Status of Genetically Engineered Wheat in North America

Order Code RS21620

Updated November 4, 2004

CRS Report for Congress

Received through the CRS Web

Status of Genetically Engineered Wheat in

North America

Gwenell L. Waters Bass

Analyst in Industrial Organization and Corporate Finance

Resources, Science, and Industry Division

Summary

Genetically engineered (GE) wheat varieties developed by the biotech industry and

university researchers hold considerable promise for producers. GE wheat developed

by chemical company Monsanto is engineered to resist damage from the widely used

Roundup Ready (RR) herbicide, making it easier for farmers to control weeds. The

development of GE wheat raises issues of market acceptance and agronomic

management. Market acceptance of GE wheat focuses on its direct acceptance by

consumers, either segregated or when co-mingled with non-GE or conventional wheat.

Most research suggests GE foods are safe to eat; however, uncertainty about health and

environmental effects has led to public opposition particularly in Europe and Japan.

This is of great concern to U.S. wheat producers because the United States exports more

than half of its wheat production. Producers are concerned as to whether or not a

segregation system can be designed which ensures that no co-mingling between GE and

non-GE wheat will occur. Agronomic management issues include the effect of GE

wheat on crop management practices and profitability, issues of contamination and

spread, the development of pesticide resistance, and the cost and management of

volunteer plants. While developers of the technologies are seeking regulatory approval,

they indicate that they will postpone their commercialization until market acceptance is

assured and systems for separating GE and non-GE wheat are in place. In May 2004,

Monsanto announced that it was deferring efforts to introduce GE wheat until such time

that other wheat biotechnology traits are introduced. This report will be updated as

events warrant.

Background

GE wheat was first produced at the University of Florida in 1992. The strain of

wheat that was developed was herbicide-tolerant. The University holds a patent on the GE

wheat technology, but has granted an exclusive license to the chemical and seed company

Congressional Research Service ˜ The Library of Congress

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Monsanto.1 Herbicide-tolerant crops were developed to survive certain herbicides that

destroy a crop along with the targeted weeds. With herbicide-tolerant crops, farmers can

use potent postemergent herbicides, providing a more effective weed control than

otherwise. Monsanto’s GE wheat is a Roundup Ready (RR) crop that is resistant to

glyphosate, a herbicide effective on many species of grasses, broadleaf and other weeds.

Since the first GE crops (mainly corn, soybeans, and cotton) became commercially

available in the mid-1990s, U.S. farmers have been rapidly adopting them.2 Proponents

of agricultural biotechnology say it offers the potential to increase crop production, lower

farming costs, improve food quality and safety, and enhance environmental quality. Cited

advantages of RR products are that they cut herbicide costs and make spraying and

cleaning up of fields more convenient. For example, a key aspect of RR soybean is that

it provides enormous gains in crop and time management flexibility, freeing up labor time

for other activities. Thus, even if output remained the same, cost would be lower for weed

control chemical applications and mechanical tillage. Since producers pay more to seed

companies for the herbicide-tolerant seeds, the profitability of the herbicide-tolerant

varieties depends on weed control cost savings compared with seed cost premiums.

Presently, the United States has approved 12 different plants with GE traits for commercial

use. Two of these plants which are widely used are corn and soybeans. A study by the

United States Department of Agriculture (USDA) found the adoption of herbicide-tolerant

corn improved net farm returns of specialized corn farms. Herbicide-tolerant soybeans,

however, did not have a significant impact on net farm returns in either 1997 or 1998.3

Leonard Gianessi, a senior research associate with the National Center for Food and

Agriculture Policy in Washington, said the GE wheat could solve a key problem for

producers experiencing relatively low wheat prices. In some areas, according to Gianessi,

current weed-control measures cost about $30 an acre. The use of GE wheat could reduce

costs to $16 an acre. Monsanto’s GE wheat could make it affordable to plant more

according to Gianessi. These estimates do not include the potential cost of separating GE

from non-GE wheat or the market price implications of increased wheat production.4

The Canadian National Farmers Union (CNFU), is opposed to the introduction of GE

wheat. CNFU has cited several reasons for its opposition of GE wheat. The list includes

food safety, price impact , market loss, health concerns, environmental damage and

agronomic costs. One agronomist estimates that costs to control the potential cross

contamination between GE RR wheat and GE RR canola would require additional

chemical applications (non-RR) totaling up to $ 400 million annually in Canadian dollars.5

1

Monsanto is the third largest agri-chemical company worldwide. It is the only company

besides Sygenta (second largest) that has developed a potential GE wheat product.

2

For background see CRS Report RS21381, Adoption of Genetically Modified Agricultural

Products.

3

United States Department of Agriculture. Economic Research Service. Adoption of

Bioengineered Crops. AER-810. 68 pp. May 2002.

4

Melcer, Rachel. “Coalition Asks For In-Depth Study of Genetically Modified Wheat.” St.

Louis - Dispatch. Mar 12, 2003.

5

[http://www.nfu.org]

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Implications for U.S. Wheat -- Importance of Wheat Trade

The commercial acceptance of GE wheat is an issue of major importance for U.S.

wheat farmers because it depends on the attitudes of consumers, domestic and foreign, and

on the potential impact on food safety, health, and the environment. The United States is

the fourth largest wheat producing country, with its output exceeded only by the EU,

China, and India. In 2003, wheat ranked fourth among U.S. field crops in planted acreage,

behind soybeans, corn, and hay. During that same period, wheat represented 6% of gross

cash farm receipts, third highest among U.S. field crops.

The United States is the world’s largest wheat exporter, with wheat accounting for

approximately 7.5 % of the nation’s agricultural export value in 2003. U.S. wheat exports

equal almost one-fourth of total world wheat exports. Although nearly half of U.S. wheat

is sold to foreign customers, U.S. wheat exports have shown little to no increases since

1996/97. Global competition has intensified in recent years as several non-traditional

wheat exporters have emerged (Russia, Ukraine, India in particular) and the United States

has seen its market share decline. The degree of foreign acceptance can significantly

affect international trade and may create the need to identify and segregate GE wheat.

Market loss is a major concern of U.S. wheat producers because some of the United

States’ biggest trading partners have raised issues about accepting GE wheat if it is

commercially traded. Approximately 70% of the Upper Midwest’s hard red spring wheat,

for example, is sold to the EU and Japan, where consumers shun biotech crops like GE

corn and soybeans. Resistance to GE wheat may be even greater than for corn and

soybeans, which are principally animal feeds, since wheat products are eaten by humans

directly. U.S. corn exports to the EU have dropped from approximately $300 million in

the mid-1990s to less than $10 million in recent years. This decline is due primarily to the

fact that new biotech corn varieties have not been approved for marketing in the EU.6

Regulatory Status of GE Wheat

United States. In December 2002, Monsanto submitted a petition to the USDA

and Canadian authorities for regulatory approval of its GE spring wheat.7 USDA’s Animal

and Plant Health Inspection Service (APHIS) conducts programs to protect American

agriculture against pests and diseases. Generally, before a genetically engineered crop can

be produced on a wider scale and sold commercially, its creators must petition APHIS for

a “determination of non-regulated status.” APHIS must be provided scientific details

about the genetics of the plant, the nature and origin of the genetic material used,

information about indirect effects on other plants, field test reports, and information

unfavorable to the petition. All petitions are published in the Federal Register for public

comment. APHIS grants the petition only if it determines that the plant poses no

significant risk to other plants in the environment.

6

7

For background see CRS Report RS21556 Agricultural Biotechnology: The U.S.-EU Dispute.

Three agencies using a coordinated framework are primarily responsible for regulating

biotechnology in the United States – the USDA, the Environmental Protection Agency (EPA),

and the Food and Drug Administration (FDA). For background see CRS Report RL21556 Food

Biotechnology in the United States: Science, Regulation, and Issues.

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The EPA, which would have to set a tolerance for glysophate for the wheat variety,

is waiting for the USDA to complete its work. Monsanto then may approach the FDA for

a premarket consultation, in which the company supplies its information indicating that

the variety is safe to eat, but this consultation is not required by law. While Monsanto

expects that its wheat will pass the long regulatory process, company officials have

pledged not to sell the GE wheat seeds to farmers until the company can guarantee

domestic and export markets. They also promised to help develop grain-handling and

testing procedures that can be used to separate its modified wheat from non-modified

wheat.8

On March 9, 2003, a coalition of environmental and farming groups filed a petition

asking the USDA to conduct in-depth environmental and socioeconomic impact studies

before considering approval for GE wheat products. The groups consist of the Center for

Food Safety based in Washington DC, Dakota Resource Council based in North Dakota,

Northern Plains Resource Council based in Montana, and other farm groups. The

Environmental Working Group and Greenpeace have also questioned commercialization

of GE crops.9

Their coalition petition to the USDA sought three actions: (1) institute a moratorium

on GE wheat until all possible environmental, human health and socioeconomic impacts

are analyzed; (2) institute a moratorium until possible impacts under the Migratory Bird

Treaty Act are assessed; and (3) classify GE wheat as a noxious weed and thereby prohibit

its production.

On April 25, 2003, the National Association of Wheat Growers, U.S. Wheat

Associates, and the Wheat Export Trade Education Committee sent a letter to Agriculture

Secretary Ann Veneman in response to petitions. The three national farm groups represent

most U.S. wheat farmers. The organizations, while acknowledging that there are market

acceptance concerns to be addressed, contend that a science-based regulatory system is not

the appropriate place to address non-scientific concerns. They suggest that a mechanism

other than the regulatory process must be found to address the timing of

commercialization, so that the scientific safety determinations may proceed free of nonscientific encumbrances.

A statement issued jointly by the three national wheat organizations said that wheat

producers would work with all segments of the industry to develop and assure that a viable

identity preservation system and testing program would be instituted prior to

commercialization of GE wheat varieties. They urged technology providers to obtain

international regulatory approval and to ensure customer acceptance prior to

commercialization. The wheat organizations declared that they support voluntary labeling

of food products, but oppose government-mandated labeling of wheat products in both

U.S. and international markets, based upon the presence or absence of biotechnologically

derived traits that do not differ significantly from their conventional counterparts.

8

Monsanto. Bringing New Technologies to Wheat: Information on the Development of Roundup

Ready Wheat. Pamphlet.

9

National Association of Wheat Growers, U.S. Wheat Associates, and Wheat Export Trade

Education Committee letter to Agriculture Secretary Ann Veneman. April 25, 2003.

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In their letter responding to the March 9th petition, the three national wheat

organizations argue that the use of Roundup Ready wheat treated with glyphosate as an

alternative to other types of herbicide treatment will have virtually no impact on migratory

birds. They also note that herbicide resistant weeds are nothing new in agriculture and

have been a problem long before the advent of biotechnology.

In May 2004, Monsanto announced that after eight years of research, it was

deferring efforts to introduce GE wheat. Monsanto stated that as a part of its realignment

of research and development investments, the company was suspending the introduction

of Roundup Ready wheat, until other wheat biotechnology traits were introduced. The

company made the announcement even as its application for commercialization remains

pending. Organizations who are opposed to the development of GE wheat view

Monsanto’s decision as a victory. Monsanto indicated that the sales potential for GE

wheat was less attractive relative to the company’s other commercial priorities.

Canada. Producers in Canada are also concerned about the acceptance of GE wheat

in export markets. Canada exports more than 80% of its wheat to Europe and Japan. In

Canada, the Canadian Wheat Board (CWB), which enjoys a monopoly on sales of wheat

to export markets, has developed a set of conditions it says must be met before a GE wheat

variety could be released.

According to the CWB, there must be identified markets for the entire production of

GE or co-mingled wheat for multiple years. The CWB maintains that in order to protect

access to non-GE wheat markets, an effective segregation system must be developed.

Farm management questions concern the effect of introduction of GE wheat varieties on

management practices and profitability with respect to different kinds of farming

operations (e.g., conventional tillage, conservation tillage, organic, pesticide-free, etc.)

across a multi-year rotation. The CWB called for research on other agronomic risks such

as contamination and spread of genetic material, the development of weed-resistance, and

the cost and management of volunteer plants. Finally, the CWB called for a

comprehensive analysis to account for the balancing of risks and costs associated with GEwheat. Such an analysis would incorporate possible market benefits and costs, including

segregation costs, as well as agronomic benefits and costs.10

On May 27, 2003, the CWB asked Monsanto Canada to withdraw its application for

its environmental safety assessment of its GE RR wheat product to protect wheat exports

to key foreign markets. The CWB asked Monsanto to confirm its compliance with the

request to withdraw its application by June 27, 2003. The CWB was concerned that the

unconfined release of GE wheat in Canada would result in significant and predictable

economic harm to western Canadian farmers. Monsanto did not withdraw its application.

A recent study prepared for the CWB by three agricultural scientists concluded that

the unconfined release of GE wheat into western Canada would threaten the environment

and be environmentally unsafe.11 The report points to earlier experiences in Canada with

10

Conditions for the

11

R.C. Van Acker, A.L. Brule-Babel, and L.F. Friesen. An Environmental Safety Assessment of

(continued...)

Grain Industry Working Group on Genetically Modified Wheat.

Introduction of Genetically Modified Wheat. Draft February 5, 2003.

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GE canola and claims that if glyphosate-resistant wheat were granted unconfined release

in western Canada, “the trait would move between wheat cultivars and fields in a fashion

similar to that seen in canola.”

Other Countries. Internationally, regulations being developed with respect to

genetically modified crops could lead to potential loss of markets for producers and the

additional marketing costs of segregating and/or identity-preserving. These phenomena,

in turn might reduce incentives for the development of new agricultural biotechnology

products. Both Canada and the United States have approved more than thirty-five GE

products and allow voluntary labeling of them. The EU’s moratorium on genetically

modified products which was in effect for six years ended in May 2004. However, the

EU’s strict traceability and labeling laws for GE products took effect April 2004. Prior

to the moratorium the EU approved ten products. Japan has approved at least twenty

products, but it also requires mandatory labeling.

On May 13, 2003 the United States, Canada, and Argentina initiated a case with the

World Trade Organization (WTO) against the EU over its five-year moratorium on

approving new agricultural GE products. The WTO case will go forward in spite of the

EU labeling agreement. On July 2, 2003 the EU reached a compromise agreement that

settles differences over pending GE products traceability and labeling regulations. The

new traceability and labeling laws will effectively require U.S. farmers to separate GE

crops from non-GE crops if they want to export to the EU. Approval of the traceability

and labeling legislation has been one of the conditions imposed by some EU member

states for allowing a renewal of GE authorizations. The threshold level for labeling a GE

product is 0.9 %. In the absence of a system to segregate biotech from non-biotech

products all U.S. and Canadian wheat would have to be labeled as containing or possibly

containing GE products.

Conclusion

The potential benefits of GE wheat are great, according to proponents, but some

producers foresee many risks as well. Market acceptance is the biggest concern especially

in export markets. Strict segregation of GE and other wheat for export may be required

in the field and during storage, transportation and processing. Segregation could raise

production costs for all growers, not just those who produce GE varieties. Full-scale

commercialization of GE wheat appears to be many years away and will depend as much

on consumers’ acceptance as on government regulation.

11

(...continued)

Roundup Ready Wheat: Risks for Direct Seeding Systems in Western Canada. University of

Manitoba: June, 2003.