Market Morsel: To GM or not to GM.
I was chatting to a leader of the sheep industry yesterday about how the grains industry is quite sedate in comparison.
We don’t have any controversial issues that get the general public’s ire (See The Cheap Sheeps), which gains public and political attraction. This is a good thing. The grain industry can carry on and do its thing in the background; we are even the darling of the animal rights activists due to our production of alternate proteins.
The only controversy is GM crops, and we took our fair amount of flack and abuse as the lead authors of the independent economic analysis, which led to the introduction of GM crops into South Australia.
Years ago, GM crops were seen by many city commentators as a blight on our landscape that would cause all sorts of woes. These days GM crops don’t really get all that much attention. Maybe the narrative towards GM will change to being more positive as the world faces food security crises.
I thought it was a good time to take a look at the price spreads between GM and Non-GM.
Non-GM holds a premium over GM, and there is no arguing with that. There is a premium for the product, but how large is the spread?. I have elected to focus on WA as there is where the bulk of the crop is grown.
The first chart below shows the spot price for canola as a monthly average since 2015. In recent years there have been times when the monthly average has narrowed, especially in 2021. This was a time when globally canola was in short supply.
The second chart shows the actual percentage spread. The spread is a 9% premium to GM, with an 8% spread over recent years for the harvest period. The spread is between a 5 and 10% discount at harvest over recent years.
With the tightness of the global oilseed market, we may see that canola becomes canola with little differentiation. A world that is tight of cooking oils (and biodiesel) can’t afford to be too picky.
We have been asked by many of our subscribers if they should grow GM canola. The answer is ‘I dunno, I’m not an agro”. The question really should be asked of the agronomist, are the benefits in weed control going to cover the discount.