APPENDIX 27
Supplementary memorandum submitted by
the Managing Director, Cargill plc (R 41)
This is to follow up the evidence that my colleagues
and I gave to the Committee on 30 November 1999. Mr Mitchell said
that we had been reported as offering premiums to farmers who
supply non-GM crops and asked whether that was the case.
I replied that there had been a differentiated
price put into the US market during the harvest season but that
at the time I had no knowledge of how successful that had been.
We agreed to provide more information on this point.
Premia did play a part, as they normally do,
for speciality soybeans or corn grown under contract to meet specific
customer demand. These premia vary widely. Depending on the contract
specification they can range up to 300 per cent of the commodity
price for very specialised organic crops. The premia relate to
special handling and logistics requirements whatever the speciality
demanded. About 2.5 million acres of corn and about 85,000 acres
of soybeans are known to be grown under contract for their specific
properties, eg high oil corn, white corn, waxy corn, high oleic
soybeans. These acreages compare with about 73-74 million acres
for the commodity corn crop, of which a third were planted with
GM corn, and about the same number of acres for the commodity
soybean crop, of which between 55 per cent and 60 per cent was
GM.
However, aside from these contract-grown crops,
I believe the Committee was interested in whether premia were
paid at harvest for non-GM crops from the commodity stream and,
if so, for what volume. It is important to note that there is
no generally accepted definition of "non-GM", so prices
and volumes may relate to different specifications. The Japanese
market is generally working to a non-GM definition of "above
95 per cent purity = non-GM".
Cargill did offer some farmers premia at some
locations based on whether or not their corn and soybean harvests
contained GMOs at the time of the 1999 US harvest. Such premia
were offered in order to fulfil specific demand from Japan for
crops that were at least 95 per cent non-GM. The demand for such
crops materialised during the course of the year so little had
been contract grown. Meeting a 95 per cent purity standard was
feasible at harvest in some areas (whereas meeting a tighter standard
would not have been) and the extra handling, storage and transport
costs involved could be covered because it was clear that Japenese
buyers were prepared to pay premia of up to 50 cents per bushel—up
to $18 dollars per tonne (delivered Japan). This amounts to a
premium on the market price of corn of over 20 per cent and a
premium on soya of over 10 per cent.
Neither Cargill nor other companies offered
a general differentiated price across the board because there
was no general, consistent demand for higher priced, non-GM crops.
There was no consistent two-tier market price for GM and non-GM
crops, neither for soybeans nor corn. The market is still in a
phase of early price discovery on this issue, at a more tentative
stage than I had thought when speaking to the Committee. The demand
for non-GM crops, particularly for the feed sector, was clearly
not very solid at that stage.
Premia were offered at the farmgate only in
a few areas sourcing for export and were of the order of 10-15
cents (5-7 per cent) a bushel for corn and 15 to 35 cents per
bushel (3-7 per cent) for soybeans. (Commodity corn was at 210
cents per bushel = $82 per tonne; commodity soybeans at 470 cents
per bushel = $172 per tonne). We do not know what tolerances (what
percentage of co-mingling with GM material allowable) all these
prices relate to, but they are most likely related to the 95 per
cent tolerance. As we said in our original written submission
to the Committee, premia of 5-20 per cent would be likely to be
paid to the farmer for a non-GM crop, depending on the strictness
of specification he had to adhere to. However, these premia at
harvest time required the farmer only to keep his harvest separated
and did not impose other conditions on him. Beyond the premia
paid to the farmer, premia would also have been paid on storage
and transport to keep these crops separate for export. There are
no reports of how much these premia generally were - we believe
they varied widely according to circumstance.
We have no knowledge of significant quantities
of non-GM soybeans coming to Europe from that US harvest, other
than for certain crops specifically contracted for in advance.
US corn is not imported as corn into Europe except under the special
arrangements applying to Spain and Portugal.
12 January 2000
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