Mixed Signals

Biotechnology is starting to have a dramatic impact on global trade scenarios as international testing, container use and tolerance levels are inconsistent. Negotiations are ongoing to prevent intense stress felt by buyers, sellers and risk managers when international trade is disrupted.
By By Nicholas Zeman | September 18, 2009
Controversy hit the international commodities trade sector in August when a shipment of contaminated U.S. soybean meal was unloaded and detained in Tarragona, Spain, the nation's largest port. But the problem wasn't the soybeans themselves-commercial soybean events are all approved in the EU-it was a dirty container. As a result, 180,000 tons of soybean meal were sequestered and EU importers are refusing to book additional shipments of U.S. soybeans and soybean meal until the issue is resolved.

"We're disappointed that a shipment was halted and that there was a disruption to trade and to our customers in Europe," says Johnny Dodson, president of the American Soybean Association. This certainly affects the biodiesel industry, Dodson says, even if not directly. Certainly, biodiesel producers that possess complimentary crush operations have potential markets in the EU, even if U.S. methyl esters have essentially been banned there. When trade is disrupted, even a single shipment, there is a ripple effect that is felt by everyone in the system, especially risk managers.

The issue is that when more and more genetically modified organisms (GMO) are cultivated and traded globally, accidental contamination in shipments may become more frequent. Hence, it is it likely that, in the future, buyers may not want to face the costs of a more frequent rejection of grain at the border of countries applying a zero-tolerance policy towards low-level presence of unapproved GMO crops. "That puts us all in an uncertain, risky trade situation, and that is most serious for the entire European Community trade, livestock production and economy," says David Merino, a spokesman for the European Commission.

A different source in the American soybean industry had another opinion. "I've been involved in the futures markets since 1972 and I never saw any problems until we had the price explosion," the source tells Biodiesel Magazine. "Then the bottom fell out of the market, and buyers obviously want out of those contracts."

Sources further observed that ports in the EU are often stricter with shipments coming from the U.S. than they are with other sources such as Brazil, Argentina and India. "It wasn't like they found 100 pounds of corn in this shipment," says Jerry Gidel of North American Risk Management Services in Chicago. "They decided to test the dust. I don't know how often they test dusts and residues, but it seems a little odd." GMO contaminated corn dust was found along the edges of the soybean shipment in Spain. It is speculation, however, to say the situation resulted from a disgruntled buyer looking for a reason to keep from paying on delivery. There are many corn "events," or commercially ready genetic modifications, in different stages of the approval process, but GMO maize is still prohibited in the EU.

Zero Tolerance, New Products
Dodson says the ASA has been working for the past 18 months to make the approval process quicker for new GMO events, and to have a "reasonable tolerance" level for any material that is not approved. "We want there to be something besides zero tolerance," Dodson says. "It's almost impossible to meet these criteria, and we need to have some level of tolerance that would be acceptable to not disrupt trade."

Two out of three of the biggest GMO developers in the world are headquartered in Europe. Also, 80 percent to 90 percent of the soybeans grown in the Western Hemisphere are genetically modified. RoundUp Ready 1 and RoundUp Ready 2 made by Monsanto, and Liberty Link, made by Bayer Crop Sciences U.S., are approved for cultivation and use in Europe. Bayer just launched Liberty Link earlier this year as an alternative to Monsanto's glyphosate platform, which certain weeds have started to resist.

"If they had [marketed an event] that focused on increased oil or a better protein schedule, the whole world would have loved them," Gidel says. "Instead, the first thing they come out with is something that encourages the increased use of their herbicides. People act like these are radioactive beans, and you're lucky they don't explode in your system as soon as you eat them."

Before the commercial launch of the product, import approvals were obtained in key soybean export markets with biotech approval processes including Australia, China, the EU, Japan, Mexico, New Zealand, Russia, South Africa and Taiwan, as it has been recognized that certain crop threats have already developed a resistance to Monsanto's glyphosate platform.

"Glyphosate-resistant weeds have been confirmed in 19 states, and many states report weed resistance to multiple chemistries including ALS-, PPO- and triazine herbicides," Bayer stated. "By rotating to Liberty Link soybeans, growers have the benefit of effective, over-the-top weed control with Ignite, which has a unique, nonselective herbicide mode of action."

Peripheral Developments
While the shipment of soybean meal contaminated with GMO corn dust has led to an indefinite de facto ban against U.S. soy shipments, the EU nevertheless started accepting GMO canola from Canada earlier this summer. "We've been shut out since 1996, so it is a very positive development," said Joanne Buth of the Canola Council of Canada. "But this is not a huge market for us, and we don't expect that it will be because Europe has increased its acreage of rapeseed quite dramatically. But any additional demand is good for our growers."

Europe is a big buyer of the world's commodities but seems to have contradictory policies when it comes to buying GMO feedstuffs. Canola's primary application is as a food ingredient, but grocers and other manufacturers in Europe have to label their products appropriately if they use GMO ingredients, so they might be discouraged from buying Canadian oil or seeds. Regarding increasing feedstock availability for biodiesel production, sources say that the unofficial stance of the European biodiesel industry is that it doesn't want to be associated with GMOs.

There are certain countries, Dodson says mostly in the Eastern Bloc, adopting zero tolerance policies against all GMO material, above and beyond EU guidelines. "The possibility that no GMO products will be accepted in these countries is causing great concern for their grocers and animal ag-groups," he says. About 10 percent of the U.S. crop is grown under contract for certain export markets, especially Japan, as well as the natural foods and organic industries, Dodson says.

China is the biggest importer of soybeans in the world and has a strong genetic program, which it sees as something that will help the country increase production. But Asia as a whole is a strong market for U.S. growers banking on projections that world protein needs will continue to increase exponentially in coming years. Some countries, however, are still fiercely resistant to the proliferation of GMO crops, even though biotechnology is seen as a means to combat world hunger and some environmental problems.

Also, there is no World Trade Organization standard for GMO acceptance. As previously mentioned, even some European countries are bucking the policies of the union in resistance to biotechnology. This is the situation of mixed signals that Dodson says some of the advocacy work he has been involved in hopes to change. Steadfast, 100-percent purity is virtually impossible to maintain in commodities shipments, and intermodal containers are used to serve the entire market, which consists of dozens of various feedstuffs. Containers are certainly not sterile, and are not boiled or scrubbed after every use, however these practices have very little to do with producers. "We have to come to agreement that is slightly more tolerable than absolute zero," Dodson says. "What percentage or level that would be, I don't know, but zero is zero and that's just impossible."

Nicholas Zeman is an associate editor for Biodiesel Magazine. Reach him at (701) 738-4942 or nzeman@bbiinternational.com.
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