The demand for non-GM grain is small but growing as more foreign markets demand labels for GM foods. The big question is, What seed should fill your planter box?

Although it may be hard for farmers to swallow, far from dissipating, consumer resistance to genetically modified (GM) crops and foods continues to spread throughout the world. Consider these recent developments:

* The list of countries planning to require labeling of GM foods continues to grow. * Increasingly, food processors are looking for sources of grain free of genetically modified organisms (GMOs) to meet labeling requirements and consumer demand abroad. * Brazil's southern-most state, Rio Grande do Sul, is treating GM soybeans as if they were drug plants and is offering farmers special low-interest loans if they rip up the biotech beans, which are illegal throughout Brazil. * The Tokyo Grain Exchange will offer the world's first futures contract for non-GM soybeans this spring.

"The momentum of consumer resistance has picked up steam in recent weeks," says Neil Harl, professor of economics at Iowa State University (ISU). "Food processors are not risk takers. They will take the safest route, deliver what the consumer wants and protect their brands."

This product contains GM ingredients Increasingly, countries are requiring that GM foods be labeled as such. The European Union (EU), Japan and Korea have passed laws requiring labeling of GM foods. Countries with proposed food labeling programs include Canada, Thailand, Russia, Australia, Brazil, New Zealand, Philippines, Russia and the U.S. The EU's food labeling program requires labeling of products with a proposed 1% or more GM content. The labeling law affects restaurants, grocers and caterers as well as food processors. Japan's food labeling plan will go into effect in April 2001 with a proposed tolerance level of 5% GM content in foods containing soy protein. Japan will not label soy oil, which does not contain protein and therefore does not contain modified DNA. South Korea is the first country to announce a labeling program for raw grain with a proposed 5% tolerance level that could impact grain shipments as early as March 2001.

Uncertainty over meat labeling "Up to this point there has been nothing to discourage GM grain from being used in livestock and poultry feed," says Bob Wisner, ISU ag economist. "This is good news since 75% of the U.S. corn crop is fed to livestock. But growers will need to watch developing labeling plans closely to see whether GM labeling laws will apply to retail meat products and livestock feeds. If that happens, it will affect a much larger share of our market."

Harl adds, "Despite the fact that GM residues are undetectable in meat, some customers from the Far East are asking when the U.S. will be able to certify GMO-free meat." The EU is drafting novel feed regulations that could impact how biotech feed ingredients are labeled, sold and traced in livestock production. The EU, until last year, accounted for roughly one-third of U.S. soy exports, and 80% of that soy tonnage is destined for the feed market.

Soybean meal exports plunge The EU market could already be discriminating against GM soybean meal. USDA's mid-December marketing report indicates that soybean exports and outstanding unshipped export sales so far this season are about even with a year ago but that soybean meal sales to the EU are down 90% from a year ago. "Last year's U.S. soybean and meal exports to the EU were down 28% and 77%, respectively, from previous year. In short, U.S. soybean meal exports to the EU have fallen to just a trickle in one year's time despite low prices," Wisner says. The EU is the largest U.S. soybean export market by a wide margin.

"Labeling food does not guarantee loss of market for GM crops. It depends on how consumers react and how much they are willing to pay for non-GM products," Wisner says. BST-free milk died a quick death with most American consumers who voted with their pocketbooks and chose to buy the cheaper unlabeled milk instead. Look for early indications of consumer reactions to labels on GM foods during the next six months, in the EU and Japan.

Market for non-GM grain small, but growing Identity-preserved non-GM corn and soybeans represented less than 2% of the total market in 1999. It's a small, but growing niche market. "CG&B expects its demand for non-GM crops to double this year," says John Haas, market development, Consolidated Grain & Barge Co. "The demand for non-GM crops will continue until public acceptance catches up with the technology."

In an interview this fall with ISU ag economist Roger Ginder, Martin Andreas, CEO of Archers Daniel Midland, stated, "Requests for non-GMO food ingredients from European and Japanese customers have increased a great deal. There is a considerable amount of export business at stake here and we feel we have to protect this business. There are alternate sources for the ingredients we supply from the U.S." He went on to list non-GM soybeans from Brazil, non-GM corn from Eastern Europe, tapioca and field peas. "Where convenient, we encourage farmers to segregate non-genetically enhanced crops to preserve their identity," he said.

Modest premium potential In 1999, grower premiums for non-GM soybeans ranged from $0.05 to $0.30/bu., while premiums for non-GM corn ranged from $0.02 to $0.20/bu. These offers were not widespread.

According to a Sparks Companies' survey of 100 elevators in nine corn-producing states, only 1% paid a premium for non-GM corn and 3% paid a premium for non-GM soybeans in 1999. That survey and another of more than 700 elevators indicated that about 10% of the elevators segregated GM crops from non-GM crops in 1999.

"I'd expect significant premiums in some markets if less than 25% of the corn crop was usable (not commingled) non-GMO," says Iowa's Wisner. "With that supply, I would not expect GMO corn prices to be discounted unless some big users put labels on meat products and livestock feed. The situation is in a state of flux pending details of labeling plans in the U.S., South Korea and Japan." Japan and South Korea are the number one and two export markets for our corn.

Cenex Harvest States is not seeing premiums for non-GM crops in 2000. "The market is just too uncertain," says Dave Christofore, vice president of market development for Cenex Harvest States. However, the company is helping growers develop production protocols for identity-preserved grains in hopes of taking advantage of market premiums that may develop later. "We think an identity preservation system will be useful beyond the current GMO debate as crops with consumer health benefits reach the marketplace. We're interested in helping the farmer train himself in how to grow for the next millennium," Christofore says.

Beyond Japan, overseas buyers have thus far been reluctant to pay extra for non-GM crops. "While there has been a lot of noise in Europe, I am unaware of any major purchase bid requests for non-biotech soybeans from Europe," says Bob Callanan, communications director with the American Soybean Association. He notes that Japan has actively contracted production of non-GM food-grade soybeans with U.S. soybean growers for premiums of $0.35 to $0.55.

Chris Wehrman, CEO of the National Corn Growers Association, notes, "There were no noticeable premiums or discounts in the corn marketplace in 1999. This is an evolving market and we don't know how much demand there will be for non-biotech corn or whether premiums will be paid in 2000."

It should be noted that U.S. corn exports to the EU have dwindled to nothing because of biotech grain issues. EU-unapproved GM corn is of concern to U.S. processors since the EU market for U.S. corn gluten and meal is a major one.

Grain companies buying biotech grain In December, Cargill announced it will accept crops enhanced through modern biotechnology at all of its grain-handling, oilseed-processing and corn wet milling facilities. All major U.S. grain companies indicate they will accept all GM corn and soybeans approved in the U.S. and the EU. The grain companies will require growers to declare whether a grain shipment contains either EU-approved, yet-to-be approved or conventional grain. Most will help producers channel corn awaiting EU approval to domestic markets. As grain companies attempt to segregate some portion of non-GM grain, it's likely they will require special delivery days and times to accomplish the identity preservation. That's how CG&B and Cenex Harvest States handled the task last year.

Decisions, decisions To make the best planting decision, you need to know where your corn and soybeans will go after harvest. Factor in your production, storage and transportation costs and any expected premiums or discounts. If your grain is going to the export market, you will need to be sensitive to customers on the other side of the world. If your grain goes for livestock feed and is used domestically, planting and marketing GM crops will be less of an issue.

Keep in mind that crops planted this spring will have to meet market demands 18 months after planting. ISU's Ginder warns, "Right now, very few people know what those demands will be. Things are changing day to day, and it's hard to predict what the level of demand will be or what the premium might be."

Seed certification group develops program to preserve crop identity for export markets A process devised by a group of seed certification agencies may help the U.S. retain its soybean export markets to Asia. The process is a third-party identity-preserved (IP) program for grain.

The group expects companies to use it to verify grain identity when exporting overseas.

"This will help preserve U.S. market share in markets that are concerned and want a new category of soybeans like non-biotech soybeans," reports Kim Nill, American Soybean Association. "It looks like we will be able to make a smooth transition from the former mixed soybeans going to Asian soy foods to non-biotech ones without losing a single bushel of U.S. market share."

Under the program, products that have met specific requirements that preserve their identity to a desired purity will carry the IP logo. Japan appears willing to accept the program for identifying grain, Nill adds.

Not a new program. The program was first developed by the Illinois Crop Improvement Association (ICIA). "The IP program is not new," Dennis Thompson of ICIA states. "We have been working on this for many years. We have operated an IP grain laboratory for 10 years."

Now the Association of Official Seed Certifying Agency (AOSCA), an organization of 42 U.S. and Canada seed certification agencies, including ICIA, has adopted and further developed the IP program.

AOSCA expects companies to enlist its help in designing and conducting company IP programs.

AOSCA will be an independent, third-party verifier for preserving the identity of grains.

Thompson explains that AOSCA will not determine if a trait is good or bad, only if the grain contains or does not contain the trait.

Last summer, AOSCA adopted specific requirements for non-genetically modified (GM) corn and soybeans. As other programs for other traits or grains are needed, AOSCA will develop them.

The IP program offers the upper purity levels of 99% for corn and 99_1/2% for soybeans. AOSCA states that 100% non-GM purity is not possible. Companies may select lower purity levels for their own programs.

The IP program will be tested on soybean exports to Japan, which plans to label GM products in the future. "We deeply appreciate AOSCA's IP efforts to help assure that those soybeans come from soybean farmers," Nill adds.

Grower requirements. AOSCA's IP program sets base requirements needed to preserve the grain's identity. The requirements for some projects include the following: * Seed must be from known sources with invoices provided. A test confirming non-GM status is recommended. * IP corn and soybeans must be grown where a different crop was grown the year before, or where the same hybrid or variety was grown. No IP crop may be raised on land on which a GM cropfor seed was raised the year before. * The corn crop must be isolated by 660 ft. from GM corn fields. A grower with a field larger than 20 acres may modify that rule by removing 8 adjacent rows after pollination if the field is 165 ft. or more from a GM corn field or by removing 16 rows if the field is less than 165 ft. away from GM corn. * The fields must be inspected during pollination and again post pollination if requirements are not being met. * The fields must be clearly identified with the hybrid or variety number. Bins also must be identified by number. * GM soybean fields must be isolated by an adequate distance to prevent mixing seed. The level of contamination with other varieties cannot exceed _1/2%. The fields must be inspected before harvest. * Crop samples must be taken and tested in approved laboratories. * Planting, harvesting, conveying, storing and handling equipment must be thoroughly cleaned before IP products are run through it.