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The impact of StarLink corn on U.S. exports and who really wins with GMOs

(Jan. 30, 2002 Ė CropChoice news) Ė Dan McGuire, director of the Farmer Choice Ė Customer First program of the American Corn Growers Foundation http://www.acga.org, spoke recently to a group of farmers in Bismarck, North Dakota. Here is the text of his speech.

The impact of StarLink corn on U.S. exports and who really wins with GMOs
Speech by Dan McGuire

Itís great to be here today to address the issues and discuss the impacts that GMOs (genetically modified organisms) are having on U.S. corn exports and U.S. corn producers.

Perhaps the most evident impact is reflected in farm-level market price that farmers are being paid for corn. This week, corn prices in eastern Nebraska were in the $1.75 per bushel range, about $1.25 per bushel below the cost of production. Soybean prices were in the $3.85 per bushel range and wheat prices are at parallel low levels. Low grain prices are a direct result of current farm and trade policies. I mention that point specifically because the farm bill weíre living under was promoted to farmers as being "export and market oriented." I say that, not to go into a lengthy discussion on farm policy, but to emphasize that the very same agribusiness interest groups that promoted current farm policy since 1985 are also pushing U.S. policy on GMOs on a global scale. That policy is having a negative impact on corn exports. Lost corn exports year after year have the cumulative effect of increasing corn inventories with the end result being lower corn prices.

The ACGA as an organization has consistently opposed current farm policy. Weíve known that low prices would not increase exports and even if U.S. grain exports do increase somewhat, in some years, current commodity loan rate policy assures that prices will remain low in the absence of a major crop shortfall somewhere. So we can be clear on what the U.S. grain export trend has been under this farm policy.

Indeed, US wheat exports would be even lower than they are had the European Unionís wheat crop not had a 6 MMT production drop from 1998/99 to 1999/2000. Itís forecast to have a nearly 11 million ton drop from the 2000/01marketing year to the current 2001/02 year. That explains why Spain is importing U.S. soft red winter wheat, for instance. So these sales donít result from U.S. farm policy, but from a policy better described as a "hope for a crop disaster-somewhere" policy.

Why do I mention wheat? Because current farm policy forces wheat into being much more of a feed grain than ever before. Cheap U.S. and Canadian wheat competes more directly with corn, both domestically and in export markets.

If GMO wheat is introduced, the EU, Japan and other markets will reject it, which will force more wheat into the feed-grain market here in the U.S., causing further downward pressure on corn prices. Add that to the already large quantity of Canadian wheat imported into the U.S. market and weíll have even lower grain prices here south of the border.

So, thatís one of the reasons weíre concerned about the introduction of GMO wheat.

Additionally, why would the U.S. want to introduce varieties that major importers have already warned U.S. producers they wonít buy? European buyers have specifically said that GMO wheat will be a "market destructor." Asian buyers have issued similar warnings.

Now, to more specifically address the StarLink GMO corn issue. As you may recall, the StarLink GMO corn variety was only approved for uses other than human food but it found its way into human foods anyway. That sent a shock wave through both the domestic and export markets. Japan and other import markets severely cut back on U.S. corn imports last year. Japan bought about 52 million bushels less U.S. corn in the marketing year that ended August 31, 2001 than in the prior year. As of December 20 in this new marketing year, Japan has taken delivery on about 14 million fewer bushels of corn than last year. Outstanding sales of U.S. corn, according to USDA, are also running about 7 million bushels behind last year. Thatís the record so far and weíre only 30 percent through the corn-marketing year.

Itís also worth noting that the United States was exporting nearly 2.8 million metric tons of corn to the European Union in 1995/96. That dropped to 1.7 MMT the following year and has steadily gone down to nearly nothing last year. Europe has not bought any U.S. corn so far this year. Keep in mind that the EU still imports about 2.5 million metric tons or 100 million bushels of corn each year, but not from the United States. If only we had held onto the 1.7 mmt of corn export quantity we had to the EU in the 1996/97 marketing year, each year since, and including the current year, cumulative U.S. corn exports for that period would be nearly 350 million bushels greater than they have been. As a result, U.S. corn ending stocks would likely be closer to 1.2 billion bushels instead of the nearly 1.6 billion that USDA projects for the 2001/02 marketing year and farm level corn prices would likely be forecast at $2.50 instead of $2.00 per bushel. $2.50 is still too low of a price for corn but it sure beats the prices that farmers are being paid today.

Part of the impact on the export market from the introduction of GMOs is that it gives foreign export competitors an opportunity to make inroads. Brazil and China are examples. Brazil exported a record quantity of corn this past marketing year, some to the EU. Brazil is officially a non-GMO exporter and given the trend for increased soybean area we can expect more corn export competition in the future as more acres come into production and a corn/soybean rotation becomes more of a factor.

Once new exporters establish and cultivate positive supply relationships with import customers they tend to last awhile. What had been U.S. markets then become more difficult to maintain or regain, especially if the U.S. message to world buyers and consumers is that they have to buy whatever we decide to grow. Such an approach by the U.S. grain industry is neither "export-oriented" nor "market-oriented." It will cause the U.S. to be even more of a residual supplier.

The ACGA also considers important is the fact that the vast majority of the U.S. corn crop is produced from conventional, non-GMO varieties. Approximately 80 percent of the 2001 U.S. corn crop was non-GMO varieties. Yet, the minority of the crop as represented by GMOs causes lost export markets and causes the prices of the entire corn inventory to be less for all farmers. This same situation results in added testing and segregation expenses that are an increased cost factor that gets passed back to farmers. But farmers know that the U.S. must give the foreign customer and consumer what they demand or lose markets.

Indeed, a strong majority of U.S. corn producers are tuned in to the market realities regarding GMOs. A random, scientific survey of 509 U.S. corn farmers conducted for the ACGA in June of 2001 showed that 74 percent believe that the rejection of GMO corn and soybeans by our largest export customers contributes to low commodity prices; 78 percent said they will plant non-GMO corn varieties if keeping satisfied customers depends on it; 56 percent are aware foreign competitors are using non-GMO marketing strategies to compete for exports; and 56 percent believe that the U.S. Congress should require the labeling of U.S. corn cargoes to show the levels of GMO varieties present as a marketing strategy and sales tool to keep global markets for U.S. corn. It also appears that the U.S. grain elevator industry is taking measures in an attempt to hold on to export markets by either requiring or suggesting the segregation of GMO corn and soybeans from conventional varieties either in the elevator upon delivery or on the farm prior to delivery. An ACGA survey of 1,149 elevators in 11 mid-western states conducted during the fall of 2001. The survey shows that more than 50 percent of the elevators say theyíre requiring segregation of GMOs from non-GMO varieties either upon delivery or on the farm and 20 percent of the elevators say theyíre offering premiums for non-GMO corn or soybeans.

And itís not just the ACGA survey showing what U.S. producers want. Another major survey of more than 14,000 farmers conducted for the Farm Foundation in September of 2001 by the major land grant universities confirms some of the ACGA findings to an even stronger degree.

This survey shows that 98 percent of the nationís farmers support Country-of-Origin Labeling; Regarding biotech products, 90% say they support labeling biotech products if they are scientifically different and 61 percent support the labeling of biotech products even if theyíre not scientifically different. On the issue of traceability, 76 percent support improved traceability of food products from Consumer to producer.

From an ACGA point of view weíre pleased to know that our policies are in step with the majority of U.S. farmers. And those U.S. farmers appear to be in tune with the old dictum, "The customer is king" as recently pointed out by Dr. Daryll E. Ray, the Blazingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee. Dr. Ray is the Director of UTís Agricultural Policy Center. In his recent policy paper, GMOs: Let consumers decide, he stated:

"When it comes to customer preferences, it is not a matter of science or right or wrong or what might ultimately be acceptable. Itís also not a matter of U.S. testing and certification. It simply is a matter of what the customer wants to buy."

One would think that the U.S. would have learned that lesson in the 1970ís and 1980ís when foreign competitors provided consumers the type of automobiles they wanted while the U.S. refused to do so and lost market share right here in the U.S. market.

In closing let me emphasize that there are other very serious issues related to GMOs, not the least of which is the patenting of seeds, the technology fees and control of the food supply in the hands of a few, that go along with that. These patents and the recent Supreme Court ruling will prevent farmers from saving seed whether itís a GMO or traditional variety. I compare it to a situation where there were no trucks or barges to move grain and you had to rely 100 percent on the railroad. Just like trucks and barges, seed saving by farmers has helped provide some competition to hold seed prices down a little. Now thatís disappearing, plus itís an insult to all the American farmers that have paid commodity check-off taxes plus general state and federal taxes for years into the land grant universities for the purpose of developing new varieties. Now we find that under this new regime, biotech companies are allowed to control the germplasm bank, charge technology fees and sue farmers even if they only suspect that they may be saving seed. There are liability issues, production contract issues and market loss issues in addition to the challenge of segregation. These are all economic concerns for farmers that the ACGA has raised since GMOs were introduced.

What it all comes down to is just more of the agribusiness concentration or near monopoly trend thatís been running rampant and out of control since the 1985 farm bill. That trend is not good for farmers or the rural economy and it provides no benefit to consumers because cheap grain prices donít result in cheaper food prices. They primarily result in higher corporate agribusiness profits. And thatís the bottom line regarding who primarily benefits from GMOs.

On behalf of the ACGA Farmer Choice Ė Customer First program Thank you. Itís a pleasure visiting with you today and we look forward to working with you in the future.