Critical Thinking about Biotechnology:
Genetically Modified Crops
C. Economics
The issues:
Are GM crops a fad or the wave of the future?
Produced locally; Sold globally
The issue: Are GM crops a fad or the wave of the future?
 Producing, processing and selling canola and canola products is a $800 million business for Manitoba. GM crops must make `business sense' for farmers to use them. Let's take a look at some the economics of growing and processing canola. We will also look at the impact of GM crops on the business of canola production.
In Manitoba, the area seeded to canola has doubled over the last 10 years. On average, a Manitoba farmer can grow 1.68 metric tonnes of canola per hectare. The price of canola varies, but with an average price of $350 per tonne, the farmer would earn $588.00 for every hectare of canola in production (Manitoba Agriculture and Food, 2000).
While canola is a high value crop, it also costs a lot of money to produce one hectare of canola. Farmers have two types of costs when they grow a crop. Fixed costs include payments for land, taxes, utilities and equipment purchases. Variable costs include the costs to grow the crop like seed, fertilizer, pesticides and fuel for equipment. On top of these costs, the farmer must earn enough money from the crop to support a family. On average, it costs about $500.00 per hectare to grow canola.
Farmers who choose to grow GM crops have to make several decisions:
Does the extra price for GM canola seed earn more money for my farm?
Canola seed with GM traits costs more than non-GM seed. The companies that have invested large amounts of money in developing GM seed want to ensure continued research on new varieties. The farmer must decide if the higher price of seed will translate into more money for the canola - either by a higher price because of a desirable trait, or from more yield per hectare.
Will the canola I produce from GM seed be purchased?
The majority of the canola produced in Canada is exported to other countries. Therefore, the reaction of other countries to GM crops is very important to canola farmers. The United States and Japan accept canola from both GM and non-GM varieties. Other buyers for example, countries in the European Union, have stopped buying canola from Canada until they approve the GM varieties.
 Ernie's Perspective:
“Farming is a business, often times with low economic returns and high risk because of the ever-changing weather and commodity prices. To farm as a hobby doesn't make sense. I run my farming operation as a business. I feel that long-term business planning is key to long-term profitability and viability to our farm business. For example, one business decision that I've made this year is not to market our canola crop as aggressively as I usually do because of low commodity prices.
I believe that long-term business planning is something every business should do by establishing goals and objectives and developing a mission statement which guides the business.”
 Geoff's Perspective:
“The decision to get involved with biotechnology on my farm was based on business. GM crops can in some instances reduce the amount of inputs required like pesticides and provide a marginally higher yield. In order to survive in an industry like farming, farmers must look for and utilize any economic advantage they can find. In some instances GM crops can provide that advantage.
 Kelvin's Perspective:
“Farming is a lifestyle choice for us but we run it as a business since we are in agribusiness. We hope to maintain a certain lifestyle but the industry is not the same as it was even 10 years ago. Farming is now very business-oriented and if you don't treat it as a business then you will lose it.
At this point it is difficult to determine whether the extra price for GM seed earns us more money. However, use of this technology can aid in good farm practices and this is another management tool that we can put in the toolbox.”
 Zenneth's Perspective:
“Farming is both a lifestyle and a business for my family and I. First of all, it is a business because we have to make a living just like everyone else. We make a living not only on what makes good economic sense, but also on what makes good business sense. Farming is a lifestyle we enjoy because we are close to nature and to the environment.
The extra cost of genetically modified (GM) canola seed helps us expand our production capabilities, but the overall return in these economic times is still questionable. The return however, is still better when compared with the other available alternatives.”
There are two ways I make money on my farm by maximizing productivity or reducing per-unit costs. In the case of canola, production and marketing should not be viewed in isolation, rather they are a partnership to improving returns to farmers. My family farm has a strategy that takes into account the financial requirement of the farming operation, available markets and other factors.”
To learn more about growing canola in Manitoba, visit: http://www.gov.mb.ca/agriculture/crops/oilseeds/bga01s00.html
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The issue: Produced locally; Sold globally
 Once the canola is harvested, it is sold to different local purchasers, including grain elevators and oilseed processors. About 23% of the canola grown in Canada is used here; the rest is sold to countries around the world like the United States, Japan and China.
Ernie's Perspective:
“The canola I grow is used primarily for oil. The canola seed from my farm is delivered to a crushing facility or a local elevator. Once the oil is crushed it is sold to food companies across Canada and the United States. I have a network of people that I work with to ensure that I get the best price for my canola. Of course I always aim to get the best quality canola, but sometimes because of poor weather conditions our canola isn't of the highest quality. In these few rare cases, I may need to sell our canola for a lower price because it is of lower quality.
Local elevators will sell the seed to crushers. They also have a network of locations around the world that will buy Canadian canola because it has the reputation of being the best. Japan and the United States are two of Canada's largest importers of canola seed.”
Geoff's Perspective:
“I try to sell my canola based on who will pay the highest price. Canola production is a very high-cost, high-risk endeavor and I need to find the highest price possible.
Despite the confidence I have in GM canola, some countries in the European Union are still not certain with the technology and are not as eager to accept it. It's primarily because of food safety problems in the past. It has eroded their confidence in the food regulatory system. To date, all Canadian canola crushers are buying GM canola. I appreciate the strong statements that crushing companies make, ecause it gives me confidence that there will continue to be a market for my GM canola.”
Kelvin's Perspective:
“Since we are seed growers, our seed is sold locally to other producers in Canada. Our product is also used for commercial products such as canola oil, margarine, salad dressing and many other food products. The meal that remains after crushing is used for livestock production. We do not crush our own canola but there is potential for that in the future.
Within the canola market, 75 per cent of it is exported to five major markets: within Canada, the USA, Japan, Mexico and China. Once the canola is transported to the crushers, they decide to what market it will be exported to.”
Zenneth's Perspective:
“I sell my product to both the domestic crushing industry and the export market. If the canola is crushed locally then the meal is used in the feed industry and we do use some of it for our own livestock operation. The export market that we target is for whole seed. Despite some resistance by the European Union to accept genetically modified (GM) crops, the marketplace which we sell our canola to is currently accepting both GM and non-GM canola.
Another promising potential use for canola is as a bio-diesel, which is a fuel made from vegetable oils like canola oil. Bio-diesel is environmentally friendly, is usable in diesel engines and could be another alternative to fossil fuel. Through my involvement in the Canadian Renewable Fuels Association, I had the opportunity to work with people from Agriculture Canada here in Saskatchewan to produce a small amount of bio-diesel. We have used the fuel in our farm equipment and provided demonstrations for other producers in the area. It has been a real hit here so the community is now in the process of setting up a processing plant in a local area to produce canola bio-diesel on a larger scale.”
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Canola is a commodity crop with buyers and sellers around the world. Check out some of the marketing opportunities and challenges faced by Canada's canola growers at: www.agr.ca/mad-dam/e/index2e.htm and http://www.gov.mb.ca/agriculture/statistics/aac04s06.html
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