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DAVID KRUSE

By Staff | Dec 26, 2014

Badcorn.com is a website posted by the Onder Law Firm soliciting farmers to participate in a class action lawsuit against Syngenta for losses related to reduced corn prices resulting from the ban of U.S. corn and DDG imports by China.

The WSJ reported that 180 separate lawsuits have been filed by farmers. That ban resulted from the introduction of the corn trait MIR 162 prior to it being approved for import into China.

The website states, “Corn prices were at $6.78 per bushel Oct. 31, 2012 and, after rising to a high of $7.13 in March 2013, fell back to $4.63 by Oct. 31, 2013.

The following month China refused the first shipment of corn from the U.S. after testing positive for the MIR 162 trait.

The price received for U.S. corn as of Nov. 30, 2013 was just $4.37.

A thorough analysis done in April 2014 by the National Feed and Grain Association estimated losses to the U.S. agricultural industry at $1.1 billion to $2.9 billion for the 2013/2014 market year and up to $3.4 billion for the 2014/2015 market year.

Furthermore, it is unknown just how long and widespread this problem will become. Until August, there were still hopes for China’s approval of the MIR 162 trait, not only did that not occur, but China also announced it was abandoning its own transgenic corn development program, suggesting MIR 162 may never be approved.

Additionally, soybean prices have even seen volatility due to fears of potential MIR 162 contamination. Word now is that China will be coming through soon with an approval of the trait, but even if that is true it won’t erase the commercial loses that are material.

Commercials claim that they were kept in the dark and that Syngenta had asked for approval of MIR162 for both import and domestic production in China. That was a deviation from the typical path to approval usually focused on just import approval which delayed the process.

Others see it as a World Trade Organization permissible way for China to close its market to corn imports that they don’t need as Chinese reserves are burgeoning and related subsidies to farmers there were a burden on Beijing.

No matter. Commercial grain companies had physical shipments rejected and had to find new buyers at a logistical cost. They are leading the lawsuits against Syngenta.

Badcorn.com reports Bunge North America began refusing to purchase corn grown from Viptera seed in 2011 and was sued by Syngenta. The lawsuit was dismissed and when Syngenta appealed, only a single claim was sent back to the lower court.

Trans Coastal Supply Co. filed a lawsuit against Syngenta in September, alleging that the company had lost $41 million dollars because of China’s ban on corn bearing the MIR 162 trait. Weeks later Cargill filed suit against Syngenta, alleging that Syngenta exposed it to more than $90 million in losses by selling Viptera corn without first gaining China’s approval.

This is not the first time around the block for losses resulting from a Chinese ban on corn imports related to unapproved GMO traits. Aventis introduced Starlink corn with the Cry9C protein which was not approved by China resulting in a ban of U.S. corn in 2000. Food companies sued Aventis.

Taco Bell owners settled for $60 million. A class action suit was filed on behalf of farmers which were settled for $100 million. I was a participant in the proceeds which were paid in the form of a debit card redeemable at specific merchants.

MIR 162 is deja vu to Starlink. Syngenta failed to learn from the Aventis mistake. They are wryly attempting to generate support from the ag community with the charge that China is blocking access to new technology by U.S. farmers. That is just pure ad street spin.

China also banned DDGs. The unapproved MIR162 contaminated corn will have gone through the ethanol process as part of the DDG co-product. China had become the cornerstone of DDG price discovery in the U.S. and the market collapsed as a result of the ban.

This certainly negatively impaired ethanol company revenues. Badcorn.com makes no mention of DDGs because it’s asking farmers to participate in a class action lawsuit and no direct farmer losses related to DDG ban occurred; but indirect losses certainly resulted.

Ethanol companies would pay less for corn when they lost margin due to the lower distiller’s grain revenue resulting from the ban on DDG exports to China. It is harder to prove indirect losses, but farmers certainly shared the loss from lower DDG prices.

China has a WTO commitment to purchase a small amount of U.S. corn and by approving the GMO trait can allow imports to resume. It will be the DDG market that appreciates the approval the most as Chinese demand had become the backstop for U.S. DDG prices and should become so again.

China is not the only GMO trade problem. Turkey has stopped U.S. corn and DDG imports over six pending trait approvals. Turkey was the 6th largest DDG buyer before the ban.

While we can’t hold back introduction of seed technology to appease the lowest common denominator that rejects GMOs, China is not the lowest common denominator. It is the buyer who is always right even when he is wrong, so China is never wrong. Syngenta is.

An industry group, U.S. Biotech Crops Alliance, is working together to complete the guidelines that should become the industry protocol for how to handle the introduction of new biotech seed traits into the market that they hope to complete by April. Syngenta is a participating member of the group. China is indirectly participating too by its actions.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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