September 18, 2003

 

Study on Optimal Testing Strategies for Genetically Modified Wheat

Development and commercialization of genetically modified crops continues to challenge the functions and operations of the grain marketing system. "With the anticipated commercialization of GM wheat in future years, the issues become increasingly important," says William Wilson, an agricultural economist at North Dakota State University.

A low cost system of testing and segregating genetically modified wheat (GM) from non-GM wheat can efficiently provide end-users differentiated grain shipments that meet consumer requirements. That’s one of the finding in a study by Wilson, Eric Jabs and Bruce Dahl with the Department of Agribusiness and Applied Economics at NDSU.

"While zero tolerances can’t be attained, genetically modified content can reasonably be assured for current import specifications of 0.5 percent or above," Wilson says. "Sellers view deviations from zero percent GM content as a cost that would require more rigorous testing to reduce GM content in non-GM shipments."

The study compared the relationships between optimal testing strategies, risks, costs, and different variables that would impact a dual marketing systems. Cost elements including those related to testing, quality loss, and a risk premium were estimated for a model representing a grain export chain.

Sensitivity analysis was used to analyze the effects of variety risks, penalty differentials, re-evaluation discounts, import tolerances, variety declaration, risk aversion, GM adoption and domestic end-user.

"The development of testing, tolerance, shipping and segregation strategies are imperative to commercial firms throughout the production and marketing supply chain to facilitate marketing in a dual system," Wilson says.

A system of testing and segregation would cost less than an identity preserved (IP) alternative, Wilson says. Identity preserved involves increased monitoring and documentation through production, storage, transportation, and handling phases and would only be necessary to market GM crops in special cases.

Other findings in the study include:

• With rapid advancements in testing technology, costs and risk will progressively decrease.
• Risk premiums will evolve to compensate grain handlers for added risks of a dual marketing system versus a non-GM system.
• The possibility of commingling varieties will encourage grain handlers to adopt contract mechanisms to assure content of grain delivered to elevators.
• Additional penalties will encourage handlers and shippers to test more intensively to avoid quality losses.
• Import tolerances set by governments and end-users will define the testing strategy and accompanying costs and risks.

* More grain handlers that are seeking less risk will tradeoff known testing costs for unknown quality loss.

The rate of genetically modified grain adoption will have a significant bearing on the viability of the defined system of testing and segregation, Wilson says. "GM adoption of greater than 25 percent will necessitate a variety declaration mechanism. If GM adoption goes higher than 70 percent, it becomes cost prohibitive and an alternate form of testing and segregation will have to be used or an identity preserved system put in place."

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Source: William Wilson, (701) 231-7472, bwilson@ndsuext.nodak.edu
Editor: Rich Mattern, (701) 231-6136, richard.mattern@ndsu.nodak.edu