GM drags down the value of farmers' crops (23/9/2007)

GM drags down the value of farmers' crops
Some thoughts from the tractor cab
Peter Lungren

For some time I have been of the opinion that the huge expansion of GM maize and soy in the USA, along with Argentina and Brazil, has been dragging down the world price of grains - and that was having an impact on the viability of farms around the globe.

My argument ran that the world price of grains is set by the Chicago Board of Trade (CBOT) and is therefore very sensitive to the USA grains market.

When the USA adopted GM varieties and failed to ensure proper separation and segregation of GM and GM-free varieties, the USA lost access to its two most profitable markets - Japan and Europe. That left the USA attempting to dump its excess grain (mainly GM) onto the world market or into food aid. Both actions have the effect of dragging down the world price.

The problem was that it was very difficult to prove and quantify the effect of the GM varieties on the collapse of world prices. However, now the Bush administration is pouring funding into biofuel production, the previously exportable surplus of GM maize is in demand by the domestic bioethanol industry. Suddenly the dragging effect has been removed and we have seen the world price of grains double in a few months - and still increasing.

There are unboubtably other factors relevant to the current increase in prices but the major factor has to be the disappearance of unexportable stockpiles of US maize into biofuel production.

Increased prices have got farmers around the world thinking about how to increase yields - and adopting GM varieties is one of the issues under discussion. However, somewhere in this undigested thought process there is an argument against the adoption of GM varieties.

The lesson for farmers' leaders and land managers has to be that excess production of GM grains leads to an unmarketable surplus, dumping, unexportable surpluses and the collapse of the world price - in just the same way that the excess production of all grains drives down the price - but, importantly, that the excess production of GM grains can collapse the market independently of combined GM and GM-free production levels.

Effectively there is a market within a market.

Therefore, regardless of the environmental and social aspects of adopting GM varieties, there is a severe financial penalty for growers if the global demand threshold for GM varieties is exceeded.

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