Wednesday, 8 January 2014

Reading the GM tea leaves

It is starting to look as though the GMO industry, having been armed to the teeth by a lax regulatory regime in the USA, may have shot itself in the foot. If so, some firms are heading for a very painful lesson on the dangers of having your wishes granted.

First a brief background. The GMO industry is headquartered in the USA where the regulatory framework is largely voluntary. This hands-off regime can be traced back to 1984 and it reverses what was previously a very cautious approach. It is based on the view that there is nothing special about the process of GM (despite the outputs being patentable) so one should just look at the product. 

Shimoda(pdf) reports key features of the US regime. Developers voluntarily "consult" with the FDA, design their own safety studies and are allowed to keep them secret. The FDA does not approve the safety of GM crops, does not have mandatory testing protocols for the safety assessment of GM derived food, and does not require long-term safety testing. 

What could possibly go wrong with this terrific spur to innovation? Three things, according to Shimoda, who as an active investor should know. In no particular order they are
  1. Complexity. It turns out that genetics is much more complicated than was realised 15-20 years ago. The great hopes of drought resistance and more nitrogen efficient plants are basically pipe-dreams at this point. Worse, getting beyond simple stuff like herbicide resistance is now recognised as carrying a significant risk of unintended consequences.
  2. Nature. If you keep spraying weeds with Roundup they become resistant to it, so you need a lot more Roundup which makes farmers start wondering why they are playing this silly game. Oh, and your crop doesn't grow so well either, because Roundup is nowhere near as benign as we have been led to believe.
  3. Preferences. As the ongoing calls for transparency over food contents grow louder, the GM industry finds itself defending the indefensible, which makes it look defensive, which makes consumers wonder what they're hiding, etc, etc. 
That's a killer list when you think about it: there are quite serious problems with the technology itself, and with both the supply and demand sides of the final markets for the output.

Shimoda argues that the industry needs to take a good hard look at itself, become much more transparent and honest with consumers, and try to work with nature. The whole slide pack is worth reading - its a major wake-up call from a deeply embedded insider. 

With this view in mind, the recent HardTalk interviews with Syngenta CEO Mike Mack (pt1, pt2) are very interesting. Mack starts by downplaying Syngenta's GM business, noting they do lots of other stuff as well. He also admits that that GMO crops lead to increased herbicide use, and says he could live with GMO labelling laws. The only time he gets really excited is when defending a class of insecticide he sells. 

To my eyes, its quite believable that Mack has heard the wake up call. In fact, his very presence on that show could be seen as an attempt to tackle problem #3, the tricky task of changing consumer preferences. 

Anyway, these issues will no doubt get more difficult over time rather than less, but its interesting to get a bit of a look at how the insiders see things.

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