When Good Science Meets Bad Agricultural Economics We Get Segregated Markets

Wheat Fus 510     I was living a charmed life until I got 3 inches of rain in just over 36 hours this past week.  This is agriculture, there are always ups and downs and Mother Nature can sometimes be cruel.  I was parched dry but now it’s so wet I cannot even walk across the fields.  Next week it’s time to put fungicide on my soft red winter wheat.  Maybe I should look on the bright side; the wheat was parched but now will have life.  I am looking forward to harvest time next month.

Of course the events of this past week would put some doubt on what really is in that wheat field.  Last fall I made the deliberate decision to buy mostly new seed, as the variety I had sowed in the past had grown old.  So now I grow a specific variety of soft red winter wheat that is shorter and can take the higher nitrogen applications.  The only question I have is how much of it is glyphosate tolerant?  Is there some Roundup ready wheat out there in my fields?

Of course if you haven’t heard last week glyphosate tolerant wheat was found growing in a field in Oregon.  It was a major bombshell to hit the Ag news in the United States as that cat was supposed to be put back in the bag in 2005.   So with that news hitting the market, it was only a matter of time before we heard from countries that are large wheat end users.  It took a day but Japan canceled all imports of soft white wheat from the United States.  As of this writing I do not know if South Korea or the Philippines, large buyers of this class of wheat have curtailed their imports.  The bottom line is, this is a question of agricultural economics and market structure, not about food safety.  In one day, the specter of some genetic modification in the world wheat market cost US farmers some real money.  For those who constantly defend the big Ag corporate giants, this is proof that sometimes-stupid things happen.

Yes, the toothpaste is out of the tube and the cat is really out of the bag this time.  Is their any genetically modified wheat growing in the fields across Ontario Québec and the prairies?  Does this represent real opportunity for Canadian wheat producers who might be able to fill these markets with the guarantee of no GM wheat?  Or is this something that will just simply blow over like it did with US rice a few years ago where genetic modification was found?  The bottom line is having genetic modification in the wrong place, serving a market that doesn’t want it is bad agricultural economics.  When good science meets bad agricultural economics, good science loses every time.

However, I do not want this column to be about the pros and cons of genetically modified organisms.  I grow tens of thousands of dollars worth of genetically modified crops every year but I am under no delusions of why.  In many ways, genetic modification in our commodity system is more about market structure and price discrimination.  The latest discovery of genetically modified wheat in an Oregon field, where it shouldn’t be is one example of how a market can be segregated almost without trying.

What do I mean?  In Ontario, about 30% of soybeans grown in 2013 are non-gmo.  Of course 20 years ago it was all non-GMO.   As the popularity of genetically modified soybeans rose in Ontario, premiums for non-GM soybeans went up.  There was even a deliberate attempt to introduce a GM white hilium soybean into the Ontario market to effectively kill the non-GMO competition.   It didn’t work; in fact it increased costs for the testing of genetic modification for all non-GM crops.  However, at the end of the day the preponderance of genetically modified soybeans which only go to a crusher have made non-GM soybeans much more valuable.  The soybean market is no longer the soybean market in Ontario.  It is segregated into a GM and non-GM market with higher prices to the latter.

From a purely production agriculture perspective it doesn’t make a lot of sense.  However, consumers do not want genetic modification in their food supply, but it is gladly traded off for the bigger prize of cheap food.  All of North America is like this.  It would be the same way in the wheat market if we ever got there.  You would have a GM wheat market and a non-GM wheat market.  That’s why the news of last week with the glyphosate resistant wheat growing in an Oregon field was such big news.  At this point, the whole export market to Japan was shut down.   These people take their genetic modification seriously.

It is all such a slippery slope. To think that spraying wheat with glyphosate had any redeeming value.   I think it was insanity.  However, using genetic modification for fusarium resistance in wheat makes so much more sense.  Heck, using genetic modification to make wheat more functional, I’m all for.   Needless to say, we have to get it right and right now I’ve got a wonder how much more genetically modified wheat is growing out there in the field.

The future is more genetic modification regardless of where you find yourself on that issue.  I’ve said it a million times; this cat is out of the bag.  The challenge is to get it right and with the protests last weekend and the rogue wheat in Oregon blowing in the wind this past spring it’s pretty obvious agricultural biotechnology has got it wrong.   An even better thing would be for people to admit that on both sides.  So we move ahead.  We’ll have more good science and when it meets bad agricultural economics, it means good science loses.  Expect more of this as we move ahead.