Saturday, June 01, 2013

Monsanto’s Genetically Modified Wheat Scare

A discovery of an unapproved GM wheat strain in the US triggers a backlash on global wheat markets.
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Charts from the Washington Post

The details from Quartz (bold original)
The discovery
Last month an Oregon farmer sprayed one of his fields with Roundup weed killer, only to find that several wheat plants survived the cull. When the US Department of Agriculture investigated, it found out why: the plants were an unapproved genetically modified strain made by the biotech giant Monsanto. So-called “Roundup Ready” modifications allow farmers to apply much higher levels of pesticides without harming crops, and are common in soy and corn—but those crops are mostly used for animal feed. No GM wheat is currently approved for sale or production in the US, or anywhere else in the world. 

Monsanto was authorized to test their GM wheat from 1998 to 2005 in 16 US states. It did, but decided to scrap the variety because there wasn’t much of a market. The crop never received final approval. 

The problem 

The wheat is not probably not harmful to humans—although since testing was never completed, we can’t be sure.  Nevertheless, most of Asia (not to mention Europe and a certain portion of the United States) is firmly opposed to GM crops made for human consumption. Asia consumers around 40 million tonnes of wheat a year—about a third of the global total—and much of it comes from the US, the world’s biggest exporter. 

The reality of GM testing a product in open fields is that it’s quite easy for cross-contamination. It’s like the dinosaurs in “Jurassic Park”—no matter how well-designed the safeguards, life always finds a way to jump the fence. Doug Gurian-Sherman, a scientist with the Union of Concerned Scientists in Washington, told Bloomberg Businessweek he “wouldn’t be at all surprised if there are a number of experimental genes that have contaminated and are happily being passed along at low levels in the food supplies of various crops already, but nobody’s testing. It’s really a ‘don’t look, don’t tell’ situation. We just really don’t know.”
The fallout
Japan has already cancelled its imports of some types of US wheat including white grains and animal feed. China, South Korea and the Philippines have all said that they are monitoring the ongoing US investigation, and the European Union said it was stepping up testing. China, which is expected to need much more imported wheat in the coming years, is expected to import 3.5 million tonnes in the year to June 2014. The Philippines imports around 4 million tonnes each year, according to Reuters

But the damage to US exports is only likely to go so far. As the biggest exporter of wheat (around a fifth of global supplies), the US is indispensable for wheat importers, particularly in Asia where the climate is not particularly well-suited to the crop.
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The hullaballoo over GM wheat has prompted US wheat futures to close at a three week high

My impression is that this could just be a short term scare. For today's financial markets, which have been bereft of price discovery from sustained interventions, sensational developments like this tends to magnify the emotions of greed or fear.

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