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 Duracade 5307 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.
Meanwhile, the NGFA analysis estimates that U.S. corn prices would have been 11 cents per bushel greater if the MIR 162-related trade disruption with China had not occurred. The study found that applying this price-depressing impact across U.S. corn production amounts to a $1.144 billion loss for U.S. corn farmers over the last nine months of the current 2013-14 marketing year.
At the time NGFA conducted the analysis, it was uncertain if and when China would approve MIR 162 corn for import during the current marketing year that ends Aug. 31.
For DDGS, the NGFA analysis noted that prices at terminal locations declined by between $80 and $100 per metric ton in January 2014 following the trade disruption with China. While prices subsequently have rebounded, the analysis found that an approximately $7 per metric ton price-depressing impact continues to persist, resulting in a $202 million loss to sellers of DDGS during the 2013-14 marketing year.
For soybeans and soybean meal, the study found that soybean prices were affected negatively by lower values for soybean meal and the increased risk of Chinese detection of MIR 162 in U.S. soybean shipments. U.S. soybean prices at the Louisiana Gulf declined by $20 per metric ton between Dec. 20, 2013, and Jan. 3, 2014.
While soybean prices have rebounded to reach higher levels, the analysis found that a 15 cent per bushel price-depressing impact persists "because of the overhanging trade uncertainty that results in the incorporation of increased risk premiums in commercial pricing, which in turn reduce U.S. prices."
Noting the extreme importance of the Chinese market to U.S. soybean growers and marketers, the NGFA study found that as of March 20, USDA projects that more than two-thirds of U.S. soybean export sales for the 2013-14 marketing year are destined to China. Further, USDA forecasts that the United States is expected to export 46% of its 2013 soybean crop.
Finally, the NGFA study on MIR 162 reported that aggregated data provided by U.S. exporters shows that since the trade disruptions with China began in mid-November 2013, a total of 3.327 million metric tons of U.S. corn have been subjected to rejected or diverted shipments, or canceled or deferred sales.
Of this quantity, 1.45 million metric tons of U.S. corn shipments have been rejected by China, greater than the 908,800 metric tons reported most recently by the Chinese government. Conservatively estimated costs to U.S. corn exporters total $225 million.
Importantly, these costs do not include likely losses of U.S. corn export sales to China that may have occurred in 2013-14 were it not for the MIR-related disruption in shipments and sales. The estimated costs also do not include economic damage from disruptions in U.S. exports of DDGS and soybeans.
Potential economic impact
Meanwhile, the second NGFA analysis estimates that the potential net economic loss to the U.S. corn, DDGS and soybean sectors resulting from the commercial launch of Syngenta's Agrisure Duracade 5307 biotech-enhanced corn could range from $1.2 billion to $3.4 billion, with a mid-point range of $2.3 billion. The majority of the estimated economic impact falls on U.S. corn producers.
The NGFA analysis is confined to the economic impacts associated with U.S.-China trade, although the Duracade 5307 trait also is not approved yet for import by the 28 countries of the European Union, Colombia, Switzerland, Brazil, Egypt, India, The Philippines, Indonesia, Thailand, Singapore, the Russian Federation, Kazakhstan, Belarus or Turkey.
The analysis does not evaluate the impact on the perceptions of foreign customers concerning U.S. reliability as a predictable, reliable supplier of grains and oilseeds.
The analysis is predicated upon the assumption that the presence of Duracade 5307 in exportable U.S. corn supplies at some level exceeding a zero tolerance virtually is inevitable given cross-pollination and potential commingling, particularly given the wide geographic area and number of acres involved.
The study notes such a zero-tolerance policy creates risk of potential shipment rejections; each U.S. exporter makes its own individual and independent decision on how to respond to such risk in making marketing decisions with respect to China and other affected export markets where approval of Duracade 5307 currently is lacking.
In arriving at its net cost estimate, the NGFA analysis accounted for the estimated benefits to growers and handlers resulting from corn rootworm protection afforded by Duracade 5307, including increased corn production volumes, as well as economic benefits to Syngenta and sellers of the seed.
View both studies here:
NGFA's analysis of the impacts of the Agrisure Viptera MIR 162-related trade disruption with China
NGFA's assessment of potential impacts of the Agrisure Duracad 5307 commercial launch