NGFA Estimates Up to $2.9 Billion Loss to U.S. Corn, Soy in Aftermath of Trade Disruption with China Over Detection of Unapproved Syngenta Agrisure Viptera™ MIR 162 Corn
WASHINGTON (April 16, 2014) – A pair of economic analyses issued today by the National Grain and Feed Association (NGFA) estimates that up to $2.9 billion in economic losses have been sustained by the U.S. corn, distillers grains and soy sectors 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, where the trait has not been approved yet for import as food or feed.
But according to a second NGFA analysis, U.S. growers, grain handlers and exporters could sustain an even greater economic impact – up to $3.4 billion – during the 2014/15 marketing year that starts Sept. 1 given Syngenta North America Inc.’s decision to launch seed sales of its new Viptera Duracade™ 5307 biotech-enhanced corn well before the earliest regulatory-approval timelines in key U.S. corn export markets (including China). Syngenta has said seed sales of Duracade 5307 are expected to result in the planting of between 250,000 and 300,000 acres in portions of as many as 19 U.S. Corn Belt states.
The NGFA stressed that it strongly supports agricultural biotechnology and other scientific and technological innovations that contribute to efficient production and availability of a safe, abundant, affordable and high-quality food and feed supply for U.S. and world consumers. In addition, the 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 timeliness and synchronization of U.S. and foreign governmental approvals of biotech-enhanced traits.
However, the NGFA said its economic analyses of the impacts of the trade disruptions resulting from the detection of unapproved Agrisure Viptera MIR 162 provides a “case study” on the ramifications of commercializing crop biotechnology before securing import approvals from major U.S. export markets – particularly foreign countries with a zero-tolerance policy for the presence of unapproved biotech-enhanced traits.
“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.”
The NGFA noted that the U.S. Department of Agriculture (USDA) currently forecasts China’s corn imports will increase from 2.7 million metric tons in 2012 to 22 million metric tons by 2023, accounting for nearly half the projected growth in world corn trade over that time span. For the current 2013/14 marketing year, USDA had projected before the trade disruption that the United States would be the principal corn exporter to China – at an estimated 7 million metric tons. However, U.S. corn export shipments to China reported on an aggregated basis to the NGFA by U.S. exporters have amounted to only 1.23 million metric tons thus far.
The NGFA’s study found that in the aftermath of the disruption in U.S. corn shipments to China that began in November 2013 following the detection of MIR 162, financial losses to the U.S. corn, distillers dried grains with solubles (DDGS) and soybean sectors are estimated to range from $1 billion to $2.9 billion. 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. For instance, U.S. exporters have reported that China has detained and tested several shipments of U.S. soybeans following the detection of MIR 162, and that some U.S. soybean sales to China have been reduced or canceled as a result. 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 noted 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 percent 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, substantially 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. Nor do the estimated costs include economic damage from disruptions in U.S. exports of DDGS and soybeans.
Potential Impact of Commercialization of Agrisure Duracade 5307
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.
Importantly, 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. Nor does the analysis 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.
The NGFA’s analysis of the impacts of the Agrisure Viptera™ MIR 162-related trade disruption with China is available here, while the assessment of potential impacts of the Agrisure Duracade™ 5307 commercial launch is available here.
The NGFA, established in 1896, consists of more than 1,050 grain, feed, processing, exporting and other grain-related companies that operate more than 7,000 facilities and handle more than 70 percent of all U.S. grains and oilseeds. Its membership includes grain elevators; feed and feed ingredient manufacturers; biofuels companies; grain and oilseed processors and millers; exporters; livestock and poultry integrators; and associated firms that provide goods and services to the nation’s grain, feed and processing industry. The NGFA also consists of 26 affiliated State and Regional Grain and Feed Associations, and has strategic alliances with Pet Food Institute and North American Export Grain Association.