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GE Wheat is a Major Issue for Corn Growers

As stated more than a year ago, GMO wheat is a corn grower issue, too

(Nov. 2, 2003 -- CropChoice news) -- Editor's note: Given the recent study
by ISU economist Robert Wisner on the potential economic downsides of
allowing commercial planting of Monsanto's genetically engineered wheat (see
that story at http://www.cropchoice.com/leadstry.asp?RecID=2173 ), now seems
like a good time to revisit a 2002 commentary by American Corn Growers
Foundation CEO Dan McGuire on how GMO wheat could affect corn growers.

By Dan McGuire
Director, American Corn Growers Association's Farmer Choice-Customer First
program

(July 22, 2002 -- CropChoice guest commentary) -- Some might ask whether
American corn producers should be concerned about the introduction of GMO
(genetically modified) wheat. They should, for a number of reasons. Perhaps
the most important is the negative impact that GMO wheat is likely to have
on the demand for and price of corn. Given the fact that wheat importers,
millers and bakers from Asia to Europe have warned the United States and
Canada that they do not want, nor will they buy GMO wheat, where is that
wheat likely to end up if U.S. and Canadian farmers deicide to grow it? The
most likely answer is U.S. livestock feeding or industrial use channels such
as ethanol plants. I place the reasons why GMO wheat will displace corn and
other feed grains in the livestock feeding market in three categories:
Research on wheat feeding; U.S. grain standards and U.S. farm policy:

Research on wheat feeding

Evidence that wheat will end up in livestock feed when the corn/wheat price
relationship favors it is best described by research from three land grant
universities: Oklahoma State University; Kansas State University and the
University of Nebraska which report:

* "Wheat grain has long been recognized as an excellent energy feed resource
for livestock. Because wheat is generally used for human food consumption,
it is typically priced higher than feed grains, such as corn and milo, on an
equal weight basis. Higher prices result in modest use as a feed grain
during most years. However, during periods when the wheat market is
depressed or feed grains are scarce (and high priced), wheat can be used as
an economical feed source for beef cattle. Other situations that increase
the use of wheat grain in cattle rations are low test weight and sprout
damaged wheat. Market discounts for low test- weight and sprout-damaged
wheat can be substantial enough to encourage cattle producers to consider
this feed resource in their beef cattle rations." The same research states,
"Wheat and corn grain have similar feeding values, with wheat having higher
protein concentration and more rapidly fermented starch." It adds that wheat
can be substituted for corn when corn prices are: corn-$2.00 and wheat -
$2.39; corn-$2.50 and wheat-$$2.88; corn-$3.00 and wheat-$3.38; corn-$3.50
and wheat-$3.87; corn-$4.00 and wheat-$4.36.
*
*
* "Wheat is quite palatable to poultry. Milo and wheat are comparable in
metabolizable energy, but both are slightly lower (5-7 percent) than corn.
The protein content of wheat is higher than corn and may be higher than
milo. Protein content varies from 11 to 19 percent, depending on the type of
wheat, variety and test weight. The first step in formulating rations with
wheat is the determination of protein content and consideration of other
nutrient levels. Corn, milo and wheat as to composition in the tables." The
table referenced showed protein as follows: corn-8.2 percent; milo-9 percent
and wheat (hard red winter)-12.5 percent.
*
*
* "Wheat can be an excellent replacement for a portion or all of the milo or
corn in most swine diets. However, like most ingredients, there are
advantages and disadvantages of feeding wheat to swine." And, "Wheat
contains approximately 30 percent more lysine and over 3 times the amount of
available phosphorus than either corn or milo."
The above information provides just a minor glimpse at why "unwanted" GMO
wheat may displace corn in both livestock feeding and industrial markets.

U.S. Farm Policy

A quick review of farm policy, wheat prices and wheat feeding to livestock
is enlightening on this issue. The following statistical information comes
from various reports by the United States Department of Agriculture. In
marketing year (MY) 1983/84 the average price that farmers received for
wheat was $3.51/bushel and the average price of corn was $3.25/bushel.
However, the average price of hard red winter (HRW) wheat was $3.34/bu. in
July of 1983 during wheat harvest. With the narrow spread between the wheat
and corn price, the quantity of wheat used for livestock feed jumped to 371
million bushels, from 195 million the year before. The national average
price of wheat dropped to $3.39 in MY 84/85 but the July harvest price of
HRW was $3.30/bushel. The national average corn price ranged from $2.70 in
April of 1984 to $2.44 in August and the number of bushels of wheat used for
livestock hit 407 million for the 1984/85 marketing year. Corn prices
dropped to an average of $2.23/bu. in MY 85/86. Wheat averaged $3.08 so
wheat feeding dropped to 284 million bushels.

The 1985 Farm Law: The wrong-headed low loan rate policy in the 1985 farm
law set an increase in wheat feeding in motion as the wheat loan rate was
the first to drop, from $3.30 to $2.40, wrecking the historical balance
there had been between the wheat loan rate and that of other commodities.
And since the loan rate became effective with the new wheat marketing year
that began June 1 (rather than September 1 for corn), the average market
price of HRW dropped to $2.19 in July of 1986 and below $2.00 in some
western Nebraska locations, where large feedlots are located. The quantity
of wheat used for feed jumped to 401 million bushels in MY 1986/87. Since
the low wheat prices directly resulting from the low loan rates in the 1985
farm bill failed to increase wheat exports as promised, wheat feeding stayed
at near 300 million bushels in MY 1987/88, displacing corn demand.

The 1990 Farm Law: The next agribusiness-oriented farm law came in1990,
causing wheat feeding to soar again. The wheat loan rate dropped from $2.06
to $1.95. The average market price was $2.61/bushel for all wheat but HRW
dropped as low as $2.36 that year and the quantity of wheat fed to livestock
hit nearly half a billion bushels, considerable competition for corn.

The 1996 Farm "Freedom to Farm" Law: The wheat loan rate remained at $2.58
from MY 1995/96 through MY 2001/02 and wheat feeding averaged 274 million
bushels for that 7-year period. However, low U.S. wheat prices have not
increased foreign demand and wheat exports have languished during this same
period, dropping all the way down to 887 million bushels in the just-ended
2001/02 wheat marketing year.

The 2002 Farm Law and GMO Wheat: Now that policy makers developing this new
farm law finally realized the failure of the past 17 years of the
wrongheaded farm policy and raised the wheat loan rate to $2.80 per bushel,
"rebalancing" it with corn and other loan rates, along comes the prospect of
GMO wheat to put upward pressure on un-exportable wheat inventories and
downward pressure on wheat prices. Simply put, if GMO wheat cannot be
exported to traditional customers (from both the U.S. and Canada) it is most
likely to go looking for a home in the U.S. feed market, competing with
corn.

U.S. Grain Standards

As of data current in the Federal Register dated July 18, 2002 wheat is
defined as: "Grain that, before the removal of dockage, consists of 50

percent or more common wheat (Triticum aestivum L.), club wheat (T.
compactum Host.), and durum wheat (T. durum Desf.) and not more than 10
percent of other grains for which standards have been established under the
United States Grain Standards Act and that, after the removal of dockage,
contains 50 percent or more of whole kernels of one or more of these
wheats." There are eight classes of wheat. Since it has been reported that
the first GMO wheat to be introduced is likely to be of the class Hard Red
Spring (HRS) wheat, (grown primarily in the Dakotas, Minnesota and Montana)
it¹s worth examining HRS a little more closely. HRS is subdivided into three
subclasses: Dark Northern Spring (DNS) wheat which is,"Hard Red Spring wheat
with 75 percent or more dark, hard and vitreous kernels"; Northern Spring
(NS) wheat which is "Hard Red Spring wheat with 25 percent or more but less
than 75 percent dark, hard and vitreous kernels."; and Red Spring wheat
which is, "Hard Red Spring wheat with less than 25 percent of dark, hard and
vitreous kernels."

The U.S. grain standards allow 3 percent "wheat of other classes" in No. 1
grade wheat; 5 percent "wheat of other classes" in No. 2 grade wheat; and 10
percent "wheat of other classes" in No. 3 grade wheat. This encouragement
for the blending of various classes of lower value wheats, while still being
able to Omake grade¹ is a potential concern. DNS (HRS) wheat, along with
Canadian Western Red Spring (CWRS), is considered the "Cadillac" of wheats
for milling and baking purposes in Europe and other marketsSthe very same
markets that have already stated that they will not buy GMO wheat and that
the U.S. should not introduce it. GMO-HRS wheat cannot be isolated to the
areas where it is grown. Even if some market, somewhere wanted it, strictly
identity-preserving it is not possible. Consider that during the winter
months, when the Great Lakes ports are closed, HRS wheat is transported to
either Gulf or Pacific ports. There are plenty of cases where low quality
HRS wheat has been blended with HRW wheat for export, and the grain trade
are masters at exploiting the allowances in the wheat grade standards,
through blending, to maximize their profits. If that would happen with
GMO-HRS wheat, markets for HRW wheat would also be killed. All that wheat
would likely then go to livestock feed, hurting corn demand and prices. This
is why GMO wheat is a corn grower issue!

About the author: Dan McGuire was Agency Director of the Nebraska Wheat
Board for 12 years and Executive Director of the Interstate Agricultural
Gain Marketing Commission for 6 years.

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