Major global importers expressed alarm over U.S. wheat supplies on Thursday after the first-ever discovery of an unapproved strain of genetically modified grain in Oregon, as U.S. officials raced to contain the fallout.
Japan canceled a tender offer to buy U.S. western white wheat and the European Union said it would test incoming U.S. shipments and block any containing genetically modified wheat. U.S. wheat merchants did not report any cancelations of purchases on Thursday, but some analysts feared a potentially damaging blow to the $8 billion export business.
“Unless there's a quick resolution, this is not going to be good for the export market,” said Art Liming, grain futures specialist with Citigroup.
The U.S. Department of Agriculture said nine investigators were collecting evidence in and around Oregon, the West Coast state where the genetically modified, or GM, wheat was found growing. A USDA spokesman said the investigators are taking witness statements, records and samples.
“We have increased the number of investigators throughout this month to work quickly and carefully to cover as much ground each day to determine what we are dealing with, how it got there, and where it might have gone,” he said.
The USDA said the GM wheat found in Oregon posed no threat to human health, and also said there was no evidence that the grain had entered the commercial supply chain.
GM crops tolerate certain pesticides, allowing farmers to improve weed control and increase yields. Many consumers are wary of GM food, and few countries allow imports of such cereals for direct human consumption.
While most of the U.S. corn and soybean crops come from genetically modified plants, no GM wheat varieties are approved for general planting in the United States or elsewhere, the USDA said. The EU has asked Monsanto, the maker of the GM wheat, for a detection method to allow its controls to be carried out.
Scientists said the wheat found in Oregon was a strain field-tested from 1998 to 2005 and deemed safe before St. Louis-based Monsanto withdrew it from the regulatory process. On Wednesday, Monsanto said there was “considerable reason” to believe that the presence of its product was “very limited”.
U.S. wheat futures on the Chicago Board of Trade dipped on Thursday. CBOT wheat for July delivery closed 4 cents per bushel lower at $6.98-3/4 per bushel.
Asian wheat importers South Korea, China and the Philippines said they were monitoring the situation. The world's biggest wheat importer, Egypt, said it had no fears yet over supplies.
Found in Oregon
The wheat was discovered this spring in an Oregon field that grew winter wheat in 2012. USDA officials said that when a farmer sprayed the so-called “volunteer” plants with a powerful herbicide meant to kill off standard, unaltered wheat plants, some of them unexpectedly survived.
Environmental activists expressed alarm at the discovery.
“The developers of GE wheat have repeatedly said that GE wheat will not contaminate conventional or organic wheat because it is predominantly self-pollinating. Despite these empty promises, GE contamination has happened,” Greenpeace International scientist Janet Cotter said.
“The only way to protect our food and environment is to stop the releases of GE crops to the environment - including a ban on field trials.”
Past discoveries of unapproved corn and rice varieties in the supply chain have shuttered export markets for months and cost billions of dollars in lost revenue.
The latest finding revives memories of farmers unwittingly planting genetically modified rapeseed in Europe in 2000, while in 2006 a large part of the U.S. long-grain rice crop was contaminated by an experimental strain from Bayer CropScience , prompting import bans in Europe and Japan.
The company agreed in court in 2011 to pay $750 million to growers as compensation.
But some said the more apt precedent involved StarLink corn, a GMO variety not approved for human consumption that was found in a shipment of corn in Japan in 2000. Shipments to Asia were cut deeply for more than a year afterward.
Wayne Bacon, president of French-based grain trader Hammersmith Marketing said some consumers would have a knee-jerk reaction.
“We all buy things with GM products in it every day, we just don't know about it, but if suddenly we know that the loaf of bread we are buying is made from GMO wheat then it becomes a very negative thing with the consumer,” he said.
Asia imports more than 40 million tons of wheat annually, almost a third of the global trade of 140-150 million tons. The bulk of the region's supplies come from the United States, the world's biggest exporter, and Australia, the number two supplier.
“Asian consumers are jittery about genetically modified food,” said Abah Ofon, an analyst at Standard Chartered Bank in Singapore. “This is adding to concerns that already exist on quality and availability of food wheat globally.”
European traders said any buyers who grow leery of U.S. grain could opt for Black Sea and EU wheat.
China emerged this year as a key buyer of U.S. wheat, taking around 1.5 million tons in the past two months. Chinese purchases in the year to June 2014 are estimated to rise 21 percent to 3.5 million tons, according to the USDA, with most shipments coming from the United States, Australia and Canada.
The Philippines, which buys about four million tons of wheat a year and relies mainly on U.S. supplies, is waiting for more details before acting, an industry official in Manila said.
Genetically modified crops cannot be grown legally in the United States unless the government approves them after a review to ensure they pose no threat to the environment or to people.