The GMO issue continues to get attention. Recently Archer Daniels Midland (ADM) company issued a statement encouraging suppliers to segregate non-genetically enhanced crops to preserve their identity. Gerber has announced that crops with genetically modified organisms (GMO) would not be used in baby food products. Europe has resisted importing GMO grains. Japan and other countries may reject GMO grains for some uses. Brazil may not allow the use of GMO seeds (their producers want them) so that they can market as a GMO free supplier.

Would GMO be an issue if grain supplies were tight? It's easy for certain buyers or markets to say they don't want a certain type of grain (without offering to pay a premium for what they want) when world supplies are large and expected to increase. Will this be the case if supplies get tight? Also keep in mind, most of these buyers don't represent a large portion of the market. For example, while Europe is rejecting some of the Bt corns, we really don't export that much corn to Europe. Still, they are a segment of the market and you have to ask--would it pay to segregate non-GMO from GMO grain?

It might sound easy, but can you really segregate the non-GMO from the GMO's? Standards aren't really clearly defined and this raises more questions than answers. Can there be traces of GMO in non-GMO grains or do they have to be pure? If there can be traces, how much? Who will determine the standard? Where, when and how will it be tested? There could be many sources of "contamination." In the case of corn, cross-pollination of non-GMO with nearby GMO could be a problem. Did you clean out the planter/drill completely when you switched varieties or will some GMO be mixed in fields that were planted to non-GMO varieties? Will combines, auger wagons, trucks, dump pits, bins, etc. have to be thoroughly cleaned and vacuumed to prevent mixing of non-GMO's? The problems will be compounded for elevators who have to deal with a large number of producers. Whether it occurs on the farm or at the elevator, the standards aren't clear and it will cost money to segregate non-GMO grain!

What's the payoff? Demand for a "special" or "more desirable" product is usually expressed through the market in the form price premiums. In general, the major grain companies haven't offered much yet in the way of premiums or discounts. ADM has offered an eighteen-cent premium for non-GMO soybeans, but is this enough to cover the costs of keeping them separate. Company statements encouraging segregating of grains or market advisors saying that it "may" pay doesn't provide the same clear market signals as price premiums or discounts.

While the payoff is uncertain, segregating non-GMO grains might be a good idea--if you have bins available and can do it with minimum cost. Other than the costs and extra effort required to keep it separate, there appears to be little downside risk and you might capture some premium. Longer term, it is unclear where the GMO issue is headed and how it will play out in the markets.

-- Melvin

Decisive Marketing - September 10, 1999
http://outreach.missouri.edu/agconnection/DCT/DM990903.html -- Revised: April 20, 2004
breesm@missouri.edu