Drought-Stricken Wheat Belts Offered a Thorny Solution From Argentina

(Bloomberg) -- Argentina thinks it has a solution to droughts that’ve plagued blockbuster wheat producers from the Black Sea to Australia. The problem? Acceptance won’t come easy.

Agtech startup Bioceres has developed a genetically-modified wheat plant that can withstand drought and offer farmers higher yields. But while GMO soybeans and corn, mainly used for animal feed, are widely planted and traded, the agriculture industry has been loathe to take the plunge with wheat, which is directly consumed by humans.

Argentina’s government and agriculture industry want to foster the nation’s potential as a global leader in seed and farm technology. But growing GMO wheat could cause global buyers to shun Argentine supplies. Just last year, Japan and South Korea suspended purchases from Canada after GMO plants were discovered on its wheat belt.

There’s a desire to approve the Bioceres seed, said Luis Urriza, Argentina’s agriculture undersecretary. “But, there’s a risk for trade. We need assurances from our export markets.”

Even as it mulls a shift to GMO, Argentina is emerging as a bigger player for wheat. The nation harvested a record 19 million metric tons this season. That’s more than even powerhouse rival Australia. With only a third used domestically, the rest is shipped -- chiefly to neighboring Brazil, which bought 5.9 million tons through December.

GMO wheat isn’t legal in Brazil. Bioceres will file its seed, HB4, for approval this month with authorities in South America’s biggest economy after a commercial launch at the end of last year, Chief Executive Officer Federico Trucco said in an interview.

If Brazil’s willing to receive shipments, that may be enough for Argentina to give HB4 the green light, Undersecretary Urriza said. But shippers want to get more parties on board. That’s because, even after the recent boom, Argentina still accounts for just 8 percent of global trade, so it could easily be substituted by the biggest importers.

“An agreement with Brazil alone isn’t enough,” said Gustavo Idigoras, head of Ciara-Cec, Argentina’s crushing and crop-export chamber. The group’s members include stalwarts of the agriculture industry such as Cargill Inc. and Bunge Ltd.

To increase its global leverage, Argentina should work with other producing nations to create a consortium of GMO-wheat exporters, Idigoras said.

Presidential Meeting

Rounds of meetings between Bioceres, exporters, millers and government officials are currently being held ahead of a summons this month with President Mauricio Macri, who’s asked the industry to come up with a way to push ahead with HB4. Macri’s office didn’t reply to requests for comment.

If Brazil does accept HB4, one of the biggest problems would be preventing non-GMO cargoes from getting contaminated. If HB4 is detected in shipments to nations that haven’t approved it, Argentina’s wheat prices would likely plunge.

“Consumer resistance is not going to go away quickly,” said Abdolreza Abbassian, a senior economist at the United Nations Food and Agriculture Organization. “It’s going to take years, if not decades.”

David Hughes, head of Argentine wheat production and trade chamber ArgenTrigo, said he can’t see how the economics works out for farmers. That’s because isolating the GMO wheat would increase their logistics costs, but there’ll be no premium paid by traders.

At stake for Bioceres is investor sentiment for its upcoming public offering, which it plans to execute through the creation of a special purpose acquisition company. Bioceres has already faced push-back over its other technology, with drought-resistant soybean seeds pending approval from China before they can be sold.

“Being first always generates fear,” CEO Trucco said. “We don’t want to be a ‘me too’ company. We have to challenge the status quo.”

--With assistance from Megan Durisin and Lydia Mulvany.

To contact the reporter on this story: Jonathan Gilbert in Buenos Aires at jgilbert63@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi, Reg Gale

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