By: Gabriela Flora
May 17, 1999
Institute for Agriculture and Trade Policy

As agribusiness investments in biotechnology have increased, consumer concerns over the health and environmental risks and ethical implications of genetically modified organisms (GMOs) have risen. In addition, consumer and farmer critiques over the increasing corporate control of biotechnology have augmented. Consumers, particularly in Europe, have been demanding the labeling of products containing GMOs and the promotion of non-GMO products. In order for labeling to be a viable option and non-GMO products to be available, the segregation of GMO and non-GMO crops must occur throughout the food chain.

Segregation is the separation of products based on particular traits through all levels of production and processing. The traits that serve as the criteria for segregation can be placed under two general categories, output and input. Output traits are the value-added characteristics that are incorporated into a crop for its sale as a product and are often referred to as "designer" traits (e.g. high oil). Input traits are the methods used in producing a crop (e.g. non-GMO, chemical-free). Input traits are also output traits when the methods of production become selling points. Although input and output traits can be fluid terms, GMO and non-GMO will be defined as input traits in this paper for the purposes of clarity.

Segregation is a mechanism to ensure consumer choice in the market place. When the purpose of segregation is to identify whether products are genetically modified or not, agribusiness and government officials argue that segregation is not possible. But when segregation will increase their profits, agribusiness ensures that it is feasible and occurs.

This paper begins with a description of the socio-economic context in which agribusiness interests argue against the feasibility of segregation of GMOs. Next, it explores these arguments and how they contradict what is currently occurring. Finally, this paper examines the role that consumer concerns over GMOs has led to increased segregation.

The privatization of life through the patenting of genetic material has intensified oligopolistic control in the seed, chemical and pharmaceutical industries. Overlapping oligopolies, rather than a single monopoly, reduce the likelihood that the currently overlooked anti-trust provisions of corporate law will be invoked.[1] In the last three years there have been well over $15 billion worth of mergers and acquisitions between seed, chemical and pharmaceutical companies.[2] Many of the mergers and acquisitions in the agricultural sector are pursued in order to combine key pieces of genetic information that can be used to increase the profit margins of the companies that sell the inputs and process the products of the world’s agricultural producers.

Investments in biotechnology further agribusiness control of the food industry from genetic material to production and distribution.[3] As control of the market becomes consolidated by a few transnational corporations, the increased marketing of GMO products provides a means to regain investments in biotechnology.

For GMO products to increase their market share, non-GMO products must be pushed out of the market. Domestic and international concern over the human health consequences, environmental impacts and ethical implications of GMOs has encouraged agribusiness oligopolies to speed up their effort to mainstream GMOs into the food chain. An important step in this mainstreaming is the mixing of non-GMO and GMO products. Thus, identity preservation of non-GMOs through segregation is not in the interest of corporate agribusiness.

Agribusiness conglomerates backed up by the United States Department of Agriculture (USDA) and United States trade officials assert that segregation is not logistically possible. In January of 1999, Dan Amstutz, President of the North American Export Grain Association stated at a U.S. State Department meeting on the upcoming Biosafety Protocol negotiations that segregating grain was in no uncertain terms "impossible."

As the U.S. delegate at the Codex Alimentarius Food Labeling Committee meetings Robert Lake, Director of the Planning and Strategic Initiatives in the Office of Policy at the Food and Drug Administration, said the U.S. has "great concerns about the practical implications" of segregating and labeling of GMOs.[4]

In its submission to WTO on labeling of GMOs, the U.S. stated that "[s]egregation [of GMO and non-GMO products] would require nothing less than establishing two or more parallel storage, transport and processing systems. This would be extremely burdensome for suppliers and difficult to justify."[5]

Ironically, while companies are fighting against the segregation of non-GMO commodities, agribusiness' future profits rely upon segregation of their "designer" output traits induced through biotechnology. It is the segregation of input traits, not output traits, that agribusiness interests discourage. The most profitable scenario for agribusiness is one where segregation is the framework of production: a system where agribusinesses contract grain farmers to grow GMO products for a wide variety of specific output traits. Under these circumstances, farmers become dependent upon the oligopolies for all aspects of production and marketing.

Increased segregation of designer crops on industry terms is a means of restructuring the market so producers are fully dependent upon agribusiness for their survival. For example, a farmer signs a contract with a processor to produce a specific designer corn, which is marketed as a critical ingredient for a particular product. The contract determines the seed to be used (which is provided through a specific input supplier), where it will be grown, how it will be grown (what chemicals to use in what quantities at what times) and how and when it will be marketed (usually a "just in time" delivery to the processing plant, pushing the cost of storage and delivery on the farmer).

The argument that segregation is "impossible" both logistically and financially hinges on the assumption that we currently do not have the infrastructure for segregation. However, segregation currently is commonplace and its frequency will increase as biotechnology industries attempt to increase the marketing of crops containing "designer" traits.

At a very basic level, segregation occurs with all commodities — the separation of one grain from another (e.g. barley from wheat, soybeans from corn). The segregation of organic products from non-organic products occurs throughout the world. Grain varieties are segregated for different uses (e.g. durum wheat for pasta and hard red winter wheat for bread). Traditionally-bred grains with particular output qualities are designed with the objective of their segregation for niche markets (e.g. Dupont-Pioneer's Optimum high oil corn).

Agribusiness already segregates "designer" GMO crops based on output traits, and the practice will be more commonplace in the future as agribusiness tries to recapture the significant investments they have made in the research and development of biotechnology.[6] When addressing the World Economic Forum in Switzerland on February 3, 1999, Dupont CEO Charles Holliday said, "a key strategy of the business is to focus on the use of biotechnology to enhance the output traits of crops so that they yield more value from each unit of resources used, whether it be farmland or chemicals." [7] In order for this added value to be retained, crops must be segregated. Frank DeGennaro, Dupont-Pioneer Optimum's vice president of operations said that over 250 grain elevators throughout the Midwest segregate different corn varieties.[8]

Mergers are being justified in the name of segregation. In his testimony to the House Committee on Agriculture, Frank Sims, president of Cargill's North American Grain Division, explained that the purchase of Continental increases Cargill's ability, through an increased number of grain facilities, to expand to new specialty markets, meeting customer's needs. The increased number of grain storage and transportation facilities will allow for "a distribution network that ensures the integrity of identity-preserved handling from farm gate to dinner plate."[9]

The Food Biotechnology Communications Initiative (representing industries such as Monsanto, Nestle and Coca-Cola) funded the "Economics of Identity Preservation for Genetically Modified Crops" study conducted by Wye College. The report concluded that not only is segregation possible, but that the practice is widespread in world trade markets.[10] In addition, the study found that segregating and labeling soybeans and corn in the U.S. currently adds six to nine percent to the cost of the product. Allan Buckwell, lead researcher on the study, commented that segregation costs will decrease as the practice becomes more widespread.[11]

Although oligopolistic control of the food system is reducing access to and control of the food system by individuals, consumer concerns influence the market structure and show that segregation of GMO products is possible. Consumer demand has been the driving force behind the segregation of non-GMO products in Europe. A European food retailers and producers consortium comprised of Sainsbury (U.K.), Marks and Spencer (U.K.), Carrefour (France), Delhaiz (Belgium), Migros (Switzerland), Effelunga (Italy) and Superquinn (Ireland) have joined forces to work "with farmers and producers to find a supply of ingredients that can be scientifically assessed to prove that they are GM-free," according to a consortium spokeswoman.[12] Marks and Spencer has already announced it will be removing all GMO foods from its stores. Sainsbury's, the second largest food retailer in the U.K., own-brand products will be non-GMO by summer of 1999.[13] In mid-1998 the British supermarket chain and frozen food specialist, Iceland, began labeling all of its own products as non-GMO.[14]

In response to consumer concern over GMOs, Burger King, McDonalds and Kentucky Fried Chicken in the United Kingdom have announced that they are taking measures to become non-GMO as soon as possible.[15] Public opposition to GMO food is also increasing in Japan. GMO food has been banned in school lunches by the city of Fujisawa near Tokyo. The Japanese government has proposed the labeling of all GMO food. Various Japanese food buying cooperatives, whose membership total 16% of the Japanese population, hope to label and eventually eliminate GMO foods in the Japanese market.[16]

U.S. businesses are responding to the demands in Europe and Asia for non-GMO food. In mid-April 1999, the third largest U.S. corn processor, A.E. Staley Manufacturing Co., announced that it will not purchase any genetically engineered corn that is not approved by the European Union.[17] [18]

International market pressures have particularly increased the segregation of soybeans. In 1996 Monsanto’s genetically engineered Roundup Ready soybean was introduced on the U.S. seed market as an attempt to maintain the industry's significant profits from their Roundup herbicide whose patent will expire in 2000. Roundup Ready soy is the most commonly grown GMO seed worldwide. Because a significant portion of soybeans is GMO and soy is a component of 60% of processed foods,[19] the segregation of non-GMO soybeans has gained prominence as a niche market. Because of the demand for non-GMO contaminated soy products, specialty commodity brokers in North America are dealing in non-GMO soybeans for premium prices.[20]

Archer Daniels Midland (ADM) recently announced a new line of identity preserved (IP) soya protein products which rely on the segregation of non-GMO soybeans from harvest to end product. ADM states that its shift to IP non-GMO products was "in response to the customer demand to segregate Genetically Modified Soya."[21]

In June of 1998 U.S. Soy opened its doors in Mattoon, Illinois as a non-GMO soybean processor. One hundred and fourteen bins stored the 400,000 bushels of soybeans that were contract grown in 1998 and in 1999 this amount is expected to more than double.[22] James Skiff, president of U.S. Soy, states that they designed the company to gain a profit margin by providing non-GMO soybean ingredients to brokers, processors and manufacturers in Europe and Japan. They contract growers within a sixty-mile radius who deliver non-GMO soybeans directly to the processing plant.[23]

The examples of segregation set out in this paper show that it is not logistically "impossible" and that, in fact, segregation is commonplace. Segregation occurs not only for "designer" crops, but also for organic and non-GMO crops. Segregation is an important component of choice in the market place.

Agribusiness profit, not societal health and socio-economic sustainability, is the driving force behind the biotechnology agenda. Agribusiness has much to gain by farmer and consumer acceptance of their technologies and products derived through these technologies. This includes direct profits from the sale of their technologies and products and increased market control as farmers and consumers access to traditional technologies and products is reduced. Agribusiness is meeting resistance in the market place for their GMO products. The contradictions in the arguments made by agribusiness and government officials against the feasibility of segregation are a result of this tension.