The International Consortium on Agricultural Biotechnology Research (ICABR)


The Impact of Transgenic Crops on the International Grain Trade


Michael J. Strauss, Bridge News London, UK





The advent of transgenic crops is expected to trigger structural changes in the centuries-old international grain trade, regardless of whether the crops achieve worldwide acceptance or continue to face resistance in major markets like Europe. Among things at stake are the economic benefits of bulk handling, the ability of long-established commodity trading firms to adapt to a more complex business environment, and the pattern of international grain trade flows.

In a scenario where regional consumer resistance to GMOs persists or spreads, one can expect the further development of two-tiered markets that are already starting to emerge loosely and informally. The bulk handling system that has shaped the grain industry's economics from producer to end-user may face considerable challenges and strains amid the implicit pressure to segregate transgenic from non-transgenic crops, raising the prospect that one or both types could become more costly.

Any cost increases for transgenic or non-transgenic grain stemming from reduced cost-efficiencies in handling would make organic grain--currently more costly to produce and handle--more competitive in relative terms. If the markets for organic foods in major industrial economies keeps growing strongly, narrowing this cost gap would have implications for the market shares of transgenic, non-transgenic and organic grain at the national and international levels.

On the other hand, if consumer resistance to GMOs is overcome and international demand for transgenic crops accelerates, the stage could be set for a much more complex fragmentation of the grain business.

The development of "designer" transgenic crops--those tailored to thrive when grown in specific climates or engineered to meet the needs of specific end-users--raises the prospect that dozens or even hundreds of new grain types will emerge. This would dramatically change the nature of a global market that is now dominated by a much smaller number of major grain types that can meet most buyers' specifications.

Like the first scenario, this would likely have major implications for the bulk handling system. And as grain buyers become accustomed to material that meets their needs more exactly, purchase contracts would likely evolve toward having a narrower set of quality standards. Companies involved in trading grain may be forced either to specialize or to broaden their trading expertise to simultaneously handle many more types of grain, each influenced by a potentially different set of market fundamentals.

This would have the potential to strengthen some already-large companies that trade multiple commodities on a worldwide scale, if they are able to leverage their expertise in already-fragmented markets to benefit their grain trading operations. At the same time, it would create new pressures for smaller, more specialized grain trading firms to adapt to major structural changes in the market in which they operate.

Regardless of whether transgenic crops win global acceptance or not, their further development into more tailored types has the potential to alter international supply and demand patterns. Countries that currently are not self-sufficient in grain because of climatic reasons may be able to grow much more with crops engineered to thrive in local conditions, and in extreme cases may even become exporters. This could change the basic nature of their economies, and impact the export prospects of existing large grain producers.



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