China Injects Uncertainty into World of Genetically Modified Seeds

There is a new era in weed management fast approaching farmers.

Monsanto and competitor Dow AgroSciences are on the verge of introducing the next generation of herbicide-resistant corn, soybeans and cotton — genetically modified seeds representing hundreds of millions of dollars in research and the promise of billions in sales.

U.S. regulators have given the green light for Dow’s Enlist corn and soybeans, while final approval is expected shortly for Monsanto’s new Xtend cotton and soybean systems.

There is, however, a potential problem: China.

The marketing of new biotech seeds has long been fraught with perils of one sort or another because of the global nature of grain trading. A seed might be approved in the U.S., but that doesn’t mean other nations are ready for it.

Historically, it’s taken an extra two years to gain approvals in China, which won’t even consider a new engineered seed until it’s been approved by the originating country. But lately, the secretive nation — which happens to be the top importer of soybeans — has become something of a wild card when it comes to unapproved seeds.

“There seems to be a bit of a breakdown in the predictability of that two-year time frame,” said Nathan Fields, director of biotechnology for the National Corn Growers Association in Chesterfield. “We’re just not sure what’s happening in China.”

But what everyone does know is what happens when China enforces its rules.

That was hammered home in November 2013 when China decided, for reasons not totally clear, to test incoming corn shipments.

Regulators found traces of Viptera — a biotech seed introduced in 2010 by Syngenta of Switzerland, but not yet approved by China.

And just like that, U.S. corn’s door to China was effectively slammed shut.

In the months that followed, somewhere around 1 million tons of U.S. corn were rejected, creating havoc in global pricing. Industry estimates suggest the losses to corn growers range from $1 billion to $2.9 billion.

There are theories about why China, seemingly out of the blue, started taking a closer look at those shipments. Many in the agriculture industry suggest it was nothing more than an attempt to shed high-priced contracts in the face of falling corn prices.

“They bought a bunch of corn when it was $7 a bushel. Then prices went down and a month later, they started rejecting corn,” Fields said. “You can draw whatever conclusions you want.”

But this is one of those cases where the reason may be relatively insignificant. All that matters is what happened after China took action. It sent shock waves through an agriculture industry that’s grown increasingly reliant on bioengineered seeds. And it highlights the inherent dangers of selling seeds that lack approval in key export markets.

“The fundamental problem with this is the market uncertainty,” said Nicholas Kalaitzandonakes, director of the Economics and Management of Agrobiotechnology Center at the University of Missouri-Columbia. “How do I as a trader send a load to China if I think there’s a chance it’s going to get tested?”

POLITICAL FACTORS

To be clear, China isn’t opposed to genetically modified seeds. Like virtually every other nation, it has its own rules for determining if and when a new trait is allowed inside its borders. Things also get tricky in the European Union, where politics often cause havoc with the approvals process.

“Each country has its own timing,” Kalaitzandonakes said. “It’s become a very difficult process.”

But it’s particularly true with China, which has some unique rules, including the requirement of field trials on China’s own soil.

It has resulted in a process that’s a bit of a mystery to the industry. There are seeds that gain approval in less than two years, while others can take seven or more years. It took nearly five years before those Viptera corn seeds by Syngenta finally gained approval in December.

When asked about it, U.S. Agriculture Secretary Tom Vilsack told Reuters: “Their system is what it is. You get approvals sometimes. And sometimes you don’t.”

Creve Coeur-based Monsanto, for its part, is optimistic about its chances of the beating the two-year timeline for its new Roundup Ready 2 Xtend soybeans, engineered to be immune to the company’s signature Roundup herbicide, as well as dicamba and glufosinate.

Development of the seeds has been driven largely by the increasing growth of weeds immune to Roundup — generically known as glyphosate.

This new generation of herbicide-resistant seeds has drawn strong criticism from groups who worry about an increased use of chemicals in the food chain and potential health risks.

The company declined an interview request to discuss the regulatory situation in China. But during a recent conference call with analysts, Monsanto’s chief technology officer, Robb Fraley, said the company expects to have the soybean approvals in time for a commercial launch in 2016.

But what if that doesn’t happen?

Things can get tricky for companies mulling what to do with a new seed, whose patent clock is ticking, while waiting for the go-ahead in China.

SEGREGATING SEEDS

Certainly Syngenta’s earlier decision to move forward with the ill-fated commercial launch of Viptera is getting a lot of attention, with some 200 lawsuits — recently consolidated in U.S. District Court in Kansas City — filed on behalf of farmers, grain handlers and others who say they were hurt by the resulting market turmoil.

“From the very beginning, Syngenta was warned about this,” said Don Downing, a St. Louis attorney with Gray, Ritter & Graham, one of the firms involved in litigation against the seed maker. “They have an obligation to prevent this situation from happening.”

Syngenta, however, argues the lawsuits are without merit and that it strives to give growers access “to approved new technologies that can increase both their productivity and profitability.”

Still, the company is taking a different approach with its new Duracade corn, engineered to fight rootworm. The seeds still lack approval in China and the European Union. After running into market resistance, the company decided to halt Canadian sales last year and forged a deal with grain trader Gavilon, which will buy the corn from U.S. farmers and channel it to approved destinations.

Dow is taking a more cautious approach, restricting sales of its own new corn and soybean seeds, designed to be immune to its new Enlist Duo herbicide, a combination of glyphosate and 2,4-D.

The company, which has been waiting for two years for Chinese approvals, will allow farmers to grow the corn only if they plan to use it as feed on their farms. The soybeans are being offered through a small pilot program that lets farmers test them.

History, however, shows that even these more cautious approaches carry substantial financial risk.

In 2000, global demand for U.S. corn fell after a bioengineered corn — called StarLink — was detected in taco shells and chips, despite not being approved for human consumption.

The corn, developed by Aventis CropScience, was allowed to mix with regular grain at elevators and processing operations. The North Carolina company was plastered with lawsuits from farmers across the nation, and eventually agreed in 2003 to pay more than $110 million to settle claims.

Just three years after that, Bayer CropScience got into trouble when its unapproved LibertyLink biotech rice made its way into the food supply.

Demand for rice exports plummeted, with Japan and European nations banning U.S. rice. Bayer agreed in 2011 to pay up to $750 million to farmers in five states, including Missouri, along with another $270 million to other businesses suffering losses in the incident.

The problem is that the grain network simply isn’t designed around the idea of absolute segregation of different varieties of the same crop, said Bryce Knorr, senior market analyst at Farm Futures.

“The supply chain is this Rube Goldberg contraption,” Knorr said. “You have to have everybody along the line doing everything 100 percent right.”

Tim Barker, St Louis Dispatch, January 20 2015

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