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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


By Dr. Robert Wisner

University Professor of Economics

Iowa State University

gmo world marketing issues
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
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
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
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.
new gmo developments iii
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 iii7
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
areas of foreign concern
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 concern15
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
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
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
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 developments20
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
china gmo developments
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
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
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
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
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
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
unanticipated consequences cont
Unanticipated Consequences, Cont.
  • Soybean gene fragment--- reported to be non-harmful
  • Cancer resistance from GMO Tomato, at Purdue Univ..---A positive development

Recap of





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


Carryover stocks are co-mingled

Taken off seed market for 2001







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



food or feed, has jail penalties

  • Seed supplies contaminated, recalled

Instructions to have

accompanied sales of



Max. population 40,000/A.

Buffer distance 660 feet to protect against cross


. Corn in buffer area not approved for

food or export

Structured refuge of at least 20% of


acres of non-


corn required

Instructions for seed disposal

Original plan: targeting seed sales to livestock



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%

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%

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%

StarLinktm: Elevator Impacts

Added costs of testing, segregating

Lenders unwilling to finance full value of No. 2


Could not sell to food processors

Jan. 2001 example, N. Iowa if rejected @ ADM,

next market is feed exports



bid to elevator$.36 under March


bid: $.50 under if open river can be found

Earlier, poultry


. in Arkansas was ok, but

became saturated

Local feed mill: best outlet if enough demand

Source: Dr. Marty




-Industries, Des Moines, IA



Corn Refiners


. Release 10/9/00

Ethanol is produced by CRA members concurrent

with & in same facilities with food production



to their facilities violates




. registration for the product

Also, gluten feed goes to export markets

Limited no. of dry-milling plants may be able to use



for ethanol, where by-products are used

only for feed

  • Expect similar policy for root-worm resist. corn

Industry/USDA Efforts to Deal With

the Problem

Work with producers,


, elevators to

isolate supplies

Food export certification program

Feed export certification program

Sampling problem: Japan & Korea found


Contamination low on


. : fraction of a %

Three-year problem


Future Implications

EU-unapproved varieties: another



waiting to happen?

ADM and Staley caution farmers: plant

only varieties approved world/wide

1/12/01 Illinois Dept. of


requests seed

companies not to sell EU unapproved

varieties in Ill.

At stake: the EU gluten


. (About 60%

of output)

Some companies plan to target sales only to

approved mkts. (Similar strategy to



other gmo developments
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
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
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
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
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.
  • 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?