 0.1%

19. C. GM crops planted by farmers *New IP of PVPCs (’72) and patents (’85) helped spur private sector development of GM crops • 1995 – no farm acreage of GM crops • 2008 – 136 million acres, or average increase of 100% per yr - US adoption rates for GM soybean, corn, cotton from 1996- 2011 – Fig. 4 - US acres in GM field crops (2008) - Table 1 *Leading states (2008) • GM corn – IA, IL, NE, MN, IN, SD, KN, OH, WI, MO, TX, ND, MI • GM soybean – IA, IL, MN, IN, MO, NE, OH, SD, ND, AR, KS, MI, WI • GM cotton – TX, GA, AR, NC, MS, MO, TN, CA, LA

20. Fig. 4

22. D. What can consumers conclude about GMOs? - All GM food crops have been substantially equivalent to previously marketed food products, inc enhanced oils - GM crops for pharmaceuticals are to be segregated, but adventitious presence has occurred in few cases – but no adverse health effects detected - New empirical evidence that BT corn has reduced levels of harmful mycotoxins in corn products (Wu) - Some evidence of localized weed resistance to Roundup - Evidence from food experiments: • Rousu et al. discounted GM (IR/HT) by 14% • Colson et al. 25% premium for GM veg with enhanced levels of antioxidants and vit C by intragenic GM methods

23. IV. Managing for Co-Existence A. Agr requires wide range of inputs, and seeds receive special attention. -For almost 100 years, US seed producers have been taking special precautions to protect purity of their seed, including using physical and biological buffers, and careful handling -Over past 20 years, sensitivity of instruments to impurities has been increasing, and 100% pure is infeasible biologically, mechanically and economically -Organic agr production has been increasing at roughly 15% but GMO by 100% per year, and in big 3 GM crops, GM is 500 x more common than organic

24. *Agr is largely an open-air production system where pollen and pollinators frequently drifts onto neighboring fields, and products are harvested and moved along marketing chains where adventitious mixing may occur •NOP policy is that a certified organic farmer is not to be barred from selling USDA organic produce due to adventitious presence of non-permitted substances - No documented claim of organic produce being rejected because it did not meet USDA standards - Some organic producers have signed contracts to deliver products with higher that 95% organic ingredients, and there are cases where these products have been refused, but presumably sold as USDA organic (95% organic ingredients)

25. B. Adventitious Presence in Common in Agr *Impossible for US farmers to grow and harvest a 100% pure crop, adventitious presence of weed seed, seeds from vol plants, dirt and other unwanted materials regularly reduce purity of grain and oil seeds -Farmers face incentives to keep this material low, but not at 0% (McHughen and Kershen 2005) *Main causes of adventitious presence - transport and storage systems might comingle products - action of wind and pollinators might carry pollen from one field to another - volunteer plants following from in-blown GM pollen greatest concern for open pollinate crops – corn much less concern for self pollinated crops – soy, cot

26. Examples: - Co-mingling: StarLink (Aventis Crop Sc) – corn variety engineered to produce protein toxic to various insect pests of corn was approved for animal feed but found its way into corn chips and other food products – a marketing chain problem - Cross pollination by insects: Monsanto filed petition with USDA for deregulating two alfalfa biotech events in 2004 • 2005 - USDA concluded HT alfalfa did not pose a plant-pest risk and deregulated • 2007 – Organic alfalfa interests and others filed lawsuit in N. CA that challenged the USDA’ decision – court decided that environmental and economic impact assessment was inadequate, GM alfalfa pulled from market • 2011 – USDA again deregulated HT alfalfa after prepared new environmental assessment and taking comments -Organic farmers are concerned about adventitious presence of GM content in their organic food products – they label it as “contamination,,” low-key label is “adventitious presence”

27. C. Segregation, Coordination and Identity Preservation • Although US organic producers’ problems due to adventitious presence of GMOs could be solved by banning GMOS, this is politically unlikely with the 500:1 advantage of GM over organic • HT alfalfa has passed a critical test • Court (2/12) threw out OSGAT et al. v Monsanto case – organic seed cos. complaint: might be sued by Monsanto when sell seeds with adventitious presence of GMOs. Judge found no credible threat • Co-existence requires using available knowledge and existing laws -Although seed products remain a contentious area, in seed production, field isolation is a well est’ed practice and widely used to restrict gene flow (Bradford 2006) physical isolation - distances biological isolation – timing

28. • Seed purity laws recognize that 100% purity is infeasible, and hence, impurity thresholds and purity standards and auditing procedures have been est’ed based on field level experience and intended use of seed (Gealy, et. al. 2007) -Distances between organic and non-organic fields may be short but still achieve low prob of inter-field cross- pollination in corn • Ripplinger et al. (2009) show that in IA with tolerance level of 1/1,000 or (0.1%), the probability of detectable GM pollen flow from a 40 ac field 0.5 mile downwind is 0.24% and at 3/4 mile, the probability is a tiny number. • Organic and GM grain and beans can be segregated and an attempt for identity preservation but marginal cost rises dramatically as purity increases - Guaranteed 100% purity in bulk commodities is economic and physically infeasible

29. D. Inter-Farm Effects and Legal Problems: • Arise because of weak property rights on air above agr land when airborne agr particles can easily move by wind and pollinators from one farm to another - Legal precedent for pollen drift has been slow to evolve (Flood; Cox) •Langan v Valicopters(1977) – organic farmer sued to recover damages alleged to have occurred from chemical pesticide drift from adjacent farm - Court concluded high degree of risk of harm because of uncontrollable and other factors (1) size of spray particles (2) air turbulence by applicant aircraft (3) natural atmospheric forces (4) gravity of harm – depends on activity on adjacent land (5) activity is a matter of common usage -In 1977, the court found plaintiffs were faultless, innocent victims of chemical drift and defendants had to pay damages

30. Implications for pollen drift cases: • Strict-liability suits (exact source) are difficult to prove for pollen drift, and some state courts have required that plaintiffs prove negligence in drift cases (hard!) -Also, GM crops are living uncontrolled organisms, and farmers are not responsible for their drifting, which may go long distances • Even when circumstances seem ripe for law suits farmers seldom file -- makes cooperation on other issues difficult • Also, federal regulations of GMOs and their release may prevent states from imposing conflicting laws • CA law recognizes legal recourse for pollen drift – no evidence of any damages paid

31. E. Insurance against uncertain events: *Uncertainty about adventitious presence of GMOs could be managed through an insurance product - Ripplinger et al. (2009) provide a model that can be adopted to show the fair market value of an insurance product to compensate organic farmers for adventitious presence of GM content above a threshold • First-party rather than strict-liability would make for low transactions costs • Use of fair-valued insurance product allows one to compare risks against benefits by putting $ value to the risks • Bridges divide between biological scientists (risk/benefit) and economist (cost/benefits) • Solves technical problems – pollen can travel long distances if conditions are right *Real Potential for insurance against adventitious presence above some threshold – sticky issue is who pays for insurance

32. *Precedence: US case law on agr issues tends to protect the dominant local farming technology, making non-organic the dominant technology almost everywhere • Also, organic farmers might be assigned responsibility for measures to reduce damage from pollen drift – biological and physical buffers, which raises costs • From Coase’s analysis of externalities—assignment of liability between parties does not affect efficiency but does affect distribution of income/wealth • Economic, legal and biological realities seem likely to favor some regional concentration in organic and GM/ conventional agr production systems - But, efforts to legislate technology has created fierce resistance--a lower degree of specialization may have potential

33. F. Local/state Initiatives on Technology *Since 2004, some local areas have voted on anti-GM or pro-GM policies • CA – where majority have occurred -Mendocino county – first to passed an anti-GM ordinance – 3/2004 -Five additional counties held anti-GM votes, 2004-05, but passed only in Marin - In Trinity and Santa Cruz, County Board Supervisors voted in favor of anti-GM ordinance – 2006 - In another 11 counties, there have been votes on pro-GMO referendum

35. Fig. 5. Anti-GMO Ordinances in California, 2011

36. • New England Towns serve role of counties elsewhere Town of Montville, ME, 43 sq miles, voted to approve an anti-GMO ordinance in 2008 at issue was cross-contamination of native trees *State legislatures may attempt to pre-empt local bans on GM technology • CA – 2005 – failed • 2005-2007 –Twenty other states had introduce leg but passed in 15 states (FL, GA, PA, OH, IN, MI, IA, TX, OK, KN, SD, ND), and three had vetoed (NE, MO, SC) -Even in states that do have pre-emptive legislation, local bans on GMOs may violate federal regulations Proposition 37 to mandate GMO labeling in CA failed 2012 – estimated cost to consumers seemed to tip balance

37. Fig. 6. States Voting on Premptive Action to Prevent Local Control of Seeds and Plants, 2007

38. Political Action, e.g., legislate a particular type of technology: • One perspective: Interest group politics, where private agents divide themselves according to private interests into two groups – those that favor and initiative and those that oppose it • Political power: due to # and homogeneity of membership # votes, and the amount of resources, but also ability to control free-riding • Policy outcome is due to relative strength of two opposing groups, which shift with shocks to system – affecting relative political power and expensive in resources used because of a never-ending struggle • A year ago, Secretary Vilsack stated that it is time for cooperation between organic, GM and conventional farming interest – dramatically lower the tendency to create conflict

39. V. Conclusions • The tension between organic and other farming methods in the US have heightened with the introduction of GM crops, given the approved methods/processes and substances that the organic industry chose to lobby for in implementing the Organic Food Act of 1990 -For some, organic food production and organic foods have become a religion; strong beliefs but little scientific support -The organic seed industry seems to have exaggerated the potential negative consequences -Lots of talking but not much effective communication • The biotech industry has underestimated the potential for weed resistance to Roundup, but resistance is a well known scientific phenomena with any pesticide • Society has undervalued Bt technology by ignoring the very toxic nature of the chemical pesticides they replaced

40. • Regarding international trade -Organic foods can be produced abroad, properly certified and imported into the US —must meet the same standards as US producers -On June 1, 2012, the new US-EU Organic Equivalence Arrangement went into effect The EU and US will recognize each others’ organic production rules and control systems as equivalent for three years – USDA organic will be labeled as “Organic” in the EU.

41. • To feed the world’s population over the next 40 years, public and private R&D are needed to development new technologies and to better understand existing technologies, including any special problems they raise -Farmers (and countries) will need opportunities to use new farming technologies -Consumers will demand increasing amounts of livestock products and fruits and vegetables - Large amounts of energy and resource should not be wasted on divisive interest-group politics on ag technology choice