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World Markets & GMO Grain

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?”

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World Markets & GMO Grain

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  1. World Markets & GMO Grain 7/10/02 • By Dr. Robert Wisner • University Professor of Economics • Iowa State University

  2. 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

  3. 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

  4. 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

  5. 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? • 7/1/02:Japan’s Ministry of Agriculture, Forestry, and Fisheries (MAFF) plans compulsory testing of GMO livestock feeds, effective 4/1/03.

  6. 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.

  7. 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

  8. Non Labeling

  9. 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

  10. 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

  11. Future GMO Labeling • 13 future EU entrants • Philippines • New Zealand • Thailand • Malaysia (Jan. 1, 2003) • Taiwan (Jan. 1, 2003) Expected total 40

  12. 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

  13. 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

  14. 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

  15. EU Bans Unapproved GMOs

  16. Processors go non-GMO

  17. 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

  18. 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

  19. 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

  20. 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..

  21. 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

  22. 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 uncertain, alleged GMO or StarLinktm corn

  23. Unanticipated Consequences, Cont. • Soybean gene fragment--- reported to be non-harmful • Cancer resistance from GMO Tomato, at Purdue Univ..---A positive development

  24. Recap of StarLink tm Developments • StarLink or Cry9C: A stacked trait with tm 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

  25. StarLink Developments, Cont . tm • 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 • Seed supplies contaminated, recalled

  26. Instructions to have accompanied sales of StarLink tm • 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

  27. 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%

  28. StarLinktm--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%

  29. 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%

  30. StarLinktm: 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

  31. Corn Refiners Assoc . Release 10/9/00 • Ethanol is produced by CRA members concurrent with & in same facilities with food production • Directing StarLink to their facilities violates tm 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 tm StarLink for ethanol, where by-products are used only for feed • Expect similar policy for root-worm resist. corn

  32. 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

  33. Future Implications • EU-unapproved varieties: another tm StarLink 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 )

  34. 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”

  35. 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

  36. 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

  37. 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

  38. 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)

  39. 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.

  40. Dr. Mike Duffy, ISU

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