Market Talks: Why GM wheat in Argentina could hit the global market?

Author Argus

The planting of transgenic wheat in Argentina, the main supplier of the grain to Brazil, is causing a lot of controversy. Will Brazil approve the entry of GM wheat in the country? And if not, what would the effect be on other wheat producing and consuming countries?

Join Camila Dias, Argus Brazil Bureau Chief, and Alessandra Mello, Deputy Editor of the Argus Brazil Grains and Fertilizer publication. They discuss what is at stake in this debate about GM wheat.

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Camila Dias: Hello and welcome to 'Market Talks' - a series of weekly podcasts produced by Argus discussing the main events impacting the commodities and energy sectors in Brazil and around the world. My name is Camila Dias, Argus Brazil Bureau Chief. In today's episode I will talk to Alessandra Mello, deputy editor of the Argus Brazil Grains and Fertilizers publication about the controversy surrounding the possible regulatory approval of transgenic wheat in Brazil, a variety that is being cultivated in Argentina and that could have an impact on the world scenario. Alessandra, welcome.

Alessandra Mello: Thank you, Camila, always good to be here at Market Talks.

CD: Alessandra, how can the cultivation of transgenic wheat in Argentina affect other countries?

AM: Camila, what happens is that 46pc of the wheat exported by Argentina is destined to Brazil. Currently Brazil imports between 6 to 7 million tonnes of wheat per year and has a total consumption of 12 million tonnes. The issue is causing a lot of controversy and most of the imported wheat industries have been speaking out against the release of genetically modified wheat in Brazil. The leaders of the sector argue that transgenic wheat is not yet authorized for human consumption in any country in the world and they fear a negative reaction from Brazilian consumers. Abitrigo, for example, the Brazilian Association of the Wheat Industry, has already said it is willing to bar the entry of Argentine grain and start buying from other countries, possibly the United States, Canada and Ukraine. That's why the use of this crop in Argentina could stir up the international market, creating opportunities for those northern hemisphere countries.

CD: And how big is this production of GM wheat in Argentina?

AM: Well, the estimate is that Argentina has planted between 55,000 to 60,000 hectares with the GM variety and, considering the average productivity of the country, it is believed that the production of transgenic wheat reaches 200,000 tonnes already in this harvest that is in progress. Of course it is still a small quantity if we analyze the total production of wheat in Argentina, which reaches 20 million tonnes.

And why isn't it even bigger? Because the Argentinean authorities are also slowly releasing the advance of this technology. The Argentinean government has authorized the commercialization of transgenic seeds in the domestic market, but has kept the possibility of exportation suspended. To export transgenic wheat, Argentina is waiting for the approval of Brazil, which is the main destination of the country's wheat production.

CD: And what do you think Brazil is likely to decide on this matter?

AM: It's hard to know because it's a very controversial issue. Brazil's National Technical Commission for Biosafety (CTNBio), the organization overseeing this issue, has already postponed a final decision several times. Now the issue is expected to be decided in the meeting that takes place this November, on the 10th and 11th, but nothing prevents it from being postponed again. CTNBio will analyze a request for permission to commercialize the GM wheat variety called HB4, produced by the Argentinean company Bioceres which is represented in Brazil by TMG, a group that also works in genetic improvement and seed production. Over the last few decades we have observed an advance in the use of transgenic crops around the world, and this trend is no different in Brazil. Today, transgenic soy and corn account for the majority of the planted area in Brazil and Argentina, just as they do in the United States. But analysts highlight that when it comes to wheat the situation is different. No other country has yet started to consume GM wheat, there is little research about the impact that this crop could have on human health or the environment, that is why the industry does not want Brazil to become a kind of guinea pig, as some market leaders suggest, because they don’t want to risk losing consumer trust. Opponents to the release of these products also point out that transgenic soy and corn are destined mainly for animal feed, whereas wheat is different, as it is mostly used in products like flour and it is consumed by people in the form of bread, pasta, and so on. That is why regulators should be cautious and the research should be more extensive, according to market leaders and especially the NGOs linked to the environment.

CD: And what would be the advantage of using this variety of GM wheat?

AM: The most common argument when talking about transgenic seed is productivity gain and cost reduction, since it is normally possible to use less pesticides on the crop. In the request made to CTNBio, TMG presented data that indicate that GM wheat could offer an increase in productivity of 40pc under drought conditions. It is known that Argentina and southern Brazil, which have the right climate for wheat planting, very often suffer periods of severe drought and irregular rainfall. So, technology could help to minimize the problem. This wheat is resistant to glufosinate ammonium, an herbicide that is also quite controversial, since it can be highly toxic, according to critics.

There are those who say that transgenic wheat could lead to a leap in productivity even in Brazil, if in the future it is approved here as well. The sector believes that wheat has the potential to be the new corn. To explain it better: 15 to 20 years ago Brazilian corn production was totally focused on the domestic market, but then Brazil advanced in productivity and took on an important role in the exportation of corn as well. Today Brazil is a major importer of wheat, and who knows, maybe in the future it could also advance in exports, if it manages to increase production.

CD: What are the next steps then?

AM: The focus now is on the CTNBio's decision, the pressure from mills and industry is strong for the request to be rejected. Meanwhile, to make sure that no transgenic wheat enters the country illegally, Abitrigo informed that it has asked the Ministry of Agriculture to establish rules and monitor the entry of the grain into the country. In Argentina the issue is also facing scrutiny, a series of Argentinean court decisions have already prohibited even the commercialization of transgenic wheat domestically. And those who work in this market think that Argentina should not move forward if Brazil does not approve. This is because it is too big of a market to lose. That's why we also have to wait on what the Argentinean authorities will decide.

Recently we heard a report that exporters in Argentina are demanding that some kind of label be put on the wheat stating that it is not transgenic. The industry is worried there because they know that there can be contamination between the two types of grain in the machines and in the trucks, so the issue really promises a lot of controversy yet.

CD: Is there a risk of a shortage of wheat in Brazil?

AM: I talked to the president of Abitrigo and he guarantees that the mills are not worried about that. He pointed to the United States, Canada and Ukraine as potential substitutes for Argentina in the supply of wheat to Brazil. He also pointed out that in 2010 Brazil had to import 4 million tons of North American grain due to climate problems in Argentina. Now, according to other market participants, the situation would not be so simple, because the cost of bringing this wheat from the northern hemisphere is much higher. They consider Abitrigo’s threat to bar the Argentine GM wheat to be worrying. Marcelo De Baco, from one of the main wheat brokers in the south of the country, said that importing wheat from the US and Canada is viable for the northeast region of Brazil, which is closer and can buy it with more accessible freights and competitive prices. He believes that any restriction imposed on wheat purchases from Argentina, may lead to an increase in prices, which will also reflect negatively on the end consumer. In addition, De Baco said that wheat has recently seen significant price increases globally due to low stocks and falling production in different countries. In other words, it is not the ideal time for trade restrictions.

But, I would like to add another information. This week our deputy editor of agriculture in Europe, Bilal Muttoulu, talked with some market participants in Colombia. They said that Brazilian buyers are making too much of a big deal out of this to pressure Argentine wheat prices. Argentinean wheat prices are already at a discount to most other origins but Brazilians might be looking for a better deal as global wheat prices in general are much higher this year.

The second thing is Argentine wheat can find buyers in Latin America, especially in Colombia, Ecuador and Peru. They are seeking alternatives to North American crop this year because of higher prices and reduced supply. So if this situation becomes quite serious and affects Argentina-Brazil flows, there’s still an outlet for Argentinian sellers, that’s what Bilal highlighted.

CD: Now, Alessandra, to finish up, do you believe that similar to what happened with soy and corn in the past, the cultivation of transgenic wheat may end up advancing over the years?

AM: I believe so, it is very difficult to stop the development and use of this biotechnology. When the planting of transgenic soy began in Argentina in the late 1990s, producers from southern Brazil ended up buying seeds in the neighboring country and increased the cultivation even before the authorization of Brazilian authorities, which meant that seeds were being smuggled. The industry fears that history could repeat itself with wheat instead of soy, if cultivation in Argentina expands. Anyway, as there is still no transgenic wheat widely being cultivated in the world and still no authorization for consumption, it may be that in this case the process will take longer, compared to soy and corn. We will have to wait and see what happens next in the global wheat market.

CD: Without a doubt, Argus will keep a close eye on this issue! Thank you very much, Alessandra.

This and other episodes of our podcast are available on the Argus website at Visit the page to follow the events that affect global commodity markets and understand their developments in Brazil and in Latin America. We'll be back soon with another edition of “Market Talks”. See you soon!

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