Melvin Brees
Farm Management Specialist
University of Missouri Extension

 

 

 

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February 4, 2000

GMO--Headlines or Market Signals?

Recently, Frito-Lay announced that it was telling its suppliers to not use GMO (genetically modified organism) corn. This action was said to be in response to consumer concerns. No other reasons were given. While anti-GMO groups praise the decision, others question the motive--especially without more specific reasons. Some suggest they are trying to use questionable health issues to promote "junk food."

Last week in Montreal, representatives of 130 nations signed a "Biosafety Protocol" agreement. The ultimate impact of this agreement is unclear and it must first be ratified by 50 nations. It contains provisions to label grain shipments that "may contain" genetically modified material (which could about be all of it). It's unclear whether protocol provisions require segregation of GMO. It also appears to allow countries to ban GMO, but it claims not to override World Trade Organization (WTO) rules. WTO rules require countries base food import restrictions on "sound science." Many expect Europe to insist on labeling and possibly imports could be banned on "precautionary principles."

Do the above represent consumer demands and loss of export markets? Or are they just more headlines based on a lack of knowledge that only affects small or insignificant markets?

Produce what the consumer wants! That's usually sound economic advice, but what does the consumer want? Most anti-GMO activists would have everyone believe that consumers don't want GMO. Food companies telling suppliers they don't want GMO grain and potential import bans seems to back this up. But consumer desires should be communicated through the market--what's happening there?

So far, the market signals really don't indicate a lack of markets beyond some limited preferences for non-GMO. Safety tests have shown that GMO grains aren't really different than other grains. Roundup ready soybeans are approved for exports in Europe and other countries. Some Bt corns aren't approved for European markets, but this isn't a large US export market and there is plenty of non-GMO or approved Bt varieties to meet this need. Much of the non-GMO demand or companies (like Frito-Lay) not wanting GMO represents specialty markets that are often supplied under contracts anyway. Most grain merchandisers have said that they plan to buy both GMO and non-GMO grains planted in 2000. However, the most important market signal may be that while there continues to be headlines about consumer preferences for non-GMO, there still aren't many willing to offer much of a premium to get it!

The GMO issue still makes headlines, but business decisions should be based on market signals and production economics--not headlines. It is an important issue that needs to be watched closely. However, so far the markets don't suggest much in the way of non-GMO premiums, discounts for GMO or a lack of markets.

-- Melvin


University of Missouri ExtensionDecisive Marketing - February 4, 2000
http://outreach.missouri.edu/agconnection/DCT/DM000204.html -- Revised: April 20, 2004
breesm@missouri.edu