Analysis reveals unapproved GM trait causes significant trade impacts.
AN economic analysis issued last week by the National Grain & Feed Assn. (NGFA) estimates that the U.S. corn, dried distillers grain (DDG) and soy sectors have sustained economic losses of up to $2.9 billion in the aftermath of the enforcement of a zero-tolerance policy regarding Syngenta's Agrisure Viptera MIR 162 corn technology in U.S. shipments to China, where the trait has not been approved for import.
A second NGFA analysis revealed that U.S. growers, grain handlers and exporters could face an even greater economic impact — up to $3.4 billion — during the 2014-15 marketing year that starts Sept. 1, given Syngenta North America Inc.'s decision to launch seed sales of its new Viptera Duracade 5307 biotech corn well before the earliest regulatory approval timelines in key U.S. corn export markets, including China.
NGFA emphasized that it supports agricultural biotechnology and other scientific and technological innovations and said it is working in tandem with the North American Export Grain Assn., corn, soybean and other grower organizations, biotechnology providers and the seed industry to try to improve the timeliness and synchronization of U.S. and foreign government approvals of biotech traits.
However, NGFA said its analyses of the economic impacts of trade disruptions resulting from the detection of unapproved Agrisure Viptera MIR 162 provide a "case study" on the ramifications of commercializing crop biotechnology before securing import approvals from major U.S. export markets — particularly foreign countries with a zero-tolerance policy for the presence of unapproved biotech traits.
"Regaining and maintaining access to the Chinese import market, as well as preserving access to other U.S. export markets, is critically important to the short- and long-term prospects of U.S. agriculture," NGFA president Randy Gordon said. "These export markets are key drivers of producer profitability, current and future economic growth for U.S. agriculture and achieving global food security."
NGFA noted that the U.S. Department of Agriculture currently forecasts China's corn imports to increase from 2.7 million metric tons in 2012 to 22 mmt by 2023, accounting for nearly half of the projected growth in world corn trade over that time span.
For the current 2013-14 marketing year that ends Aug. 31, USDA had projected before the trade disruption that the U.S. would be the principal corn exporter to China, shipping an estimated 7 mmt. However, U.S. corn export shipments to China reported on an aggregated basis to NGFA by exporters have amounted to only 1.23 mmt thus far.
At the time NGFA conducted the analysis, it was uncertain if and when China would approve MIR 162 corn for import during the current marketing year.
NGFA's study found that U.S. corn trade with China has come to a standstill since rejections began in November 2013, and trade with China in DDGs and other U.S. commodities is being conducted in a riskier market environment.
For instance, U.S. exporters reported that China has detained and tested several shipments of U.S. soybeans following the detection of MIR 162 and that some U.S. soybean sales to China have been reduced or canceled as a result.
China has responded by significantly increasing imports of U.S. grain sorghum, importing more corn from the Ukraine and utilizing its own domestic stocks. Recently, Brazil and Argentina were granted approval to begin exporting corn to China.
Meanwhile, the NGFA analysis estimates that U.S. corn prices would have been 11 cents/bu. greater if the trade disruption with China had not occurred, and applying this price-depressing impact across U.S. corn production would amount to a $1.144 billion loss for corn farmers over the last nine months of the current 2013-14 marketing year.
For DDGs, NGFA noted that prices at terminal locations declined by $80-100/mt in January following the trade disruption with China. While prices subsequently have rebounded, the analysis found that a price-depressing impact of approximately $7/mt persists, resulting in a $202 million loss to DDG sellers.
For soybeans and soybean meal, the study found that soybean prices were affected negatively by lower values for soybean meal and the increased risk of China's detection of MIR 162 in U.S. soybean shipments.
U.S. soybean prices at the Louisiana Gulf declined by $20/mt between Dec. 20, 2013, and Jan. 3. While soybean prices have rebounded to higher levels, the analysis found that a 15 cents/bu. price-depressing impact persists "because of the overhanging trade uncertainty that results in the incorporation of increased risk premiums in commercial pricing, which, in turn, reduce U.S. prices."
NGFA reported that aggregated data show that since the trade disruptions began last November, a total of 3.327 mmt of U.S. corn shipments have been rejected, diverted or canceled or sales deferred. Of this quantity, 1.45 mmt have been rejected by China, which is substantially greater than the 908,800 mt China recently reported.
Conservative estimates put total costs to U.S. corn exporters at $225 million — and that does not include likely losses of corn export sales to China that may have occurred in 2013-14 were it not for the MIR-related disruption in shipments and sales, nor does it include economic damage from disruptions in U.S. exports of DDGs and soybeans.