Bunge North America, a major corn exporter, has posted signs at its receiving elevators that it will not accept Agrisure Viptera corn this fall because of concerns for the Chinese market. Syngenta has sued Bunge under various federal and state statutes that require buyers to treat farmers “in a fair and reasonable manner.” More recently, Cargill and ADM have announced they will not accept the corn at wet mill ethanol plants until it has been approved by the EU. Both companies sell wet mill by-products for livestock feed in international markets and, with prior written notification, both will work with farmers to secure domestic market opportunities. Consolidated Grain and Barge is also not accepting Agrisure Viptera corn.
Syngenta has secured access to export markets for Australia, Brazil, Canada, Japan, Mexico, New Zealand, the Philippines, Korea and Taiwan which include most of the major corn and DDGS markets. Syngenta estimates that corn with the Agrisure Viptera trait accounts for less than 2 percent of U.S. corn acres in 2011. Finding a market is not a problem, but keeping it from being commingled and found unexpectedly in a shipment to a country where it is not approved is an issue. China is expected to be the seventh largest U.S. corn market this year, but small compared to Japan at 16.1 MMT and Mexico at 9.2 MMT.
The old phrase that “time is money” is particularly true for biotech seed companies. Traits can require up to ten years to move from concept to commercial use, including up to two years to be deregulated by USDA. If Syngenta waited for the expected early 2012 approval of Agrisure Viptera by China, the company would have lost two years of intellectual property rights protection and seed sales. Farmers were also ready to use the product that protects against 14 insect pests that Syngenta estimates cost corn farmers $1.1 billion each year.
Under current procedures, China will always be an impediment to full acceptance in the export market. A new trait cannot have an application filed in China until it has been fully approved in the originating country. In this case there is roughly a two year lag between April 2010 approval in the U.S. and the expected early 2012 approval in China. According to the U.S. Agricultural Attaché in China, that is about average for other approved traits for import of commodities for food processing and well beyond the 270 days set in the Ministry of Agriculture regulations. Biosafety certificates are good for five years for non-food crops and three years for food crops. China also has a zero tolerance for low level presence for unapproved varieties, which is a clear restraint on trade and gives rise to the hesitancy of Bunge and others to assume the financial risk of trace amounts of the new trait.
The situation is likely to get worse with China until they adopt a system that gives approval close to the time of U.S. approval because imports of corn are expected to increase sharply in the immediate years ahead. The U.S. Grains Council, a non-profit group promoting the exports of U.S. corn, other feed grains and DDGS, believes China could be importing 10-15 MMT of corn annually by 2015, most of it from the U.S. That volume would rival Japan as the largest market for corn and easily surpass Mexico and Korea, the current number two and three markets.
The EU also has a zero tolerance for U.S. approved traits that have not been approved for use in the EU. They have created a technical solution that allows livestock feed with a presence of 0.1 percent or less to be accepted. The biotech feed must be authorized for commercialization in a non-EU country and have a request for authorization applied to the European Food Safety Authority for at least three months or for which an authorization has expired. The EU farmers association believes the new rules are still too restrictive given the bulk handling of grains and feed in international trade. EU approval for livestock feed should take about a year if no problems develop, but can take much longer. Authorizations are valid for ten years and renewable for additional ten year periods.
After 15 years of use of biotech crops around the world from almost three billion acres, there should be a high degree of harmonization across countries that regularly participate in international trade. The reality that ten countries including the U.S. have approved the use of Agrisure Viptera is an indication that harmonization is occurring, but that two major markets have not provided authorization for feed use means more work must be done. It is also approved for cultivation in Canada, Argentina and Brazil.
The most direct approach would be to have simultaneous approval processes across countries and the respective regulatory agencies share results on an ongoing basis. This should reduce the time period for working through the details, lower costs and increase the amount of oversight provided by the countries collectively. This would allow each country, or group of countries, to maintain its own regulations, while gaining the benefits of sharing analyses. If China does buy 10-15 MMT per year, it would be in its best interest to participate in this coordinated authorization process.
A less beneficial option would be to increase the threshold for low level presence of unapproved varieties as long as the varieties have been approved in other countries. That would still require some segregation of grain, but remove the impossible standard of zero tolerance in a bulk handling industry.
Markets will continue to change and regulatory systems must change along with them. Harmonization of regulations across countries with reasonable standards would work to the advantage of seed developers, farmers, handlers and end users.
Ross Korves is the Economic Policy Analyst for Truth About Trade & Technology