Fonterra’s Future at Risk from GE Milk
Fonterra’s Future at Risk from GE Milk
A report on the future of “biopharming” in New Zealand is a warning that Fonterra's future as a dairy-food exporter is in jeopardy because of AgResearch’s plans to manufacture pharmaceuticals and ‘medical foods’.
AgResearch is seeking approval* for commercial production for an unlimited duration, at multiple unspecified sites across Zealand, using animals as ‘bioreactors’. The plans include cattle, sheep, buffalo, goat, pigs, deer, llama, alpaca, horses, rats, mice, hamsters, guinea pigs, rabbits, possums, and chickens; incorporating bacterial, viral, synthetic, monkey and human genes. (Maori genes are excluded.)
But Fonterra should oppose the applications as they are a threat to the cooperative’s standing as a food exporter, with potential losses of hundreds of millions of dollars, and the creation of irreversible stigma against New Zealand.
The report (1) “Preliminary Economic Evaluation of Biopharming in New Zealand” by Lincoln University’s Agribusiness and Economics Research Unit (AERU) says “introducing a GMO into the New Zealand dairy sector has a potential to cause a minimum of NZ$539.6 million in losses to the dairy and tourism industries. Thus, such a biopharming endeavour would need to offset those losses before it could be viewed as a net positive for the New Zealand economy”. The report warns that because of the importance to New Zealand’s economy of “export-focused industries “the reactions of overseas consumers are important.”
“AgResearch’s plans represent a transformation of the agricultural sector of New Zealand that Fonterra should not embrace,” says Jon Carapiet from GE Free NZ (in food and environment). “It will impact far more than farmers or pharmaceutical companies,including millions of consumers who buy Fonterra’s products. Yet in the applications by AgResearch the consumer has been cut out of the equation.”
The report signals that Fonterra and Brand New Zealand as a whole could be irreversibly stigmatized. “Commercial release of a food GMO, such as functional food, that will affect any of New Zealand’s major products or markets (especially Europe) has a high probability of causing an adverse effect and can potentially affect large parts of the country’s exports….In addition, there is a body of research on risk perception (that) affect consumers and researchers alike. One important concept from this literature is ‘stigma’. It is possible for products to be stigmatised; producers and even countries can be similarly affected” .p45( emphasis added)
considers as examples two potential products: recombinant
human lactoferrin (rhLF) produced in cow’s milk and low-GI
potatoes. The report shows AgResearch’s proposals for
indefinite and broad-ranging genetic engineering of animals
is at best premature if not disastrous, and cannot be
“(It) is clearly early days for these products. The future impact of consumer concerns is unknown and contested. The regulatory regime and practices needed to segregate novel products from other food have not been set up and are untested.”
The report also says paints an alarming picture of the lack of basic information that demands a Ministerial call-in of AgResearch’s applications. “The main reason to cover so much ground is that definitive information on the economics of biopharming is scant….The main result from this examination is that the necessary information to develop a robust economic analysis of these products is lacking.”( p52)
The report points out: “The main idea that falls out of this discussion is that biopharming is still in a research stage; it is not a developed industry with commercial products and commercial revenue.” And: “The RCGM did not fully explore the economics of GMOs, and in particular did not receive independent advice regarding the economics.”
“The government should intervene and “call in” the
applications. This is a decision that goes to the heart of
New Zealand’s values and international positioning. It
will change the very nature of this country, not just in the
short-term but forever,” says Jon Carapiet.
Jon Carapiet 0210507681
(NB Page references provided are for the downloadable PDF document )
Agribusiness and Economics Research Unit (AERU) , Lincoln University
Preliminary Economic Evaluation
Biopharming – the production of pharmaceutical compounds in plant and animal tissue in
agricultural systems – is touted as the next major development in both farming and
pharmaceutical production. Biopharming represents new territory for both the agricultural and pharmaceutical industries, and presents novel challenges for government regulators. It presents both opportunities and challenges for the New Zealand economy. It is thus important to understand the current situation regarding biopharming and to assess the future directions and potentials of the industry.
The food, agricultural and tourism sectors in New Zealand are economically significant,
contributing around 27 per cent of GDP. They are also export-focused industries therefore the reactions of overseas consumers are important. New Zealand and overseas research suggests that agricultural biotechnologies like biopharming can contribute to economic growth, but also may risk negative reactions if the technologies are not accepted by consumers. For example, biopharming currently uses genetic modification, so the experience with that technology may be instructive.
Production of a food or pharmaceutical compound can be viewed as a bundle of
characteristics or a vector of dimensions, including technical issues of production, applicable regulations, political concerns, and consumer responses to the product. The literature indicates that biopharming differs from existing production methods in a large number of ways. The extent of the differences is generally unknown or known qualitatively. The analysis presented here suggests that not only are the sizes of the difference unknown, but their potential contributions to either costs or benefits are also unknown. Analyses that project future financial benefits from biopharming tend, on the other hand, to assume that technical, regulatory, political, and consumer issues are resolved.
From the academic literature, this report derives an economic model or framework for
considering biopharming. This model is based on a cost-benefit approach to valuing changesin products and production methods. The model indicates the product dimensions that are likely to be affected by biopharming methods and how these dimensions may affect the costs and benefits of production. It also identifies the uncertainties in existing analyses. Finally, it demonstrates a method by which careful analysis of the economic costs and benefits of biopharming could proceed.
Two potential products are discussed using this model: recombinant human lactoferrin (rhLF) produced in cow’s milk and low-GI potatoes. The analysis of rhLF suggests several things.
First, all the necessary business information to assess the economic potential of producing recombinant human lactoferrin in milk in New Zealand is not available. Any assessment at this stage is necessarily preliminary. Secondly, it will be difficult to earn more than an economically normal profit by developing and marketing rhLF. There seem to be several close substitutes and competing technologies, so there appears to be little opportunity to create a dominant position in the market and earn oligopoly or monopoly profits. Finally, social science research suggests that introducing a GMO into the New Zealand dairy sector has a potential to cause a minimum of NZ$539.6 million in losses to the dairy and tourism industries. Thus, such a biopharming endeavour would need to offset those losses before it could be viewed as a net positive for the New Zealand economy. Given that worldwide sales of lactoferrin are currently in the tens of millions of US dollars, offsetting hundreds of millions of NZ dollars of lost exports seems unlikely in the short to medium term.
By contrast, the low-GI potato could have clear consumer appeal in the functional foods
market, a multibillion dollar and expanding market segment. As a functional food, it would have lower regulatory hurdles than a biopharmaceutical. Furthermore, potatoes are a commonly consumed food, and the total market is again a multi-billion dollar market. A final positive factor is that New Zealand has scientific expertise in the area and business experience in creating profits from Plant Variety Rights. However, the genetically modified status of the product could create problems in some markets, and there is the risk of losing at least NZ$191.1 million in annual tourism earnings. It is unknown at this point what competing products would be developed, other types of low-GI potatoes, other low-GI foods, and even other dietary trends.
Thus, the economic potential of these products varies tremendously, depending on the overall size of the potential market, control of technology or proprietary information, and otherfactors. However, it is clearly early days for these products. The future impact of consumer concerns is unknown and contested. The regulatory regime and practices needed to segregate novel products from other food have not been set up and are untested. The potential contributions to cost savings or other benefits of the technology have not been quantified.
This is a preliminary piece of research. As more information becomes available on the
potential products, the economics of their production, and consumer demand for them, future research will be able to improve the estimates of the economic impacts of biopharming in New Zealand.
Additional references from the report:
A study for the New Zealand Ministry for the Environment (Sanderson et al., 2003) found “ if New Zealand were to be one of a few countries not to release GM organisms into the environment, 33 per cent said their image would improve, 59 per cent said it would remain the same, and six per cent said it would worsen. ‘ (p37)
The report refers to The PABE
project (Marris, Wynne, Simmons, & Weldon, 2001) showing a
gap between consumer values and those of scientists
promoting biopharming. “Although the general public may
not have the specialist knowledge of a geneticist, they are
not basing their decisions on that type of knowledge.
Instead, they use their empirical knowledge of pas
tinstitutional behaviour, especially of lapses in public
safety. ‘Signal’ events..such as the BSE crisis are
perceived to be examples of the normal
behaviour of institutions charged with protecting the public safety”(P34)
Cheap manufacturing a reason for
“These same compounds may be produced using other non-biopharming technology, however.In fact, according to Elbehri (2005) there are 84 biopharmaceuticals on the market, while Goldstein & Thomas (2004) stated that ‘during the last two decades, approximately 95 biopharmaceutical products have been approved by one or more regulatory agencies for the treatment of various human diseases including diabetes mellitus, growth disorders, neurological and genetic maladies, inflammatory conditions, and blood dyscrasias’. All of these biologics, except perhaps one, are produced using non biopharming methods. Instead, they are produced using cell culture, in which vats of modified mammalian or plant cells are grown in containment and are then processed to extract the target compound”.
The Independent Biotechnology Advisory Council (IBAC) prepared an early economic
analysis of the impact of GMOs, Economic Implications of a First Release of Genetically
Modified Organisms in New Zealand (Campbell et al., 2003; IBAC, 2000). Jan Wright (a
member of IBAC) relied on these findings for her submission to the Royal Commission on
Genetic Modification (RCGM). The IBAC paper and Wright’s submission indicated that there were serious economic issues with GM in agriculture, particularly with the ‘first release’. Wright suggested that the RCGM look closely at economic issues (Campbell et al., 2003; Wright, 2000). In the event, the RCGM did not fully explore the economics of GMOs, and in particular did not receive independent advice regarding the economics.
“The allure of these products is the increased profit from a price premium that consumers would pay. These would be valueadded products that move producers out of the commodity market and into a market with higher profit margins. However, these products are also likely to lead to changes to the structure of agricultural sector, both through concentration of the control of inputs and desire for quality control over these enhanced products (Caswell, Fuglie, & Klotz, 1998; Oehmke & Wolf, 2002). ( p16)
• GMC07012: Import into containment livestock and laboratory animal species (live animals, sperm, embryos - importation of live animals into containment will be rare). Maintain animals for research, breeding and production. Import animal cell-lines (including human and monkey cell-lines), E. coli and yeast for use in the development (genetic modification) of livestock and small animals under GMD07012 and GMD07074.
• GMD08012, this application: Develop livestock and laboratory animals in indoor containment. Maintain those species for research, breeding and production. Develop animal cell-lines (including human and monkey cell-lines), E. coli and yeast for use in the genetic modification of livestock and laboratory animals.
• GMD07074: Develop livestock species in outdoor containment. Maintain those livestock for research, breeding and production.
• GMF07001: Field test livestock in outdoor containment. Maintain those livestock for research, breeding and production.