A great follow up article from the Australian Financial Review on the lunatic report from the Australian Bureau of Agricultural and Resource Economics (ABARE) that claimed the GM crop bans in Australian states would cost billions!

ABARE, it may be remembered, deduced this massive loss by taking Australia's entire crop output (including wheat!) and saying 5-10% of that figure is what is being lost by not going GM!!

In fact, it should be simple maths to calculate the fact that GM canola - the only GM crop under discussion - yields less in Australia, costs more and will trigger market rejection. All of which adds up to a serious potential loss for Australia's farming industry.

The headline says it all: "Crop ABARE-ations"!

Crop ABARE-ations
Julie Macken
Australian Financial Review, Friday 14th October 2005

The government's rural forecaster is under fire over its assumptions about genetically modified crops, Julie Macken writes.

The headlines were alarming. Australian grain growers would lose at least $3 billion in income over the next 15 years if the state governments did not lift their moratoriums banning commercial planting of genetically modified crops.

The claim wasn't from a multinational cropping conglomerate but from the federal government's own Australian Bureau of Agricultural and Resource Economics (ABARE) report, Transgenic Crops, Welfare Implications for Australia.

A transgenic crop is produced after the artificial insertion of genetic material not normally present.

The report portrays a global market with "continued growth in the adoption of transgenic crops and continued development of new varieties of transgenic crops in Asia and in north and south America".

This trend, the report argues, will "potentially result in Australian grain and oilseed producers competing with increasing volumes of transgenic grains and oilseeds in export markets. This is likely to result in lower profitability and lower market share for conventional grain crops, which are more expensive to produce than transgenic varieties".

ABARE executive director Brian Fisher concludes in the report that the state-based moratoriums are hurting Australia's research and development effort and "Australia risked being left behind as other nations embrace innovations in transgenic crop development".

But as farmers and environmentalists examined the report more closely, their outrage grew and it was directed at ABARE, which, according to its own brief, provides "high-quality economic policy analysis and forecasts in order to enhance the competitiveness of Australia's agricultural and resource industries and the quality of the Australian environment".

What made the critique of ABARE more than a predictable diatribe from vested interests who fear GM agriculture was that a number of Australian economists were prepared to challenge the report's assumptions.

Geoff Wells, an adjunct senior lecturer at the International Graduate School of Business at the University of South Australia, has concerns about the lack of evidence supporting ABARE's assumption that consumer resistance to GM food is not an issue. "The market reaction to the product with which we have had longest experience, GE soybean, suggests opposite assumptions are more reasonable," Wells says.

"The majority of the relevant market research studies - of which there is a considerable body - indicate significant consumer resistance to GE foods. And there has been very little modification of this opposition, not only in Europe but in other developed countries where research has been carried out.

"I find it surprising that ABARE is prepared to state its conclusions with such relative certainty."

A report released earlier this year by the government's Rural Industries Research and Development Corporation - a statutory corporation set up to work with Australian rural industries on the organisation and funding of their R&D needs - says consumers' level of concern about GM food is the same as their concern over pesticides and chemical preservatives. About 76 per cent of respondents say they will reduce or never purchase products with traces of genetic modification and no perceived benefit. It also states that "consistent with previous research, in the absence of benefit, consumers will avoid GM products". Up to 34 per cent of people say they would buy GM potato chips, potatoes or milk only if a discount of between 30 and 60 per cent was given.

Kate Owne, co-author of the report, told The Australian Financial Review that given both Japan and New Zealand "have made it clear that they do not want GM food for human consumption, it would have been helpful if ABARE had shown greater sensitivity to the issue of consumer resistance and factored that in".

Richard Denniss, economist and deputy director of the Australia Institute, suggests ABARE's assumptions on consumer take-up of GM foods "reads more like a wish-list than an assessment of the state of play".

Julie Newman, a canola, wheat and barley farmer in Western Australia and national spokesperson for the Concerned Farmers Network, accuses ABARE of releasing a "terribly misleading" report "based on unsubstantiated claims". She believes that if GM canola, wheat or barley were introduced into Australia, non-GM farmers would be wiped out. "This is a $12.25 billion a year industry being put at risk," Newman says. "It's not only grains but honey, stock, milk, poultry and feed that is imperilled - even our yabby exporters have to guarantee the yabbies are GM free. Our markets just don't want it."

Hitting back at critics, a spokesman for ABARE went through the assumptions made by the department in achieving the figure of a $3 billion loss over 15 years.

The first was that "transgenic crops were assumed to provide a lift in productivity of 5 per cent for canola, 5 per cent for wheat and 10 per cent for barley. These were based on the results of published field trials - or in the case of canola, experience with commercial production. The productivity gains were assumed to be realised over a five-year period (from 2006 to 2010)".

However, it is difficult to imagine how to achieve a 5 per cent lift in productivity for GM wheat because no country in the world, including North America, is willing to produce GM wheat.

In May 2004, Monsanto announced that it would shelve R&D on GM wheat. The announcement followed five years of opposition from wheat farmers, consumers and food safety activists to the commercial introduction of Roundup Ready wheat.

Newman says the last report by ABARE calculates the Monsanto user licensing fee "as being 7 to 10 per cent of the value of the product, and Bayer Cropsciences reported to OGTR [the Office of the Gene Technology Regulator] that their GM Invigor variety has 20 per cent less vigour than conventional non-GM hybrids. In both cases it appears we're being asked to pay more to get less".

A professor of economics at Iowa State University, Robert Wisner, says the introduction of genetically modified wheat in the US still risks the loss of a third to a half of US hard red spring and durum wheat export markets and a drop in price of up to a third, according to the latest update of an October 2003 report, Market Risks of Genetically Modified Wheat.

Last year, the Canadian Wheat Board, one of the world's largest wheat sellers, confirmed that buyers of 87 per cent of its wheat in the 2002-03 marketing year required guarantees that the wheat was not genetically engineered. That's up from 82 per cent two years ago. The CWB's 10 highest volume markets all required the guarantee, including Japan, Mexico, Britain, Italy, Indonesia and Malaysia, as well as domestic millers.

Market and consumer resistance to GM wheat means the issue of cross-contamination is a live one for the AWB. The AWB has found, "there is a clear market signal from international and domestic customers that strong reservations exist concerning GM wheat. None of AWB's national pool customers are prepared at present to purchase GM wheat".

However, as the supply chain works at present, if GM canola is introduced, there are no guarantees it will not contaminate wheat exports. The AWB has concerns about the impact the commercial release of GM canola varieties would have on the marketing of Australian grains, particularly wheat.

The AWB argues that "with approximately a third of the AWB national pool customers, Australia's non-GM grain status is a distinct marketing advantage. Therefore, before GM canola can be released commercially in Australia, the AWB national pool requires a supply chain system that can achieve segregation of GM and non-GM grains and guarantee product integrity".

ABARE also assumes there will be no barriers to selling the GM crops on world markets. A spokesman says: "We already sell canola in competition with transgenic canola in our major markets.

Opportunities in growing markets such as China were considered sufficient to outweigh any closures to smaller markets such as Europe."

ABARE defends its decision to assume GM canola will fetch the same price as its non-transgenic competitor, saying no price differences have been seen in Australia's major market, Japan, and that Canadian transgenic canola sells for the same price and has retained market share.

Greenpeace campaigner Jeremy Tager disputes this.

"Australia has lost no market share as a result of being GM-free and unlike the Canadians, has not lost its European market and does not face a consumer backlash in Japan for widespread genetic contamination caused by GM canola." He criticises ABARE for failing to note "that Canadian [GM] canola is currently of such poor quality that the amount of unsold canola stock in Canada now comprises around 40 per cent of their total canola stock".

The most recent international survey of consumer attitudes towards GM food undertaken by the Pew Global Attitude Survey says 89 per cent of French consumers believe GM food "could harm human health and the environment". It also says 81 per cent of Germans, 76 per cent of Japanese and 74 per cent of Italians take a negative view of the GM technology.

Closer to home, the most recent poll taken by Biotechnology Australia found "a slight rise in public concern about GM foods and crops over the last 12 months". The poll found that 54 per cent of people believe GM risks are higher than benefits, 27 per cent believe the benefits are higher than the risks, and 19 per cent are uncertain.

Wells argues this resistance has not decreased despite campaigns by life science companies to change it.

But ABARE remains adamant that "there seems no apparent economic justification for Australia to delay commercialising GM canola". It concedes the case for wheat and barley "is less clear", but maintains "the current moratoriums do limit our ability to react to emerging market opportunities in the future. The estimate of $3 billion over 15 years provides an indication of how large these forgone benefits might be. This is an important consideration for those involved in the GM crop debate".



Main genetically modified crop producers in 2004

Commercialised Total transgenic Commodities Estimated share of transgenic crops million ha crop that is transgenic broadacre crops

United States 1996 47.6 Soybeans, maize, cotton, canola 85% of soybeans
76% of cotton
45% of maize

Argentina 1996 16.2 Soybeans, maize 100% of soybeans

Canada 1996 5.4 Canola, maize, soybeans 77% of canola

Brazil 2003 5 Soybeans 22% of soybeans

China 1997 3.7 Cotton 66% of cotton

Paraguay 2004 1.2 Soybeans 60% of soybeans

India 2002 0.5 Cotton 6% of cotton

South Africa 1998 0.5 Maize, soybeans, cotton 50% of soybeans
85% of cotton
15% of maize

Uruguay 2001 0.3 Soybeans, maize nearly 100% of soybeans

Australia 1996 0.25 Cotton 70_80% of cotton

Romania 1999 0.1 Soybeans 50% of soybeans

Mexico 1996 0.75 Maize, cotton 10% of maize

Spain 1998 0.58 Maize 12% of maize

Philippines 2003 0.52 Maize 20% of maize

* Transgenic proportions derived using Foreign Agricultural Service of the US Department of Agriculture PS&D tables and transgenic crop areas from James (2004). Transgenic proportion based on Cotton Australia `Biotechnology_ fact sheet. Source: ABARE