China's rejections of a banned variety of genetically modified U.S. corn have cost the U.S. agriculture industry up to $2.9 billion, a grain group said on Wednesday in the first estimate on losses from the trade disruptions.
The National Grain and Feed Association (NGFA) estimated in a report that rejections of shipments containing Syngenta AG's Agrisure Viptera corn resulted in losses of at least $1 billion, based on an economic analysis that included data supplied by top global grain exporters.
China, the world's third-biggest corn buyer, in November began rejecting corn containing Viptera, known as MIR 162, after previously accepting the grain. The variety, which has been cleared by the United States and other importers, has been awaiting approval by Beijing for four years.
"It obviously is a significant cost when you add up the producer losses and the cost to exporters and others in the value chain," NGFA President Randy Gordon said about the rejections in a telephone interview.
The NGFA and North America Export Grain Association unsuccessfully lobbied Syngentato halt sales of corn seed containing MIR 162 and another unapproved variety called Agrisure Duracade.
Syngenta did not immediately respond to questions about NGFA's estimates.
Since mid-November, China has turned away 1.45 million metric tons of U.S. corn because of the presence of MIR 162, topping a Chinese government estimate of 908,800 tons, according to NGFA. The corn was diverted to other buyers, who "almost assuredly would have negotiated a discount," the report said.
Costs to U.S. corn exporters like Cargill Inc and Archer Daniels Midland Co total an estimated $225 million, not the estimated $427 million reported last week by the Wall Street Journal, according to NGFA.
Cargill, the top exporter of U.S. grains, last week said rejections of U.S. corn shipments by China contributed to a 28 percent drop in earnings for the quarter ended Feb. 28.
The rejections have depressed U.S. corn prices by an estimated 11 cents per bushel, accounting for projected losses of $1.14 billion for U.S. corn farmers for the last nine months of the marketing year that ends on Aug. 31, according to NGFA. It is unknown whether China will approve the trait before the marketing year ends.
Karl Setzer, grain solutions team leader for MaxYield Cooperative in Iowa, said he had heard estimates that China's rejections had reduced U.S. corn prices by 10 cents to 20 cents per bushel. He expects more shipments to be turned away because China has an ample supply of corn.
"How do you put a dollar figure on it?" he said. "I expect everything they have with us to be washed out."
Potential losses from trade disruptions for the next marketing year, which begins on Sept. 1, could range from $1.2 billion to $3.4 billion due to the introduction of Agrisure Duracade into the supply chain, according to NGFA. Duracade will be planted in the United States for the first time this spring.
Syngenta AG, the world's largest crop chemicals company, said on Monday it did not expect to learn before the summer whether China will approve a now-banned genetically modified strain of corn that importers have rejected by the boatload.
Syngenta said it believed that China's National Biosafety Committee, which is responsible for approving GMO imports, discussed the company's Agrisure Viptera corn strain at a meeting on April 10-11.
"We have not been informed of the outcome of the meeting and do not expect any information until this summer, based on past practice," Syngenta spokesman Paul Minehart said. "We are eager to receive the official report of the committee and, ultimately, sign-off by the Minister of Agriculture."
China in November began rejecting U.S. corn containing Viptera, known as MIR162, after previously accepting the grain. The variety, which has been cleared by the United States and other importers, has been awaiting approval by Beijing for four years.
Rejections of MIR162 corn have cost the U.S. agriculture industry up to $2.9 billion, according to an estimate from the National Grain and Feed Association. The NGFA and North America Export Grain Association unsuccessfully lobbied Syngenta to halt sales of corn seed containing MIR162 and another Syngenta variety called Agrisure Duracade until the strains are approved for import by major buyers.
China's MIR 162 Rejection Has Significant Impact on U.S. Grain Sector
Two economic analyses issued last week by the National Grain and Feed Association estimate that the U.S. corn, distillers grains and soy sectors have sustained between $1 billion and $2.9 billion in economic losses in the aftermath of the enforcement of a zero-tolerance policy on Syngenta's Agrisure Viptera MIR 162 corn technology in U.S. export shipments to China.
A second NGFA analysis has found that the losses are expected to continue as U.S. growers, grain handlers and exporters could sustain up to a $3.4 billion economic impact during the 2014-15 marketing year that starts Sept. 1 on Syngenta's plan to launch sales of its Viptera Duracade5307 biotech-enhanced corn before the earliest regulatory-approval timelines in key U.S. corn export markets.
The NGFA stressed that it strongly supports agricultural biotechnology and other scientific and technological innovations that contribute to efficient production and availability of food and feed, but commercializing crop biotechnology before securing import approvals from major U.S. export markets can have significant ramifications, as the studies show.
"Regaining and maintaining access to the Chinese import market, as well as preserving access to other U.S. export markets, is critically important to the short- and long-term prospects of U.S. agriculture," said NGFA President Randy Gordon. "These export markets are key drivers of producer profitability, current and future economic growth for U.S. agriculture, and achieving global food security."
NGFA said it is working in tandem with the North American Export Grain Association; corn, soybean and other grower organizations; biotechnology providers; and the seed industry in trying to improve the synchronization of approvals of biotech traits.
For the current 2013-14 marketing year, USDA had projected that the U.S. would be the principal corn exporter to China, with an estimated 7 million metric tons. U.S. corn export shipments to China, however, have amounted to only 1.23 million metric tons thus far.
Current economic impact
The disruption in U.S. corn shipments to China began in November 2013, following the detection of MIR 162. U.S. corn trade with China has come to a standstill since then, and trade with China in DDGS and other U.S. commodities is being conducted in a riskier market environment.
China has responded by significantly increasing imports of U.S. grain sorghum, originating corn from Ukraine and utilizing its domestic stocks. Most recently, Brazil and Argentina were granted approval to begin exporting corn to China.
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