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Insight & Intelligence™ : Oct 11, 2012

Weighing the Costs of GMO Labeling

Whether genetically modified products need to be so named is on the ballot in California.
  • Alex Philippidis

Farmers, food producers, retailers, and especially consumers can expect to pay more if a majority of California voters next month approves Proposition 37, requiring that food with genetically modified organisms (GMOs) be so labeled.

The question is, how much more?

Supporters of the California Right to Know Genetically Engineered Food Act—a coalition of environmental, consumer, and public health groups, plus smaller food retailers, and even 115 food manufacturers (many of “natural” or “organic” foods) named “Yes on 37”—insist any increases will be minimal and an affordable trade-off for learning just what is in those genetically modified soybeans or corn.

Opponents of the measure—a coalition of GMO seed companies, farmers, chain retailers, and larger food producers named “No on 37”—warn that Right-to-Know will cost California households $350 to $400 annually, as producers pass on costs whether they try to substitute with organic or non-GMO ingredients. Organics would be costlier than non-GMO ingredients, though the true costs of segregating them from GMOs are hard to estimate, according to a report issued for the pro-GMO coalition by Northbridge Environmental Management Consultants.

Either way, according to “Overview of Anticipated Impacts and Estimated Costs to Consumers,” producers will struggle: Organic ingredients may be limited or unavailable by 2014, while most non-GMO ingredients must be imported and few if any can meet California’s labeling threshold.

Burden for Manufacturers

The measure requires that manufacturers using 0.5% GMO material as of 2014—and any quantity as of 2019—in raw agricultural commodities and processed foods label their products “in clear and conspicuous language,” with the phrase “Partially Produced with Genetic Engineering” or “May be Partially Produced with Genetic Engineering.”

California’s threshold will be smaller than the 0.9% GMO material used by the European Union (EU), limiting comparisons to the EU experience and past U.S. studies assuming a higher threshold.

“For a 0.9% threshold, we find that the incremental cost in segregating major commodities like corn and soybeans is about 20%. When you go from 0.9% to 0.5%, it becomes 70%. And zero, you cannot manage. It’s not possible to do. It’s simply not doable,” Nicholas Kalaitzandonakes, Ph.D., director of the Economics and Management of Agrobiotechnology Center at the University of Missouri, told GEN

He said the labeling measure gives manufacturers three options: Continue using current ingredients and add the label; substitute non-GMO material; or reconstitute foods entirely outside of GMO—for example, using potato starch instead of corn starch.

“If you assume that some of them might try to reformulate or use non-GMO commodities in order to avoid labeling, then there is no question that this is going to be expensive. And there is also no question that you’re looking at increasing the cost probably a 10% to 15% to 20%, maybe more of the commodities that are being used today. That’s not a trivial cost,” Dr. Kalaitzandonakes said.

Producers can make up for the higher cost by shifting corn from the commodity market into feed markets, where most of corn is sold, since the California law exempts from labeling products such as meat or milk derived from animals fed GMO corn or soybeans.

“Neither the adoption of GMO corn will be affected, nor the overall price of corn for the farmers is going to be affected. Those who are going to pay the bill are really going to be the consumers in California,” Dr. Kalaitzandonakes said.

Impact on Consumers

Not so, counters Yes on 37. A report prepared for the group by Joanna M. Shepherd-Bailey, Ph.D., of Emory University School of Law, concluded that the measure would produce minimal expense for redesign of package labels and display of placards in grocery stores: “At most, the average California household will see total annual food expenditures increase by a one-time cost of $1.27 to offset these labeling expenses.”

That rosy assessment rests on relabeling being a tiny one-time expense, and assumptions that many sellers are unwilling to incur costs associated with repricing, out of fear of losing customers, and that physical and management costs are significant enough to deter price hikes.

But retailers wouldn’t be the key factor driving price increases. A better argument for a smaller price impact comes from Doug Gurian-Sherman, Ph.D., senior scientist with the Food and Environment Program of the Union of Concerned Scientists. He told GEN that GMO products such as high-fructose corn syrup or lecithin from soy beans or soy oil account for small percentages of ingredients in processed food.

“Even if you doubled the cost, which it wouldn’t, it might be 10% higher or something for those ingredients, or 20%; even if you doubled it, it still would only impact these foods as an ingredient cost by a much smaller amount, probably several cents on the dollar,” he said.

Dr. Gurian-Sherman added that most costs involving processed foods stem from factors beyond the ingredients, such as processing and marketing.

“If they fluctuate in price a lot, and I don’t expect them to very much, that would only still have a tiny impact on the ultimate price that a consumer pays,” he added. “There may be some whole products like soy bean oil that may go up somewhat, possibly if they have to source it from non-GMO sources. I think it’s very speculative and hasn’t seemed to occur in places like Europe.”

For GMO food, Dr. Gurian-Sherman added, recent price spikes stemmed more from this summer’s drought and the 40% set-aside of corn for ethanol than genetic engineering.

Yes on 37 faults the pro-GMO coalition for assuming worst-case that all food companies will substitute for GMO ingredients either organic or nongenetically engineered (GE) ingredients, since EU food producers didn’t do so when labeling came to the EU more than a decade ago.

“The American response to labeling of GE foods will likely be dramatically different,” Dr. Shepherd-Bailey wrote, rebutting Northbridge. “America has also embraced GE farming in ways that European farmers have not. Whereas the U.S. grows approximately 50% of GE crops worldwide, GE crops cover only about 0.12% of Europe’s agricultural land, and the entire European continent accounts for just 0.08% of the area growing them worldwide.”

A key reason why: The EU imposed a GMO crop ban in 1998, which the U.S. successfully challenged. The EU imposed labeling after the World Trade Organization lifted the prohibition in 2003.

Meanwhile in California, estimates vary on how much food is subject to the measure, from 34% (No on 37) to 42% (Yes on 37). Exempt from labeling are meats (including poultry), fish, dairy, medical food, alcoholic drinks, and food prepared for immediate consumption such as by restaurants.

Assessing GMO “Risks”

In arguing that GMO risks justify labeling, critics are trumpeting a study by researchers at France’s University of Caen, published in the journal Food and Chemical Toxicology. The study found that half the male rats, and 70% of female rats, consuming Monsanto’s genetically modified corn seed NK603 and Roundup herbicide died prematurely, compared with just 30% and 20% in a control group.

Tom Sanders, who heads the nutritional sciences research division at King’s College London, complained the study had not disclosed how much the rats were given to eat, and that the strain of rats studied was prone to mammary tumors following unrestricted food intake. David Spiegelhalter, Winton Professor of the Public Understanding of Risk at University of Cambridge, noted that the untreated control arm consisted of 10 rats of each sex, most of which also got tumors. GMO critics note the Caen study tracked the health of the rats throughout their life span rather than stopping at 90 days; tumors and organ damage suffered by the rats became evident only after four months.

With FDA now assessing whether to require labeling genetically modified products nationwide, the time has come for NIH to settle the controversy with better science—namely a study assessing the effect of NK603, Roundup, or other GMO products on larger populations than the 20 rats in each cohort of the Caen study, for a period longer than four months.

There is recent precedent for Washington resolving science disputes: The National Institute of Allergy and Infectious Diseases commissioned a study released last month that conclusively debunked the connection between chronic fatigue syndrome and two viruses raised by earlier studies after their results could not be replicated by researchers. A better assessment of GMOs risks will likely yield a bumper crop of better decisions that weigh the ingredients’ costs, and benefits.