Tags: Food Prices, Jason Simpkins

“Frankenfoods” Gain Greater Acceptance as Food Prices Skyrocket

By , Money Morning •

By Jason Simpkins
Associate Editor

For more than a decade, European policymakers have spurned genetically modified crops, but these so-called Frankenfoods are beginning to look more and more appetizing in the wake of food shortages and soaring prices.

Only 21% of Europeans are willing to eat genetically engineered food, according to a survey by the European Commission. Some nations, such as France, have banned the planting of genetically modified crops, while others like Germany have enacted laws that allowed foods to be labeled as "GM free."

Critics insist that such foods could pose risks to health and the environment, and further assert that genetically modified crops produce better yields.

"Most testing is carried out by the very biotech companies that have the most to gain from results that say GM food is safe," the activist group Friends of the Earth says on its Web site. "Growing GM crops also threatens wildlife and the production of GM-free foods. What's more, some GM crops could allow more pesticides to be used."

Story continues below...

But global demand for foodstuffs is on the rise, and as supplies tighten, prices continue to soar. For instance, global corn consumption is expected to rise to 793.1 million tons in 2009, up from a record 778.9 million tons this year. Stockpiles are expected to fall to just 103.3 million tons next year. Corn prices have surged about 75% over the past year and 17.5% since early June.

The price increases have trickled into the meat and dairy industry, as corn is widely used in animal feeds. Tyson Foods, Inc. (TSN), the Arkansas-based meat producer, has predicted that retail chicken prices will have to jump by double-digit percentages in 2009 for poultry processors to recoup their feeding costs, according to the Times Online.

Higher feed prices will eventually filter through to the cost of milk, cheese and yogurt, too, since 65% to 75% of a dairy farmer's production costs are for feed, Chris Galen, a spokesman for the National Milk Producers Federation, told The Associated Press.

The World Bank estimates that worldwide food prices have risen a scorching 83% over the past three years. And the president of the World Bank, Robert B. Zoellick, estimates that the spike in food prices could push 100 million people in low-income countries deeper into poverty, as food costs cut into already meager earnings.

The biotech industry claims it can help. Research by the U.S. Department of Agriculture found that one variety of genetically modified corn yielded 9% more than conventional corn. The International Service for the Acquisition of Agri-Biotech Applications, which encourages developing countries to adopt GM technology, says GM cotton has increased yields by 50% in India.

Monsanto Co. (MON), whose insect resistant crops have gained widespread popularity among U.S. farmers, has pledged to double yields on corn and soy by 2030.

Genetically modified crops have become so popular in countries like the United States that they are actually cheaper and more readily available than their non-GM counterparts.

"We cannot get hold of non-GM corn nowadays," Yoon Chang-gyu, director of the Korean Corn Processing Industry Association, told the International Herald Tribune.

According to Yoon, non-modified corn costs Korean millers about $450 per metric ton, up from $143 a metric ton in 2006. Genetically engineered corn costs about $350 per metric ton.

In 2007, 75% of the corn grown in the United States was genetically modified, up from 40% in 2003.

With food prices soaring and GM crops posting impressive results in the United States, Argentina and Brazil, the tide of opinion is beginning to turn in Europe. In Britain, the National Farmers' Union is asking supermarket chains to drop their GM-free requirements for all but organic foods.

And the National Beef Association issued a statement earlier this year demanding that "all resistance" to GM crops "be abandoned immediately in response to shifts in world demand for food, the growing danger of global food shortages, and the prospect of declining domestic animal production."

Yesterday (Monday), Peter Brabeck, chairman of Nestle SA, the world's biggest food company, joined the chorus in calling for a change in European policy.

"You cannot today feed the world without genetically modified organisms," Brabeck, told the Financial Times. "We have the means to make agriculture sustainable in the long term. What we don't see for the time being is the political will."

Organic crops are "a nice treat for those who can afford it," Brabeck said.

"The European Union used political pressure in Africa to prevent some of those countries using genetically modified organisms," he said. "I don't think that was necessarily helpful for the agriculture of those countries nor for their supplies."

Monsanto Chief Executive, Hugh Grant, recently told BusinessWeek that his company would distribute seeds to African farmers royalty free. However, he was quick to point out that this was not a "feel-good thing," but that "satisfying the demand curve is a great business opportunity."

As such, critics have been quick to accuse biotech companies of exploiting the world's food crisis to further their own agenda.

"Where politicians and technocrats have always wanted to push GMOs, they are jumping on this bandwagon and using this as an excuse," Helen Holder, who campaigns against biotech foods on behalf of Friends of the Earth, told IHT.

Regardless of that view, policymakers have been forced into reconsidering their once ardent stance against GM crops. The European Union has launched a study into whether increased use of the crops could help to curb soaring food costs across the world. Also, British Prime Minister Gordon Brown has called on the European Union to relax its rules on importing genetically modified animal feed.

"His view is that we must be guided by the scientific evidence," a spokesman told the Independent.

Should scientific evidence continue to accrue on behalf of GM foods, a company like Monsanto might soon find itself with a whole new crop of clientele.

News and Related Story Links:

  • Money Morning:
    U.S. Corn Crop Could Decrease by 10% Further Fueling the Great Ethanol Debate
  • Associated Press:
     Record corn prices mean more expensive meat, dairy