Review of the Moratorium on Genetically Modified Canola in Victoria Published by the Victorian Government Department of Primary Industries, Melbourne, November 2007

DEPARTMENT OF PRIMARY INDUSTRIES

Review of the moratorium on genetically modified canola in Victoria Published by the Victorian Government Department of Primary Industries, Melbourne, November 2007

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For more information about DPI visit the website at www.dpi.vic.gov.au or call the Customer Service Centre on 136 186. 30 October 2007

Minister for Agriculture

Victoria

Dear Minister

As members of the independent Review of the moratorium on genetically modified canola in Victoria, we are pleased to submit our report to you.

We would like to thank all those who took part in the Review by either providing submissions or other information to us or taking part in consultations.

We commend the report to you and your Victorian parliamentary colleagues.

Yours sincerely

Professor Sir Gustav Nossal, Chair

Mrs Christine Forster

Mrs Merna Curnow

Terms of reference Terms of reference

The Review Panel will:

1. Assess the economic impacts on Victoria of the moratorium on GM canola;

2. Assess the expected economic impacts of:

• allowing the moratorium to expire; and

• extending the moratorium.

3. Recommend whether Government should allow the moratorium to expire or be extended; and

4. Recommend any complementary policies and practices that are required to address the consequences of the moratorium ending.

The Review Panel’s findings and recommendations will specifically address the moratorium on GM canola.

To provide a context for its report, the Review will:

• Describe the existing regulatory framework governing the release of genetically modified organisms; and

• Summarise research findings on the extent of commercialisation of genetically modified organisms in Australia and overseas and assessments of the economic, health and environmental impacts that have resulted.

iii

Table of contents Table of contents

Terms of reference �� iii

List of abbreviations and acronyms ��xi

Executive summary �� 1

The Review ��1

Canola market and supply chain developments ��2

Benefits of genetically modified canola ��3

Economic impacts of the moratorium ��3

Complementary policies and practices ��4

Findings �� 7

Recommendations �� 9

Chapter 1 Introduction and Review process �� 11

1.1 Review process ��11

1.2 National regulatory arrangements ��13

1.3 The 2004 Order for a moratorium in Victoria ��13

1.4 Overview of this report ��15

Chapter 2 Genetically modified canola �� 17

2.1 Herbicide-tolerant canola varieties ��17

2.2 Overview of genetically modified crops worldwide ��18

2.3 Genetically modified crops in Australia ��19

2.4 Genetically modified canola varieties in Australia ��19

Chapter 3 The canola market �� 21

3.1 Overview of global canola production and trade ��21

3.2 Overview of canola production and trade in Australia ��23

Chapter 4 Impacts on markets �� 29

4.1 Factors influencing consumer choice ��29

4.2 Changes to consumer attitudes ��31

4.3 Is there a price premium for Australian non-GM canola? ��31

4.4 Is there a marketing advantage for being ‘GM free’? ��33

4.5 Trends in grain handling ��34

4.6 Segregation ��34 v Review of the moratorium on genetically modified canola in Victoria

4.7 Grain supply chain ability to achieve coexistence ��38

4.8 Downstream industries ��40

Chapter 5 On‑farm impacts �� 43

5.1 Why do Victorian farmers grow canola? ��43

5.2 Benefits of genetically modified canola ��44

5.3 Impact on gross margins ��45

5.4 The importance of choice in farm business decision making ��46

Chapter Estimating the economic impact of the moratorium �� 49

6.1 Methodology of the cost–benefit analysis ��49

6.2 Results of the cost–benefit analysis ��50

6.3 Key assumptions and sensitivity analysis ��51

Chapter 7 Impact on science, research and development �� 53

7.1 Reduction in research and development ��53

7.2 Loss of Australian research capability ��55

7.3 Broader legislative reform ��56

7.4 Securing a return on investment ��56

Chapter 8 Impact on the organic food sector �� 59

8.1 The organics industry ��59

8.2 Genetically modified canola and the organic supply chain ��59

8.3 Have genetically modified crops negatively affected organic production overseas? ��62

Chapter 9 Liability and dispute resolution �� 63

9.1 Is there unique legal risk associated with introducing genetically modified canola? ��63

9.2 Common law actions ��64

9.3 Breach of contract ��64

Chapter 10 Are further measures needed? �� 67

10.1 Communication and monitoring of ongoing impacts ��67

10.2 Consistent regulatory arrangements ��68

Chapter 11 Summary, conclusions and recommendations �� 69

Appendix 1 Membership of the Review Panel �� 87

Appendix 2 National regulatory arrangements �� 89 vi Table of contents

Appendix 3 Public submissions presented to the Panel �� 91

A3.1 Organisations and individuals who presented individual written public submissions ��91

A3.2 Individuals who presented copies of a Victorian citizen campaign submission ��93

A3.3 Individuals who presented copies of a Japanese citizen campaign submission ��95

A3.4 Individuals who presented copies of the Victorian Farmers Federation campaign submission ��98

Appendix 4 Participants in stakeholder meetings with the Review Panel �� 99

Appendix 5 Orders under the Control of Genetically Modified Crops Act 2004 (Vic.) �� 101

Appendix 6 Genetically modified crops — extent, economics, and effects on human health and the environment �� 105

A6.1 Extent of the commercialisation of GM crops �� 105

A6.2 Economic impact of the commercialisation of GM crops �� 109

A6.3 The effects on human and animal health of GM crops �� 110

A6.4 Environmental impact of GM crops �� 114

A6.5 Ecological benefits of GM crops �� 122

A6.6 Conclusions �� 124

Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman �� 125

A7.1 Methodology �� 125

A7.2 Results �� 129

A7.3 Key sensitivities �� 131

A7.4 Conclusions �� 134

References �� 135

Notes �� 145

vii

Table of contents List of tables

Table 3.1 Global production of canola seed...... 21 Table 3.2 Australian canola market...... 23 Table 3.3 Destination of Australian canola exports...... 23 Table 3.4 Production of canola in Australia, by state...... 25 Table 3.5 Value of canola seed and oil exports from Victorian ports...... 26 Table 3.6 Supply and disposal of Victorian canola, 2005‑06...... 26 Table A5.1 Summary of Commonwealth, state and territory genetic modification legislation and moratoria...... 104 Table A6.1 Countries that have commercialised GM crops...... 106 Table A6.2 GM crops commercialised or approved (deregulated) for commercial release globally...... 107 Table A7.1 Key yield and seed assumptions...... 127 Table A7.2 Performance of GM canola types relative to the average of non-GM canola...... 127 List of figures

Figure 1.1 Management of the risks associated with genetically modified canola in Australia ��14 Figure 3.1 The five-year average of Australian canola production and area harvested ��24 Figure 3.2 Comparison of Australia’s and Canada’s canola average yield ��25 Figure 3.3 Schematic of the canola supply chain in Victoria ��27 Figure 4.1 Canadian and Australian domestic canola prices ��32 Figure A7.1 Adoption rates for GM canola under scenarios 1 and 2 ��129 List of boxes

Box 2.1 What are biotechnology and gene technology? ��17 Box 4.1 Examples of product differentiation in the Australian grain supply chain ��35 Box 4.2 Grain supply chain participants who are signatories to the Single Vision Grains Australia initiative ��39 Box 7.1 Grain royalties and levies ��57 Box A5.1 Schedule of the moratorium order ��102 Box A6.1 Current and future GM canola traits ��108 Box A7.1 Key points from the cost–benefit analysis ��126

List of abbreviations and acronyms List of abbreviations and acronyms

ABARE Australian Bureau of Agricultural and Resource Economics

ADIC Australian Dairy Industry Council

AP Adventitious Presence

APL Australian Pork Limited

APVMA Australian Pesticides and Veterinary Medicines Authority

AQIS Australian Quarantine and Inspection Service

CBA cost–benefit analysis

CCD colony collapse disorder

CSIRO Commonwealth Scientific and Industrial Research Organisation

EFSA European Food Safety Authority

EI environmental impact

EIQ Environmental Impact Quotient

EPR end point royalties

EU European Union

FAO Food and Agriculture Organization of the United Nations

FSANZ Food Standards Australia New Zealand

FSE Farm Scale Evaluation

GDP gross domestic product

GE genetically engineered

GM genetically modified

GMOs genetically modified organisms

GPS global positioning system

GRDC Grains Research and Development Corporation

GTR Gene Technology Regulator

HACCP Hazard Analysis and Critical Control Points

IGTA Intergovernmental Gene Technology Agreement

IMI imidazolinone

ISAAA International Service for the Acquisition of Agri-biotech Applications

ISO International Organization for Standardization xi Review of the moratorium on genetically modified canola in Victoria

LC PUFAs long chain polyunsaturated fatty acids

MPBCRC Molecular Plant Breeding Cooperative Research Centre

NACMA National Agricultural Commodities Marketing Association

Non-GM not genetically modified

NPV net present value

OECD Organisation for Economic Co-operation and Development

OGTR Office of Gene Technology Regulator

PIMC Primary Industries Ministerial Council

PRF pesticide residue free

RR Roundup Ready®

TGA Therapeutic Goods Administration

TT triazine tolerant

TUA technology user agreement

VFF Victorian Farmers Federation

xii Executive summary Executive summary

This report outlines the findings and recommendations of a Review of the moratorium on the commercial planting of genetically modified (GM) canola in Victoria.

The Review Panel has considered the issues pertinent to this task and recommends that the Victorian Government allow the moratorium to expire on 29 February 2008.

The controversy surrounding GM crops has centred on potential risks to the health and safety of people, the environment and our ability to market and trade agricultural commodities. Responsibility for assessing risks to health and the environment of gene technology is a Commonwealth responsibility through the Office of the Gene Technology Regulator (OGTR), while the states and territories are responsible for economic and market issues.

In 2003, the OGTR concluded that Bayer CropScience’s InVigor® GM canola and Monsanto Australia’s Roundup Ready® GM canola posed no greater risk to human health or the environment than did conventionally bred canola and approved their commercial release.

However, Victorian farmers, canola user industries and the wider community were uncertain and divided about the likely economic and market impacts of introducing GM canola. On 12 May 2004, the Minister for Agriculture declared a moratorium in Victoria on the commercial scale planting of GM canola until 29 February 2008. All other Australian canola growing states also introduced moratoria, for various lengths of time, on either GM canola or, more broadly, GM crops.

On 22 May 2007, the Premier of Victoria announced the establishment of this Review of the moratorium. Other states are also reviewing their moratoria.

The Review

The terms of reference for the Review are to:

1. Assess the economic impacts on Victoria of the moratorium on GM canola;

2. Assess the expected economic impacts of:

• allowing the moratorium to expire; and

• extending the moratorium.

3. Recommend whether Government should allow the moratorium to expire or be extended; and

4. Recommend any complementary policies and practices required to address the consequences of the moratorium ending.

The Review Panel’s findings and recommendations will specifically address the moratorium on GM canola. 1 Review of the moratorium on genetically modified canola in Victoria

To provide a context for its report, the Review will:

• Describe the existing regulatory framework governing the release of genetically modified organisms.

The Panel came to the task with an open mind and sought public submissions, consulted stakeholders and examined a number of independent and peer reviewed reports. To assist with evaluating the economic impact of the moratorium, the Department of Primary Industries, supporting the Panel’s work, commissioned an independent cost–benefit analysis.

In total, 1178 submissions were received and placed on the Review’s website (see Review of the Moratorium on GM Canola at www.dpi.vic.gov.au). Individual submissions numbered 248, while the remaining 930 submissions were copies of one of three campaign letters. The Panel has considered the key issues raised in submissions, with a focus on the risks to markets and trade, as required by its terms of reference.

Canola market and supply chain developments

Demand for canola products for food, feed, industrial and biofuel uses has been growing rapidly in Australian and overseas markets. Initial resistance to GM canola in both local and overseas markets, such as Japan and Europe, has been declining.

Major importing countries are reducing restrictions on market access, and it is difficult to identify any price difference on the basis of GM status. There is no evidence to suggest a market or price advantage for Australian canola (as a bulk commodity) that is attributable to its non-GM status.

The grain supply chain has well-established systems of segregation and co- mingling to meet customer requirements. Segregation is routine in the grain supply chain, across which the costs of segregation are distributed. There is no apparent market failure in relation to segregation to meet customer requirements.

Segregation of bulk grain commodities can be achieved on a cost‑effective basis only by the acceptance of non-zero tolerances for the presence of GM canola in other grains. Low level tolerances are well established, with domestic threshold levels of 0.9 per cent of GM in non-GM grain and 0.5 per cent of GM in non-GM seed for sowing.

The effort undertaken by participants in the grain industry to enable the coexistence of GM and non-GM crops has been significant. The grain industry has demonstrated its willingness and ability to deliver GM canola, non-GM canola and other non-GM grains through the supply chain to customers.

The Panel considers that the industry could achieve effective separation of GM and non-GM crops in the supply chain to meet grain industry standards for 2 Executive summary low level presence of GM material. It understands that the Primary Industries Ministerial Council may consider a model proposed by Single Vision Grains Australia to provide self-regulatory coexistence measures on a national basis. Adoption of a national system to manage the grain supply chain, following the introduction of GM canola, would ensure least cost to business.

Benefits of genetically modified canola

Canola production grew rapidly in Victoria from the 1970s as farmers realised its benefits in crop rotation and then as a crop in its own right. Canola is an important crop in many rotations, providing yield advantages to subsequent crops and diversity in cropping species to manage price, weed, disease and herbicide resistance risks.

Canola production in Victoria and Australia as a whole has been declining in recent years, in contrast to the rapid growth in other countries. Drought has been a key contributing factor over the past four years. However, the underlying decline has been apparent for some time, and other contributing factors include the increased disease susceptibility of Australian varieties and the lower yields associated with triazine tolerant (TT) varieties.

The current GM canola varieties used in other countries can, in some circumstances, provide significant on-farm benefits beyond conventional varieties, including increased yields and improved risk management, reduced on-farm costs and reduced environmental impacts. Compared with non-GM varieties, GM canola is estimated to have a gross margin benefit for Victorian farmers of around $45 per hectare in an average season.

GM canola is perceived as an important component in farmers’ business management ‘toolbox’. These proposed GM varieties would provide farmers with increased choice in managing crop rotations, along with alternative varieties in the event that TT varieties become ineffective or triazine based herbicides are banned, as has occurred in other countries.

An extension of the moratorium would damage the capacity of Victoria’s grain producers to respond to changing circumstances and to remain competitive over time.

Economic impacts of the moratorium

To assist with its deliberations, the Panel has drawn on a cost–benefit analysis of the economic impacts of the regulation of GM canola in Victoria. The current moratorium will impose an estimated direct cost of approximately $60–65 million on the Victorian economy. Most of this cost ($55 million) is yet to be realised, given the delay in adoption of the technology. The costs will be incurred even if the moratorium is allowed to expire in 2008, because of the lag in adoption of GM canola imposed by the current moratorium.

These costs have not been accompanied by the development of any observable market advantage in terms of market access or price premiums for Victorian canola. Nor have they provided any noticeable advantage to user industries such as the dairy industry. 3 Review of the moratorium on genetically modified canola in Victoria

Extension of the moratorium from 2008 to 2016 would impose an additional direct cost of approximately $110–115 million on the Victorian economy. The total cost of an ongoing moratorium from 2004–2016 is approximately $170–180 million, reaching $29 million per year by 2015. In addition to the direct costs, there are indirect on-farm and off-farm costs that are likely to be significant. Although difficult to quantify, the costs include increased impacts on the environment and reduced investment in research and development focused on biotechnology applications for agriculture more generally.

The Panel considers that the moratorium and the Control of Genetically Modified Crops Act 2004 (Vic.) have had an undesirable impact on private sector investment in agricultural science, retaining scientific capabilities and applying new technologies in pursuit of economic advantage. Technology driven progress, increased knowledge, improved genetic traits in canola, as well as economic, social and environmental changes all require that farmers be able to adapt quickly if they are to remain competitive and continue to meet Victoria’s needs for agricultural products.

The organics industry has set a zero tolerance level for GM material in organic products or byproducts. For most organic products this is not an issue because they do not share the canola supply chain. In some cases, standards are in place to maintain adequate separation between organic and conventional agriculture (for example, organic honey production). In other instances, industry can source non-GM material (for example, the stock feed industry). The greatest risk (and thus costs) is to the organic grain sector. However, this also presents opportunities, and the Panel notes the growth of the organics sector in countries where GM crops have been extensively commercialised.

The Panel notes that the organic food sector provides choice for consumers who prefer not to consume food produced using certain farming methods, including GM technologies. The Victorian Government should work with the sector to enhance opportunities for growth.

Overall, the Panel considers that the Victorian Government should enable choice throughout the supply chain. Farmers should be able to choose the most appropriate cropping system to suit their enterprise, following health and environmental safety approvals of new technological advances. Grain handlers and marketers should be allowed to manage the supply chain in order to meet precise requirements at least cost. Consumers also demand choice and this is assisted through product labelling, allowing them to select foods specific to their preferences.

The Panel considers that the moratorium has served its purpose in providing time to consider the likely impacts of GM canola on markets, and that it should be allowed to expire on 29 February 2008.

Complementary policies and practices

The Panel considered whether complementary policies or practices may be required to address the consequences of the end of the moratorium.

The removal of the moratorium on GM canola in Victoria will result in continued private and public interest in the area. The Panel considers that 4 authoritative information is essential for the community, the grain industry Executive summary and its customers. The Office of the Gene Technology Regulator is well placed to monitor the impact of GM canola on health and environmental safety, and ABARE and the Australian Bureau of Statistics could monitor the extent and impact of GM canola on the Australian and Victorian economies.

The Panel considered whether there is a need for any legislative change to deal with liability issues. There is little evidence that the introduction of GM canola would pose any unique risks to which existing legal mechanisms could not respond and the Panel perceives no need for special legal requirements.

Allowing the moratoria on GM canola in Victoria, South Australia and New South Wales to expire at the same time would enable least cost pathways to market and facilitate efficiencies through the supply chain. The Panel is cognisant of the need to harmonise regulatory arrangements for GM crops to reduce the regulatory burden on farmers and the supply chain.

Findings Findings

Findings are numbered according to the chapter in which they appear.

Finding 4.1 There has been a substantial shift in attitudes to genetically modified canola within the farming community and user industries, as well as in the wider community.

Finding 4.2 There is no evidence to suggest a market or price advantage for Australian canola (as a bulk commodity) that is attributable to its non‑genetically modified status.

Finding 4.3 Segregation is routine in the grain supply chain, across which the costs of segregation are distributed. There is no apparent market failure in relation to segregation to meet customer requirements.

Finding 4.4 There has been significant coordinated effort across the Australian grain industry to put in place protocols to manage the grain supply chain and to provide for segregation of grain types as the market dictates. The Panel considers that the industry can achieve effective separation of genetically modified and non‑genetically modified crops in the supply chain that meets the grain industry standards for low level presence of genetically modified material.

Finding 4.5 National adoption of systems to manage the grain supply chain, following the introduction of genetically modified canola, will ensure least cost to business.

Finding 5.1 Access to genetically modified canola technology can provide farmers with improved choice regarding the management of their cropping businesses. Further, compared with non‑genetically modified varieties, genetically modified canola appears to have a gross margin benefit of around $45 per hectare in an average season, for Victorian farmers.

Finding 5.2 Retaining the moratorium would damage the ability of Victoria’s grain producers to respond, over time, to changing circumstances and their ability to remain competitive.

Finding 6.1 If the moratorium were allowed to expire in February 2008, it will have imposed a direct cost of approximately $60–$65 million on the Victorian economy.

7 Review of the moratorium on genetically modified canola in Victoria

Finding 6.2 Extension of the moratorium beyond 2008 to 2016 would impose an additional direct cost of approximately $110–115 million on the Victorian economy.

Finding 6.3 The total direct cost of an on-going moratorium from 2004–2016 is estimated as being approximately $170–180 million, reaching $29 million per year by 2015. In addition to the direct costs, there are indirect on-farm and off-farm impacts that are likely to be significant. These include reduced investment in research and development and biotechnology more generally, and an increased impact on the environment.

Finding 7.1 The Panel considers that the moratorium and the Control of Genetically Modified Crops Act 2004 (Vic.) have an undesirable impact on innovation in Victoria by discouraging private sector investment in agricultural science, decreasing Victoria’s ability to retain scientific capabilities, and discouraging application of new technologies in pursuit of economic advantage.

Finding 8.1 The Panel notes the growth of the organics sector in countries where genetically modified crops have been extensively commercialised.

Finding 9.1 Despite uncertainty about outcomes from potential causes for legal action, the Panel considers there is little evidence that the introduction of genetically modified canola would pose any unique risks to which existing legal mechanisms could not respond.

Finding 10.1 The Panel considers the Office of the Gene Technology Regulator is well placed to monitor the impact of genetically modified canola on health and environmental safety, and ABARE and the Australian Bureau of Statistics could monitor the extent and impact of genetically modified canola on the Australian and Victorian economies.

Finding 10.2 Allowing the moratoria on genetically modified canola in Victoria, South Australia and New South Wales to expire at the same time would enable least cost pathways to market, facilitating efficiencies through the supply chain.

8 Recommendations Recommendations

Recommendation 1 The Panel recommends the Victorian Government allow the moratorium on genetically modified canola to expire.

Recommendation 2 The Panel recommends the Victorian Government allow the market to determine whether segregation of non‑genetically modified canola from genetically modified canola in the grain supply chain is required.

Recommendation 3 The Panel recommends the Victorian Government support the national adoption of the Single Vision Grains Australia initiative, to ensure any industry self-regulatory approach to coexistence is national in scope.

Recommendation 4 The Panel recommends the Control of Genetically Modified Crops Act 2004 (Vic.) be reviewed to assess its ongoing impact on investment in plant breeding.

Recommendation 5 The Panel recommends the Victorian Government work with the organics sector to identify barriers to and opportunities for growth.

Recommendation 6 The Panel recommends the Victorian Government work with governments to ensure there is appropriate monitoring and in particular:

• encourage the Office of the Gene Technology Regulator to monitor the impact of genetically modified canola on health and environmental safety, and ABARE and the Australian Bureau of Statistics to monitor the extent and impact of genetically modified canola on the Australian and Victorian economies.

• encourage the Primary Industries Ministerial Council to facilitate a coordinated approach to the monitoring and management of herbicide resistance nationally and regionally to ensure ongoing diversity in cropping systems.

Recommendation 7 The Panel recommends the Victorian Government work with the governments of South Australia and New South Wales to harmonise regulatory arrangements for genetically modified crops, particularly to achieve a consistent approach to deregulating the moratoria on the cultivation of genetically modified canola.

Chapter 1 Introduction and Review process Chapter 1 Introduction and Review process

In 2003, the Federal Office of the Gene Technology Regulator (OGTR) approved the commercial release of Bayer CropScience’s InVigor® genetically modified (GM) canola and Monsanto Australia’s Roundup Ready® GM canola. The OGTR concluded that these pose no greater risk to human health or the environment than does conventionally bred canola. The Victorian Government in 2004 concluded that the timing was not appropriate for the full commercial release of GM canola, due to ‘divisions and uncertainty within industry, the farming sector and regional communities about the impact of GM crops on markets’ (Office of the Premier 2004).

On 12 May 2004, the Minister for Agriculture thus issued an Order declaring a moratorium in Victoria on the commercial scale planting of GM canola. The moratorium is in place until 29 February 2008. All other Australian states and territories, except Queensland and the Northern Territory, have introduced moratoria on either GM canola or, more broadly, GM crops for various lengths of time.

The moratorium on the commercial cultivation of GM canola in Victoria was imposed in 2004 for trade and market access reasons. With regard to markets and trade, the controversy surrounding the commercial cultivation of GM crops has centred on the potential to damage Victoria’s status as a ‘clean, green’ agriculture producer and the loss of both market access and price premiums for Australian canola export markets. These market related concerns extend to the potential for the unintended presence of GM canola in other key export grains such as wheat and barley, potentially jeopardising these valuable markets. Some stakeholders have sought the opportunity to use the technology, while others want the option to trade GM free varieties. Other issues concern the costs and liability that may be imposed on GM and non-GM farmers to segregate GM from non-GM crops so as to supply markets that are GM sensitive.

This chapter describes the process for the Review of the Victorian moratorium. It outlines the Australian system for regulating GM organisms (GMOs), including an account of the establishment of the Victorian moratorium on GM herbicide-tolerant canola. An outline of the full report concludes this chapter.

1.1 Review process

On 22 May 2007, the Premier of Victoria announced the establishment of an independent Panel to review the moratorium on the commercial cultivation of GM canola in Victoria and released the terms of reference for this Review, along with background material on the Victorian moratorium. The Premier also announced the appointment of the Review’s independent Panel: Professor Sir Gustav Nossal (Chair), Mrs Christine Forster and Mrs Merna Curnow. The Panel co-opted the expertise of Mrs Carolyn Tanner during their deliberations (see appendix 1 for details of Panel membership). The Panel was asked to submit a report to the Minister for Agriculture.

The Panel came to the task with an open mind and examined information from submissions, discussions with a range of stakeholders, and a number 11 Review of the moratorium on genetically modified canola in Victoria

of independent reports, including those prepared for this Review and others undertaken during the past four years. The terms of appointment of the Review Panel included a requirement to consult with key stakeholders and to invite public submissions.

1.1.1 Scope In considering its terms of reference (see page iii), the Panel emphasises that it is not the purpose of this Review to judge the national regulatory agencies’ health and environmental assessments of InVigor® and Roundup Ready® canola. The Panel understands that Victoria has enabled the national regulatory system through the Gene Technology Act 2001 (Vic.). Further, it notes that the Victorian Government recently commissioned an independent review of that Act and accepted the recommendations that the objectives of the Act remain valid and that the scope of the Act be maintained (Government of Victoria 2006). In other words, the Victorian Government continues to support the national agencies’ regulation of health and environmental risks (see appendix 2). The Panel is mindful, therefore, that the context for this Review is the Victorian Government’s jurisdiction only over the regulation of OGTR‑approved GM crops for marketing purposes.

Although outside the Review’s terms of reference, given the many submissions that expressed concerns about human health and environmental risks, the Panel sought assurance from the OGTR that the 2003 approvals for InVigor® and Roundup Ready® canola remain appropriate in 2007. The Panel was satisfied with the detailed evidence provided in response that the agency continues to closely (and formally) scrutinise any new data relevant to its jurisdiction, and that ongoing assessments of InVigor® and Roundup Ready® canola reveal no information that would justify varying, suspending or cancelling the commercial release licences issued by the OGTR.

1.1.2 Matters taken into account In preparing this report for the Minister for Agriculture, the Panel took account of the following:

• issues raised in written submissions received after the public release of the Review Issues paper on 16 July 2007 (Victorian Department of Primary Industries 2007)

• issues raised during the July–August 2007 consultations with stakeholders and interested parties

• issues that have changed significantly since the moratorium came into effect in 2004, including industry initiatives and positions, national and state government activities and decisions, trade and market dynamics for GM crops and consumer attitudes

• reports and other literature relating to the risks identified in 2004.

As of 28 August 2007, the Review Panel had received 1178 written submissions, and 36 individuals and organisations had participated in stakeholder consultations (see appendix 3 for a list of those who presented written submissions, and appendix 4 for a list of those who attended the 12 Review consultations). Individual submissions numbered 248, while the Chapter 1 Introduction and Review process remaining 930 submissions were copies of one of three campaign letters. Of the latter group, 262 were copies of a Victorian citizen campaign submission (sub. 9), 18 were copies of a Victorian Farmers Federation campaign submission (sub. 17) and 650 were copies of a Japanese citizen campaign submission (sub. 252). All submissions to the Review can be viewed on the Victorian Department of Primary Industries website (see Review of the Moratorium on GM Canola at www.dpi.vic.gov.au).

1.2 National regulatory arrangements

Through an Intergovernmental Gene Technology Agreement (IGTA), the Australian Government and the governments of all states and territories have implemented a national system to regulate gene technology. The federal Gene Technology Act 2000 (Cwlth) — as amended by the Amendment Act of 2007 (Cwth) — established the role of the Gene Technology Regulator and her office, the OGTR, which is responsible for assessing risks to human health and the environment from GMOs proposed for release in Australia. The OGTR website provides information on all its dealings with GMOs in Australia. Through its complementary legislation, the Gene Technology Act 2001 (Vic.) — as amended by the Amendment Act of 2007 (Vic.) — the Victorian Government also conferred responsibility on the OGTR for assessing GMO risks to health and the environment in this state (figure 1.1).

In making its assessments, the OGTR must account for the views of Food Standards Australia New Zealand, the Australian Pesticides and Veterinary Medicines Authority, the Therapeutic Goods Administration and the Australian Quarantine and Inspection Service (see appendix 2 for an outline of their roles). Further, the Gene Technology Ministerial Council (comprising a Minister from each Australian jurisdiction) oversees the OGTR. The Council has legislative authority to issue policy principles relating to GMOs, which it has exercised in allowing states and territories to manage any risks posed to markets and trade.

In 2004, the states and territories (except Queensland and the Northern Territory) established legislation enabling the current prohibitions on commercial cultivation of OGTR approved GM canola. In Victoria, the legislation is the Control of Genetically Modified Crops Act 2004 (Vic.), which enables the Victorian Government to make Orders to regulate the commercialisation of GM crops on a case-by-case basis, on trade and economic grounds.

1.3 The 2004 Order for a moratorium in Victoria

In May 2003, the Victorian Government and the technology providers agreed on a 12-month voluntary (non-legislated) moratorium on the commercial release of OGTR-approved InVigor® and Roundup Ready® canola, to allow time for thorough examination of the potential trade implications of the commercialisation of GM canola in Victoria. During the 12 months, the Government commissioned an independent review to examine the potential trade impacts of introducing InVigor® and Roundup Ready® canola and to

13 Review of the moratorium on genetically modified canola in Victoria

Risks to the health and safety of Risks to markets people and the environment and trade

Responsibility: Depatment of Health and Ageing Office of the Gene Technology Regulator Legislation: Gene Technology Act 2000 (Cwlth) Gene Technology Act 2000 (Vic.) Human health and safety • Toxicity Responsibility: State and Territory • Allergenicity Governments • Carcinogenicity Legislation: Control of GM crops Act • Pathogenictuy 2004 (Vic.) • Endocrine and reproductive effects • Impact on domestic trade perfromance Environmental risks • Impact on export trade performance • Harm to protected species • Impacts on the markets of non-GM crops • Ham to non-target organisms • Impacts on the markets associated with • Effects on species diversity/genetic diversity other agricultural industries • Creation of new weeds, pests or pathogens • Costs and liability associated with • Exacerbating the effects of weeds, pests or coexistence of GM and non-GM markets pathogens • Impact on our ‘clean green’ image • Disruption of biotic communities and ecosystems • Impact on growers’ choice to grow • Disruption of rare and endangered or highly GM-free crops valued ecosystems • Impact on industry competitiveness • Impact on industry investment in research and development Safety of food and food products Responsibility: Department of Health and Ageing; Food Standards Australia New Zealand Legislation: Food Standards Australia New Zealand Act 1991 • Toxicity (using similar mathods to those used for conventional foods) • Tendency to provoke any allergice reaction • Stability of the inserted gene • Whether there is any nutritional deficit or change in the GM food • Any other unintended effects of the gene insertion

Figure 1.1 Management of the risks associated with genetically modified canola in Australia

determine industry’s ability to segregate GM canola from non-GM canola and other grains along the supply chain (ACIL Tasman and Farm Horizons 2003; Lloyd 2003).

While considering the review recommendations and the outcomes of extensive industry and community consultations, the Victorian Government acknowledged in 2004 that the grain industry routinely handles segregated crops to ensure customer requirements. It concluded, however, that a limit on unregulated commercial release would be prudent given the uncertain agronomic benefits and unproven ability to ensure GM and non-GM canola crops could coexist. Further, some export markets had expressed sensitivities to GM crops — notably, markets for dairy products and, to some extent, grain exports to the Middle East. Both key grain marketers, AWB Limited and ABB Grain, were concerned about market risks associated with an unintended low level presence of GM canola in wheat and barley shipments. The Victorian Government considered, therefore, that the timing was not appropriate for the 14 full commercial release of GM canola. Chapter 1 Introduction and Review process

Consequently, on 12 May 2004, the Minister for Agriculture issued an Order under the Control of Genetically Modified Crops Act, declaring a four‑year moratorium in Victoria on the commercial release of InVigor® and Roundup Ready® canola (see appendix 5 for details of the Order). The moratorium is in place until 29 February 2008, to allow further assessment of market conditions. New South Wales, South Australia, Western Australia, Tasmania and the Australian Capital Territory also have moratoria in place for GM food crops (see table A5.1 in appendix 5).

In addition, on 26 October 2005, the Primary Industries Ministerial Council (PIMC), comprising ministers from the Australian Government and each state and territory, agreed in 2005 on domestic threshold levels of 0.9 per cent of GM in non-GM grain and 0.5 per cent of GM in non-GM seed for sowing.

1.4 Overview of this report

The following chapter provides details of GM canola varieties and GM crops generally. Chapter 3 describes the global, Australian and Victorian canola markets, and the structure of the grain industry in Victoria. Chapter 4 explores the possible impact on the grain supply chain and downstream industries of the introduction of GM canola. Chapter 5 describes the impacts on farming businesses, and chapter 6 includes results of a cost–benefit analysis relevant to the terms of reference. Chapters 7–9 address issues relating to the agricultural research and development environment, the longer term or indirect impact on the organic food sector and legal liability matters associated with the introduction of GM canola. Chapter 10 outlines measures that might assist the smooth introduction of this new crop technology into Victoria. Chapter 11 summarises the report and provides the Panel’s recommendations.

Appendices 2 and 5 outline the existing regulatory framework governing the release of genetically modified organisms. Appendix 6 summarises research findings on the extent of the commercialisation of GM organisms in Australia and overseas, and assessments of the resulting economic, health and environmental impacts.

Chapter 2 Genetically modified canola Chapter 2 Genetically modified canola

This chapter describes genetically modified (GM) canola and GM crops generally. The first section describes herbicide-tolerant canola; the second section provides a worldwide overview of GM crops. The third section describes GM crops generally in Australia, while the last section describes GM canola varieties in Australia.

2.1 Herbicide-tolerant canola varieties

Canola (Brassica napus L.) is a plant that originated from either the Mediterranean or northern Europe. It is also known as oilseed rape or rapeseed (Warwick et al. 2000). The crushing of canola seed produces canola oil, which is used in margarines, cooking oils and some processed foods such as biscuits, salad dressings, snacks and frozen foods. The byproduct of the crush (canola meal) is used as a feed supplement in livestock diets, mainly pig, poultry and dairy rations (Spragg and Mailer 2007). Demand for canola oil and canola meal (and thus canola seed) has been rapidly increasing in recent years. The canola industry is extremely competitive, and global production has increased by almost 40 per cent by tonnage over the past five years.

To compete globally, canola varieties have been bred to improve yields, reduce costs of production and improve oil content and quality. A particularly important development has been the breeding of herbicide-tolerant crops, which allows chemical based weed control without affecting the crop. In canola, herbicide tolerance has been introduced using both conventional breeding methods and gene technology (see box 2.1).

Box 2.1 What are biotechnology and gene technology?

Biotechnology is a broad term used to describe any technique that uses living organisms or parts of organisms to make or modify products, or improve plants or animals, or to develop micro-organisms for specific uses in industry, technology, medicine or agriculture. Biotechnology is used, for example, in the production of foods and medicines, the removal of wastes and the creation of renewable energy sources.

Gene technology is one of a number of tools used in some biotechnology processes. The generation of genetically modified plants (for example, GM canola), whereby the genes of a plant are modified, is one of a number of applications of gene technology.

Production systems for canola in Australia are largely based on reduced tillage, whereby the land to be planted is sprayed with herbicide to eliminate weeds before seeding, rather than the land being ploughed. Estimates of the costs of weeds in agriculture vary, but one estimate puts the direct financial impact of weeds at $3.5 billion a year, covering both production losses and control costs (Plant Health Australia 2002).

In Australia, the use of herbicide-tolerant canola is a relatively new technology. 17 Conventionally bred herbicide-tolerant canola was introduced into commercial Review of the moratorium on genetically modified canola in Victoria

production in 1994 and has been readily adopted by Australian growers. The first commercial herbicide-tolerant canola varieties contained inbred tolerance to triazine herbicides (for example, Gesaprim®). Triazine tolerant (TT) canola varieties were developed by conventional breeding methods from naturally mutated plants found in Canada. The TT canola varieties are less energy efficient than non-TT canola, yielding 10–30 per cent less seed and lower oil content than conventional canola yields (Robertson et al. 2002). Compensating for this lower yield, however, is the ability of growers to better manage weeds and also sow their canola crop earlier (Carmody et al. 2001).

In 2000, canola with inbred tolerance to imidazolinone herbicides (for example, Clearfield®) was introduced. This seed is sold with the herbicide. The Clearfield® trait does not carry the inherent yield penalty of TT canola (Carmody et al. 2001).

The use of herbicide-tolerant canola has produced a major shift in cropping in southern Australia, essentially due to superior weed control (Carmody et al. 2001). Effective weed control can increase yield and thus increase the value of the crop. The use of herbicide-tolerant canola increases the weed management options available to growers, such as using fewer types of chemical and having greater flexibility in timing operations to adjust to variable climatic conditions. Additional weed management benefits include the chemical thinning of crops, increased seed purity and the ability to cultivate new areas of land where weed problems previously made growing the crop unmanageable and unprofitable. An estimated 80–90 per cent of the canola crop of Western Australia and 30–40 per cent of the canola crop of the remaining states comprise conventionally bred herbicide-tolerant canola (Norton 2003).

2.2 Overview of genetically modified crops worldwide

GM crops have been grown commercially since 1996. In 2006, 10.6 million farmers in 22 countries (11 developing and 11 industrial) planted a total of 102 million hectares of GM crops (James 2006). Argentina, Canada and the United States accounted for 60 per cent of that area. Six countries in the European Union (France, Germany, Spain, the Czech Republic, Portugal and Slovakia) are also now planting commercial GM crops, predominantly insect‑tolerant maize. The global area planted to GM crops has increased more than 60-fold over the first 11 years of commercialisation, reputedly making GM crops the fastest adopted crop technology in recent history (James 2006).

In addition to canola, international agricultural commodity markets now accept large volumes of GM crops such as soybeans, maize and cotton (see Brookes and Barfoot 2006a; Fernandez-Cornejo and Caswell 2006; Gomez-Barbero and Rodriguez-Cerezo 2006; James 2006; Trigo and Cap 2006). In the three years to 2005‑06, more than 60 per cent of the world trade in soybeans, maize, canola and cotton came from countries that grew GM varieties (US Department of Agriculture 2007). In the case of soybeans, GM varieties dominate world trade, with only 8 per cent of trade in certified non-GM soybeans (Foster and French 2007).

18 Chapter 2 Genetically modified canola

2.3 Genetically modified crops in Australia

GM cotton, tolerant to herbicides and/or resistant to insects, is the only broadacre GM crop that Australian farmers grow. In 2005‑06, Australia produced more than 840 000 tonnes of cotton over 335 000 hectares in New South Wales and Queensland (Australian Bureau of Statistics 2006). The Australian cotton industry is valued at approximately $1.5 billion, with GM varieties making up 90 per cent of all cotton grown. This is the maximum amount of GM cotton that can be grown, given the isolation and trap crops required for sustainable pest management. Apart from cotton lint, the uses of cotton seed almost mirror those of canola: GM cotton seed protein is used in the animal feedlot and dairy industries and as drought feed for cattle, while cotton seed oil is used extensively in commercial cooking in Australia.

The Panel is aware of a number of economic and scientific studies that have assessed the impact of GM crops worldwide on economic, environmental and human health grounds (notably, Brookes 2007; Gomez-Barbero and Rodriguez-Cerezo 2006; James 2006). Appendix 6 provides a detailed account of these reports.

2.4 Genetically modified canola varieties in Australia

In July 2003, the Federal Office of the Gene Technology Regulator (OGTR) issued a licence (DIR 021/2002) to Bayer CropScience Australia, approving the commercial release of seven GM InVigor® hybrid canola lines. InVigor® canola consists of a unique hybrid breeding system using a male sterility gene (barnase) and a fertility restorer gene (barstar), both derived from a common soil bacterium. The InVigor® technology enables production of hybrid seed, which allows increased plant vigour and seed production.

An additional gene confers resistance to the active ingredient (glufosinate ammonium) in the herbicides Liberty®, Basta® and Finale®. The Australian Pesticides and Veterinary Medicines Authority (APVMA) has registered the herbicide Liberty® for use with InVigor® canola crops.

In December 2003, the OGTR issued a licence (DIR 020/2002) to Monsanto Australia for the commercial release of GM Roundup Ready® canola. Herbicide tolerance is enabled by the introduction of two genes from a common soil bacterium. The Monsanto Roundup Ready® GM canola is tolerant to the herbicide glyphosate, which is the active constituent of a range of proprietary broad spectrum herbicides (including Roundup®) registered by the APVMA. Glyphosate is also registered for use in non-selective (general) weed control in broadacre agriculture, horticulture and non-cropped areas (including industrial areas and roadsides), and it is a widely used chemical in all these situations. It kills plants by inhibiting an enzyme in a biochemical pathway for the synthesis of aromatic amino acids. This pathway is not present in mammalian, avian or aquatic animals.

Monsanto Australia has licensed Roundup Ready® canola technology to Pioneer Hi-Bred and Nufarm, and has also sold Nufarm its Roundup Ready® canola germplasm, developed specifically for the Australian market between 1996 and 2003. 19

Chapter 3 The canola market Chapter 3 The canola market

World canola production and trade have grown rapidly over the past five years as the demand for canola oil and meal has increased. Australia plays an important role in this trade, as the world’s second largest exporter of canola seed. Critical to the increasing trade are the dynamic and diverse systems of grain handling and storage required to segregate different products to meet the demands of the marketplace. This chapter gives an overview of canola markets and the industry supply chain in Australia.

3.1 Overview of global canola production and trade

Global canola seed production has increased by more than 40 per cent over the past five years (table 3.1). It is estimated that seed production for 2007‑08 will be 51.4 million tonnes, an increase of 10 per cent on the previous year’s production (US Department of Agriculture 2007). Also for 2007‑08, global protein meal and processed oil production are estimated to be 28.6 and 18.8 million tonnes respectively. The majority of canola production is consumed in the country of origin, with an estimated 8 million tonnes of seed, 3 million tonnes of protein meal and 2 million tonnes of processed canola oil produced for the export market in 2007‑08 (US Department of Agriculture 2007).

Table 3.1 Global production of canola seed

2002‑03 2003‑04 2004‑05 2005‑06 2006‑07 Country (’000 metric tonnes) Australia 871a 1 703 1 496 1 441 500a Bangladesh 233 218 230 248 255 Belarus 60 55 143 150 180 Canada 4 178 6 771 7 728 9 660 9 100 Chile 13 14 14 14 14 China, People’s 10 552 11 420 13 182 13 050 12 700 Republic of Ethiopia 17 17 17 17 17 EU-27 11 752 11 185 15 432 15 523 15 991 India 4 050 6 800 6 500 7 000 5 800 Japan 1 1 1 1 1 Kazakhstan, 11 7 4 4 4 Republic of Korea, Republic of 2 2 2 2 1 Morocco 1 1 1 1 1 Norway 18 13 10 10 10 Pakistan 235 238 215 181 318 Paraguay 6 10 45 75 150 Russian Federation 115 192 276 303 525 Switzerland 49 44 54 54 50 Ukraine 61 51 149 285 600 United States 697 686 613 718 633 Total 32 922 39 428 46 112 48 737 46 850 a In 2002‑03 and 2006‑07, the impacts of severe drought reduced canola production in Australia. Source: Data from the Foreign Agricultural Service of the US Department of Agriculture, retrieved 15 October 2007, from www.fas.usda.gov/psdonline. 21 Review of the moratorium on genetically modified canola in Victoria

The European Union, China, Canada and India are by far the largest producers of canola (table 3.1). Canada and the United States are, to date, the only producers of GM canola (James 2006), with Canada typically accounting for over 70 per cent of world canola exports. In 2006, Canada produced 9.1 million tonnes (compared with 3.7 million tonnes in 1996) of canola over 5.3 million hectares, exporting 63 per cent of that grain. Major destinations for Canadian canola include Japan, Mexico and the United States (Foster and French 2007).

The crushing of canola seed produces canola oil that can be sold to the food market and, more recently, to the biofuel market for conversion into biodiesel. The meal that remains after the oil has been extracted can be sold to the livestock industry as feed (canola meal) and used as a soil amendment or fertiliser.

The introduction of GM canola in Canada from 1996 initially limited Canada’s access to the EU canola market, thus conferring a short term advantage on Australia for non-GM canola. This market advantage is eroding as the European Union continues to certify, on a case-by-case basis, approval for the importation of GM canola lines to meet market demands and domestic production shortfalls. Recent World Trade Organization rulings have clarified rules for importation of GM crops into the European Union (European Communities 2006)

Major canola importing countries have specific laws that deal with the use, trade and labelling of GM products. Japan, for example, allows for up to 5 per cent of an individual approved GM ingredient in an imported product before requiring labelling. Japan tolerates 1 per cent adventitious presence of GM material where Japanese authorities have not approved the GM variety but the relevant authorities in the exporting nation have given safety approval. Highly processed foods such as canola oils are exempt from labelling.

In the European Union, all imports of GM products must gain Novel Foods Regulations approval. Following the EU moratorium on GMOs in 1998, several import approvals have been granted primarily for animal feed processing and, more recently, biofuel production. Any intentional use of GM ingredients at any level above 1 per cent must be labelled.

Biodiesel is an emerging new use for canola. Globally, the European Union is the largest producer and consumer of biodiesel, with mandated targets of 5.75 per cent of biofuels in fuel for transportation by 2010 and a minimum 10 per cent target in all member states by 2020 (European Biodiesel Board 2006). Similarly, the Canadian Government has targeted for on-road fuels to have 5 per cent biofuel content by 2010 and for 2 per cent of the total diesel fuel market to be reserved for renewables such as biodiesel by 2012, requiring an estimated additional 1 million tonnes of Canadian canola seed per year (Canola Council of Canada 2007). The ambitious targets set through regulation have created an increased demand for canola, which existing global canola production cannot meet. How long this demand will last is unknown, however, because future regulation and changing targets will affect demand.

22 Chapter 3 The canola market

3.2 Overview of canola production and trade in Australia

Canola is Australia’s third largest broadacre crop after wheat and barley, and it is widely grown across south east Australia and Western Australia. Australia’s two major oilseed crops are cottonseed and canola, which together account for over 90 per cent of production. The remainder comprises small amounts of sunflower, safflower, peanuts and soybeans.

During the 2004‑05 season, Australia produced 1.5 million tonnes of canola over 1.3 million hectares, with a gross value to the economy of $503 million (Australian Bureau of Statistics 2006). Australia exported 60 per cent (896 000 tonnes) of this production as seed, but only small quantities of oil and virtually no canola meal (tables 3.2 and 3.3). These exports accounted for 19 per cent of world canola (seeds and processed oil) trade. Almost half of Australia’s exported unprocessed canola is sent to Japan (Foster and French 2007).

Table 3.2 Australian canola market

2002‑03a 2003‑04 2004‑05 2005‑06 2006‑07a Canola seed (’000 metric tonnes) Production 871 (2.6)b 1703 (4.3) 1496 (3.2) 1441 (2.9) 500 (1.1) Exports 502 (12.2) 1206 (22.0) 896 (18.4) 820 (11.7) 350 (4.9) Imports 0.21 0.23 0.11 0.14 57 Canola oil Production 161 (1.3) 175 (1.2) 184 (1.2) 184 (1.1) 184 (1.0) Exports 30 (3.3) 52 (4.0) 40 (3.1) 29 (1.7) 30 (1.5) Imports 10.48 1.27 1.22 2.10 20 Canola protein meal Production 230 (1.2) 250 (1.1) 264 (1.1) 264 (1.0) 265 (1.0) Exports 0 0 0 0 0 Imports 0 11 0 0 0 a In 2002‑03 and 2006‑07, the impacts of severe drought reduced canola production in Australia. b The numbers in parentheses are the percentage of world totals. Sources: Data from the Foreign Agricultural Service of the US Department of Agriculture, retrieved 15 October 2007, www.fas.usda.gov/psdonline.

Table 3.3 Destination of Australian canola exports

2002 2003 2004 2005 2006 Destination (’000 metric tonnes) Japan 446 379 681 396 312 European Union 63 1 94 0 287 Bangladesh 115 81 103 66 30 China 386 0 2 40 3 Malaysia 11 1 3 0 not available Pakistan 307 142 289 326 50

Source: Data from ABARE, 18 July 2007, from www.abareconomics.com.

Over the past seven years, Australian canola production and area harvested have steadily declined (figure 3.1). Since the 2000‑01 growing season, the five‑year average for production and the area of canola harvested have decreased by 30 per cent and 17 per cent respectively. Similarly, average yield has trended downwards, compared with an upward trend in Canada 23 (figure 3.2). The decline in Australian production contrasts with the rapid Review of the moratorium on genetically modified canola in Victoria

global expansion of canola production and demand. Reasons for the decline are likely to include several dry seasons, increased disease prevalence and the uptake of herbicide resistant triazine tolerant (TT) cultivars to improve weed management, which have a lower yield potential than that of other conventional canola varieties (Carmody et al. 2001).

Sources: Data from the Foreign Agricultural Service of the US Department of Agriculture, retrieved 8 October 2007, from www.fas.usda.gov/psdonline.

Figure 3.1 The five-year average of Australian canola production and area harvested

In the drought affected 2006‑07 season, Australian production was limited to 513 000 tonnes, of which the east coast contributed only 130 000 tonnes. Consequently, Australia imported 57 000 tonnes of Canadian GM canola and also shipped canola from Western Australia to the east coast, to meet the domestic demand for canola oil and protein meal. Coupled with high demand, the domestic production shortfall increased the value of canola as a commodity (see section 4.3).

Canola production in Victoria during the 2004‑05 season was 342 000 tonnes, with a farmgate value of $104.5 million (table 3.4). For the same period exports from Victorian ports contributed 22 per cent to total Australian exports (Australian Bureau of Statistics 2006). However, while exports from Victorian ports remained relatively stable in 2005‑06 (23 per cent of total Australian exports), total production of canola in Victoria fell slightly to 337 500 tonnes, with a preliminary estimated farmgate value of $85.4 million (Australian Bureau of Statistics 2006).

Since 2002, Japan, Germany, Pakistan, Bangladesh and the United Arab Emirates have been the major export markets for Victorian canola. The combined value for exports to these destinations from Victorian ports for 2004‑05 and 2005‑06 was around $100 million and $50 million respectively (table 3.5).

24 Chapter 3 The canola market

Sources: Data from the Foreign Agricultural Service of the US Department of Agriculture, retrieved 8 October 2007, from www.fas.usda.gov/psdonline.

Figure 3.2 Comparison of Australia’s and Canada’s canola average yield

The main domestic consumers of Australian canola are the oilseed processing industry (which includes the processed oil and protein meal markets) and the certified seed industry for re-planting. To the former, Victoria contributed more than 102 000 tonnes of processed oil and almost 150 000 tonnes of protein meal in 2005‑06 (table 3.6). The certified seed industry in Australia is an important source of quality assured seed varieties, including hybrid seed that must be sourced each season. In 2003‑04, 132 tonnes of canola seed were certified under the Organisation for Economic Co-operation and Development’s (OECD) seed certification schemes (OECD 2007). Detailed statistics on certified seed production in Australia are available from the Australian Seeds Authority (2006).

Table 3.4 Production of canola in Australia, by state

2002‑03 2003‑04 2004‑05 2005‑06 State (’000 metric tonnes) New South Wales 184.0 438.0 468.0 253.8 Victoria 177.0 384.0 342.0 337.5 Queensland 0.0 0.0 1.0 1.0 Western Australia 299.0 527.0 488.0 630.0 South Australia 210.0 354.0 242.0 217.5 Tasmania 0.8 0.0 1.0 1.0 Total 871.0 1703.0 1542.0a 1440.8 a ABARE estimates differ from the Foreign Agricultural Service of the US Department of Agriculture estimates shown in tables 3.1 and 3.2. Source: Data from ABARE, retrieved 15 October 2007, www.abareconomics.com.

25 Review of the moratorium on genetically modified canola in Victoria

Table 3.5 Value of canola seed and oil exports from Victorian ports

Export destination 2002-03 ($A) 2003-04 ($A) 2004-05 ($A) 2005-06 ($A) Japan 9 984 040 73 988 724 93 923 053 26 003 778 Germany 0 0 0 22 826 452 Belgium 497 754 3 773 634 4 760 161 2 286 812 Pakistan 59 511 141 331 2 274 667 2 219 414 United Arab Emirates 579 423 197 361 913 225 537 454 Total 11 120 728 78 101 050 101 871 106 53 873 910

Source: Data from Trade Data International 2007.

Table 3.6 Supply and disposal of Victorian canola, 2005‑06

Seed (tonnes) Oil (tonnes)a Meal (tonnes) Canola grain sources Victorian production 337 500 – – NSW imports 52 682 – – Total sources 390 182 – – Canola grain uses Total Victorian crush 255 662 107 378 148 284 Whole grain consumption in Victoria 8 155 – – Victorian farmer saved seed 273 – – Victorian grain exports 126 092 – – Total uses 390 182 – – Canola oil Domestic demand – 102 470 – Exports – 4 908 – Canola meal Domestic demand – – 148 284 Exports – – 0

a Assuming 42 per cent oil. Source: Data from ABARE 2006; ACIL Tasman 2007a.

The grain supply chain in Victoria has a fragmented production base that narrows to a concentrated handling and marketing system (ACIL Tasman and Farm Horizons 2003). The canola supply chain in Victoria is summarised in figure 3.3. Canola, like other grains produced in Victoria, is a bulk handled commodity passed through a grain handling and storage network from the farm to domestic and export markets. This network of trucks, trains, grain silos and container ships moves and stores all the major grains produced in the state, such as wheat, barley, canola and pulses (for example, field peas, faba beans, lentils and chickpeas). Along the supply chain from grower to retailer, segregating or co‑mingling grain to meet market requirements is an important function.

While canola is grown in most cropping areas of Victoria, there are only four major bulk grain handlers and marketers: ABB Grain, GrainCorp, AWB Limited and Australian Bulk Alliance. In Victoria, GrainCorp manages approximately 60 per cent of the grain crop and over 70 per cent of the rail transport (GrainCorp, sub. 104). Cargill Australia and Riverland Oilseeds are the main processors of Victorian canola. Cargill processes over 600 000 tonnes of canola, cottonseed, sunflower seed and soybeans annually to produce protein 26 meal for animal feed and vegetable oil for foods. Chapter 3 The canola market

Over the past decade, the grain supply chain has undergone significant structural change. Progressive deregulation, mergers and joint ventures have established a concentrated grain handling system and generated significant infrastructure and an array of marketing options. In 2002, for example, Cargill established a joint venture with GrainCorp to purchase Goodman Fielder’s flour milling business, which now trades as Allied Mills Australia. Allied Mills has a national network of flour mills and uses approximately 1 million tonnes of wheat annually. In 2003, Cargill and GrainCorp combined their grain and oilseed collection operations to form Australian Grain Accumulation Services, which acts as the buying agent for Allied Mills, GrainCorp and Cargill for their grain and oilseeds.

A range of regulations govern the grains industry and, specifically, GM crops (see appendix 4). On 26 October 2005 the Primary Industries Ministerial Council agreed on domestic thresholds for the low level presence of GM canola in conventional grain and seed. All Australian canola growing states (except Tasmania) introduced threshold levels of 0.9 per cent of GM in non-GM grain and 0.5 per cent of GM in non-GM seed for sowing (see section 4.6.3).

Contract services • Sowing • Spraying Export customer • Harvesting • Storage

Grain accumulation Sea freight • Receival On-farm • Grain declaration • Quality testing Road and rail Port terminal • Planting Road transport transport • Harvesting • Grading • Grain quality testing • Storage • Segregation and/ • Segregation and/or • Planting seed or co-mingling co-mingling retention • Storage and fumigation Road and rail Road transport transport Seed supplier/ retailer Grain processing Protein meals • Certified seed ‘the crush’ ONLY Road transport

Road and rail Road transport transport

Road transport Grain processing Processed oils Food industry ‘the crush’

Figure 3.3 Schematic of the canola supply chain in Victoria

Chapter 4 Impacts on markets Chapter 4 Impacts on markets

The impact of cultivating genetically modified (GM) canola in Victoria on the grain industry’s ability to meet market requirements is central to determining whether removing the state’s moratorium on GM canola would pose trade risks. Segregation helps meet specific market requirements, but can increase supply chain costs. Consumer preferences and perceptions are also important factors when considering the market effects of GM canola.

This chapter looks at the factors influencing consumer choice, including global and national community perceptions about gene technology. It examines whether a price premium exists for non-GM canola. It also examines the potential impact of the cultivation of GM canola on Victoria’s reputation. Finally, it discusses the ability to segregate GM canola and manage coexistence of GM and non-GM canola in the supply chain.

4.1 Factors influencing consumer choice

Consumers’ purchasing decisions are likely to reflect a number of factors, including purchasing power, the range of complementary and substitute products available, knowledge and beliefs about a product, and perceived benefits and costs. Key issues underpinning many of the public concerns regarding GM products are:

• risk and uncertainty

• distribution of benefits

• ethical, cultural and social preferences.

4.1.1 Risk and uncertainty A number of factors are likely to increase consumers’ perceptions of risk or uncertainty in the context of GM products. Broad social, cultural and personal influences as well as scientific facts shape consumers’ risk perceptions (Deane 1999). In particular, perceptions of risk and uncertainty are likely to vary according to the ability of consumers to exercise choice or control over their decisions. Perceived risk is likely to be higher, for example, for consumers who cannot distinguish between food with characteristics that they do not want from food they consider acceptable (other things being equal). Any uncertainty surrounding possible long term consequences of genetic modification may contribute to some consumers’ feelings of loss of control (Dolling and Peterson 2000).

Risk preferences also affect purchasing decisions. Highly risk averse consumers, for example, may prefer to eliminate the chances of a particular unfavourable outcome. Dolling and Peterson (2000) noted that consumers who are highly concerned about perceived health risks from GM products may choose to avoid all products with GM ingredients even if the probabilities of adverse outcomes are very low and the potential benefits from GM products are significant. Such consumers may be unwilling to trade off some product attributes for others. They may strongly desire information to identify the products they wish to avoid, and they will want information that is easily 29 Review of the moratorium on genetically modified canola in Victoria

accessible at a low cost to them. Other consumers may be willing to purchase a product with greater perceived risk if the product has some potential health benefits and/or price advantage (for example, see MacPherson et al. 2000). More information may help these consumers identify the type and size of potential trade-offs.

4.1.2 Distribution of benefits Consumers may display weak preferences for products that do not directly confer benefits upon them. Some review participants expressed frustration that the benefits of the current herbicide-tolerant and insect resistant GM crop varieties go to farmers and the technology developers and do not confer direct consumer benefits (see, for example, Milawa Mustards, sub. 24).

Others argued that the benefits of gene technology reside largely with the technology developers: ‘Much of the economic benefit in GM crops is going to multi-national companies in royalties on seed, and not to the whole community in any cheaper food’ (Yarra Ranges Shire Council, sub. 62, p. 3). The Panel notes that the development of new crop technologies by large companies provoked a broader response in some members of the public: ‘GE is about lining the pockets of big companies’ (Kerry Dawborn, sub. 143, p. 1); ‘The beneficiaries are the companies selling the seeds and the chemicals. Food production is too important to put in the hands of a few multinationals’ (Vanessa Errol, sub. 226, p. 1); ‘Farmers have become increasingly dependent on high-tech seeds and chemicals. The knowledge and power has shifted from the farmers to giant agri-business corporations such as Bayer and Monsanto. And as the power has shifted, so have the profits’ (Greenpeace, sub. 103, p. 4); and ‘All substantial profits, in the end, are going to be only made by Monsanto and Bayer anyway … All they want to do is control our food’ (Lucy Naylor, sub. 163, p. 1). Other submissions stated a more general frustration — for example, Mothers Against Genetic Engineering commented that ‘GM food has not been shown to improve anyone’s health’ (sub. 50, p. 10).

The Panel notes however, that the on-farm benefits (as outlined in chapter 5) may lead to community‑wide benefits such as decreased use of toxic farm chemicals, and that other benefits are to be delivered by research and development, including foods with specialty ingredients desired by consumers (such as enhanced health promoting micronutrients or vitamins) (Anderson and Jackson 2005; Holtzapffel et al. 2007; McHughen 2007). In addition, on‑farm productivity gains may benefit consumers by leading to lower food prices. To the extent that there are significant unrecognised benefits salient to consumers, the producers and suppliers of GM crops may have a marketing opportunity.

4.1.3 Ethical, cultural and social preferences The consumption of many products can involve ethical, cultural and social questions for some consumers. Biotechnology and genetic modification can particularly challenge some firmly held preferences. Issues raised in submissions include:

30 Chapter 4 Impacts on markets

• religious concerns (see, for example, Sunni Overend, sub. 239)

• ethical concerns (see, for example, Glenn Bain, sub. 147)

• other cultural or social perspectives (see, for example, Leneen Forde, sub. 146).

4.2 Changes to consumer attitudes

Numerous surveys conducted around the world since the introduction of GM crops have attempted to understand public attitudes to the new technology —see, for example, the analysis by the US Department of Agriculture (2006) of the first decade of GM crops. The attitudes in countries that adopted GM crops early differ significantly from those in countries yet to allow their introduction. Li (2002) for example, highlighted strong historical consumer support for GM foods in China, while Grimsrud (2004) outlined European preferences for bans on growing GM crops.

In Australia, the 2007 Biotechnology Australia survey of consumer attitudes recorded a significant decrease in the number of consumers who perceive risks associated with the use of GM crops, compared with the 2005 results. In 2007, 54 per cent said GM crops were risky, compared with 71 per cent in 2005 (sub. 29). Biotechnology Australia attributed the decrease in concern to increased ‘familiarity’ with gene technology in general terms. Its survey found 48 per cent of respondents were aware and had positive perceptions of GM foods in 2005, yet 73 per cent reflected those sentiments in 2007. Despite methodological limitations to the survey, its results nevertheless indicate a substantial shift in public opinion. The interpretation is consistent with Foster’s (2001) suggestion that concerns grow as consumers become aware of the prevalence of GM products in the food chain, but then diminish as knowledge about gene technology increases. A survey conducted in Ireland and the United States by McGarry et al. (2002), in which consumers expressed greater willingness to consume GM food as they became more familiar with the technology, supports this argument.

Despite the apparent rise in public support for GM foods and crops, the Panel considers further research may be warranted. The increase in public support, for example, may be a transitory response to difficult drought circumstances and publicity for climate change, which are both compelling events for eliciting public approval to search for new technological solutions. Finding 4.1 There has been a substantial shift in attitudes to genetically modified canola within the farming community and user industries, as well as in the wider community.

4.3 Is there a price premium for Australian non-GM canola?

Foster and French’s (2007) analysis of market acceptance of GM canola found that the vast majority of GM canola is sold at prices similar to those for non-GM canola in most major canola markets. They concluded that there 31 Review of the moratorium on genetically modified canola in Victoria

is unlikely to be a disadvantage from marketing GM canola (and livestock products fed on GM canola) produced in Australia. They further stated that ‘despite perceptions of consumer resistance and the range of market access conditions, GM producing countries dominate world trade in maize, soybeans, cottonseed and canola’ (Foster and French 2007, p. 2).

Nonetheless, the Network of Concerned Farmers presented data showing that Australian canola has commanded a higher price than that for Canadian canola (the major world producer) in recent years (sub. 41). It said the premium is attributable specifically to Australia’s non-GM status. Canadian and Australian domestic canola prices between 2001 and 2007 are shown in figure 4.1.

Foster and French (2007) explained that domestic supply and demand dynamics in the two countries make it difficult to isolate any purchasing preferences for non-GM canola despite the occasionally significant price difference between Australia and Canada. In drought years, for example, the pricing of canola moves from an export parity base (led by Canada) to import parity, as a result of the production shortfall and the need of domestic crushers (such as Cargill and Riverland Oilseeds) to maintain the efficient use of their crushing plants.

The Panel notes that the recent price inflation was apparent also for other grain crops (such as wheat and barley, pulses and cottonseed) following the 2006 drought (Auscott, sub. 33; Louise Staley, sub. 87). In addition, Andrew Broad indicated that Australian canola enjoys a freight rate advantage relative to Canada in Asian markets. So while Canadian exports at the world price, Australia has been able to extract some of the freight advantage in the form of higher prices (sub. 4). The shifts in pricing are complex to assess and should not be confused with a premium being paid for non-GM status.

Source: Max Foster, ABARE, pers. comm., 15 October 2007

Figure 4.1 Canadian and Australian domestic canola prices

Many submissions from parties involved in the primary production of grain and farm input services expressed confidence that no price premiums are gained from remaining GM free (Roslyn Corporation, sub. 23; Auscott, sub. 33; 32 Heather Baldock, sub. 44; IHD, sub. 99). They wanted access to the possible Chapter 4 Impacts on markets on-farm benefits from GM canola (as outlined in the next chapter) to retain a competitive position in the global market:

Australian farmers are being forced to compete on a global market using inferior genetics without receiving any extra market access or price advantage by maintaining non-GM. (Andrew Broad, sub. 4, p. 30)

4.4 Is there a marketing advantage for being ‘GM free’?

A number of submissions questioned the potential loss of reputation as a ‘clean, green and safe’ producer if GM canola were to be introduced. Les Dalton noted ‘the reputation built by Australia as a source of quality food products should not be gambled for the questionable rewards of genetic modification of canola’ (sub. 117, p. 1). The Yarra Ranges Shire Council stated that ‘there would be expected losses from a downgrading of Australia’s status as a “clean, green, safe” food supplier, domestically and abroad’ (sub. 62, p. 2). Andrea Buckley also expressed the view that ‘Australia will lose … its reputation for “clean, green and safe” agriculture’ (sub. 27, p. 1), while Don Stokes was of the view that ‘we should keep our competitive advantage’ (sub. 118, p. 2). Greg Pell suggested that calf meat exports for baby food could come under threat if Victoria loses its ‘clean green’ reputation (sub. 11). Similarly, Graham Connell from Black Hill Apiaries was concerned about the loss of reputation and markets for Australian conventionally produced ‘clean and green’ honey (sub. 57). The Gene Ethics submission, quoting from Westen et al. (2006), outlined a further possible cost associated with loss of reputation:

Another real social cost, but one that is difficult to quantify, is the health costs of emotional and psychological stress from impaired trust in the healthiness and cleanliness of food … loss of trust may be seen as a ‘daily hassle’ or chronic stressor that results in negative health consequences for many people. (sub. 234, p. 25)

The Panel also received a large number of campaign letter submissions from Japanese citizens that stated:

The introduction of GE [genetically engineered] canola to Australia would result in unacceptable risks to Australia’s key export markets, such as Japan, to say nothing of the risk to consumer health and the environment. (sub. 252, p. 1)

The Panel is mindful that the concerns expressed are general in nature — that is, the introduction of GM canola may affect the reputation of the broader food industry.

While a price or marketing advantage attributed to a ‘clean and green’ image may be true for some Victorian products, it is not currently represented in pricing on the global bulk canola market, where prices received for non-GM canola generally align with those for GM canola (Foster and French 2007).

In fact, the key buyers of Australian canola products (namely, Japan, Germany, Mexico, China and Pakistan) routinely source GM canola (and oil derived from GM canola) from other oilseed producing countries. As discussed in section 3.1, the European Union’s biodiesel policy has led to increased demand for canola oil and the certification on a case-by-case basis for the 33 Review of the moratorium on genetically modified canola in Victoria

import of GM canola lines from Canada. This canola market appears unlikely to continue to discriminate between GM and non-GM canola for meeting its biodiesel demand. Moreover, Weidemann Pastoral Company indicated that the introduction of GM canola may help Victoria retain a ‘clean and green image’ given Japan’s scrutiny of some of Australia’s chemical maximum residue limits and the European Union’s likely prohibition on the use of triazine herbicides, which are important for managing weeds in current canola varieties (sub. 71). The Panel concurs with the Foster and French (2007) finding that there is little evidence to suggest Victoria will experience a competitive advantage in maintaining a moratorium on GM canola. Finding 4.2 There is no evidence to suggest a market or price advantage for Australian canola (as a bulk commodity) that is attributable to its non‑genetically modified status.

4.5 Trends in grain handling

Market pressure for more accurate identity preservation and improved traceability is occurring for all types of food (including grain) in Australia, independently of the commercial release of GM crops. Product segregation and identity preservation are now routine business for participants in the grain supply chain (McMullen 2003; Sonka 2003). Virtually all grain types delivered to the Victorian bulk handling system have multiple quality segregations to meet market demands for differentiated grain products (see box 4.1). By contrast, canola is largely a bulk commodity in Victoria. Canola is not yet a differentiated product, but small amounts of canola seed may be downgraded as a result of adverse seasonal conditions. (GrainCorp, sub. 104).

As new traits and varieties are developed, specialty markets for canola can also be expected to emerge. Specialty oilseeds, for example, are increasingly being segregated in most oilseed producing countries (ACIL Tasman 2007b). The Panel notes the grower contract arrangements for the Dow AgroSciences non-GM Nexera™ canola commercialised in Canada. The marketing of this variety (with higher levels of oleic acid making healthier oil) involves a highly managed supply chain to preserve its identity — and, therefore, the higher value — of the crop (Dow AgroSciences, sub. 82). The Canadian industry experience shows that several factors (such as oil quality) drive canola segregation, of which GM status is only one.

4.6 Segregation

Participants in the supply chain will have an incentive to segregate canola as long as the benefits cover the costs of differentiation. The following section discusses drivers of segregation, as well as how costs are distributed across participants in the supply chain.

34 Chapter 4 Impacts on markets

Box 4.1 Examples of product differentiation in the Australian grain supply chain

GrainCorp handles over 50 segregations throughout its network to meet market requirements. These include multiple segregations of wheat for milling and feed, barley for malting quality and feed, pulses such as chickpeas, lentils and faba beans, and oilseeds such as canola, sunflower, soybean and cotton.

More than 50 different wheat products are exported each year, for example, with each targeted to a specific flour end‑product use, such as noodles, breads, other bakery products and the premium durum varieties for semolina. Several of Australia’s major wheat markets (for example, Japan and the Republic of Korea) require pesticide residue free (PRF) grain with organophosphate levels of less than 0.1 milligram per kilogram. To accommodate this demand, 1 million tonnes of grain (including canola) are tested and graded as PRF and kept in designated storages at bulk handling centres, and the identity is preserved through the export terminal. GrainCorp charges an extra $1 per tonne above standard costs to handle PRF grain.

The export of polished white rice to the highly sensitive Japanese market also requires special segregation procedures to ensure the rice is virtually free from impurities. This process includes agreed cleaning procedures for the entire grain supply chain. Other specialist segregations include significant quantities of organic wheat, specialist malting barley for premium niche markets (such as for use in the Japanese fermented spirit Shochu) and, more recently, imports of GM canola when domestic supply was scarce. Approximately 2 per cent of the Australian cotton crop is marketed as GM free and managed according to customer requirements, including regular testing for GM content. Other examples of segregation management include a 0.5 per cent threshold of canola seed in wheat exports and the segregation of organic products from conventionally grown products.

Sources: ACIL Tasman and Farm Horizons 2003; Auscott sub. 33; GrainCorp sub. 104; AWB Limited website, retrieved 9 October 2007, www.awb.com.au

4.6.1 What drives segregation activities? The customer’s willingness to pay for particular specifications is a major factor influencing grain handling practices. However, other factors, such as long term market relationships, and the need to respond to market access or other customer-driven requirements, may also influence suppliers’ behaviour. Nevertheless, given there is scant evidence to suggest that most bulk canola markets are seeking non-GM canola, bulk handling companies might co‑mingle GM and non-GM canola at the receiving silo. For this crop technology and any other, segregation costs should be borne only as far as the customer requires segregation and is prepared to pay for it.

Some respondents to the Review felt the attribution of most segregation costs to non-GM growers over time would be unreasonable (Samantha Dunn, sub. 35; Network of Concerned Farmers, sub. 41; Caduceus Health, sub. 43; Bexley Pastoral Co., sub. 56; Don Lazzaro, sub. 116). Some sought government intervention to resolve the perceived inequity. In particular, the Panel notes 35 Review of the moratorium on genetically modified canola in Victoria

an expectation that segregation of GM from non-GM canola would (or should) accompany expiry of the moratorium. For example, Gene Ethics stated that:

Even if systems were implemented, the successful segregation of GM and GM-free canola depends on the goodwill and vigilance of supply chain managers. There appears to be a lack of intention to segregate and identity preserve GM and GM-free. (sub. 234, p. 11)

Louise Staley’s submission stated, however, that:

… the core of this submission is a belief that GM crops, once approved by the OGTR [Office of the Gene Technology Regulator], should be treated like any other variety. Market acceptance must be determined by consumers through price rather than through the heavy hand of government intervention. Additional protocols, buffer zones and restrictions should not be put on farmers growing GM crops because they are not the ones chasing higher prices by doing so. (sub. 87, p. 1)

As markets require further varietal identity preservation (including the possibility of price premiums for specialty GM and non-GM crops), the Single Vision Grains Australia industry strategy (discussed in the section 4.7) will enable efficient implementation of specific requirements. The Panel cautions against any expectation that the bulk supply chain would be segregated simply because GM canola were introduced. That would create distortions unless a market advantage for doing so were apparent. As the Birchip Cropping Group noted, ‘the release of GM canola should not be dependent on co‑segregation of GM and non GM canola’ (sub. 55, p. 3).

Foster (2006) summed up the Panel’s view:

In terms of economic efficiency, an additional segregation aimed at protecting price premiums and market access for non-GM canola is only justified if the additional value it creates in the form of higher value grain is greater than the cost of segregation. While it is evident that there are additional costs associated with the segregation of GM canola, in general terms it does not appear at this stage that there is a price premium in domestic and world markets for certified non-GM canola that is sufficient to offset the additional costs of segregation. (p. 4)

4.6.2 What does segregation cost and how is that cost distributed? Foster (2006) and ACIL Tasman (2007b) analysed the costs of keeping GM and non-GM canola separate, should markets require segregation. If GM canola is introduced and less GM than non-GM canola is produced, GM canola will likely be segregated through dedicated facilities. Such facilities will either be small or their use will be suboptimal, so handling costs are likely to be higher. Additionally, there are likely to be just a few receival sites, so transport costs for the GM grower will also be higher. However, if the adoption of GM canola exceeds non-GM canola, the bulk commodity crop will comprise largely GM material. Non-GM canola producers, pursuing a price advantage for ensuring non-GM status, are likely to incur the segregation costs (ACIL Tasman 2007b).

According to Foster (2006), additional costs may arise both on‑farm and in the central receival system. The on-farm costs for segregation include the 36 purchase of certified seed, additional labour costs for cleaning machinery Chapter 4 Impacts on markets and extra queuing time at the grain receival site. Additional costs in the central receival system include the extra time taken to switch between grains throughout the logistics chain and the possible requirement to test the grain for GM content.

In his Western Australian study, Foster (2006) concluded that most of the extra cost would be borne on-farm (85 per cent) and that a non-GM grower, to cover costs, would require an additional 4–6 per cent of the farmgate canola price in a typical year, assuming a tolerance of 0.3 per cent of unintended presence of GM canola in the planting seed. ACIL Tasman (2007a) supported this finding, asserting that a non-GM grower would need to secure a price advantage of approximately $14 per tonne to justify the segregation and identity preservation costs. It noted, however, some on-farm costs may offset the benefits arising from the use of certified seed. These benefits could include maintaining the genetic purity of the crop, reducing the weed burden from year to year, and improving general farm management as a result of fewer weed and disease problems.

Costs incurred for segregation in the bulk handling system are around a few dollars per tonne, according to GrainCorp (sub. 104). This amount is consistent with the Foster (2006) estimate of approximately $2 per tonne. Some parties have asserted, however, that the non-GM grower would not necessarily incur these central receival system costs. The pricing policies of the bulk handlers, competing for market share, may distribute the costs variously (Foster 2006).

Further, extra segregation costs are not particular to GM crops. Rather, they are incurred for any grain segregation that requires management at receival sites to meet customer specifications. Given the wide range of grain segregations already accommodated, care should be taken when considering what costs to allocate to GM canola.

4.6.3 Tolerances Segregation costs increase as tolerance for the unintended presence of other material decreases (ACIL Tasman 2007b; Hurburgh 2003). This adventitious material may include other grains, weed seeds, soil and so on. Griffiths et al. (2003) reviewed the various technologies available for detecting GM materials. Foster (2006) examined the issue of GM and non-GM grain separation and concluded that it was manageable; he highlighted the modest additional costs involved in testing for the presence of GM materials should it be required.

The establishment of tolerances (also known as ‘low level unintended presence’, ‘admixture’, ‘adventitious presence’, ‘trace levels’ or, as in some submissions, ‘contamination’) underpins the grain industry’s ability to achieve coexistence of GM and non-GM crops, and it is a normal part of seed and grain trade globally (Demeke et al. 2006; CropLife, sub. 85). A separate Order under the Control of Genetically Modified Crops Act 2004 (Vic.) has been gazetted to establish adventitious presence levels for GM canola in non-GM canola shipments (see appendix 5).

Foster and French (2007) stated that it is difficult to avoid low level presence of GM materials in the grain handling system. There is no evidence, however, that low level presence of GM canola has caused market acceptance problems overseas — as exemplified by Canadian wheat and barley exports. Foster’s 37 Review of the moratorium on genetically modified canola in Victoria

(2006) analysis suggested the unintended presence of GM canola in other grains would be almost negligible in Australia. The ACIL Tasman and Farm Horizons (2003) study examined current segregation practices (including at the farm level, where good agricultural practices and crop management plans were followed) and found the level of adventitious presence is likely to be within the industry standard of 0.9 per cent.

ABB Grain stated that it will market non-GM grain (‘which implies the grain is within existing Adventitious Presence (AP) limits’) but not ‘GM free’ grain (sub. 61, p. 6). AWB Limited similarly stated in its policy on the application of biotechnology that ‘We will provide non-GM and GM products to commercial customers in Australia and overseas to meet their requirements’ (sub. 54, p. 2). GrainCorp is also of this view: ‘We will supply the market with supply chain and market solutions for GM and non-GM as demanded’ (sub. 104, p. 2).

The 2007 position of these major Australian grain handlers and traders indicates a supply chain that is confident it can meet its customers’ needs. AWB Limited further noted that key Asian markets such as China, Japan and South Korea have already approved InVigor® and Roundup Ready® canola, so there will be no regulatory or labelling issues with low level presence of GM canola in a wheat shipment. Notably, as set by the Canadian grain industry, low level GM presence thresholds of 0.9 per cent in non-GM canola and 0.05 per cent in wheat ‘should be possible within the current supply chain without additional costs’ (AWB Limited, sub. 54, p. 3). With the industry adoption of principles and protocols for managing the supply chain in place (see section 4.7), AWB Limited stated that it is ‘comfortable that it can protect its commercial position through legally binding contractual arrangements with suppliers and customers’ (sub. 54, p. 3). Finding 4.3 Segregation is routine in the grain supply chain, across which the costs of segregation are distributed. There is no apparent market failure in relation to segregation to meet customer requirements.

4.7 Grain supply chain ability to achieve coexistence

The Panel notes that there is a more cohesive grain industry view in 2007 (compared with four years ago), asking for the Victorian Government to allow the moratorium to expire. Effort by participants in the grain supply chain to enable the coexistence of GM and non-GM crops has been significant. In 2003, the grain industry had difficulty determining its capacity to manage GM canola in the supply chain because import approval status and thresholds for low level unintended presence in key markets were unclear. AWB Limited, for example, did not support the commercial release of GM canola in 2004 because it was not sure whether coexistence could be achieved in the supply chain.

There is now agreement among grain industry stakeholders about how coexistence would be managed in Victoria if markets required segregation. These stakeholders consider that they can successfully separate GM canola and non-GM canola in the supply chain. Since 2003, many other countries have clarified their import status, and threshold limits for low level presence have been specified in most key markets, including Australia. In particular, AWB 38 Chapter 4 Impacts on markets

Limited recently changed its policy to state that it is ‘not opposed to the lifting of the current moratorium on GM canola … because of the potential benefits to farmers and the community’ (sub. 54, p. 2). ABB Grain expressed its confidence that the grain industry can segregate to industry and market requirements (sub. 61), and the Australian Oilseeds Federation stated that ‘the industry will benefit from GM canola; that this can be managed in a market choice framework; and that the industry is prepared for GM canola’ (sub. 46, p. 14).

The Single Vision Grains Australia report (signed by 29 grain supply chain participants — see box 4.2) detailed evidence of this new cohesive view. The report Delivering market choice with GM canola showed current industry stakeholder support for the introduction of GM canola, along with readiness to manage the commercial introduction of GM crops. The report said new canola varieties will be introduced in a manner that: maintains or enhances trade in Australian canola; enables market choice along the supply chain; is open and transparent; and provides confidence to all stakeholders, particularly customers, consumers and governments. The additional Single Vision Grains Australia report Principles for process management of grain within the Australian supply chain is a guide for industry in an environment where GM and non-GM grain is marketed. It sets out principles relating to technical and market access issues.

Box 4.2 Grain supply chain participants who are signatories to the Single Vision Grains Australia initiative

ABB Grain Ltd Grains Council of Australia Ltd AgForce Queensland Pty Ltd Grains Research and Development Agrifood Awareness Australia Ltd Corporation Allied Mills Australia Pty Ltd Monsanto Australia Ltd AusBiotech Ltd National Agricultural Commodity Marketing Association Australian Food and Grocery Council National Farmers’ Federation Australian Oilseeds Federation NSW Farmers’ Association Australian Seed Federation Nufarm Ltd Bayer CropScience Australia Pty Ltd Pacific Seeds Pty Ltd Cargill Australia Ltd PGA Western Graingrowers Committee Co-operative Bulk Handlers Ltd Pioneer Hi-Bred Australia Pty Ltd CropLife Australia Ltd Riverland Oilseed Processors Pty Ltd Flour Millers’ Council of Australia Pty Ltd South Australian Farmers’ Federation Grain Growers Association Victorian Farmers Federation GrainCorp Ltd WA Farmers Federation Grains Section

Source: Single Vision Grains Australia 2007 Delivering market choice with GM canola, July

The institutional framework for applying the principles and protocols developed by the signatories is the existing National Agricultural Commodities Marketing Association (NACMA), which is responsible for ensuring facilitation of trade across the Australian grain supply chain for both domestic and export 39 Review of the moratorium on genetically modified canola in Victoria

grain. Each year, over 95 per cent of the Australian grain crop is stored in facilities operated by NACMA members, with 90 per cent of the grain contracts executed in Australia referring to NACMA grain standards and/or trade rules. NACMA has over 300 member organisations, from regional family businesses to large national and international trading companies.

The industry thus proposes self-regulation in the pathway to market for new crop technologies. The Panel understands that NACMA will develop the required processes for any new varieties brought to market (sub. 25). These processes would apply to both varieties developed by traditional breeding techniques and those deriving from GM events approved by the Office of the Gene Technology Regulator (OGTR). According to the demands of the market, the practices may vary from formal systems based on Hazard Analysis Critical Control Point (HACCP) and International Organization for Standardization (ISO) requirements, to proprietary systems, industry codes of practice and best agricultural or manufacturing practices. The NACMA dispute resolution process will play an important role in this industry self-regulation.

Representative industry groups and farmers alike expressed confidence in these industry initiatives, as shown by the following two examples:

The FMCA [Flour Millers’ Council of Australia] believes that over the period of the moratorium a somewhat fragmented industry view has been consolidated in support of an environment where GM and non GM grain is marketed and that procedures and processes of assurances have been enhanced and adopted. (Flour Millers’ Council of Australia, sub. 74, p. 3)

GrainCorp supports the removal of the GM moratoriums in Victoria and other states, and is confident that the Australian grains industry has the capacity to deliver market choice through the existing supply chain. (GrainCorp, sub. 104, p. 9)

Some individual farmers referred to these broader industry initiatives, and proclaimed their readiness to take on any new obligations and responsibilities associated with the use of GM crops (Chris Kelly, sub. 6; Heather Baldock, sub. 44). They perceived these obligations as an extension of the existing product quality standards required of farmers (Victorian Farmers Federation campaign letter, sub. 17).

The Panel understands that the Primary Industries Ministerial Council may consider the Single Vision Grains Australia approach, because it appears to provide measures for coexistence that would fit within a national framework for the coexistence of GM and non-GM crops.

4.8 Downstream industries

Some downstream industries have complex issues to consider. In particular, the dairy industry presented a changed position on the introduction of GM canola since 2003. Historically, the Australian dairy industry has held a range of views about GM technology. The Australian Dairy Industry Council undertook extensive consultation with all sections of the dairy supply chain in developing its policy. The Council’s board adopted the following policy on gene 40 Chapter 4 Impacts on markets technology with no dissenting view from manufacturers and few dissenting views from individual farmers:

… providing the outputs of GM technology have been thoroughly assessed on a case-by-case basis and approved for human, animal and environmental safety under the national regulatory framework, the dairy industry should have the opportunity and choice of researching, testing and potentially using GM plants in the future. (Australian Dairy Industry Council, sub. 26, p. 1)

In the context of canola, the Australian Dairy Industry Council has confidence that the supply chain can manage market requirements, and ‘on balance, recommends that the Government should allow the moratorium on GM canola to expire’ (sub. 26, p. 2). The Panel understands that milk processors can (and do) limit the inclusion of GM feed ingredients for lactating cows to 5 per cent without jeopardising markets.

The Australian Grain Harvesters Association (sub. 7) expressed concerns about the expiry of the moratorium, including operational problems, additional expenses and potential liability issues for its members. It did not take a stance on the moratorium, but provided a useful perspective on harvester cleaning and associated costs to assist the Panel (see chapter 9 for a discussion of liability issues).

The stock feed industry uses GM derived raw materials from imported soybeans, Australian cottonseed, imported canola meal and other GM micro‑ingredients and feed additives (Stock Feed Manufacturers’ Council of Australia, sub. 36). The Stock Feed Manufacturers’ Council of Australia wants the moratorium removed, so its members can use more Australian grown canola (GM and non-GM). On the other hand, while Australian Pork Limited (APL) did not provide a submission, the Panel understands APL is uncertain about the introduction of GM crops (ACIL Tasman 2007b). ACIL Tasman (2007b) further reported that some niche poultry markets, such as the markets for turkey and duck, may require diets to be free of GM ingredients.

Given the importance of consumer attitudes and purchasing behaviours to members of the Australian Food and Grocery Council, the Panel is interested in the Council’s position. While the Council ‘neither promotes nor defends gene technology per se’, it seeks to avoid unnecessary regulation, and it recommends that Victoria allow the moratorium to expire (sub.78, p. 4). The Council supports a strong regulatory framework for public health, food safety and the environment, within which companies and individuals can make their own independent decisions. The broader issue of regulatory burden and its stifling impact on innovation appears to strongly inform the Council’s position on the Victorian GM canola moratorium.

41 Review of the moratorium on genetically modified canola in Victoria

Finding 4.5 National adoption of systems to manage the grain supply chain, following the introduction of genetically modified canola, will ensure least cost to business.

42 Chapter 5 On‑farm impacts Chapter 5 On‑farm impacts

In the context of declining Australian canola production and yields outlined in chapter 3, this chapter discusses why farmers grow canola and continue their pursuit to remain competitive producers of canola. The discussion then turns to the traits of genetically modified (GM) canola and how the farm business may benefit from access to these GM technologies.

5.1 Why do Victorian farmers grow canola?

From a relatively minor crop in the 1980s, canola is now the third largest broadacre crop (after wheat and barley) by area planted in Australia. Currently, Victoria produces around 23 per cent of the total volume of canola in Australia. Victorian farmers have been incorporating canola in their farming businesses since 1969, initially as an important break crop in winter cropping systems, then as a crop in its own right. Many farmers would not be able to sustain a continuous cropping system without including canola in rotations.

Canola is a profitable crop in its own right. While Victorian data are not available, in February 2007 the New South Wales Department of Primary Industries predicted that the gross margin for the 2007 winter crop of canola in central New South Wales will be nearly $220 per hectare, while the predicted gross margins for wheat are around $120 per hectare following a cereal crop and around $185 per hectare following a canola crop (New South Wales Department of Primary Industries 2007).

Farmers also seek to spread price and production risk by planting a variety of crops in any one year. The Birchip Cropping Group (sub. 55), for example, noted that without an economically attractive alternative to the cereal crops there is a lack of diversity in Australian cropping rotations. It cited a survey of oilseed growers and advisers, which found the most significant factor in a farmer’s decision to grow canola is the reduction of cereal diseases, with the other significant factors including farm system weed control and the rotation of herbicide groups.

As the gross margins for New South Wales show, farmers also incorporate canola into winter cereal rotations because cereal crops may capture disease and weed management benefits. Norton (2003) noted the beneficial effects of canola on the yields of subsequent cereal and pulse crops. Pratley and Stanton (sub. 64) noted that results of their own trials (unpublished) demonstrated yield benefits for wheat in the years following a Roundup Ready® canola crop. Several submissions cited Australian research findings that planting wheat following canola has a 20 per cent yield benefit over rotations of wheat following wheat (Monsanto, sub. 101; Agrifood Awareness Australia, sub. 108).

Despite these benefits, the production and value of Australian canola have been in decline since 2000. As previously discussed, this fall has been driven by a number of factors including unfavourable seasonal conditions, increased disease presence and yield penalties associated with the adoption of triazine tolerant (TT) canola (as previously discussed in chapter 3). The next section discusses how GM canola may address some of the challenges 43 Review of the moratorium on genetically modified canola in Victoria

faced by growers and enable farmers to continue to capture the benefits of incorporating canola into their cereal cropping businesses.

5.2 Benefits of genetically modified canola

There are several direct benefits for farmers from the adoption of GM canola, including increased yields and improved risk management systems (from use of hybrid varieties, improved weed management and earlier sowing options), and reduced on-farm costs (as a result of reduced tillage practices). Flow‑on environmental benefits associated with reduced tillage practices include improved soil health and the option to use more environmentally benign herbicides.

5.2.1 Improved yields The GM canola varieties that are the subject of the moratorium include hybrid varieties as well as herbicide resistance for improved weed management. Both these traits can improve yield over conventional varieties, including TT canola.

Norton (2003) noted that farmers seek to sow canola as early in autumn as possible, given the direct relationship between planting date and yield. This study estimated that yield reduction is around 2–5 per cent of yield per week of delayed sowing. GM canola allows earlier sowing through improved management of weeds without reliance on a pre-emergence herbicide. The Victorian Farmers Federation noted that ‘superior weed control enables earlier time of sowing with better returns and profits’ (sub. 115, p. 16). Carmody et al. (2001) observed the time of sowing and paddock selection far outweigh any choice of canola variety.

As noted in chapter 3, one factor influencing the downward trend in Australian canola production and yield has been the adoption of the TT canola varieties. A TT canola production system allows for improved weed management, but yields are approximately 10–30 per cent lower than those of non‑TT canola varieties (Robertson et al. 2002). Consistent with this study, many submissions argued that GM varieties would offer weed management advantages without the well known yield penalty of TT varieties.

The Monsanto submission asserted a 20 per cent improvement in weed competitiveness where GM canola replaces TT and conventional varieties (sub. 101). Although the trial data for GM canola in Australia are limited (given the current regulatory restrictions), Pacific Seeds suggested a 28 per cent yield advantage over TT varieties may be possible for Roundup Ready® canola, representing $300 per hectare in annual gross farm income in medium to high rainfall areas (sub. 84). Some submissions provided comparisons of yield and profit for conventional, TT and GM canola, showing that GM canola could overcome the current yield decline experienced by Australian canola growers, through hybridisation, particularly under moisture stress (Andrew Broad, sub. 4; Roslyn Corporation, sub. 23; Weidemann Pastoral Co., sub. 71).

Many Victorian farmers are optimistic about the potential for yield advantages of GM canola. The Victorian Farmers Federation pointed to the yield improvements and declining costs experienced in Canada (sub. 115). The 44 Australian Oilseeds Federation expects farmers to benefit from GM canola Chapter 5 On‑farm impacts

(sub. 46) as does the Grains Council of Australia (sub. 5). Generally, submissions from farmers who favoured letting the moratorium expire indicated an expected yield improvement of between 10 and 20 per cent over conventional canola, with a few farmers expecting a little more (Roslyn Corporation sub. 23; Auscott, sub. 33; Birchip Cropping Group, sub. 55).

However, not all submissions expected significantly favourable increases in yield as a consequence of sowing GM canola. The Biological Farmers of Australia, for example, cited studies that show much lower yield benefits (Stone et al. 2002) — or even losses (Fulton and Keyowski 1999) — compared with conventional canola (sub. 114). It is worth noting, however, that these early studies showed GM canola yield varied from farm to farm as a result of production scale, product specialisation, geographic location and on-farm management — factors that affect the performance of all crops. The trends in average canola yields for Australia and Canada are discussed in section 3.2.

5.2.2 Reduced tillage Because GM canola can be sown before opening autumn rains, it supports reduced tillage practices, resulting in direct environmental and production benefits. Environmental benefits arise from, for example, a reduction in herbicide use and the use of more environmentally benign herbicides. Current use of triazine based chemicals poses greater risks to human health and has greater residual effects. Further, where there is direct surface run-off to drinking water, supplies can pose a risk to human and ecological health (Warnemuende et al. 2007).

In addition, reduced tillage systems have environmental benefits, including:

• the capture of carbon in the soil contributing to greenhouse abatement efforts (CSIRO, sub. 105)

• improved soil structure and the removal of the need to burn stubble (Robertson et al. 2002)

• reduced fuel consumption and associated emissions by farm machinery, due to reduced tillage during the production cycle (Brookes and Barfoot 2006a).

Reductions in both volumes of fuel and herbicides as well as simplified on‑farm management practices should also result in improved gross margins as has been the case in the Australian cotton industry (see appendix 6).

5.3 Impact on gross margins

The combined benefits of GM canola over conventional varieties can result in improved gross margins (discussed in chapter 6). The ACIL Tasman (2007a) economic analysis, conducted for this Review, estimated average farm gross margin benefits of GM canola of around $45 per hectare compared with non-GM varieties, following the introduction of GM canola. They further predicted that the whole farm gross margin for cultivating GM canola (for the average Victorian farm growing 300–400 hectares of canola) may increase by between $13 500 and $18 400 per year. These estimates exclude any rotational benefits that a cereal crop in the following year may capture. ACIL Tasman considered 45 Review of the moratorium on genetically modified canola in Victoria

these figures to be conservative estimates, for a range of reasons detailed in its report. Chapter 6 contains further detail on the cost−benefit analysis.

Foster (2003) reported that the agronomic benefits of GM canola in Canada seem to be substantial, yielding 10 per cent higher than non-GM canola varieties. Some submissions (for example, G and R Dyer and Son, sub. 75) pointed out that GM canola in Canada also delivers a 2–3 per cent higher oil content, which attracts a higher price per tonne.

Some disagreed with estimates of the on-farm benefits of GM canola (for example, Twynam Agricultural Group, sub. 216) and highlighted some on-farm costs not often recognised by farmers. Christine Jaeger identified reduced soil fertility, follow-up weed control of volunteer GM plants, the loss of production in buffer zones, and insurance as additional costs of GM varieties (sub. 94). The Twynam Agricultural Group noted that some GM crops (including cotton) have clear environmental and financial benefits, but GM canola does not (sub. 216).

However, Pratley and Stanton (sub. 64) reported results of their five-year canola rotation trial in New South Wales between 1999 and 2003. Where herbicides were required for weed control, the trial found that Roundup Ready® canola outperformed conventional and TT varieties in yield, weed control and oil quality, and delivered the highest gross margin.

5.4 The importance of choice in farm business decision making

As highlighted in several submissions, a key issue for many farmers is the ability to access new technology. GM canola has several traits that would allow farmers to modify their tillage, weed and disease management practices, resulting in the potential to capture the agronomic benefits of canola while ensuring production efficiency and profitability.

Peak representative primary producer groups, such as the Grain Growers Association, support farmers being able to choose whether they use the technology on their own farms. They contended that this policy of choice will be best served by allowing the moratorium to expire (sub. 67).

Farmers want access to GM canola mostly as an added resource in their business management ‘toolbox’ to improve domestic and international competitiveness (Penny Hendy, sub. 51). Without farmers’ access to the technology, the profitability of canola cropping will continue to decline, also affecting the subsequent cereal and pulse crops in the rotation and their profitability (Grains Council of Australia, sub. 5). As the National Farmers’ Federation pointed out, farmers have varying expectations of the benefits that GM canola might provide to their production systems, depending on their information sources, growing conditions and business model (sub. 40). Some respondents who were dubious about the benefits still valued having the option to choose the new technology.

Some farmers want access to GM canola as a management tool in case TT canola becomes ineffective or unavailable in the future (Geoff and Bronwyn Hunt, sub. 59; Geoff Kendell, sub. 98). There is concern that triazine herbicides 46 could be banned for public health and environmental reasons, as has occurred Chapter 5 On‑farm impacts in some other countries (Driscoll Seeds, sub. 76). As stated by Driscoll Seeds: ‘We see RR [Roundup Ready®] canola as another way of managing weed resistance to herbicides. It is not a silver bullet, but it will allow canola to be grown profitably into the future’ (sub. 76, p. 2).

Beckie et al. (2006) cautioned against over-reliance on herbicide-tolerant crops in rotation and using the same mode-of-action herbicide over time. They maintained that ‘cropping system diversity is the pillar of sustainable agriculture’ and that integrated weed management must be carefully planned to prevent weed herbicide resistance (p. 1243). Roundup Ready® and InVigor® canola are resistant to herbicides from different modes of action.

Pratley and Stanton concluded their study by saying that ‘The Roundup Ready system provides a new significant option for farmers for control of both broadleaf and grass weeds by an alternate mode of action to other selective herbicides’ (sub. 64, p. 12). Their study demonstrated that the Roundup Ready® system is at least as productive as — if not more than — current canola weed management options.

The Panel acknowledges that not all farmers support allowing the moratorium to expire, or will want to access GM canola technology at this stage or in the future. However, if the moratorium is permitted to expire, that will not preclude farmers from continuing to use conventional canola cultivars. Access to the technology, and thus the provision of additional choice, can provide significant potential benefits to farm business. Farmers are in the best position to decide whether GM canola can be suitably incorporated into their whole farm plans to increase efficiency of production and capture the agronomic benefits.

Technological progress, increased knowledge, improvements in GM canola cultivars, as well as economic, social and environmental changes, require that farmers be able to adapt quickly if they are to remain competitive. Extension of the moratorium could affect farmers’ ability to respond to change. Finding 5.1 Access to genetically modified canola technology can provide farmers with improved choice regarding the management of their cropping businesses. Further, compared with non‑genetically modified varieties, genetically modified canola appears to have a gross margin benefit of around $45 per hectare in an average season, for Victorian farmers.

Finding 5.2 Retaining the moratorium would damage the ability of Victoria’s grain producers to respond, over time, to changing circumstances and their ability to remain competitive.

Chapter 6 Estimating the economic impact of the moratorium Chapter 6 Estimating the economic impact of the moratorium

To assist with its deliberations, the Review Panel has drawn on a cost–benefit analysis of the economic impacts of the regulation of genetically modified (GM) canola in Victoria, undertaken by ACIL Tasman (2007a). The model was designed to analyse the direct economic impacts of the current moratorium and the expected economic impacts of extending the moratorium. The model and its results are briefly described in the following sections, with additional detail provided in appendix 7 and ACIL Tasman (2007a).

6.1 Methodology of the cost–benefit analysis

The model’s conceptual approach broadly followed standard cost–benefit procedures. It involved tasks such as identifying and quantifying various impacts, aggregating all past, present and future impacts through the application of appropriate discounting procedures to determine a net present value (NPV), and carrying out sensitivity analyses on the key assumptions. Fundamental to any cost–benefit analysis is the development of a ‘base case’ scenario to which other policy options can be compared — in this case, what would have happened had there never been a moratorium in Victoria (see scenario 1). To quantify the direct economic impacts (that is, the costs and benefits), ACIL Tasman (2007a) developed a partial canola industry model to explore the on-farm impacts of GM canola, likely GM adoption rates, production of GM canola and the impact of this quantity of GM canola on the supply chain.

An essential component of the model is a gross margins analysis of canola production based on six canola types, each with a unique set of on-farm costs and benefits, including impacts on herbicide types (and costs), yield, fertiliser requirements, labour productivity, oil content of seed, cost of seed, machinery requirements, rotational impacts and on-farm storage and transport costs. Three of the canola types modelled were the most widely grown non- GM canola in Victoria — namely, conventional, triazine tolerant (TT) and imidazolinone tolerant (IMI). The other three were the licensed GM canola (that is, Roundup Ready® open pollinated, Roundup Ready® hybrid, and InVigor®) that would be the first to be commercially grown if the moratorium were allowed to expire.

The gross margins analysis estimated the net benefits of growing a particular variety, in terms of dollars per hectare. However, to predict what would be most likely grown under particular policy scenarios and thus to estimate the economic impact of the current moratorium and of extending the moratorium (or, conversely, allowing the moratorium to expire), it was necessary to develop adoption curves for GM canola. In developing these adoption curves, three policy scenarios were considered.

49 Review of the moratorium on genetically modified canola in Victoria

• Scenario 1: no moratorium. This is the base case scenario, whereby a moratorium was never introduced, and GM canola was adopted.

• Scenario 2: a moratorium in place until 2008 and then removed. This is the scenario that will occur if the current moratorium expires and is not replaced or extended.

• Scenario 3: an ongoing moratorium, covering the whole projection period (2004–2016). That is, the Victorian canola market develops without introduction of GM canola and adoption is zero.

The impact of the current moratorium is the difference in predicted outcomes — in net present value terms — between scenarios 1 and 2, and the impact of the continuation of the moratorium is the difference in predicted outcomes between scenarios 2 and 3. The overall impact of an ongoing moratorium for the whole of the projection period (2004–2016) is the difference in predicted outcomes between scenarios 1 and 3.

6.2 Results of the cost–benefit analysis

The ACIL Tasman (2007a) modelling demonstrated that the current moratorium has already imposed a small cost on the Victorian economy but the majority of the costs will be felt over the next few years. These future costs, resulting from the delay in adoption of GM canola imposed by the moratorium, will be incurred even if the moratorium is allowed to expire and is not replaced. This is because the adoption rate of GM canola is assumed to be low in initial years, and the adoption rates for scenario 1 and scenario 2 are not comparable until 2015 (see appendix 7). The magnitude of the cost imposed by the extension of the moratorium beyond 2008 is larger.

The total direct cost (that is, net present value) of a moratorium from 2004–2016 is modelled to be approximately $175 million, reaching $29 million per year by 2015. This projection comprises:

• $63 million for the current 2004–2008 moratorium, with most of this impact ($55 million) to be realised after 2008.

• $112 million for an extension of the moratorium from 2008 to 2016.

The results are driven by the reduced yield — and hence farmer income — from the use of non-GM varieties, the increased costs imposed by the use of more herbicides and the related increase in cultivation costs. The benefits of the moratorium are largely found in the cost savings from not having to pay technology access fees, reduced fertiliser requirements and lower transport, storage and handling costs (both on-farm and off-farm). The majority of the economic impacts of the moratorium occur at the farm level. As discussed in section 5.3, in seasons with average rainfall, the farm gross margin for non-GM canola production (excluding any rotational benefits in subsequent years) is about $45 per hectare lower than the average gross margin for the three GM varieties over the projection period. For the average Victorian canola farmer producing 300–400 hectares of canola per year, this difference in gross margin is equivalent to a change in net income of approximately $13 500–18 000. These results are sensitive to the modelling assumptions discussed in section 6.3. 50 Chapter 6 Estimating the economic impact of the moratorium

In addition to the direct costs and benefits of the moratorium that have been quantified, there are indirect impacts — both on‑farm and off‑farm — that have not been included. At the farm level, these include benefits from the use of GM canola, such as a substantial reduction in the use of chemicals that are generally of a more toxic nature; increased conservation farming practices; increased machinery and labour efficiency; increased simplicity and ease of farm management; greater choice in crop selection; and reduced weed burdens and associated farm hygiene costs.

A continuation of the moratorium would also deny Victorian farmers the potential use of a range of next generation GM canola traits, such as environmental stress tolerance, improved oil qualities and a wide range of high value new industrial and human health traits. The next generation of canola traits are likely to be considerably more valuable to Victorian farmers than are the current traits (see appendix 6). These benefits are speculative and were beyond the scope of the analysis.

Beyond the farm gate, there are the spillover effects on investment in cereals research and development and biotechnology more generally (discussed in chapter 7), and on communities and the environment from lower herbicide use. Further, economy-wide impacts flow from increased investment in research and from higher farm incomes. The cost–benefit analysis did not include these effects.

The Panel considers that the indirect negative impacts of the moratorium are likely to be significant and that the estimated costs of the moratorium should therefore be viewed as being conservative.

6.3 Key assumptions and sensitivity analysis

The results of the model are highly sensitive to some of the input assumptions (see appendix 7 and ACIL Tasman 2007a for a detailed discussion). The results were most sensitive to the adoption rate of GM canola. An increase in the timing of adoption of GM canola, such that a maximum adoption rate was achieved one year earlier, results in an increase in cost of an overall moratorium to 2016 of $18 million.

The results were also sensitive to climatic conditions. As ACIL Tasman (2007a) pointed out, many of the benefits of GM canola — particularly for the higher yielding varieties — are experienced only in average to good seasons. ACIL Tasman estimated that the impact of the drought in 2006, for example, more than halved the impact of the moratorium in that year. The impact of climatic conditions on the gross margin calculations is thus significant. The difference between gross margins for GM and non-GM canola was estimated to range from approximately $68 per hectare in a year of high yield and average prices to a negligible difference in a drought year.

The model assumed there is no premium for bulk non-GM canola — consistent with the Panel’s finding 4.2 — and that the future price of canola would remain constant in real terms. The results were also sensitive to these assumptions regarding canola prices. If the real price of canola increased by 10 per cent in the projection period, the cost of an ongoing moratorium would increase by $10 million. If the price of GM canola were 18 per cent below that of 51 Review of the moratorium on genetically modified canola in Victoria

non-GM canola, then the cost of the moratorium would decline to zero. The Panel considers that such a price differential is unlikely.

By contrast, the results were less sensitive to the additional transport and segregation costs that may be imposed through the introduction of GM canola to the Victorian production system. ACIL Tasman (2007a) estimated that, assuming other variables remain unchanged, the current transport, storage and handling expenses would have to more than double for a net benefit to result from the current moratorium (that is, the benefits outweigh the costs). The Panel considers that this is unlikely to occur.

The proportion of the technology access fee that remains within the state is challenging to estimate. It depends upon unknown variables, such as:

• the state or country to which to attribute Monsanto or Bayer CropScience revenue from Victorian GM canola seed sales

• the extent to which the costs incurred in bringing the GM seed to market are already a ‘sunk’ cost

• the extent to which technology access revenue will ultimately be reinvested back into Victoria (for example, through research and development of locally adapted GM seed varieties).

For the model, ACIL Tasman assumed that 75 per cent of the technology access costs remain in Victoria. If this figure were 100 per cent, then the overall cost of the moratorium would be $17 million larger; if it were 0 per cent, then the cost of the moratorium would be $50 million less (that is, $125 million).

Because 75 per cent of the technology access costs is assumed to remain within the state (and thus largely represents a transfer rather than a loss), results are not particularly sensitive to changing the cost of introducing GM canola. Even doubling the technology access costs would reduce the cost of the moratorium by only $23 million. On the other hand, with no technology access costs, the cost of the moratorium would rise by only 17 per cent. Finding 6.1 If the moratorium were allowed to expire in February 2008, it will have imposed a direct cost of approximately $60–65 million on the Victorian economy.

Finding 6.2 Extension of the moratorium beyond 2008 to 2016 would impose an additional direct cost of approximately $110–115 million on the Victorian economy.

The Review Panel received a clear message that investment in research and development in both public and private sector canola breeding — and, more broadly, agricultural science — has been significantly hampered as a result of the moratorium. This chapter describes the changes in the research and development environment in the face of global trends in biotechnology and the importance of both public and private sector investment. The Panel also examines the effect of the Control of Genetically Modified Crops Act 2004 (Vic.) on current and future investment in agricultural biotechnology in Victoria.

7.1 Reduction in research and development

Over the past decade, investment in canola breeding programs has undergone significant change. This section explores the impact of the moratorium on this investment, and the consequences of the delay in access to genetically modified (GM) technology.

7.1.1 Investment in canola breeding programs In the early 1990s, the release of new canola varieties was dominated by public sector breeding programs in both New South Wales and Victoria. However, the ability to recover investment in plant breeding through intellectual property rights (such as patents and plant breeder’s rights) has resulted in strong private sector engagement in this area. In the late 1990s, both Bayer CropScience and Monsanto Australia sought to introduce their GM traits into locally adapted canola varieties. Monsanto also purchased Australia’s leading private sector canola breeding company, AgResearch, as a platform from which to introduce GM traits into Australian canola varieties.

With the benefits of GM technology in North America being realised, both public and private sector investment in conventional canola breeding decreased. Public and private research and development portfolios were redirected to accommodate GM technologies and pre‑breeding activities, with a focus on delivery to market. This new investment environment created an efficient vehicle for commercialising new national and international technologies suited to Australian cropping conditions.

However, the introduction of state and territory government moratoria in 2004 significantly affected public and private sector canola breeding programs. The moratoria have prevented private and public sector technology developers from commercialising their products, and forced them to incur significant losses on their investments. Monsanto, for example, suspended its canola breeding program once the Victorian moratorium was introduced, stating that ‘with the moratorium legislation as it stands, Monsanto as a global company has little confidence in investing in Australia outside of cotton’ (sub. 101, p. 4). Similarly, Pioneer Hi‑Bred put on hold projects that were entering or already in the commercialisation pathway (sub. 30).

53 Review of the moratorium on genetically modified canola in Victoria

7.1.2 Delayed technology benefits for Victoria Developing locally adapted canola varieties involves long lead times (see, for example, BioMelbourne Network, sub. 37). The Commonwealth Scientific and Industrial Research Organisation (CSIRO) advised, should the moratorium be lifted, that there would nonetheless be a time lag for reinvestment in and scale up of GM canola breeding programs and for the rebuilding of research capabilities, continuing the moratorium’s impact beyond its sunset (sub. 105). As a result, the reduced investment has delayed anticipated future benefits to grains and other primary industries from GM technologies. Future breeding could, for example, improve the salt tolerance, drought tolerance, disease resistance and nitrogen use efficiency of canola (Andrew Broad, sub. 4; Australian Institute of Agricultural Science and Technology, sub. 20; Pacific Seeds, sub. 84).

The moratorium in Victoria has also adversely affected opportunities for wider community benefits, delaying anticipated future consumer health benefits from GM products in the pipeline, such as development of low glycemic index wheat and omega-3 oils (CSIRO, sub. 105), and oils with reduced trans-fatty acids (Bayer CropScience, sub. 17). The CSIRO indicated that the community can benefit from gene technology: ‘Gene technology is not just a tool to develop GM crops, but is also a critical research technology which, together with functional genomics, gene silencing and other technologies, underpins all of our modern bioscience’ (sub. 105, p. 5).

7.1.3 Reduced confidence in research and development investment in plant biotechnology The moratorium on the commercialisation of GM canola has reduced confidence in investing in Victorian and Australian plant biotechnology more broadly. This outcome appears to be inconsistent with the objective of the Victorian Government’s (2007) Biotechnology Strategic Development Plan to be recognised internationally by 2010, ‘as one of the world’s top five biotechnology locations,’ (p. 5) and as a world leader and to attract international partnerships, investment and skilled people (p. 22).

Public research institutions depend on a competitive agricultural biotechnology and seed sector to undertake final stage research and to bring new locally adapted products to industry and the Australian market. CropLife Australia (sub. 85) suggested that without a clear path to market, significant investment in canola varietal improvement in Australian laboratories has nowhere to continue except overseas. The Molecular Plant Breeding Cooperative Research Centre (MPBCRC) shared this view, stating that some of its canola projects are in jeopardy due to private sector uncertainty about bringing new products to market (sub. 229). Dramatically, the CSIRO has experienced ‘a 40 per cent reduction in expenditure on projects specifically aimed at developing a GM food crop while expenditure on projects aiming to make non-food products has not significantly changed’ (sub. 105, p. 12). Bayer CropScience said the moratorium has ‘resulted in a dampening effect on the progress for research and development in agricultural biotechnology … and Bayer CropScience has significantly limited its investments’ (sub. 19, p. 29).

The MPBCRC was concerned that ‘the continuance of the GM moratorium will 54 dampen investment in Victorian transgenic research’ (sub. 229, p. 12), while Chapter 7 Impact on science, research and development

Pioneer Hi-Bred (sub. 30) noted that if the moratorium is extended, many of Australia’s future biotechnology products and platform technologies could be exported following ‘proof of concept’, and not be introduced in Australia. Conversely, the capacity to grow GM canola and other crops could stimulate further research that could help to resolve many production and environmental challenges, even extending to the dairy industry (ADIC, sub. 26).

Some research organisations and technology companies have retained a level of investment in GM canola activities in anticipation of the expiry of the moratorium. However, a continuation of the moratorium and no clear path to market may reduce even this limited level of investment. Bayer CropScience stated that it:

… has made a significant investment in its canola activities in Australia over the past 10 years. It has remained here with the hope that one day Australian farmers may have access to the technology … If the moratorium was to continue Bayer CropScience would of course have to re-examine continuing involvement in its current program in Australia. (sub. 19, pp. 31–2)

Lifting the moratorium might prompt further private investment in Victoria, although the Panel acknowledges that investors may wait until the broader legislative environment is clearer. Dow AgroSciences Australia, for example, claimed it would consider investing in a number of areas in Australia if there were a clear path to market (sub. 82).

7.2 Loss of Australian research capability

The research community is concerned about the harmful impact of the moratorium on innovation and their profession and is keen for the moratorium to be lifted. The CSIRO urged all state governments to consider ‘the potential impact of the moratoria on the innovative capacity of Australia, in particular on Australia’s capacity to nurture research capability in the next generation of gene technologies’ (sub. 105, p. 4).

The Panel notes the loss of key Australian scientists to competing research programs overseas (MPBCRC, sub. 229). The problem extends beyond the ‘brain drain’ of existing scientists, as noted by David Tribe:

The opportunity costs of an extension to the moratorium start with disincentives for talented new biological scientists to enter agriculture. Talented human capital is driven away from plant science training by the depressing uncertainty that success will never be rewarded. (sub. 73, p. 2)

Australian researchers need to collaborate internationally to access technology and deliver research outcomes suited to Australia. Further, due to the high costs of obtaining approval of GM events for commercialisation (see Kalaitzandonakes et al. 2007), effective partnerships with industry are essential. For those researchers who have continued, the moratorium has discouraged this international collaboration (Australian Centre for Plant Functional Genomics, sub. 58).

55 Review of the moratorium on genetically modified canola in Victoria

7.3 Broader legislative reform

Submissions to the Panel from technology developers opposed any alternative government oversight if the moratorium is lifted and endorsed the grain industry’s ability to effectively manage the supply chain. Most argued for broader legislative reform than is the focus of this Review. Some called for the repeal of Victoria’s Control of Genetically Modified Crops Act (and all such state legislation) because they did not want to invest in canola and other GM crops based on ad hoc state government reviews as new crops are introduced. Dow AgroSciences Australia made a strong case:

There is no incentive for technology providers to conduct the 3–5 years (minimum) preliminary work on Australian crop varieties required to commercialise technology already in place elsewhere if a Federal approval can be overridden by a State Government. Removing the moratorium on canola only does not remove the disincentive for investment in other crops. (sub. 82, p. 2)

Similarly, Pioneer Hi-Bred stated that ‘Markets and industry self-regulation are more appropriate mechanisms to ensure the integrity of all grain and affiliated industries’ (sub. 30, p. 5). This view was not limited to international technology companies, but was also expressed by Australian investors and researchers. The Grains Research and Development Corporation (sub. 15) and the CSIRO (sub. 105), for example, indicated that their future investments in GM crops would take into account the future direction of gene technology legislation in Australia.

In contrast, ABB Grain argued that ‘the Victorian government must retain the current Act and therefore its ability to regulate the commercial cultivation of future GM Crops’ (sub. 61, p. 1). It further stated that there needs to be a ‘formal mechanism between industry and Government that has a nationally consistent transparent approach to market considerations’ (sub. 61, p. 3). ABB Grain supports and is a signatory to the proposed formal model described in the Single Vision Grains Australia report Principles for process management of grain within the Australian supply chain (as discussed in section 4.7).

7.4 Securing a return on investment

Some submissions received by the Panel criticised private sector plant breeding companies and expressed concern about monopolisation by large multinational companies. In discussing the commercialisation of research and development, the Panel particularly considered concerns about the costs to farmers of GM canola seed.

Intellectual property rights through patents allow technology owners an exclusive right, for a limited time, to commercialise and restrict access to their technology through licence arrangements. Licence agreements generally oblige growers to follow defined crop management plans, grain marketing arrangements and other conditions to preserve the identity of the novel products. Similarly, plant breeders rights allow for exclusive commercialisation rights to a registered plant variety. Methods for recovering the costs of commercialisation include licence fees for the technology and royalties. The 56 Panel notes that farmers currently pay seed royalties and end point royalties Chapter 7 Impact on science, research and development for seed varieties covered by intellectual property as well as a research and development levy proportional to their grain production (see box 7.1).

Box 7.1 Grain royalties and levies

Upfront seed royalties and end point royalties are the two main approaches for the return on investment in the development of plant varieties. In addition, through the Grains Research and Development Corporation (GRDC), grain growers invest a proportion of their production back into research and development through a levy matched by the Australian Government.

Seed royalties Seed royalties are paid upfront as a one-off transaction when the seed is purchased. No further payment is required. The distributor usually collects the royalty (a component of the total cost of the seed) as part of the sales transaction. The distributor collates the seed royalties on behalf of the breeder and transfers them to the breeder periodically. This method of royalty collection is common for pasture, forage and oilseeds. The seed royalty method is now rarely used for cereal and pulse grains, for which an end point royalty is usually employed. Growers are not usually required to sign a seed licence agreement for varieties where only a seed royalty exists.

End point royalties (EPRs) EPRs are applied to new varieties to reward breeders for innovation and effort. They differ from traditional seed royalties, which are collected at the point of seed sale as part of the seed cost. Instead, EPRs are calculated on the grain produced by the licensed grower. They comprise mostly a breeder royalty and, if applicable, a collection fee and a management fee to commercialise and market the variety. The breeder royalty is the majority of the total royalty payable by the grower.

Traditional seed royalties increased the initial purchase price of the sowing seed — a cost to the grower, even if the crop failed. The advantage of an EPR is that it is calculated on only what the grower produces. The upfront cost to the grower (as in a seed royalty) is removed and the breeder’s return depends on the performance of the crop.

Newly bred varieties producing higher yields will increase the breeder’s reward because the grower will receive an increased return. Conversely, poor seasonal conditions or lower yielding varieties will reduce the royalty received by the breeder because grower returns will be lower. The breeder and the grower share the risk.

Grain levies The GRDC is a statutory authority established to plan and invest in research and development for the Australian grains industry. Its primary role is to support effective competition by Australian grain growers in international markets by enhancing productivity and sustainability. The primary business of the GRDC is to both allocate and manage investment in grains research and development.

The GRDC is jointly funded by a 0.99 per cent levy on grain growers partially matched by the Australian Government. The levy is collected on 25 crops and determined each year by the grains industry’s peak body, the Grains Council of Australia. The research expenditure of the GRDC is matched by the Australian Government up to a maximum of 0.5 per cent of the gross value of grain production, but does not exceed the grower levies. The GRDC has a diverse research and development portfolio that includes investments in gene technology.

Source: Based on CropCare Seed Technologies website; http://cropcare.komodocms.com/ SeedTechnology/EndPointRoyaltiesEPR; GRDC website http://grdc.com.au

57 Review of the moratorium on genetically modified canola in Victoria

Technology providers thus have an incentive to develop a profitable product for farmers, to ensure a return on investment. CropLife Australia (sub. 85) reminded the Panel, however, that farmers choose varieties based on market signals, consumer preferences, production costs and yield, among other influences. Victorian farmer Louise Staley (sub. 87) noted that while multinational companies will charge as much as the market will bear, farmers will only grow GM canola if it yields higher economic returns, and that non-GM alternatives — for example, saved seed — will always exist.

Other submissions raised concerns about the conditions placed on the use of seed and associated liability risks (see chapter 9). The Panel expects that charges and conditions for growing GM canola will be based on the normal market interaction between a farmer and technology provider. Dow AgroSciences Australia argued agreements are not a disincentive to growers because approximately 10 million farmers in 22 other countries have embraced GM technology and agreed to the associated licence conditions (sub. 82).

The Panel also notes that the technology providers with Office of the Gene Technology Regulator licences for the commercial or general release of GM canola are already working with potential licensees and industry partners, developing commercial plans for 2008 and beyond, should the moratorium be allowed to expire. While the plans are commercially sensitive, technology providers have indicated that the introduction of the GM canola varieties would initially be limited in area due to the relatively low amounts of seed available. Finding 7.1 The Panel considers that the moratorium and the Control of Genetically Modified Crops Act 2004 (Vic.) have an undesirable impact on innovation in Victoria by discouraging private sector investment in agricultural science, decreasing Victoria’s ability to retain scientific capabilities, and discouraging application of new technologies in pursuit of economic advantage.

58 Chapter 8 Impact on the organic food sector Chapter 8 Impact on the organic food sector

Organic products are a small but diverse range of goods that may appear like their conventional equivalents but differ in how they have been produced (Australian Government 2004). By definition, organic production excludes genetically modified (GM) crops, and any products or byproducts that are derived from GM technology are not compatible with the principles of organic agriculture. This chapter explores the scale and scope of organic production in Australia and Victoria and how the commercial release of GM canola in Victoria may affect it. This chapter also examines international organic production and the impact of GM crop production on the organics industry.

8.1 The organics industry

Global certified organic production has increased by an estimated 8 million hectares since 2002, to over 31 million hectares in 2005 (Apted and Mazur 2007). Although there are no official census data on the extent of the organics industry in Australia, an estimated 8–12 million hectares were under certified organic management in 2005, accounting for around 2.5 per cent of agricultural land (Willer and Yussefi 2007). The majority of Australian land given to organic production is pastoral land in the low rainfall zone. About 15 per cent involves the organic production of grains (cereals, pulses and oilseeds).

While rising consumer demand for organics is becoming noticeable, the organic food market in Australia is still considered a niche market accounting for 0.5 per cent of foods purchased in Australia in 2003 (Apted and Mazur 2007). On the domestic market, organic produce receives a substantial price premium over that of conventionally grown produce (Australian Government 2004).

Australian exports of organic products were estimated at $50 million in 2002, with more than 50 per cent exported to the European Union and the remainder going to Japan, Switzerland and the United States (Apted and Mazur 2007). Organic cereals (predominantly wheat) accounted for over 70 per cent of exports, which also included oilseeds and oilseed products (sunflower and canola based) (10 per cent), fruit and vegetables (7 per cent), meat and wine (3 per cent) and honey (1 per cent) (Apted and Mazur 2007).

Organic production in Victoria is worth at least $32 million per year to the state economy (although some in the organics industry suggest it is considerably higher) and includes a broad range of organic fruit, vegetables, nuts, meat (beef, lamb, pork and poultry), wine grapes and grains. Victoria is Australia’s leading producer of organic milk and leading organic food processor, particularly of dairy products, fruit juices, flour and flour mixes (Australian Bureau of Statistics 2006). The Review Panel is not aware of any commercial organic canola grown in Victoria at this time.

8.2 Genetically modified canola and the organic supply chain

This section explores the mechanics of the organics industry and how the introduction of GM canola would affect organics certification and management, 59 Review of the moratorium on genetically modified canola in Victoria

the supply of organic animal feed and any additional costs to the organics supply chain.

8.2.1 Organic certification and management In Australia, the Australian Quarantine and Inspection Service (AQIS) cooperates with seven approved certifying organisations to enforce the inspection and certification of organic produce for export (Australian Government 2004). This co‑regulatory system was set up in the early 1990s to ensure buyers of organic products could be confident that certified produce is grown and processed according to organic or biodynamic principles.

The system is underpinned by Commonwealth legislation and the National Standard for Organic and Biodynamic Produce. The National Standard was developed to be compatible with EU, the Codex Alimentarius Commission and Japanese regulations to enhance international trade in organic products and has also been adopted by the organics industry for domestic marketing purposes. Although the National Standard is defined in export regulations, it is not defined in domestic food regulations.

Organic certification standards in Australia prohibit GM presence in organic products or byproducts (that is, there is no threshold for low level GM presence). However, the Panel recognises that some GM material could unintentionally enter the organics supply chain. To some organic producers, therefore, the introduction of GM canola would represent an additional risk to manage. The Biological Farmers of Australia took the view that ‘any lifting of this moratorium would be an unmitigated disaster for Australian agriculture’ (sub. 114, p. 22).

For some respondents to the Review, ‘contamination’ of non-GM material with GM material is the key concern and they considered that their livelihoods would be at risk (Milawa Mustards, sub. 24; Original Foods, sub. 47; Bexley Pastoral Co., sub. 56; D. and S. Brain, sub. 113). Organic and non-GM producers often cite gene flow as a potential source of unintended co‑mingling. As the Panel is unaware, however, of any commercial organic canola under cultivation in Victoria, the risk of gene flow to organic canola is therefore not currently an issue (although this may change in the future if commercial organic canola is grown in the state).

Similarly, the risk posed by the cultivation of GM canola to organic honey producers does not appear to be a significant issue. Under the National Standard, hives must be placed at least 5 kilometres from crops treated with prohibited pesticides, to avoid the presence of pesticide residues in organic honey products. Conventional canola production too often relies on pesticides that are unacceptable to the organics industry, and because GM canola is likely to be planted as an alternative to conventional canola, there would be little additional effect on organic honey production. Further, pollen movement by foraging bees is unlikely to be a significant issue if organic honey producers observe the 5 kilometre separation distance.

Many organic farmers supply product direct to the consumer, but this is only a small proportion of total sales on average (Australian Government 2004). The majority of organic product (for example, meat, milk and cereals) reaches the 60 consumer via specialised supply chain intermediaries, including processors. Chapter 8 Impact on the organic food sector

Poultry and eggs, for example, are commonly processed on farm and sold direct to specialist retailers and health food stores. These and other produce, such as organic fruit and vegetables, do not share the same supply chain that GM canola is likely to follow, so the likelihood of GM canola material appearing in organic produce seems low.

At present, the threshold for GM material in organic produce is set at zero in Australia. In the European Union, agriculture ministers have agreed to amend the regulation of organic food to allow a non‑zero threshold (0.9 per cent) for the unintentional presence of approved GM material in certified organic products. The new regulation will come into force in January 2009 and will allow Australian organic produce marketed into the European Union to have up to 0.9 per cent adventitious GM content without losing organic status.

8.2.2 Impact on organic feed The Australian national organic standards for livestock and dairy production require that certified organic animals be fed on certified organic feedstuffs. The Victorian Organic Dairy Farmers Association (sub. 89) stated that organic dairy farmers have avoided canola meal in the past three years, not willing to risk inadvertent contamination from trial sites and imported product. Several other submissions also indicated that their business would completely avoid Australian (and presumably imported) canola (for example, Original Foods, sub. 47).

Nevertheless, the Australian organic standards allow for supplementary feed to be brought onto farms to provide a minor proportion (up to 5 per cent) of animal diets (Apted and Mazur 2007). Canola meal, therefore, potentially plays a minor part in the organic livestock and dairy sector. The adoption of GM canola could mean that previously available canola meal sources may, in the future, contain the unintentional presence of GM material. However, as Apted and Mazur (2007) discussed, the organic livestock industries source suitable feed other than canola meal (predominantly non-organic soybean meal), so the introduction of GM canola would have minimal impact on the organic livestock industry.

8.2.3 Supply chain and additional costs Pursuing higher prices for specialised production methods, the organic sector argued that if GM canola were introduced, producers would have to practise a level of identity preservation not currently required, which would involve a prohibitive and unfairly placed cost. Original Foods, for example, stated that it goes to great lengths to verify the GM free status of its ingredients, and that retaining the canola moratorium would ‘avoid added complexity to the range of compliance requirements’ (sub. 47, p. 7).

The Panel notes, however, that Apted and Mazur’s (2007) study found that introducing GM canola would have a minimal impact on the organic farming sector. In explaining this finding, Apted and Mazur noted that existing organic standards protect the organics industry (for example, the requirement that organic production be isolated from non-organic production) and also that sufficient organic and non-organic protein meals are available and used to feed the organic livestock industry.

61 Review of the moratorium on genetically modified canola in Victoria

8.3 Have genetically modified crops negatively affected organic production overseas?

In considering the potential impact of the introduction of GM canola on the Australian organics sector, it is pertinent to examine the impact of GM crops on organic production overseas, particularly in countries that have adopted GM crops. In North America, organic farming is one of the fastest growing sectors of agriculture, growing at about 20 per cent per year (Apted and Mazur 2007). Organic production acreage in the United States increased by almost 230 per cent between 1995 and 2005 and organic food sales are estimated to reach over 3 per cent of the US food market by 2010 (Department of Agriculture and Resource Economics 2006; US Department of Agriculture 2006; Weidemann Pastoral Co., sub. 71). In 2005, about four million acres of organic farmland was in production, with about 1.7 million acres dedicated to organic cropping and the remainder being pasture and rangeland for organic livestock production (US Department of Agriculture 2006).

The increase in US production of organic corn (up 400 per cent to 131 000 acres) and organic soybean (up 260 per cent to 122 000 acres) has been dramatic since the introduction of GM varieties (US Department of Agriculture 2006). In contrast, organic cotton production area in the United States has reduced by two thirds to around 10 000 acres (US Department of Agriculture 2006). It is difficult for organic cotton growers to implement and maintain organic status and remain profitable compared with other organic crops, because consumer demand for organic cotton is low. Further, consumers are less resistant to GM cotton for fibre than to GM foods (Baffes 2004).

In Canada, the organics sector has similarly increased, up 60 per cent over the past five years (Statistics Canada 2007; Louise Staley, sub. 87). In 2005, the area under organic production was about 531 000 hectares (compared with about 485 000 hectares in 2004). Of this area, grains and oilseeds represented about 231 000 hectares, pasture and fodder represented about 220 000 hectares, and the remaining area included fruits, herbs and vegetables (Statistics Canada 2007). Canadian organic products were predominantly exported (mostly cereal grains) to the United States, the European Union and Japan. Further, since 2000-01, organic milk production in Canada has increased by 300 per cent to 30 million litres per year.

Collectively, this points to the feasibility of the successful coexistence of organic and GM production systems in Victoria. The Victorian Organic Dairy Farmers Association (sub. 89), while opposed to lifting the moratorium, acknowledged that allowing GM canola could boost demand for organic milk and milk products. The Panel considers there may be an opportunity for organic sector expansion in Victoria if GM crops are introduced and consumer sensitivities remain apparent.

The Panel notes that the organic food sector provides choice for consumers who prefer not to consume food that has been produced using modern scientific farming, including GM technologies. This sector would benefit from support from the Victorian Government to enhance opportunities for growth. Finding 8.1 The Panel notes the growth of the organics sector in countries where 62 genetically modified crops have been extensively commercialised. Chapter 9 Liability and dispute resolution Chapter 9 Liability and dispute resolution

This chapter considers whether the introduction of genetically modified (GM) canola might present any unique legal risk. It examines the role of existing common law remedies for dealing with disputes that might arise in the production, trade and use of genetically modified (GM) canola.

9.1 Is there unique legal risk associated with introducing genetically modified canola?

Participants in the grain supply chain in Australia who grow or handle GM canola might be legally liable for any losses that result from the adventitious presence of GM canola in non-GM canola crops or products, or from the contamination of other crops or products with GM canola. Losses might be caused at any point in the supply chain. Regarding this issue of potential legal liability, the Panel considers that the key question is whether GM canola presents any unique legal risk compared with the introduction of any other new crop varieties.

The production of commercial crops has always carried the risk of the actions of one party imposing costs on another for which the affected party is not compensated. The failure of one farmer to control weeds, for example, may impose costs on a neighbour. An example pertinent to this Review may be pollen flow from one canola crop (GM or otherwise) that may damage a neighbouring canola crop. Ellickson (1991) found that problems of this nature are generally resolved through farmer-to-farmer negotiation and agreement on adhering to sound agricultural practices, and that they rarely require court intervention. The Australian Government has chosen not to implement a strict liability regime for GM crops because the risks could be resolved through recourse to existing statute and common law, as is the case for other instances whereby the activities of a farmer affect a neighbour.

The Panel notes the use of legal remedies by farmers or participants in the grain supply chain has been rare in countries that have adopted GM crops, including Australia following the introduction of GM cotton here in 1996 (Dalton et al. 2003). Nevertheless, several submissions attributed unique liability risk to this new crop production system (Dorothy Pottage, sub. 14; Biological Farmers of Australia, sub. 114; Rupa Selecki, sub. 223; GeneEthics, sub. 234), requiring the Panel to examine the issue of GM liability.

Given that advising on appropriate legal regulatory schemes is outside the Panel’s terms of reference and expertise, the Panel sought advice from the Victorian Government Solicitor and reviewed several relevant papers covering the issue of legal liability in relation to GM crops (ACIL Tasman 2005; Dalton et al. 2003; Kershen 2002; Lunney and Burrell 2006). Specifically, it sought to identify the causes of action that may be brought in relation to the unintended presence of GM organisms, at a number of points along the supply chain. After reviewing these materials and considering the Victorian Government Solicitor’s advice, the Panel considers that introducing GM canola poses no unique legal risks.

63 Review of the moratorium on genetically modified canola in Victoria

That said, causes of action such as trespass, negligence, nuisance and breach of contract are available. The Panel does not comment on whether any of these causes of action would be successful, but observes from the relevant academic commentaries that there is uncertainty regarding which, if any, specific losses for which the courts would compensate.

9.2 Common law actions

The Panel’s considered view is that trespass, nuisance and negligence are the common law causes of action most likely to be brought against a GM farmer for losses associated with the unintended presence of GMOs:

• Trespass to land occurs where there is a direct physical interference with another party’s exclusive possession of land. If a GM farmer transports seed on a truck, for example, then a spillage of that seed may amount to trespass if it is intentional, reckless or negligent, in circumstances where the seed contaminates another person’s land.

• The cultivation of GM canola may constitute a nuisance to a neighbouring farm if the unintended presence of GM canola materially damages a neighbouring crop or unreasonably interferes with the neighbour’s use or enjoyment of their property.

• A GM canola farmer may be held liable for negligence if an established duty of care between the farmer and another party is breached and damage which was reasonably foreseeable is sustained by that other party.

ACIL Tasman (2005) explained the potential use of these common law torts following the introduction of GM canola, including examples of their application throughout the grain supply chain. The liability risk under any of these actions can be assessed only on a case-by-case basis. To minimise the risks, however, ACIL Tasman (2005) advised that GM farmers should be careful to comply with any relevant licence conditions imposed by the Office of the Gene Technology Regulator (OGTR) and any directions of the GM seed supplier included under the technology user agreement (TUA), as well as relevant industry best practice standards and guidelines. The framework under Single Vision Grains Australia will help resolve these issues.

9.3 Breach of contract

The Panel considers that liability may additionally arise under a claim of breach of contract. Commercial contracts are the key governing legal instruments facilitating trade along the grain supply chain. They are used to specify the actions and responsibilities of parties at points in the supply chain. For purchases of seed covered by intellectual property rights, TUAs between a farmer and a technology provider (either a technology developer or a seed company) outline the conditions under which the seed can be used, including licensing conditions imposed by the OGTR and the method for royalty payments on intellectual property rights. Biological Farmers of Australia highlighted farmer liability concerns with such commercial arrangements, suggesting a TUA: 64 Chapter 9 Liability and dispute resolution

… binds the farmer to Monsanto’s oversight for multiple years, and includes a variety of other conditions that have effectively defined what rights a farmer does and does not have in planting, harvesting, and selling genetically engineered seed … No farmer is safe from the long reach of Monsanto. (sub.114, pp.16–17)

Obligations under intellectual property rights covering a seed variety (and the consequences of infringement) are not particular to GM canola varieties. As discussed in chapter 7, the ability to recover investment in plant breeding improvements is vital for ensuring new technologies developed by the private sector are accessible to Australian farmers.

Put simply, farmers should not knowingly cultivate GM crops (or any other modern crop variety covered by intellectual property rights) without first signing the required seed contract, and they should then adhere to its conditions. As stated by the Victorian Farmers Federation (VFF), farmers make seed purchasing decisions on a seasonal basis, weighing up the preferred production system for their property and the most appropriate seed varieties in the marketplace, accounting for any contractual obligations (sub. 115). The VFF advocated a farmer’s right to choose (or reject) from the range of new available technologies (and any associated contractual obligations) approved by the OGTR.

Further along the supply chain, the Australian Grain Harvesters Association (sub. 7) noted significant uncertainty relating to meeting contractual warranties for hygiene of harvesting equipment. The Association stated that ‘the introduction of GM canola into Australia’s grain industry will … ignite the very real predicament of legal liability for our members’ (sub.7, p. 1). It sought special legal liability exemption for any spread or contamination of grain crops associated with harvesting equipment moving from farm to farm and held that it ‘must have absolute certainty and confidence that we will not be sued or discriminated against for any spread or contamination of grains or property, when and if GM canola is introduced’ (sub.7, p. 2).

ACIL Tasman’s (2005) overview of the legal liability risks associated with GM crops suggested that if transporters and contract harvesters act to avoid breaching contractual thresholds for low level presence of GM material or, alternatively, follow industry best practice to avoid spillage of GM material, the legal risk may be minimised. All other participants along the grain supply chain consider that the cultivation, handling and marketing of GM grain under standard contract conditions are achievable, now that thresholds for low level presence of GM canola are in place. Further, the National Agricultural Commodities Marketing Association’s arbitration system provides participants in the grain supply chain with an industry based arbitration service to resolve disputes and avoid litigation, reduce friction among members and other industry participants, prevent misunderstandings and adjust unsatisfactory contractual conditions.

The organics sector presents a particular legal risk: any detection of GM material in organic crops has the potential to result in economic loss through lost market opportunities or price premiums if organic ‘status’ is affected (Milawa Mustards, sub. 24; Original Foods, sub. 47; Ceres Natural Foods, sub. 116). The National Standard for Organic and Biodynamic Produce does not accept any threshold for low level presence of GM material at this time. 65 Review of the moratorium on genetically modified canola in Victoria

If organic status is lost, rendering the organic producer in breach of a vendor declaration, then the organic producer may seek recompense through dispute resolution or legal means. Chris Kelly (sub. 6) mentioned the European Union’s recent decision to harmonise the low level (unintended) presence thresholds (0.9 per cent) with the production and labelling of all produce along the supply chain. He suggested this approach has merit and might be explored for addressing the trade risks posed to the Victorian organics market.

Claims of economic loss would need to be assessed for individual merit, accounting for the evidence for loss, as well as proof of breach of contract, trespass, nuisance or negligence (all of which involve evidential difficulties). While the Panel acknowledges that outcomes of possible causes for action are highly uncertain at this time, there is little evidence that problems posed are ‘beyond the scope of informal resolution or the common law’ (ACIL Tasman 2005, p. 18). Although not tested in the courts, inquiry and experience suggest the introduction of GM canola would not present a unique legal liability risk compared with that of introducing any other modern crop variety. Finding 9.1 Despite uncertainty about outcomes from potential causes for legal action, the Panel considers there is little evidence that the introduction of genetically modified canola would pose any unique risks to which existing legal mechanisms could not respond.

66 Chapter 10 Are further measures needed? Chapter 10 Are further measures needed?

The Review Panel has considered whether the Victorian Government should complement the introduction of GM canola with additional policy approaches. This chapter explores two possible measures to assist the potential introduction of GM canola.

10.1 Communication and monitoring of ongoing impacts

As discussed, public perceptions of GM canola are varied. Public opinion plays an important role in policy decisions, and while there is evidence to suggest Australians’ attitudes towards biotechnology may be softening, the Panel considers that the application of biotechnology in agriculture is poorly understood. Public opinion is shaped as much by the form and source of information as by its content, with trust in the source being critical (Schuurbiers et al. 2007). As McHughen (2007) stated in his recent review of public perceptions of agricultural biotechnology in Europe and North America:

… intelligent non-scientifically trained consumers cannot be expected to learn the intricacies of the technology to enable a personal choice to support or reject biotechnology products. The only reasonable and pragmatic alternative is to place trust in someone to provide honest advice. But who, working in the public interest, is best suited to provide informed and accessible, but objective, advice to … consumers? (p. 1105)

Biotechnology Australia, in close association with the Commonwealth Scientific and Industrial Research Organisation, has undertaken to raise awareness of, and provide educative materials about, the science of biotechnology, including agricultural applications. The Panel notes the activities undertaken by these institutions are consistent with the ongoing information needs of the community.

The Panel considers several other national agencies are also well placed to provide accurate, objective and credible information on the extent and impact of GM canola, should it be introduced:

• The Office of the Gene Technology Regulator could be requested to provide the Victorian Government with an annual report outlining the performance of GM canola licence holders, including any new information that may be relevant to granting those licences.

• ABARE could be commissioned to provide the Victorian Government with ongoing analyses of the economic and trade impacts associated with the introduction of GM canola.

• The Australian Bureau of Statistics could be requested to gather statistics relevant to the cultivation of GM canola in regions of Victoria.

• The Primary Industries Ministerial Council could be requested to coordinate the monitoring and managing of herbicide resistance nationally (and regionally) to ensure ongoing diversity in cropping systems. 67 Review of the moratorium on genetically modified canola in Victoria

10.2 Consistent regulatory arrangements

Harmonisation of requirements across jurisdictions will enable efficient grain industry development. In its Review of Export Grain Handling Regulation, Victoria’s Essential Services Commission (2002) detailed the movement of grain across Victoria, South Australia and New South Wales. The analysis revealed that the state boundaries are incidental to grain trade: grain moves into Victoria from both South Australia and New South Wales and vice versa, depending on the source of least cost rail and shipping pathways to market. Maintaining GM crop regulation in any one of those states that is inconsistent with regulation in the others would result in an additional regulatory burden for a grains industry supply chain that has a national focus, with both farmers and consumers ultimately bearing the costs. Finding 10.2 Allowing the moratoria on genetically modified canola in Victoria, South Australia and New South Wales to expire at the same time would enable least cost pathways to market, facilitating efficiencies through the supply chain.

68 Chapter 11 Summary, conclusions and recommendations Chapter 11 Summary, conclusions and recommendations

Long term competitiveness is critical to the grain industry. Access to new technologies, such as improved plant varieties, is essential for enabling Victorian growers to maintain profitability. The Victorian Government delayed access to new technology for the canola industry by more than four years in response to concerns about the potential effects on markets and trade from growing genetically modified (GM) canola.

The terms of reference for this Review directed the Panel to identify the impacts of the current moratorium and any potential moratoria on the Victorian economy. The Panel carefully examined two scenarios: first, the effect of allowing the moratorium to expire at the end of February 2008, and second, the effect of continuing the moratorium until 2016. The Panel also studied the economic impacts on markets, farm businesses, the grain supply chain, non-grain industries, science and research and development, and consumers. It also examined the adequacy of current legislative tools to address any disputes in the use of this new technology. It drew on public submissions, published studies and a cost–benefit analysis commissioned by the Department of Primary Industries, to assist in its deliberations.

The Panel finds no compelling market or price advantage that can be attributed to Australia’s non-GM status as a bulk canola exporter over the past four years. It is confident that Victorian bulk canola will continue to have access to most international markets in the future, whether GM or non-GM.

Under average rainfall conditions, GM canola varieties are expected to provide net benefits on-farm, providing an average gross margin benefit of around $45 per hectare compared with non-GM varieties. Key benefits of the approved varieties of GM canola include weed management and yield benefits in subsequent rotations of cereal and pulse crops. Further, investment in the oilseed industry in Victoria will depend on expectations of future international competitiveness. Without access to GM technology, Victorian canola production will continue to become less internationally competitive.

With little prospect of price premiums for bulk non-GM canola, and with net on-farm benefits from GM canola varieties, GM canola has advantages. By forgoing these, the current moratorium (from 2004) is estimated to impose a net cost of $60–65 million. Extending the moratorium to 2016 is estimated to impose a further $110–115 million net cost on the Victorian economy. These results are based on what can be directly measured. They exclude benefits from further GM technology (such as environmental stress tolerance) and other on-farm and post-farm factors.

The Panel concludes that the costs of the current moratorium outweigh its benefits. It expects that extending the moratorium would impose even greater net costs on the Victorian economy. Recommendation 1 The Panel recommends the Victorian Government allow the moratorium on genetically modified canola to expire. 69 Review of the moratorium on genetically modified canola in Victoria

The moratorium, while costly, did provide time to better prepare for introducing GM canola into the supply chain. The Panel notes the significant coordinated effort undertaken by grain supply chain participants and downstream industries (such as the dairy and food industries), which have come to a common view and agreed on protocols to manage the grain supply chain and to provide for segregations as the market dictates. The Panel is confident that industry can effectively separate GM and non-GM crops in the grain supply chain, to meet market requirements.

Defined and agreed tolerances for unintended presence of GM canola in non-GM canola and other bulk grains are critical for achieving smooth and efficient grain trade in a coexistence environment. The Panel notes that the Victorian Government has established a tolerance level of 0.9 per cent for the low level presence of GM canola in non-GM canola shipments. However, the Panel finds no reason for government to specify who should pay segregation costs. Some grain characteristics are more valued by some customers. These are likely to be profitably provided when customers are willing to pay the costs of producing these characteristics, including any segregation and information costs. This already occurs, because there are premiums for specialty grain products, including canola. As GM and other new technologies are adopted and consumer preferences evolve, the bulk and premium components of the canola market will change accordingly. The Panel perceives no advantage in intervening in this. Recommendation 2 The Panel recommends the Victorian Government allow the market to determine whether segregation of non‑genetically modified canola from genetically modified canola in the grain supply chain is required.

National adoption of systems to manage GM crops in the grain supply chain following the introduction of GM canola would minimise business costs. The grain industries’ proposal for national self-regulation (the Single Vision Grains Australia initiative) was developed and endorsed by key grain industry representative bodies, and has been designed for national application. Recommendation 3 The Panel recommends the Victorian Government support the national adoption of the Single Vision Grains Australia initiative, to ensure any industry self-regulatory approach to coexistence is national in scope.

The moratorium and the Control of Genetically Modified Crops Act 2004 (Vic.) have had an undesirable impact on innovation in Victoria. They have reduced investment in canola research and development and broader agricultural science, contributed to a loss of scientific capabilities, and delayed application of new technologies in pursuit of economic advantage. Recommendation 4 The Panel recommends the Control of Genetically Modified Crops Act 2004 (Vic.) be reviewed to assess its ongoing impact on investment in plant breeding.

70 Chapter 11 Summary, conclusions and recommendations

While segregation can achieve a range of low level presence levels, the lower these levels, the more segregation costs. The organic food certification bodies currently prohibit known GM inputs in organic food production. The Panel acknowledges the organics sector’s concerns about the ability to market organic foods if the moratorium is allowed to expire. However, tolerances for adventitious presence in organic food production vary across markets. Notably, the European Union has agreed to a tolerance level of 0.9 per cent throughout its organic food supply chain. Further, the Panel notes the growth of the organic sector both in this country and overseas, including in countries where GM crops have been extensively grown. The organic food sector provides choice for consumers who prefer not to consume food that has been produced using certain farming methods, including GM technologies. The Panel considers that organic and GM crop production systems can coexist and the introduction of GM food crops into Australia may stimulate consumer demand for organically produced products. Recommendation 5 The Panel recommends the Victorian Government work with the organics sector to identify barriers to and opportunities for growth.

The Panel investigated whether GM canola would present unique legal risk compared with the introduction of any other new crop varieties. With thresholds for low level presence of GM canola in place, standard contractual arrangements should be sufficient to meet customer requirements, as they are throughout the rest of the supply chain. The outcomes are unclear for some potential courses of legal action, although there is little evidence that problems posed require any additional legal mechanisms.

The Panel acknowledges that there are some ongoing community concerns about the introduction of GM canola and the perceived health and environmental risks associated with GM foods more broadly. Although outside the terms of reference of this Review, the Panel approached the Office of the Gene Technology Regulator (OGTR) for an assessment of whether the licences granted for GM canola in 2003 remain valid today. The Panel notes the OGTR advice that ongoing assessments relating to InVigor® and Roundup Ready® canola do not reveal any information that would justify varying, suspending or cancelling the commercial release licences.

The Panel has examined suggestions for complementary policies in the event that the Victorian Government allows the moratorium to expire. It concludes that most regulatory approaches (such as mandatory segregation) — with the exception of establishing tolerances for low level presence of OGTR approved GM material — would restrict market function and impose costs that outweigh the benefits. The Panel does, however, perceive merit in government providing information to aid private decision making and public policy development. This could include information about the economic impacts of GM canola and the potential impacts on herbicide resistance and broader cropping systems.

71 Review of the moratorium on genetically modified canola in Victoria

Recommendation 6 The Panel recommends the Victorian Government work with governments to ensure there is appropriate monitoring and in particular:

Beyond information roles, eastern state governments could minimise the regulatory burden by having consistent regulatory regimes. Grain is collected and distributed according to business imperatives, not state boundaries, and complying with different regulations in each state would be costly. Recommendation 7 The Panel recommends the Victorian Government work with the governments of South Australia and New South Wales to harmonise regulatory arrangements for genetically modified crops, particularly to achieve a consistent approach to deregulating the moratoria on the cultivation of genetically modified canola.

72 Appendix 1 Membership of the Review Panel Appendix 1 Membership of the Review Panel

Sir Gustav Nossal AC CBE (Panel Chair) is an internationally distinguished research biologist and scientific expert, a Chief Scientist for a number of government agencies, a past president of the Australian Academy of Science, former Australian of the Year and also holds numerous international scientific awards and doctorates. Sir Gustav is a founding member of Foursight Associates, a company providing advice on research and development and science to companies, investment institutions, universities and government.

Mrs Christine Forster AM is a farmer in western Victoria and has extensive experience in regional development, rural adjustment issues, and resource management. She is currently a member of the Victorian Catchment Management Council and the Victorian Water Trust Advisory Council. She has been awarded the Centenary Medal and was inducted into the Victorian Honour Roll of Women. Christine has previously held positions on numerous agricultural and water resource related boards, advisory bodies, inquiries and reviews.

Mrs Merna Curnow has recognised expertise in agriculture, and is a partner in a grain and prime lamb enterprise in central Victoria. Merna has a background in education, is a graduate of the Australian Rural Leadership Program and in 2003 was awarded a Centenary Medal for services to the promotion and recognition of women in primary and rural industry. Merna is currently a Panel member of the Grains Research and Development Corporation. She has previously held positions as: chair, Victorian Farmers Federation (VFF) Education Committee; chair, ‘Partners in Grain’ National Reference Group; vice president and member, VFF Grains Council; member, Northern Regional Forum; and member, Regional Assessment Panel of the North Central Catchment Management Authority.

Mrs Carolyn Tanner (co-opted Panel member) is an experienced agricultural economist with particular expertise in agricultural markets and trade policy. For over thirty years, she was a member of the Department of Agricultural Economics at the University of Sydney, teaching international trade and agricultural policy. She is a former editor of the Australian Journal of Agricultural and Resource Economics and a past president of the Australian Agricultural and Resource Economics Society. She has undertaken reviews of quarantine policy and food safety for the Australian Government and served on government advisory councils for quarantine and export policy, natural resource management and World Trade Organization trade policy. In 2007, she was made a Distinguished Fellow of the Australian Agricultural and Resource Economics Society.

Appendix 2 National regulatory arrangements Appendix 2 National regulatory arrangements

The Gene Technology Regulator (GTR) and her office, theOffice of the Gene Technology Regulator (OGTR) decide whether there is any risk to human health or the environment. In this process, they must consult with and take into account the views of a number of other agencies including Food Standards Australia New Zealand (FSANZ), the Agricultural Pesticides and Veterinary Medicines Authority (APVMA), the Therapeutic Goods Administration (TGA) and the Australian Quarantine and Inspection Service (AQIS).

Food Standards Australia New Zealand FSANZ is responsible for food safety and all GM foods or ingredients to be sold in Australia must undergo a mandatory pre-market safety assessment to ensure that it is safe for human consumption. FSANZ also regulates the labelling of GM foods and since December 2001 has required that all GM food sold in Australia be labelled if novel DNA or protein is present in the final product. Through the Victorian Food Act 1984, the Victorian Government confers the responsibility for assessing food safety risks to FSANZ.

Agricultural Pesticides and Veterinary Medicines Authority The APVMA is responsible for the regulation of pesticides and veterinary medicines up to and including the point of retail sale and administers the National Registration Scheme for Agricultural and Veterinary Chemicals in partnership with the States and Territories. The APVMA’s responsibility for regulation of pesticides includes a responsibility for herbicides (weedicides) such as those approved for use over Roundup Ready® GM canola and Liberty® GM canola crops.

Therapeutic Goods Administration The TGA is responsible for the regulation of therapeutic goods in Australia. The Therapeutic Goods Act 1989 confers responsibility to the TGA to ensure the quality, safety and efficacy of medicines, including those that are GM or derived from a GM process. The regulatory framework is based on a risk management approach designed to ensure public health and safety. Under the Act, the TGA is responsible for product labelling and appearance and other provisions. Some provisions, such as the scheduling of substances and the safe storage of therapeutic goods, are covered by relevant State or Territory legislation.

Australian Quarantine and Inspection Service (AQIS) AQIS is responsible for ensuring that products imported into Australia do not lead to the introduction, establishment and spread of pests and diseases that may endanger plants, animals and human life or health. GM products imported into Australia that could potentially pose a pest and disease risk fall under the Quarantine Act 1908 administered by AQIS. In the first instance, an import application form must be completed for proposed importation of GM material. AQIS assesses import proposals using an Import Risk Analysis process. AQIS also advises importers to contact the OGTR, as the importer must also comply with OGTR requirements.

AQIS also certifies the export of agri-food products and commodities from Australia in accordance with the requirements of the Export Control Act 1982. AQIS identifies and inspects products and commodities, then certifies that they meet the requirements of the importing country governments. 89 Review of the moratorium on genetically modified canola in Victoria

In providing this certification, AQIS relies upon advice from a number of sources, mostly third-party State or Commonwealth Government agencies, to provide verification data to support certification. When an importing country has a requirement as to the GM status of a product or commodity as part of certification, AQIS will attach to its export certification a statement from the OGTR as to the commercial status of the product or commodity in Australia.

90 Appendix 3 Public submissions presented to the Panel Appendix 3 Public submissions presented to the Panel

A3.1 Organisations and individuals who presented individual written public submissions

ABB Grain Ltd Conservation Council of Western Australia Inc AgForce Grains Ltd Cotton Seed Distributors Ltd Agricultural Energy Cresswell, Saul and Harvey, John Agrifood Awareness Australia CropLife Australia Ltd AgroEco Systems Pty Ltd CSIRO Allender, Una Cullinan, Kate Allison, Stuart Currie, David Anderson, Susan Dairy Australia AusBiotech Dalton, Julia Auscott Ltd Dalton, Les K Australian Centre for Plant Functional Genomics Davies, R Pty Ltd Dawborn, Kerry Australian Cotton Industry Council Di Teodoro, Sonia Australian Dairy Industry Council Inc Disler, Helen Australian Food and Grocery Council Dow Agrosciences Australia Ltd Australian Grain Harvesters Association Inc Dowling, Chris Australian Institute of Agricultural Science and Driscoll Seeds Pty Ltd Technology Duncan, Tom Australian Institute of Self Development Dunn, Samantha Australian Milk Producers Association Edwards, Karen Australian Oilseeds Federation Edwards, Marion Australian Seed Federation Erlich, Jeffrey AWB Limited Errol, Vanessa Bain, Glenn Farah, Charles Baldock, Heather Farman, Warwick; Bernard and Jane Bayer CropScience Field, Iris Benton, Vivienne Finnigan, Karen Bexley Pastoral Company Pty Ltd Flanagan, Amelia Bidstrup, Judith Flanagan, Greg Bilney, Carolyn Flour Millers Council of Australia BioLogic AgFood Focus on Food for Health, Healing and Social Justice Biological Farmers of Australia Forde, Leneen BioMelbourne Network Frawley-Major, Kim Biotechnology Australia French Island Olives Birchip Cropping Group Friends of the Earth Australia Blakeney, Debbie Fuller, Beth Bond, Sue G and R Dyer and Son Bowman, Arthur Gaylard, Sam Boyle, Kathryn Gene Ethics Brain, DR and SD Gibb, Alan Brain, Luke Gilkes, Glynis Broad, Andrew Gilligan, Dominic G K Brown, J A Gow, Lea Brunswick East Primary School Grain Growers Association Buckley, Andrea GrainCorp Cadman, Russell and Justine Grains Council of Australia Caduceus Health Pty Ltd Grains Research and Development Corporation Caldwell, Grant Grant, Robyn Campbell, Christine - Member for Pascoe Vale Greenpeace Cannold, Leslie Griffiths, Tamara Cardinia Ratepayer and Residents Association Inc Guerin, Patrick Carey, Rachel Gurnsey, Emma Cargill Australia Ltd Harbright, Emille Carli, Carlo - Member for Brunswick Harper, Mitchell Chambers, H Haynes, Diane Charalambous, Christine Healy, Bob Charylo, Genna Hedger, Brett Cheadle, Cathy Hendy, Penny Clement, Terry Hess, G Dale Columban Justice, Peace and Integrity of Creation Hewson, Elvira Australia Hooper, Christine Columban Centre for Peace, Ecology and Justice Hornsey, Jennifer Connell, Graham Hunt, Geoff and Bronwyn 91 Review of the moratorium on genetically modified canola in Victoria

IHD Pty Ltd Phillips, Sharon Institute of Health and Environmental Research Inc Pioneer Hi-Bred Australia Pty Ltd Jacobs, Katie Pottage, Dorothy Jacobs, Margaret Poulakos, Bette Jaeger, Christiane Poynton, John Johnston, Elise and Chadwick, Terence Pratley, JE and Stanton, RA Kahlbetzer, Johnny Predominant Distributions Pty Ltd Kanavas, Tania Producers Forum Kelly, Chris Rapley, Monica Kelly, Vincent van Ravenswaaij, Joanne Kendell, Geoff Rethus, Geoff Kennedy, Joan Riverland Oilseeds Pty Ltd Kenrick-Smith, Ruth Roslyn Corporation Kibble, Bev Ross, Christine Kibell, Amanda Rossignoli, Federico Kingston, Tom Rozanitis, Fotini Kinnear, Dallas Rulc, Morva Kirkby, Jodi Rule, Christopher Koster, Peter Russell, Emma Kratzer, Terence Sacco, Lina Kunze, E Selecki, Rupa Lawson, Charles Shire of Yarra Ranges Lazzaro, Ann Southern Farming Systems Lazzaro, Don Staley, Louise Llewellyn, David - Tasmanian Minister for Primary Stawell Friend of the Earth Industries and Water Stock Feed Manufacturers’ Council of Australia and Lobato, Tammy - Member for Gembrook Stock Feed Manufacturers’ Association of Lock, Michelle Victoria Mason, Michaela Stokes, Don May, Leonie Strickland, Peter and Kathie May, Rod Studd, Joshua McCormack, Philomena Sumner, Andrea MacDonald, Anthea Sutherland, Amanda McDougall, Mark Tager, Jeremy McKenzie, Russell Tants, Karen McLaren, Angus The Pastoralists and Graziers Association of McNicol, Lydia and Ian; Fitts, David and Robyn; Western Australia Inc Stear, Colin; Smith, Palma; Brown, Geoff and The Western Australian Farmers Federation Inc Frank, Rivka Tiffin, Laurie McPartlin, Celia and Oliver, Sam Titcumb, Maureen Mikakos, Jenny – Member for Northern Metropolitan Tough, Janet Region Tribe, David Milawa Mustards Pty Ltd Vaz, Yolande Millis, Nancy Vickers, Robert Mills, Chris Victorian Farmers Federation Mision, A and Williamson, J Victorian Organic Dairy Farmers Association Molecular Plant Breeding CRC Wachter, Jane Monsanto Australia Ltd Wadsworth, Yoland Moreland Community Health Service Walter, Tania Morgan, Esther Ward, Arnold Mothers Against Genetic Engineering Weidemann Pastoral Co Mullerworth, Michael Whistler, Anthony and Jillian Murray Goulburn Co-operative Co. Ltd Whitelaw, Helen Murray, David Williamson, C National Agricultural Commodities Marketing Wyn Bell Pty Ltd Association Ltd Young, Anne National Farmers’ Federation Zouglakis, Gina Naylor, Lucy Neil, Mairi Network of Concerned Farmers Norriss, Margaret Nufarm Ltd O‘Connell, Genevieve Organic by Nature Organic Federation of Australia Ltd Original Foods Overend, Sunni Pacific Seeds Pty Ltd Page, Alfred Palerang Agricultural Society Ltd Pearson, Roger Pell, Greg Pengelly, Andrew Penny, Christine 92 PGG Wrightson Seeds Ltd Appendix 3 Public submissions presented to the Panel

A3.2 Individuals who presented copies of a Victorian citizen campaign submission

Adam, Diane Formosa, Lisa Adams, Faye Foster, Angela Alcide, Debra Franke, Christine Allan, Alyssha Fuller, Gabriel Allen, David Fuller, Michael Andrews, Carley Fuller, Rebecca Aspinall, L Fuller, Tim Baker, Sandi Fulton, Joanna Balbinot, Lorenzo George, Maria Barton, Sandra Gerogiannis, Ari Bazergh, Chantelle Gibbons, Denise Beasley, Michael Giles, Ross Bekut-Smoult, Dusanka Gleeson, Anna Bellamkonda, Abishek Goddard, Beverley Belle, Vanessa Goodwin, Amanda Belstead, Jean Goss, Margaret van Bemmel, Reuben H, Kelly Bing, Elizabeth Hall, Lauren Bingham, Niree Hall, Melanie Bishop, Ann Hamilton, Amy Bishop, Jennifer Hamilton, Rosalie Bitzman, Mario Hart, Katie Boag, Marjorie Hatfield, Lee Borrell, Jennifer Heard, Zinta Bravo, Adam Hewton, Brad Briggs, Ian Hilton, Carmen Brown, Judith Ho, Lisa Buckland, Ian Hocking, Christopher Buschel, Michael Hof, Will Butler, Jane Hogan, Nakita Buxton, Laurel Hopkins, Janet Bywater, Richard Hord, Ian Cheep, Jay Houghton, Debra Chindamo, Sonya Houghton, Susan Chriswell, Bojun Howard, Mark Chriswell, Melika Humphrey, Amber Clark, Laurence Hynes, Karen Cobb, Janine Hynes, Peter Cohen, E Hynes, Tracey Collie, Rebecca Ince, Joanne Cook, Candice Irving, Tracy Cooney, Rochelle Jay, Rachel Crawford, Sarah Jessop, Glenn Crome, Cam Johnson, Brett Cuthbert, John Johnson, Stephen Davies, Angela Joyce, David Davy, Cathryn Joyce, Nadine Dawborn, Kerry Jurca, Peter DeMaria, Holly Jurukovski, Larissa Denham, Ann-Maree Kalaja, Albert Deraps, Hugues Karas, Hana Dohmen, Rachel Kay, Gen Dubrich, Kylie Keane, Patricia Dunne, Jamie Kearney, Di Edwards, Janice Keating, Ed Edwards, Mary Kelly, Amanda Eleftheriadis, Marina Knight, Joanne Ellis, Leanne Knights, Robert Espiner, Adam Koberle, Toby Evans, Helene de Koning, Philip Fabian, Eva Kratzer, Maree Fajka, Iloana Kruger, Julie Falcon, Manwell Ladwig, Beth Farah, Charles Lange, Pelle Farah, May Lategan, Garth Farquharson, Anne Limbrick, Tanya Felder, Tamara Little, Hilary Finch, John Little, Rohan Fiore, Tanya Littlewood, Kallie Fitzgerald, Michael Lovell, Jen 93 Flanagan, Amelia Low, Sze-lin Review of the moratorium on genetically modified canola in Victoria

Maddern, Joshua Schrank, Gavin Madigan, Mary Schurr, Gary Majoor, Krista Scott, Sandra Major, Pam Sederof, Judy Malins, Peta Sheppet, Linda Malone, Veronica Shewan, Linda Malter, Richard Simmons, Tamara Mander, Annabel Simpson, Linda Mann, Sue Sinclair, Gai Martin, Vanessa Smee, Peter Masters, Leanne Smith, Alana Matthews, Luke Snowman, Corrine Maxwell, Lisa Spencer, Louise Mazzocco, Kerri Spittle, Joan McAidan, Justin Statham, William McGhee, Iain Steck, Emil-Pierre McIntosh, Kirsty Stewart, Lynette McLoughlin, Sean Storm, David McMillan, Nesam Stranger, Ernest McVilly, Beverley Sullivan, Anne Maree Meo, Charles Sunderland, Mervyn Merlin, Michael Sutherland, Amanda Metaxas, Tasoula Swanson, Stephanie Mikus, Jakki Tadinac, Stan Miller, Eric Tamlyn, Elizabeth Mira-Bateman, Linda Taylor, Allison Moloney, Jacqui Terrell, Lei-Lani Morrison, Prudence Thompson, Amanda Mortimer, Jacqueline Timpanaro, Dalys Murray, Jo Todaro, Cathy Newnham, Ebony Touchan, Hanady Nicholls, Craig T Vincent, Ariane Noontil, Lucienne Volk, Nina Norris, Kari Wade, Sophie O‘Donnell, Maree Wajslic, Diane O‘Keefe, Jane Walsh, Elizabeth Oleinikov, Igor Watkins, Samuel Ongarello, Debra Watson, Rosemary Overend, Sunni Webster, Ann Overend, Tess Wedd, Adrian Pace, Andrea Wood, Bianca Palmer, Ken Wroe, Sara Paton, El-Hannah Zakharov, Martin Paxton, Shane Zulian, Natasha Pearce, Gail Pereira, Joao Dujon Perrott, Kiera Pilgrim, Catherine Pitliangas, Nicole Price, Robert Provan, Jenny Provan, Paul Purvis, Heather Rasmussen, Mary Lou Ray, Nick Read, Bronwyn Reid, Eleanor Rein, Andrew Rhodes, Keryn Rigby, Adam Robb, Priscilla Roberts, Gwynneth Robertson, Victoria Robins-Lange, Sally Rogers, Mary Ronalds, Valerie Jean Ross, Francine Rother, Stephanie Rowan, Lois Rowley, Ann Russell, Ian Sali, Avni Sanders, Jennifer Savidge, Andrew 94 Schoof, Joanne Appendix 3 Public submissions presented to the Panel

A3.3 Individuals who presented copies of a Japanese citizen campaign submission

Abe, Saito Handa, Junichi Ikushima, Kazuko Abe, Taro Hara, Mitsue Imai, Mei Abe, Yoshinari Hara, Naoko Imamura, Mikiko Adachi, Iwao Hara, Naomichi Inaba, Ayako Adachi, Takako Hara, Yosinari Inagaki, Hiromi Ago, Kenji Harada, Mariko Inagaki, Yutaka Aihara, Noriaki Harada, Tetsushi Inosita, Sachiko Aizawa, Kaori Harada, Yukiyo Inoue, Akiko Amano, Minoru Haranaga, Makiko Inoue, Etsuko Amori, Yumi Haruta, Tomoko Inoue, Yumi Ando, Hiroko Hasegawa, Takuho Inoue, Yuki Ando, Keiko Hashimoto, Takahisa Inukai, Tomomi Ando, Shiho Hashimoto, Yoko Inyaku, Tomoya Ando, Tomoyo Hatori, Hiroyuki Irie, Koji Ando, Toshihiko Hatta, Mariko Irie, Koji Aoki, Hitoshi Hayakawa, Rie Irie, Keiko Aoki, Masayuki Hayase, Toru Ishibashi, Megumi Aoki, Satoe Hayashi, Hiromi Ishida, Akihiro Aoki, Yuuichi Hayashi, Munehiro Ishihori, Kenji Arai, Hideko Hayashi, Nobuya Ishii, Michiko Arai, Takuhiro Hayashi, Taeko Ishikawa, Satoru Arakawa, Utako Hayashi, Takanobu Ishikawa, Toyohisa Arakawa, Yuiko Hayashi, Yasuro Ishikawa, Yuimi Arceo, Shandrell Hayasi, Tosiko Ishimoto, Takako Arimitsu, Ayafumi Heflick, Shoko Ishino, Hiroki Arisaka, Shizuka Hidaka, Machiko Ishizaka, Toshio Ariumi, Kenji Higashimae, Kimiyuki Isihkawa, Rei Ariumi, Kenji Higashino, Yoko Isii, Syuuiti Asada, Masafumi Hijino, Miyuki Ito, Daisuke Asami, Tomoko Hikida, Masaki Ito, Hiro Asano, Masumi Himeno, Atsuko Ito, Junko Azuma, Sachiko Hirabe, Aska Ito, Yuka Baba, Yoko Hirai, Eiji Itou, Yumiko Carreon, Areli Hirakata, Kiyohito Itou, Mariko Chase, Yoko Hirano, Kiyoko Iwabuchi, Hirofumi Contiero, Marco Hirano, Ikuko Iwashita, Noriko Endo, Akiko Hirasawa, Takashi Iwata, Yasuhiro Endo, Fumio Hirohata, Yuji Kagitani, Kyoko Endo, Naoko Hiroi, Chie Kajimoto, Kazumi Endo, Yumi Hirose, Tomoko Kajita, Takahiro Frid, Akiko Hirose, Yoshiyuki Kakeno, Matsumi Fujikawa, Namiko Hirota, Atsuko Kakimoto, Riyo Fujimoto, Hiroko Hirota, Atsuko Kakio, Tomomi Fujino, Mitsuki Hizume, Kyoko Kakizaki, Tomoko Fujishita, Sachiko Honto, Hiroshi Kambara, Wakana Fujiwara, Sachiko Hori, Masaharu Kamijima, Toshiya Fujiwara, Yuki Hori, Norie Kamijo, Takashi Fujiwara, Toshikazu Hori, Toshiko Kamimura, Chizuko Fukasawa, Yoko Horie, Yuko Kaneda, Keiko Fukatsu, Takako Horiguchi, Shinya Kanehira, Kaoru Fukuda, Ayako Horisawa, Michio Kanehira, Mitue Fukuda, Yoko Hosaka, Chizuko Kanemitsu, Mika Fukui, Shoko Hoshikawa, Mari Kanemitsu, Sachiko Fukumitsu, Natsu Hoshikawa, Jun Kanou, Michihiro Fukushima , Keiichi Hoshina, Takuji Kariya, Tomoko Funabashi , Chitose Hosoda, Jun Kase, Naoko Furukawa, Kensuke Hosoya, Kenichi Kashima, Yasuyo Furukawa, Mari Hyakumoto, Keiko Katabuchi, Chiyoko Furusawa, Misako Hyodo, Tomoko Kataoka, Keiko Furusumi, Mihoko Ichihara, Masatoshi Katayama, Kayoko Furutani, Minako Ichijo, Naoko Katayama, Yoshiko Fuse, Masato Ichimaru, Osamu Kato, Chieko Fuse, Yoshikazu Ida, Emi Kato, Mari Fushimi, Misao Ida, Yuki Kato, Takeshi Futami, Kouichu Idei, Kumiko Kato, Yoko Goto, Ayako Igaki, Toshiko Kato, Masako Goto, Nobuko Iinuma, Shizuka Katou, Kenta Gotoh, Miwako Ikeda, Atsushi Katsumata, Makato Guan, Ling Ikeda, Tomoko Kawabata, Seiko Hagiwara, Yoko Ikeda, Yukiko Kawagoe, Masaki 95 Hanai, Ayako Ikeda, Yasuyuki Kawaguchi, Hideto Review of the moratorium on genetically modified canola in Victoria

Kawai, Mitsuru Marummoto, Hiroki Nakasoko, Mayumi Kawai, Takako Maruyama, Rie Nakata, Kayo Kawajiri, Hiroshi Maruyama, Youko Nakata, Satoe Kawakami, Jumpei Masaki, Chika Nakaya, Hideo Kawane, Shinya Masashi, Wakao Nakayama, Kazuyo Kawashima, Takeru Mashiko, Tomoyuki Nakayama, Yoko Kawauchi, Motoko Masuda, Hiroko Namba, Chie Kawazoe, Shouji Masunaga, Akiko Namba, Masaaki Kenuka, Kousuke Matsuda, Kazuki Naoto, Mori Kikkawa, Chisato Matsuda, Tatsuji Narita, Mariko Kikuchi, Masako Matsumoto, Hirishi Nemoto, Miki Kimura, Akiyo Matsumoto, Mayumi Nemoto, Tamaki Kimura, Kyoko Matsumoto, Takayuki Nishibun, Chiaki Kimura, Mari Matsumura, Ayumu Nishida, Shigeo Kinoshita, Hiromi Matsumura, Mayumi Nishigori, Tetsu Kishida, Sakae Matsuura, Mitsuhiro Nishiguchi, Youmi Kishishitra, Harumi Matsuya, Ryoko Nishihara, Chiaki Kiso, Megumi Matsuzaki, Tetsuji Nishikawa, Junko Kitabayashi, Hiroko Matsuzaki, Yoko Nishimura, Mitsuko Kitagawa, Hiroko Matsuzawa, Miwako Nishiura, Chiharu Kitahara, Madoka Matsuzawa, Yoshihiko Nishiyama, Yasushi Kiuchi, Yumiko Matuzaki, Mitusige Noda, Hiroyoshi Kiyohira, Yuuko Michishita, Haruko Nogi, Chizu Kobayashi, Chikako Miki, Naoko Noguchi, Miho Kobayashi, Daisuke Mimura, Akiko Nomura, Osami Kobayashi, Fumiyo Mineta, Ken Nomura, Osamo Kobayashi, Nobuyuki Miura, Yuuko Nomura, Tetsuya Kobayashi, Rie Miura, Setsuko Nonaka, Kunihiko Koizumi, Mariko Miura, Yoshitaka Nonaka, Michio Koizumi, Sadao Miyabayashi, Yoshihiko Nozawa, Masaru Kojima, Kunie Miyake, Misao Nozawa, Takeshi Koketsu, Mayumi Miyake, Seiko Nukada, Takayoshi Komaki, Junji Miyata, Ayumi Oaks, Rina Komatsubara, Makoto Miyata, Chisato Oda, Fumiko Kondo, Yosinobu Mizuno, Kenji Oda, Kenji Konno, Shigeki Mizutani, Akiko Ogata, Koichi Koresawa, Naoko Mizutani, Izumi Ogawara, Yuri Koshimizu, Yoshiko Mizutani, Kazue Ogino, Sachiko Kotaki, Nobuo Mochizuki, Sally Ogiwara, Naoto Kotaki, Toyomi Moori, Hirotaka Ohashi, Kyoko Kotani, Soji Mori, K Ohi, Shinko Kouno, Katsuki Morikawa, Toshimasa Ohira, Taeko Kouno, Keiko Morisaki, Noriko Ohta, Mitsumasa Kouno, Noriko Morita, Fuki Ohyagi, Kiyohito Kouya, Kenjirou Motiduki, Saori Oikawa, Masaki Kozaki, Megumi Mouri, Yuji Okabe, Naomi Kubo, Mami Mu, Shim Okazaki, Eri Kubo, Tomoko Mukai, Noriko Okihama, Shinji Kubota, Jun Murai, Masako Okina, Kunihiko Kudo, Aimi Murai, Rie Okochi, Sachi Kudo, Taiko Murai, Yasue Okura, Junko Kumasaka, Takako Murakami, Minori Omokawa, Miyuki Kuniko, Osibuchi Murakami, Yuki Onishi, Noe Kunioka, Mariko Murata, Motonari Ono, Akiko Kuno, Ritsuko Murata, Satoki Ono, Haruki Kurauchi, Tomomi Nada, Fumiko Ono, Midori Kurita, Yuko Nagai, Kanae Ono, Takako Kurokawa, Makoto Nagamine, Yuko Ono, Yukie Kurosawa, Naoko Nagamura, Maki Onodera, Aya Kushima, Kyoko Nagano, Atusyoshi Onuma, Hiromi Kuwabara, Hideki Nagano, Maya Ooba, Kyouko Kuwabara, Ryo Naganuma, Sayaka Ooishi, Setsuko Kuwahara, Kanae Nagayasu, Shigeo Oosato, Takaaki Kuwata, Nana Nagoya, Yuko Orikasa, Kazuhiko Kyouno, Chiharu Nagumo, Masayuki Osaka, Yaeko Machida, Ritsuko Nagumo, Hisako Osamura, Yasuharu Maeda, Aya Nakade, Azumi Oshima, Nobuhiro Maeda, Kimiko Nakagawa, Junko Oshiro, Yasunobu Maekawa, Mika Nakagawa, Yumi Oshiro, Yuu Maki, Kyoko Nakajima, Marie Osiro, Erika Mano, Kyoko Nakajima, Shigeto Ota, Mikiko Maruhara, Akiko Nakamura, Kayoko Ota, Yoko Maruhara, Ayumu Nakamura, Noriko Otsuka, Emiko Maruhara, Takanori Nakano, Toshie Oya, Asako 96 Marukawa, Keiko Nakashima, Chikako Prentice, Satomi Appendix 3 Public submissions presented to the Panel

Rouzineau, Pierrem Suzuki, Hiromi Uda, Sumiko Russell, Kazuyo Suzuki, Miwako Ueda, Mami Saito, Emi Tada, Kyoko Ueno, Aiko Saito, Junko Taguchi, Yumiko Ueno, Tsutomu Saito, Kazukiyo Taguti, Noriyosi Ueva, Teruaki Saito, Kikuko Taguti, Syuji Uhara, Minoru Sakai, Makoto Tai, Atsuko Umeda, Masaya Sakai, Ritsuko Takada, Hisayo Umeno, Yuta Sakai, Satoshi Takada, Tomomi Umland, Joe Sakamoto, Risa Takado, Harumi Uraguchi, Naoki Sakari, Ritsuko Takagi, Mai Urasaki, Mika Sakata, Hana Takaha, Naoharu Usui, Yoshiki Sakiyama, Hisako Takahashi, Eriko Utagawa, Yosuke Sakka, Ayako Takahashi, Hiroyuki Utida, Toshihito Sakuma, Junko Takahashi, Kazumi Utsunomiya, Chika Sakuraba, Katsue Takahashi, Keiko Wakabayashi, Norihiko Sakuri, Aya Takahashi, Maki Wakana, Emiko Sano, Hiroshi Takahashi, Miwako Wakayama, Junko Sasaki, Naomi Takahashi, Tatsuo Watanabe, Katz Sasaki, Rei Takahasi, Yoko Watanabe, Kimiko Sasaki, Takaaki Takai, Hideko Watanabe, Satoko Sasamoto, Hisashi Takano, Yasuko Yaguchi, Rikiya Sato, Akira Takeda, Hitomi Yahagi, Keigo Sato, Junichi Takeda, Kaori Yamada, Misuzu Sato, Kazuko Takeda, Yukiko Yamada, Tomoyoshi Sato, Mariko Takeda, Yoko Yamada, Atsushi Sato, Michiko Takenami, Jun Yamada, Yoshiki Sato, Momoe Takeo, Kyoji Yamaguchi, Hiroko Sato, Terumi Takeuchi, Mariko Yamaguchi, Satoru Sato, Yasuka Takizawa, Miyoko Yamaguchi, Tetsuo Satou, Hirosi Tamai, Hideki Yamakawa, Hisao Satou, Isao Tamaki, Tetsutaro Yamamamoto, Yoko Satou, Kyoko Tamura, Naoko Yamamoto, Kaori Sawa, Tamae Tamura, Summie Yamamoto, Katsumi Sawakawa, Eri Tamura, Yukari Yamane, Chiyuki Seki, Ayako Tanabe, Yasuko Yamanouchi, Masayuki Sekimoto, Miho Tanahashi, Yuko Yamaoka, Kazuno Senda, Noriko Tanaka, Hiroshi Yamasaki, Noriko Seto, Mikiko Tanaka, Kazuo Yamashita, Risa Shibuya, Maki Tanaka, Sayuri Yamashita, Tomoko Shibuya, Sakiko Tanaka, Shigemi Yamauchi, Kiyomi Shida, Yumika Tanaka, Shigeo Yamazaki, Rie Shiga, Fumiya Tanaka, Chie Yanagiya, Tomoyuki Shima, Kyoko Tanaka, Hiroshi Yashiki, Nariko Shimabukuro, Noriaki Taniai, Yuko Yasuda, Setsuko Shimada, Yoko Taninaka, Terue Yasuoka, Yasuko Shimamoto, Akari Tanino, Takashi Yatsuzuka, Chiharu Shimamura, Ikue Tano, Mayuka Yazawa, Miho Shimamura, Hideharu Tatsuke, Maiko Yokohama, Taro Shimazaki, Yuki Tatsuke, Noriko Yokoshima, Yuka Shimizu, Kaoru Tendo, Jun Yokota, Hidemi Shimizu, Yuko Tendo, Tokie Yokoyama, Yayoi Shimoda, Yukio Terao, Terumi Yonekura, Asako Shinohara, Sakiko Teshirogi, Toyo Yonekura, Yoshiko Shinomiya, Sanae Toda, Junko Yoshida, Dai Shinozaki, Kenta Toda, Tomoko Yoshida, Mari Shinozaki, Tomoko Togashi, Kazue Yoshida, Masanori Shiozaki, Eri Togashi, Mami Yoshino, Nahoko Shirai, Kaoru Tokita, Mayumi Yoshioka, Noriko Shirai, Yukiko Tokunaga, Risa Yoshitaka, Ozaki Shiraishi, Erisa Tomioka, Rie Yotsuzuka, Takeshi Shiratsuchi, Yuuki Tomiyoshi, Tokiko Zinbo, Akimi Shiro, Mesako Tomizu, Takahiro Shishikura, Katsuya Toshimoto, Mami Shounozaki, Kazuko Toyoda, Yoshinobu Sindo, Yasuko Toyosima, Kouichirou Sudou, Shirou Tremblay, Miyuki Sueki, Asako Tsuboi, Sayuri Sugimura, Harumi Tsuchiya, Saori Sugiura, Chiai Tsumura, Sactiko Sugiura, Yoshihiro Tsuneoka, Masahiro Suto, Makiko Tsutsumi, Noriko Suwa, Syogo Uchida, Masato Suzuki, Asako Uchida, Tomomi Suzuki, Chieko Uchimura, Yutaka 97 Review of the moratorium on genetically modified canola in Victoria

A3.4 Individuals who presented copies of the Victorian Farmers Federation campaign submission

Barlow, Kerry Barr, Noel Barry, Brian M Barry, Brian P Barry, Donna Barry, Maureen Callahan, Michael Davies, D Harps, Ron Hart, Fiona Kentish, Ross Lawless, Peter Marwood, Jason Nalder, Ben Simpson, Jamie Teasdale, Peter Tischler, John Tischler, Peter

98 Appendix 4 Participants in stakeholder meetings with the Review Panel Appendix 4 Participants in stakeholder meetings with the Review Panel

ABB Grain Ltd Australian Dairy Federation Australian Dairy Industry Council Australian Dairy Products Federation Australian Grain Harvesters Association Australian Oilseeds Federation AWB Limited Bayer CropScience Biological Farmers of Australia Biotechnology Australia Birchip Cropping Group Cargill Incoporated CropLife Australia Ltd Department of Microbiology and Immunology and Faculty of Land and Food Resources, The University of Melbourne GeneEthics Network GrainCorp Ltd Grains Research and Development Corporation Greenpeace Institute of Health and Environmental Research Molecular Plant Breeding Cooperative Research Centre Monsanto Australia Ltd Mothers Against Genetic Engineering Murray Goulburn Co-Operative Co. Ltd Australia National Agricultural Commodities Marketing Association Network of Concerned Farmers Nufarm Ltd Pacific Seeds Pty Ltd PGG Wrightson Seeds Pty Pioneer Hi-Bred Pty Ltd Ridley AgriProducts Pty Ltd SGA Solutions Pty Ltd Stockfeed Manufacturers Association Victoria Tatura Milk Ltd The Producer’s Forum United Dairyfarmers of Victoria Victorian Farmers Federation

Appendix 5 Orders under the Control of Genetically Modified Crops Act 2004 (Vic.) Appendix 5 Orders under the Control of Genetically Modified Crops Act 2004 (Vic.)

A policy principle established within the Commonwealth Gene Technology Act 2000 (Cwlth) — as amended by the Amendment Act of 2007 (Cwth) — provides the state and territory governments with the ability to recognise areas, designated under state law, for preserving the identity of GM or non-GM crops (or both) for marketing purposes.

In 2003‑04, all state and territory governments except Queensland and the Northern Territory introduced legislated moratoria on GM canola or, more broadly, GM crops, using this policy principle (see table A5.1).

The Government of Victoria enacted the Control of Genetically Modified Crops Act 2004 (Vic.) on 12 May 2004 to provide legislative control over the commercial cultivation of GM crops in Victoria.

The purposes of this Act (s. 1) are:

a) to provide for the making of orders that:

i. Designate areas of the State for the purpose of preserving the identity of GM crops or non-GM crops for marketing purposes;

ii. Prohibit or restrict the cultivation of GM crops, or other dealings with GM crops or GM crop related material;

b) to provide an offence for contravening those orders and certain other offences;

c) to allow authorised officers:

i. To monitor compliance with the Act;

ii. To apply to the Magistrates’ Court for the forfeiture and destruction of GM crops or GM crop related material if an order has been contravened;

d) to deal with other matters.

A schedule to the Control of Genetically Modified Crops Act established an Order (the moratorium order) prohibiting the cultivation of certain GM canola crops in Victoria until 29 February 2008. This schedule is shown in box A5.1.

The intent of the Order was to prohibit the commercial cultivation of the Roundup Ready® and InVigor® GM canola varieties approved for commercial release by the OGTR in 2003.

101 Review of the moratorium on genetically modified canola in Victoria

Box A5.1 Schedule of the moratorium order

SCHEDULE ORDER PROHIBITING THE CULTIVATION OF CERTAIN GENETICALLY MODIFIED CANOLA CROPS IN VICTORIA 1. Objective The objective of this Order is to designate the State of Victoria as an area in which the cultivation of certain genetically modified (GM) canola crops is prohibited. 2. Authorising provisions This Order is made under sections 4 and 28 of the Control of Genetically Modified Crops Act 2004. 3. Expiry This Order expires on 29 February 2008. 4. Definitions In this Order– “Gene Technology Regulator” means the Gene Technology Regulator appointed under section 118 of the Gene Technology Act 2000 of the Commonwealth. 5� Designation of Victoria as an area where the cultivation of certain GM canola crops is prohibited The State of Victoria is designated as an area in which GM crops of the following classes must not be cultivated– (a) GM crops consisting of or including plants of the species Brassica napus, common name canola, tolerant to the herbicide glufosinate ammonium due to genetic modification derived from lines T45, Topas 19/2, MS1, MS8, RF1, RF2 and RF3 defined in the application under section 40 of the Gene Technology Act 2000 of the Commonwealth designated DIR010/2001 and DIR021/2002 made to the Gene Technology Regulator; (b) GM crops consisting of or including plants of the species Brassica napus, common name canola, tolerant to the herbicide glyphosate due to genetic modification derived from transformation event GT73 defined in the application under section 40 of the Gene Technology Act 2000 of the Commonwealth designated DIR020/2002 made to the Gene Technology Regulator. Note 1: Paragraph (a) describes canola plants (generally but not exclusively known as InVigor Canola) which have been genetically modified and have been licensed under the Gene Technology Act 2000 of the Commonwealth for intentional release into the environment. Note 2: Paragraph (b) describes canola plants (known as Roundup Ready–Canola) which have been genetically modified and have been licensed under the Gene Technology Act 2000 of the Commonwealth for intentional release into the environment. 102 Appendix 5 Orders under the Control of Genetically Modified Crops Act 2004 (Vic.)

The Order was not intended to stifle ongoing research and development of the OGTR-approved GM canola lines and to that extent the Control of Genetically Modified Crops Act provides for exemptions to such an Order, as determined by the Minister for Agriculture. The exemption provision allows for:

• cultivating a specified class of GM crop on a limited scale for the purposes of research or development

• dealing with GM crops or a specified class of GM crops, or with GM crops related material, in particular ways

Requests for an exemption are considered on a case-by-case basis and if approved must be conducted under conditions set and overseen by the Victorian Government.

The Minister for Agriculture has used the exemption Order provisions following applications from Bayer CropScience Australia, the Department of Primary Industries’ Research Division, Nugrain and Pioneer Hi-Bred. The Global Positioning System (GPS) locations of all small-scale research and development trials of GM canola conducted in Victoria since 2004 under exemption orders are listed on the Department of Primary Industries website (www.dpi.vic.gov.au).

The GM canola threshold

The Control of Genetically Modified Crops Act enables the Minister for Agriculture to determine a threshold amount for the presence of a GMO in crops. This means that once a threshold amount is set, if the amount of a GMO that is present in a crop does not exceed the threshold amount determined for that GMO, the presence of the GMO in that crop is to be disregarded for the purposes of this Act.

In July 2005, routine purity tests on a consignment of conventional canola revealed trace levels of a GM material, at a level close to 0.01 per cent. It was later determined that the GM material detected had been approved by the OGTR on the basis that it is safe for human health and the environment. Oil from this canola had also been approved for food use by Food Standards Australia New Zealand.

The Primary Industries Ministerial Council at its October 2005 meeting considered management of this issue. It was agreed nationally to establish a threshold of 0.9 per cent of OGTR-approved GM material in commercial grain crops of conventional canola, to enable the canola harvest to go ahead.

In addition to this, the Agriculture Ministers agreed that the threshold for commercial seed for planting should be 0.5 per cent for the coming two seasons in 2006 and 2007 and 0.1 per cent thereafter.

On 10 November 2005, the Victorian Government gazetted an order to the Control of Genetically Modified Crops Act establishing a threshold of 0.9 per cent of OGTR-approved GM material in commercial grain crops of conventional canola in Victoria. It was not within the powers of the Act to set a threshold for GM material in commercial seed for planting even though it was intended that the 0.5 per cent threshold was to apply in Victoria.

103 Review of the moratorium on genetically modified canola in Victoria

Table A5.1 Summary of Commonwealth, state and territory genetic modification legislation and moratoria

Jurisdiction Legislation Moratorium on GM Sunset / expiry Responsibility canola / crops or review date Australian Gene Not applicable. The OGTR Not applicable Not applicable Government Technology approved both GM canola Act 2000 varieties for general (commercial) release. Victoria Control of Yes. The commercial The Moratorium Minister for GM Crops cultivation of OGTR Order (attached Agriculture Act 2004 approved GM canola only as schedule to the is prohibited (by Order Act) expires 29 under the Act). No other February 2008. GM crops are affected. New South Walesa Gene Yes. The commercial The Act expires 3 Minister Technology cultivation of specified March 2008. for Primary (GM Crop GM food crops (including Industries Moratorium) GM canola, but excluding Act 2003 GM cotton) is prohibited.

South Australia GM Crops Yes. The commercial The Act must be Minister for Management cultivation of all GM food reviewed before 29 Agriculture, Food Act 2004 crops is prohibited. April 2008. and Fisheries

Western Australia GM Crops Yes. The commercial The Act is to be Minister for Free Areas cultivation of all GM reviewed after Agriculture and Act crops is prohibited (by five years from 24 Food Order under the Act). December 2003; 2003 there is no sunset clause. Tasmania Genetically Yes. The commercial The Act expires Minister Modified cultivation of all GM five years after for Primary Organisms crops is prohibited. commencement, Industries and Control Act on 16 November Water 2004 2009. Australian Capital Gene Yes. The commercial The Act expires on Minister for Territory Technology cultivation of all GM a date (not earlier Health (GM Crop crops is prohibited. than 17 June 2006) Moratorium) to be fixed by the Act 2004 Minister by written notice. Queenslanda No legislation Nil Not applicable Not applicable

Northern Territory No legislation Nil Not applicable Not applicable

a Commercial crops of GM cotton are grown in these states

104 Appendix 6 GM crops — extent, economics, and effects on human health and the environment Appendix 6 Genetically modified crops — extent, economics, and effects on human health and the environment

The shape and structure of agriculture and rural communities has changed significantly over the past century. The term ‘Green Revolution’ is often used to describe the global transformation of agriculture that has led to significant increases in agricultural production and food security. Drivers of this change include productivity growth through changes to farm practice, global food security and the preservation of biodiversity and the environment, the increasing importance of national and global markets, and the rising influence of consumers on agricultural production. The introduction of genetically modified (GM) crops has been faced with many challenges associated with each of these drivers.

This appendix reviews the extent of GM crop adoption globally, the economic impact of adoption, and issues concerning human and animal health and safety, and the environment. This appendix does not deal with economic or social issues as these have been discussed in the chapters of this report.

A6.1 Extent of the commercialisation of GM crops

Genetically modified crops have been grown commercially in some parts of the world since 1996. The International Service for the Acquisition of Agri-biotech Applications (ISAAA) produces a report annually that characterises the global status of commercialised GM crops. This report has become widely accepted by industry, governments and academics as the authoritative reference for the global deployment of GM crops.

The ISAAA 2006 report states that 10.6 million farmers in 22 countries (11 developing and 11 developed) planted 102 million hectares of GM crops (table A6.1, James 2006). It also states that six countries in the European Union (EU) are now planting commercial GM crops, predominantly insect-tolerant maize. The global area planted to GM crops has increased more than 60-fold over the first 11 years of commercialisation, reputedly making GM crops the fastest adopted crop technology in recent history (James 2006).

The United States of America (US) is the major adopter of GM crops (54.6 million hectares, 53 per cent). In the US, 73 GM events have been approved (deregulated) for commercial cultivation. These events are combinations of 16 different crops and eight different trait or trait combinations. Table A6.2 outlines GM crops commercialised or approved for commercial release globally.

Worldwide, only four crops are commercialised extensively (greater than 50 000 hectares) with GM soybean the principal crop occupying 58.6 million hectares in 2006, 57 per cent of the global GM crop area (James 2006). This was followed by maize (25.2 million hectares, 25 per cent), cotton (13.4 million hectares, 13 per cent) and canola (4.8 million hectares, 5 per cent).

105 Review of the moratorium on genetically modified canola in Victoria

Herbicide tolerance is the predominant GM trait occupying 69.9 million hectares (68 per cent of the global GM crop area), followed by Bt1 insect resistance (19 million hectares, 19 per cent) and combined (stacked) traits (herbicide tolerance and insect resistance) occupying 13.1 million hectares (13 per cent of the global GM crop area).

Table A6.1 Countries that have commercialised GM crops

Country Million hectares Crops Argentina 18 Soybean, Maize, Cotton

Australia 0.2 Cotton

Brazil 11.5 Soybean, Cotton

Canada 6.1 Canola, Soybean, Maize

China 3.5 Cotton

Columbia <0.05 Cotton

Czech Republic <0.05 Maize

France <0.05 Maize

Germany <0.05 Maize

Honduras <0.05 Maize

India 3.8 Cotton

Iran <0.05 Rice

Mexico 0.1 Cotton, Soybean

Paraguay 2 Soybean

Philippines 0.2 Maize

Portugal <0.05 Maize

Romania 0.1 Soybean

South Africa 1.4 Maize, Soybean, Cotton

Slovakia <0.05 Maize

Spain 0.1 Maize

Uruguay 0.4 Maize

United States 54.6 Maize, Soybean, Cotton, Canola, Squash, Papaya, Alfalfa

Total 102 (250 million acres)

Adapted from James (2006)

There are several important agronomic traits under development in canola and other commodity crops (see reviews by Glover et al. 2005; Holtzapffel et al. 2007). To date, commercialised GM crops have either herbicide, insect and disease resistance traits or combinations of herbicide and insect resistance. GM crops that offer significant promise for sustainable agriculture, and more broadly potential benefits for Australia, include tolerance to environmental stresses (such as drought, frost, salinity and acid soil tolerance), pests and disease

1 Bacillus thuringiensis, commonly known as Bt, is a soil bacterium that produces proteins that are toxic to specific Orders of insects. When an insect ingests the Bt protein, the function of their digestive system is disrupted, producing slow growth and ultimately death. Bt is very selective and effective against important 106 agronomic pests such as European corn borers and cotton bollworms (Lepidoptera), Colorado potato beetles (Coleoptera), and certain flies and mosquitoes (Diptera). Appendix 6 GM crops — extent, economics, and effects on human health and the environment

(for example virus resistance in white clover; cane grubs in sugarcane) and human and animal health benefits (such as speciality oils with improved quality and quantity and composition). Some of the current and future GM based products in canola are described in box A6.1.

Table A6.2 GM crops commercialised or approved (deregulated) for commercial release globally

Crop HT IR HT/IR VR IR/VR Quality Pollination Pollination Control Control / HT Rice A Soybean A Maize A A A A A A Plum B Cotton A A A Sugar Beet A Canola/ A A A A Rapeseed Tobacco B Potato B B B Flax B Chicory B Tomato B B Papaya A Squash A Alfalfa C Carnations A Total 8 4 2 4 1 5 3 2

This table provides details of GM crops that have been commercialised globally and GM crops that have been approved for commercial cultivation and sale (deregulated) by the US Department of Agriculture (September, 2007). GM crops are grouped by trait or trait combination (see Legend below). Boxes with an ‘A’ represent GM crops that are commercially grown around the world. Boxes with a ‘B’ represent GM crops that have been deregulated in the US but are not yet commercially grown. An empty box signifies that there are no deregulated trait/crop combinations in the US. The Box with a ‘C’ (alfalfa) was initially deregulated and subsequently returned to regulated status in March 2007.

Legend: HT = herbicide-tolerant; IR = insect-resistant; VR = virus-resistant; HT/IR, IR/VR and pollination control/HR= ‘stacked’ crops with both of the indicated traits.

Pollination control is used for breeding purposes and hybrid vigour. Quality traits include altered oil composition (soybeans and canola), altered protein composition (corn), reduced nicotine levels (tobacco), flower colour (carnations) and altered fruit ripening (tomato). Note that in some cases a letter in a box represents several GM crop ‘events’ - or different types of the same basic crop-trait or combination. Data based on James (2006) and USDA data from www.aphis.usda.gov/brs/not_reg.html (accessed September, 2007)

Part of the GM debate centres on the extent of the commercialisation and why it is currently limited to only four major crops (maize, soybean, cotton and canola) and a small number of traits. This is in contrast to the large number of benefits that potential GM technologies could have, including human health and climate change. Possible reasons for the delay or withdrawal from the market of several deregulated GM events include commercial decisions, marginal consumer acceptance (for example, Flavor Savr™ tomato, Kramer and Redenbaugh 1994) and the financial cost of a pathway to market (Kalaitzandonakes et al. 2007). Of these the cost of regulation to meet 107 Review of the moratorium on genetically modified canola in Victoria

Box A6.1 Current and future GM canola traits

Australia — commercial production • Roundup Ready® GM canola. Tolerant to the herbicide glyphosate. Developed by Monsanto and approved for commercial release in Australia in 2003. • InVigor® GM canola. Tolerant to the herbicide glufosinate ammonium and also two genes that control sterility and fertility in pollen to enable hybrid breeding. Developed by Bayer CropScience and approved for commercial release in Australia in 2003. Australia — research and development: • Bayer CropScience has received approval to trial GM Canola crops in Victoria and South Australia, which are tolerant to a novel herbicide (DIR 032/2002). • The Commonwealth Scientific and Industrial Research Organisation (CSIRO) have developed GM Brassica napus and B. juncea with higher oleic acid levels (up to 89 and 73 per cent respectively). This is yet to be field trialled. • CSIRO have examined the synthesis of long chain polyunsaturated fatty acids (LC PUFAs), mainly Omega-3 and Omega-6 in plants. Overseas — commercial production • Roundup Ready® GM canola is currently grown commercially in Canada. In 2005, this represented about 48 per cent of the canola grown in Canada. • LibertyLink® GM canola (tolerant to the herbicide glufosinate ammonium) is currently being commercially grown in Canada. In 2005, this represented about 34 per cent of the canola grown in Canada. • GM bromoxynil herbicide-tolerant canola was commercialised in Canada during 1998, however its production has now been discontinued. Overseas — research and development • In the US, a field trial of GM Lepidopteran (caterpillar) resistant canola is currently underway. Other GM canola traits at different stages of research and development in the US and European Union include: Increased nitrogen use efficiency, increased oil content, increased tolerance to environmental stress (e.g. drought tolerance), increased seed size, and reduced pod shatter. • In the European Union, a major study was conducted from 1999–2005 to improve the nutritional value of B. napus. The study investigated oilseed compounds such as tocopherols and lecithin, and the benefits of introducing compounds such as resveratrol (an antioxidant) and LC PUFAs. • Monsanto have developed a GM canola crop (Laurical®), which produces high levels of lauric acid and can be used as a substitute for coconut and palm kernel oil. • Research has been undertaken to produce GM canola varieties with increased lysine levels. • The use of GM canola meals with altered phosphorous, phytic acid and sinapine levels could improve the nutritional value of canola meal as stockfeed for animals. Research has already been undertaken on GM soybean and the technology could be transferred to canola. • Canola variety with increased lauric acid and myristic acid content, which can be used in detergents — this is now at a commercial stage of development. • Canola variety with high stearic acid content, which can be used in grease — this is yet to be commercially produced although development is complete. • A canola variety with petroselenic acid, which can be used in food — this is still under development. • A rapeseed variety in Canada with increased erucic acid, which can be used in plastics and lubricants is under development. • Research is being undertaken by Metabolix to produce a plastic called Polyhydroxybutyrate in GM canola crops. 108 Source: data from Glover et al. 2005 and Holtzapffel et al. 2007 Appendix 6 GM crops — extent, economics, and effects on human health and the environment legislative requirements for the approval of GM crops is often prohibitive. The cost of deregulation for a single GM event (that is, satisfying all regulatory requirements to gain approval for commercial release) is estimated at $US6–20 million and depends on the trait, crop and intended market(s) (Kalaitzandonakes et al. 2007).

It is worth noting that a lot of gene technology research is not intended to lead to direct commercial outputs. Further, whilst many public sector research and development programs are clearly focused on commercialisation, a number of obstacles often prevent a path to market such as technical barriers, freedom to operate, regulation, value capture, marketing uncertainty and the costs of deregulation (see Glover et al. 2005).

In Australia, GM cotton tolerant to herbicides and/or resistant to insects is the only broadacre GM crop grown by farmers. In 2005-06, more than 840 000 tonnes of Australian cotton were produced over 335 000 hectares in New South Wales and Queensland (Australian Bureau of Statistics 2006). The Australian cotton industry is valued at approximately $1.5 billion, with GM varieties making up 90 per cent of all cotton grown. This is the maximum proportion of GM cotton that can be grown, given the isolation and trap crops required for GM cotton production as part of sustainable pest management. Apart from cotton lint, the uses of GM cotton seed almost mirror those of non- GM canola: GM cotton seed protein meal is used in the animal feedlot industry and the dairy industry, and as drought feed for cattle, while cotton seed oil is used extensively in commercial cooking in Australia.

A6.2 Economic impact of the commercialisation of GM crops

Globally, total agricultural production has significantly increased over the past 40 years, with the greatest increases (in percentage terms) in developing countries (Mattson and Koo 2006). Investment in research and development in agriculture increases productivity to not only contribute to food security but also to help countries to maintain and improve international competitiveness in global markets. Investment in biotechnology is providing significant impacts on productivity and competitiveness as well as opening new non-food use markets for agricultural products such as biofuels and bio-based products (Mewett et al. 2007).

Grower adoption of new technologies and practices, including GM, is primarily driven by economic considerations but increasingly include an expectation of both tangible and intangible benefits. In general, the impact on and off-farm in GM adopting countries is reportedly positive and derived from enhanced productivity, quality and improvements to efficiency (Gómez-Barbero and Rodríguez-Cerezo 2006).

Since the commercialisation of GM crops, reports indicate that global farm incomes have benefited by $US24.2 billion with 47 per cent of this benefit accruing to farmers in developing countries (Brookes and Barfoot 2006a). In Europe, farmers who have adopted GM maize (Bt insect and/or herbicide- tolerant) have, on average, earned additional annual income levels of between €65 and €141 per hectare, equal to increased profitability of 12–21 per cent (Brookes 2007). 109 Review of the moratorium on genetically modified canola in Victoria

In the three years to 2005‑06, more than 60 per cent of the world trade in soybeans, maize, canola and cotton came from countries that grew GM varieties (US Department of Agriculture 2007). In the case of soybeans, world trade is dominated by GM varieties, with only 8 per cent of trade in certified non-GM soybeans (Foster and French 2007).

A number of studies have examined the economic benefits of GM crops in the US (Falck-Zepeda et al. 2000 a and b; Fernandez-Cornejo and Caswell 2006; Moschini et al. 2000; Price et al. 2003; Sujatha 2006). A recent comprehensive study by Sujatha (2006) indicates that in 2005, the use of biotechnology contributed to increased US agricultural production by 8.34 billion pounds (3.7 million tonnes), lowered crop production costs by $US1.4 billion dollars, and reduced pesticide use by 69.7 million pounds (31 615 tonnes) on 123 million acres.

The economic benefits of insect resistant cotton in India have been disputed. The first economic study estimated potential yield benefits of up to 80 per cent (Qaim and Zilberman 2003) but focused on farm-level field trial data and did not reflect actual farm experience with commercial cultivation (Raney 2006). A subsequent study considered four different states within India and found significant positive impacts on farmer returns (Qaim et al. 2006). However, there was considerable variation between states, which the authors attribute to the use of varieties not well suited to the growing conditions in those states.

There have been reports of significant direct and indirect social and economic benefits since the introduction of GM crops into Argentina in 1996. A study by Trigo and Cap (2006) assessed the economic impact of the adoption of GM crops. For GM soybeans the total accumulated benefits for 1996–2005, allowing for the replacement of sunflower, cotton and pasture agricultural production, were estimated at $US19.7 billion. They found that the benefit was distributed 77.5 per cent to farmers, 4 per cent to seed suppliers, 5 per cent to herbicide suppliers and 13.5 per cent to the Argentine Government as revenues collected through an export tax that was imposed in 2002. Trigo and Cap (2006) concluded that the release of herbicide-tolerant soybeans may have contributed to the creation of almost one million jobs (whole economy-wide), representing 36 per cent of the total increase in employment over the period 1996–2005.

Intangible economic benefits have also contributed to the rapid adoption of GM crops. These include but are not limited to: increased flexibility in weed and pest management practices, synergistic benefits with zero or reduced tillage, increased quality through reduced mycotoxins and cleaner crops, increased health and safety of farm workers through reduced handling of pesticides and reduced effects of soil-incorporated herbicide residues on subsequent crops (Beckie 2006; Brookes and Barfoot 2006 a and b; Wu 2006).

A6.3 The effects on human and animal health of GM crops

The debate over GM crops, and in particular GM food, has highlighted the potential positive and negative impacts of agriculture on human and animal health. Nutritional and safety assessments of GM foods have featured 110 prominently with extensive study of GM crop nutrition and the fate of novel DNA Appendix 6 GM crops — extent, economics, and effects on human health and the environment and proteins in livestock products such as meat, milk and eggs (reviewed by Aumaitre et al. 2002; Flachowsky et al. 2005 a and b; Flachowsky et al. 2007).

The majority of studies have focused on assessment of herbicide-tolerant and/or insect pest resistant GM cotton, canola, wheat, rice, maize, potato and sugar beets or byproducts from these GM crops. Animal feeding studies with GM crops have been conducted with rodents, poultry (laying and broiler), dairy and beef cattle, sheep, pigs, rabbits, fish, and quails (Flachowsky et al. 2005a; Taylor et al. 2007 a and b).

To date, no significant differences in the safety or the nutritional value of GM foods have been observed compared with non-GM varieties. Further, no residues of GM DNA or proteins have been found in any organ or tissue samples obtained from animals fed GM crops (Flachowsky et al. 2005a). Despite these studies showing no differences in comparison to conventional crops, a few studies have suggested potential impacts of GM crops on health, specifically: the use of a Brazil nut gene in soybeans (Nordlee et al. 1996) and potato (Tu et al. 1998); the use of lectin genes in potatoes (Ewen and Pusztai 1999) and field peas (Morton et al. 2000); Bt genes in maize (Hammond et al. 2006; Séralini et al. 2007); and herbicide tolerance genes in soybean (Sakamoto et al. 2007). Each of these studies will be examined individually below.

A6.3.1 Improved nutrition with a Brazil nut gene Soybean is a major source of protein meal for both humans and animals. However, nutritional quality is compromised by a relative deficiency in the amino acid methionine. In an attempt to improve nutritional quality, Pioneer Hi-Bred introduced a methionine-rich gene from the Brazil nut into soybeans. Variations of this gene have also been transferred into potatoes (Tu et al. 1998). Both studies demonstrated an improvement in amino acid levels. However, since the Brazil nut is a known allergenic food, the allergenicity of the Brazil nut gene in soybean was also assessed (Nordlee et al. 1996). The study demonstrated that an allergen from a food known to be allergenic can be transferred into another food by genetic modification. Pioneer has since terminated the work and no commercial GM crops have been developed with the Brazil nut genes due to possible allergenicity effects.

A6.3.2 Use of lectin genes for insect pest resistance One of the most controversial studies examined the effects of GM potatoes on the digestive tract of rats (Ewen and Pusztai 1999). Laboratory rats were fed three different potato diets, plain potato, potato supplemented with snowdrop flower lectin, and GM potato making its own snowdrop lectin. The study claimed appreciable differences between the small intestine and large bowel of rats fed GM potatoes and potatoes supplemented with snowdrop lectin compared with rats fed non-GM potatoes. Interpretation of data in this study has been widely criticised, however it is important to note that the gene incorporated in potatoes was from a snowdrop lectin, a substance known to be toxic to mammals. The gene was chosen to provide proof-of-concept of insect resistance in potato and the research was not intended for human or animal consumption.

In Australia, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) developed a GM pea expressing an α-amylase inhibitor (a lectin-like 111 Review of the moratorium on genetically modified canola in Victoria

gene) derived from kidney bean to provide protection against the pea weevil (Morton et al. 2000). Preliminary rat feeding studies with the GM pea established minimal detrimental effects on the nutritional quality of the GM peas compared with non-GM peas (Pusztai et al. 1999). Although, the GM peas were resistant to the pea weevil, the researchers discovered that the addition of GM peas to pig and poultry diets reduced productivity by up to 10 per cent and in a subsequent study when fed in small quantities to mice over a few weeks, it caused mild allergenic inflammation in the lungs (Prescott et al. 2005). The detrimental impacts on pig and poultry productivity were considered too high and the project was discontinued in October 2003.This study demonstrates that expression of non-native proteins in plants may lead to the synthesis of structural variants with altered immunogenicity. Safety assessments conducted by food safety regulators (for example, Food Standards Australia New Zealand) carefully examine any potential toxicity or alllergenicity effects of GM foods before approval for sale.

A6.3.3 Safety of Bt maize MON863 European Union (EU) safety assessments for the GM maize line MON863 have received significant attention. GM line MON863, also commercialised as YieldGard® Rootworm, is genetically modified to express a Bt gene that provides resistance to attack by a larval form of a beetle (cucumber or asparagus beetle). This Bt gene is different from the Bt gene expressed in other currently commercialised GM maize (e.g. MON809, MON810 and Bt11), which are resistant to the European corn borer and Mediterranean stem borer.

In 2002, Monsanto applied to the EU to have MON863 maize and the maize hybrid MON863 x MON810 approved for commercialisation. Following a request from the French competent authority, Monsanto provided data from a 13-week rat feeding study. The GMO Panel of the European Food Safety Authority (EFSA) examined the results of the feeding study and concluded that the results did not indicate adverse human or animal health effects from consumption of MON863. The MON863 and hybrid MON863 x MON810 lines were subsequently approved in 2004 for commercialisation in the European Union. MON863 has also been approved for import and food use in Australia, Japan, Korea, Taiwan, the Philippines, Russia and Mexico.

Following EU approval, Monsanto published the data on the 13-week rat feeding study (Hammond et al. 2006) but were reluctant to make publicly available the raw data of the study. An Appeal Court action brought by Greenpeace forced Monsanto to publicly release the data in 2005.

In March 2007, a report of a new statistical analysis of the Monsanto study was published that raised toxicity concerns in the rats fed MON863 (Séralini et al. 2007). The re-analysis identified statistically significant differences in serum protein values in rats fed an 11 per cent or 33 per cent diet of MON863 and suggested that the animals may have exhibited toxic effects to the liver and kidneys. Although the authors emphasised that a metabolic effect independent of the MON863 gene could not be excluded, they suggested that long term feeding studies were required and that it could not be concluded that MON863 was a safe product.

Following this study, EFSA re-examined their assessment of MON863, but 112 could not find any reason to change their original conclusions (that is that the Appendix 6 GM crops — extent, economics, and effects on human health and the environment results of this study did not indicate adverse human or animal health effects from consumption of MON863). Similarly, Food Standards Australia New Zealand (FSANZ) conducted an independent assessment of the results of the Monsanto study and came to the conclusion that the data do not indicate any adverse effects, which could be attributed to MON863 corn or its constituents. FSANZ (2004) further stated that observed differences were consistent with normal physiologic variation and do not indicate adverse effects from the consumption of MON863 maize.

Speculation remains as to the interpretation of the data provided by Monsanto. However, key regulators such as EFSA and FSANZ are in agreement that variations between animals fed GM maize compared to non-GM maize appear to have occurred randomly, were generally of a small magnitude, and within the normal range for laboratory rats (EFSA 2007; FSANZ 2004). As such, both regulators have approved MON863 for import and food use.

A6.3.4 Reduced mycotoxins in Bt maize Like most other grains, maize kernels can be infected with fungi before and after harvest. Mycotoxins are toxic compounds produced by several plant fungal pathogens such as Fusarium ear rot and this can affect the nutritional value and safety of maize as a human food or animal feed.

Two of the most agriculturally important mycotoxins are fumonisins and aflatoxins. Fumonisins are found almost exclusively in maize, while aflatoxins are found in a variety of crops including maize, cotton, peanuts, pistachios, almonds, and walnuts (Robens and Cardwell 2003).

Insect damage to maize kernels can often lead to greater levels of Fusarium contamination and hence greater levels of mycotoxin. Field studies of Bt maize have consistently demonstrated that hybrids containing Bt insect resistance have a significantly lower incidence and severity of Fusarium ear rot and subsequently produce grain with lower mycotoxin concentrations than their non-Bt counterparts (Munkvold et al. 1999; Piva et al. 2001). As a consequence of this, Piva et al. (2001) observed significant weight gain in piglets fed Bt maize compared to those fed the non-GM line.

It has been reported that the total benefit of Bt maize’s reduction of fumonisin and aflatoxin in the United States was estimated at $US23 million annually (Wu 2006). The report also predicts that the strict marketing standards of these two mycotoxins could result in global trade losses in the hundreds of millions of dollars annually, with the United States, China and Argentina suffering the greatest losses. Therefore, any reduction in the prevalence of these mycotoxins would have a considerable positive impact on global trade.

A6.3.5 Herbicide-tolerant soybeans Herbicide-tolerant soybean was the largest GM crop grown in 2006 (James 2006). The health and safety of herbicide-tolerant soybeans have been examined using animal feeding studies. These have been conducted over various lengths of time and results have been ‘inconsistent’, possibly due to differences in experimental conditions.

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Research published by an Italian group indicated differences in cellular structure and function, but not gross morphology, in the liver, pancreas and testis of mice fed diets supplemented with GM and non-GM soybean (Malatesta et al. 2002; Malatesta et al. 2003; Malatesta et al. 2005; Vecchio et al. 2003).

In contrast, Brake and Evenson (2004) studied mouse testis as a sensitive model to examine potential toxic effects of GM soybean. Pregnant mice were fed diets containing GM or non-GM soybean through gestation and lactation. After weaning the young male mice were maintained on the respective GM diets. Multi-generation studies were conducted with results indicating that there were no differences between mice fed a GM or non-GM soybean diet and that GM soybean had no negative effects on testicular development in mice.

Sakamoto et al. (2007) also conducted a long term feeding study on rats, examining the influence of GM soybeans compared with that of the non- GM soybeans, and a commercial diet. At 26 and 52 weeks, animals were subjected to extensive biochemical and pathological examination. There were several differences in animal growth, food intake, biochemical parameters and histological findings between the rats fed the GM and/or non-GM soybeans and the rats fed a commercial diet. However, body weight and food intake were similar for the rats fed the GM and non-GM soybeans. Autopsy findings, biochemical parameters, organ weights, and pathological findings showed no differences between rats fed the GM and non-GM soybeans, indicating that the long-term feeding of a GM soybean diet has no apparent adverse effect in rats (Sakamoto et al. 2007).

One of the most controversial GM feeding studies has been the unpublished data provided by Dr Irina Ermakova of the Institute of Higher Nervous Activity and Neurophysiology of the Russian Academy of Sciences. The limited information presented by Ermakova has been widely criticised by a number of authorities by having insufficient detail and not being subjected to peer review. Recently, Marshall (2007) provided an account in Nature Biotechnology of the work appended with comments from researchers in the field, who noted that due to the lack of information concerning the composition and nutritional adequacy of the test diets and the abnormally high incidence of mortality in the control animals, a number of other explanations for the results presented remain open, apart from the effects of the GM and non-GM soybean diet.

A6.4 Environmental impact of GM crops

Increases in agricultural productivity have been directly related to advances in technology such as farm mechanisation, advances in plant and animal breeding, increased yields and quality enhanced by the rapid development of inexpensive chemical fertilisers and pesticides, development of crop rotation and reduced tillage, the propensity to grow single crops over a large area and more recently, the introduction of GM crops. In order to evaluate effects that GM crops might have on the environment, it is important to compare them with current crop management systems and any impact they might currently have on the environment.

A substantial component on the regulatory evaluation of the safety of GM crops is an assessment for their impact on the environment. Direct effects of 114 GM crops on the environment might include impacts on non-target organisms Appendix 6 GM crops — extent, economics, and effects on human health and the environment and gene flow into non-GM crops and related species. Indirect effects might include impacts on pest and weed management (including chemical use), and effects on natural habitats and ecosystems. Through an understanding of these potential impacts, breeding programs and crop management practices may be tailored to ensure environmental safety and future sustainable crop production (for example see review by Beckie 2006).

A6.4.1 Potential effects on non-target organisms There have been concerns that insect resistant GM crops could harm organisms other than the pests targeted by the insect resistance genes (non-target organisms). Potential effects could be directly associated with the mode of action of the introduced gene(s), or indirectly associated with changes in the availability of and or quality of non-target organisms (reviewed by Glare and O’Callaghan 2000; O’Callaghan et al. 2005; Romeis et al. 2006).

In order to be directly affected, non-target organisms would need to ingest the insecticidal protein(s) from the GM crop. This can occur via ingestion of GM plant tissue, feeding on insects that have consumed the GM crop, or from the environment from the persistence of GM residues in the soil.

Impact on lacewings Several studies have suggested that Bt maize may have negative impacts on the beneficial insect, the green lacewing (Hilbeck et al. 1998 and 1999). This insect occurs naturally but is also used widely for the biocontrol of many different insect pests including those of non-GM maize. The adult lacewings do not kill insect pests, but their larval offspring are predacious on the eggs and the immature stages of most soft-bodied pests such as aphids, thrips, spider mites, whitefly, mealybugs, leafhoppers, and the eggs and caterpillars of most pest moths. Under laboratory conditions, elevated mortality was observed in lacewing larvae reared on the larvae of Egyptian cotton leaf worm or European corn borer that were fed Bt maize (Hilbeck et al. 1998 and 1999). In another study, effects on lacewings were only observed when fed with Egyptian cotton leaf worm but not when fed with spider mites or aphids reared on Bt maize (Dutton et al. 2002). The authors suggest that the effects observed were related to the quality of the prey rather than as a direct effect of the Bt protein. This conclusion is supported by bioassay studies examining the direct effect of the Bt protein on lacewing larvae (Rodrigo-Simon et al. 2006; Romeis et al. 2004).

Several independent field studies (e.g. Candolfi et al. 2004; de la Poza et al. 2005; Pilcher et al. 2005; Whitehouse et al. 2005) have revealed only minor, transient or inconsistent effects of Bt crops when compared with non-Bt controls (reviewed by Romeis et al. 2006). The main effect appears to be a reduction in specialist predator populations within crops as commonly seen with the use of other pest control methods such as chemical pesticides, biological control agents and the use of crop rotation to reduce the availability of host plants.

A recent comprehensive analysis of 42 field experiments to examine the effect of Bt cotton and corn on non-target invertebrates found that non-target invertebrates are generally more abundant in Bt cotton and Bt corn fields than in non-GM fields managed with pesticides (Marvier et al. 2007). The abundance of non-target insects was less in GM fields compared with insecticide-free control fields. 115 Review of the moratorium on genetically modified canola in Victoria

Impact on honey bees Many plants rely on insects, such as honey bees, to facilitate cross pollination. The impact of GM crops on honey bees is of both ecological and economic importance. As such, many regulatory risk assessments include studies that directly evaluate the potential toxicity of a GM crop on bees (for example, EPA 2001).

Studies of honey bees fed with Bt proteins and with pollen from Bt crops (cotton or maize) have identified no negative effects on the health or flight activity of honey bees (Babendreier et al. 2004, 2005 and 2007; Hanley et al. 2003; Liu et al. 2005; Malone et al. 2001; O’Callaghan et al. 2005; Sanvido 2006). Similarly, pollen from GM canola resistant to glyphosate had no effects on honey bee health (Huang, Hanley et al. 2004; Mohr and Tebbe 2007) and GM protein has not been detected in the nectar and pollen of different GM canola varieties (Pham-Delègue et al. 2002).

Behavioural studies of honey bees have indicated that they do not discriminate between GM or non-GM canola (Pierre et al. 2003). However, a one year study comparing pollination and bee abundance in conventional, GM and organic canola in Canada suggests that both were the lowest in GM canola fields (Morandin and Winston 2005). The authors noted that although the use of insecticides was similar for the conventional and GM canola, the GM canola fields could have been less attractive to honey bees because of the use of a highly effective herbicide, such as glyphosate, which allows for greater weed control and hence a reduction in food diversity for insects such as bees. This hypothesis is supported by the work of Williams (2002).

GM crops are often claimed to cause a number of impacts on the environment without scientific evidence to back the claims. For example, in early 2007, beekeepers in the United States reported an unexplained die off of bee colonies. Essentially, bee colonies abruptly disappeared from the hive and did not return. Beekeepers in 22 US states (including Hawaii) reported this problem and similar observations have been reported in Europe (Oldroyd 2007). This phenomenon is termed ‘Colony Collapse Disorder’ (CCD) and is poorly understood, with the exact mechanisms of CCD unknown. A number of causative mechanisms have been proposed including malnutrition, pesticides, pathogens, immunodeficiencies, mites, insect resistant GM corn and GM cotton crops, beekeeping practices and electromagnetic radiation (Oldroyd 2007).

There is no evidence that GM crops cause acute toxicity to honey bees (see above) and as such the involvement of GM crops in CCD seems highly unlikely. Further, the US states of Kansas and Nebraska, which have large areas of insect-resistant GM crops, have not reported problems with CCD (Johnson 2007) and a recent report indicates a high correlation between CCD and the Israeli acute paralysis virus (Cox-Foster et al. 2007).

Impact on monarch butterflies The case of Bt maize pollen and the monarch butterfly has been one of the most controversial environmental issues. When maize plants flower, pollen may be deposited onto milkweed if it is growing within the crop. The leaves of this plant are the only plant tissue that monarch butterfly larvae eat. A laboratory study found that monarch butterfly larvae had high mortality and consumed less milkweed leaves that were covered with pollen (and anthers) 116 from Bt maize compared to milkweed leaves covered with non-GM pollen Appendix 6 GM crops — extent, economics, and effects on human health and the environment

(Losey et al. 1999). A similar study observed elevated mortality in monarch butterfly larvae fed Bt maize pollen (Jesse and Obrycki 2000).

Both of these studies were criticised because, whilst the Bt maize pollen might be toxic to larvae, ecological data such as the spatial and temporal patterns of the butterfly and Bt maize might preclude impacts on butterfly populations. In other words this result may not be ecologically relevant. Additionally, the Bt maize event used for that research (Event 176), expressed significantly higher Bt protein levels in pollen and anthers compared with the most widely planted Bt maize events (MON810 and Bt11) and is no longer commercially available (Stanley-Horn et al. 2001).

Recent studies also suggested that monarch butterfly larvae exposed to the anthers of Bt maize behave differently than if exposed to non-GM anthers and hence may indirectly affect populations (Anderson et al. 2004 and 2005; Prasifka et al. 2007) but the ecological significance or relevance of this finding remains uncertain.

A two-year study in Canada suggests that the impact of pollen from commercially grown Bt maize on monarch butterfly populations is negligible (Sears et al. 2001). Evidence included laboratory and field studies showing no acute toxic effects at any pollen density, limited overlap between pollen and anther distribution and monarch butterfly larval activity, and only a portion of monarch butterfly populations use milkweeds in and around Bt maize fields (Anderson et al. 2004; Sears et al. 2001).

Soil organisms Soil populations (for example, micro-organisms, earthworms, mites and nematodes) are affected by a number of factors and agricultural practices including soil type, level of cultivation, history of the location, level and frequencies of pesticide application and type of crop and variety grown. It has been demonstrated, for example, that soil microbial populations can vary between varieties of the same crop (reviewed by Garbeva et al. 2004). Similarly, numerous studies have investigated aspects of the biology and ecology of soil micro-organisms (including plant pathogens) with respect to herbicide application (reviewed by Altman and Campbell 1977; Altman and Rovira 1989).

The introduction of herbicide resistant GM crops has raised questions of the effects of herbicides on soil micro-organisms and in particular plant pathogens. In a recent field study at six sites in Canada, Lupwayi et al. (2007) evaluated the effect of glyphosate resistant wheat and canola crops on soil micro-organisms under reduced tillage or conventional tillage systems. Results indicated that the effects on soil microbial biomass, bacterial functional diversity and community structure, and dehydrogenase enzyme activity were minor and inconsistent over the wide range of growing conditions and crop management (Lupwayi et al. 2007).

Several reports have described synergistic effects between the herbicides used on GM crops (for example, glyphosate and glufosinate) and plant pathogens (Ahmad et al. 1995; Desclazo et al. 1998; Fernandez et al. 2005; Kremer et al. 2005). For example, sudden death syndrome (SDS) is a fungal disease of soybeans caused by Fusarium solani f.sp. glycines, and has caused substantial soybean yield reductions in the United States. An increase in the incidence 117 Review of the moratorium on genetically modified canola in Victoria

of this plant pathogen was linked to the use of glyphosate in GM soybean and caused widespread concern amongst US farmers (Sanogo et al. 2000). However, a three-year field study evaluating both susceptible and resistant soybean cultivar response to four herbicides found that the response of GM soybeans to SDS was not different from responses by conventional soybeans to herbicide application (Sanogo et al. 2001). Further, the application of glyphosate to SDS resistant soybean cultivars did not alter their resistance and the authors proposed that poor cultivar selection was the most likely cause of SDS in soybeans and that selection of resistant cultivars was the most effective solution to the problem (Sanogo et al. 2001). Similar observations and conclusions have been reported for Sclerotinia stem rot and a damping-off pathogen of soybean (Harikrishnan and Yang 2002; Nelson et al. 2002). This research highlights the importance of complementary roles of gene technology and plant breeding.

Although Bt has been shown to bind to soil particles (for example, see Stotzky 2004), a number of studies have found no evidence of accumulation in the soil after several years of cultivation (for example, Baumgarte and Tebbe 2005; Dubelman et al. 2005). However, CSIRO research examining the ecological impacts of GM cotton on soil biodiversity observed the presence of Bt in the roots of Bt cotton varieties in different soils and that Bt protein was released by cotton roots into solution culture and in soil (Vadakattu and Watson 2004). The significance of bioaccumulation of Bt from GM cotton remains unknown. In field studies with Bt maize compared with non-GM maize, soil micro-organism diversity appeared to be more impacted, primarily by variation in the soil and the age of the plants grown (Baumgarte and Tebbe 2005) and cultivar variation (Griffiths et al. 2005).

Overall, studies examining the effects of GM crops on soil micro-organisms have been inconsistent (reviewed by Bruinsma et al. 2003; Dunfield and Germida 2004; Motavali et al. 2004). To date, laboratory and field studies have not been able to demonstrate toxicity of GM products to non-target soil organisms (Sanvido et al. 2006). The major impediments to understanding any potential effects of GM crops on soil communities include the lack of knowledge of the background variation within agricultural systems and the highly diverse soil environments that occur (Griffiths et al. 2005; Sanvido et al. 2006). Without an understanding of this information, it remains difficult to establish the ecological relevance of any differences that might be observed in soil ecosystems, regardless of whether the crops are GM or non-GM.

Farm-Scale Evaluation experiments in the United Kingdom In 1999, the UK government asked an independent consortium of researchers to investigate how growing herbicide-tolerant GM crops might affect farmland wildlife compared with growing non-GM varieties of the same crops. The Farm Scale Evaluation (FSE) study was designed to test the hypothesis that there is no difference in biodiversity between GM crops and conventional crops. The study was carried out over three years in 60 fields across England and Scotland. The crops grown were sugar beet (including fodder beet), maize, and winter and spring canola, and the biodiversity recorded included the abundance of weeds and invertebrates. The data were rigorously analysed, peer-reviewed, and published in a series of eight papers in the Philosophical Transactions of the Royal Society of London (reviewed by Freckleton et al. 2003). 118 Appendix 6 GM crops — extent, economics, and effects on human health and the environment

Results of these studies indicated that there were reductions of between 60–80 per cent in weed biomass at the end of the growing season in GM sugar beet and spring GM canola, reflecting increased weed control in these crops. In contrast, there was an increase of 82 per cent in weed biomass in GM maize compared with the conventional maize crop. The authors suggest that a reason for this is that pre-emergence weed control using the herbicide atrazine in conventional maize is extremely efficient, and that the herbicide‑resistant GM maize system is unable to improve on this.

Additional findings from the study included: difference in biodiversity were more related to the type of crops rather than GM or not; lower herbicide inputs to GM crops and reduced numbers of bees, butterflies and Heteroptera (certain bugs) in GM sugar beet and GM canola due to reduced weed populations (Freckleton et al. 2003).

Following the release of data from this study, the CSIRO conducted an independent appraisal of the results as they might apply to Australia (Lonsdale et al. 2003). Conclusions from their assessment identified that although the FSE study was important and well designed, it has only limited relevance to Australia. For example, the study confirmed that the impacts that GM crops might have on biodiversity, relative to conventional crops, would depend on the crop, the type of genetic modification and the crop management strategies employed (Lonsdale et al. 2003).

A6.4.2 Gene flow issues associated with GM crops A major concern amongst opponents of GM crops are claims that a GM trait(s) will move into other organisms, non-GM crops and wild relatives, especially those with a propensity to become weeds (Snow 2002).

Gene flow from plants to other organisms The risk of GM traits transferring to other organisms (horizontal gene transfer) such as humans, animals, fungi, bacteria, other micro-organisms and viruses is reportedly negligible (Flachowsky et al. 2007; Mohr et al. 2007; Nielsen 1998). Since the introduction of GM crops, no genetically modified DNA has been integrated into the cells of animals fed GM crops (Flachowsky et al. 2005a) or insects (Mohr et al. 2007). In general, cross species gene transfers could only be detected over evolutionary time scales (Ochman et al. 2000) and comparison of the sequences of plant and bacterial genes suggests that horizontal gene transfer from plants to bacteria during evolutionary history has been extremely rare, if it has occurred at all (Nielsen 1998). For gene transfer to happen, a complex series of events would be required and studies indicate that natural gene transfer between plants and other organisms is also exceedingly rare (Aoki and Syono 1999; Mayo and Jolly 1991). Gene transfer from plants to bacteria has not been demonstrated under natural conditions (Nielsen et al. 1997; Nielsen 1998; Syvanen 1999) or through deliberate attempts to induce natural transfers (Coghlan 2000; Schlüter et al. 1995). However, the transfer of plant genes to bacteria and viruses has been demonstrated in laboratory and glasshouse experiments between both the plants and bacteria following heavy unnatural selection methods (Greene and Allison 1994; Nielsen et al. 2000; Schoelz and Wintermantel 1993).

Gene flow between plants Gene transfer between plants through cross pollination or out-crossing can 119 Review of the moratorium on genetically modified canola in Victoria

only occur between related and sexually compatible plants that are in very close proximity and that flower synchronously (Glover 2002). Gene flow occurs naturally via pollen from species that are partial or obligate out-crossers (for example, canola and maize) but is less likely from plants that predominantly self pollinate (for example, soybean, wheat and rice). The distance that viable pollen can travel is influenced by the dispersal method (for example, insect or wind dispersal), environmental conditions, the weight and the longevity of the pollen, many of which are species dependent (Rieger et al. 2002).

Pollen movement per se is not the primary issue associated with gene flow. Any potential problems associated with gene flow from GM crops should consider the likelihood of introgression of the GM traits into populations, not just the movement of pollen (reviews by Conner et al. 2003; Hails and Morley 2005; Nap et al. 2003; Stewart et al. 2003). Introgression is dependent on the nature of the gene and the biology and ecology of the recipient plant (Hails 2002). It is also dependent on the gene having a selective advantage, such as herbicide resistance.

Plant seeds provide another important mechanism of gene flow. Seeds from one cultivar can be inadvertently mixed with the seeds from another in agricultural equipment and through bulk handling. Seeds can also remain viable in the soil following harvest for many years, germinate and grow in subsequent crops as a ‘volunteer’. Any seed formed from volunteers could then be combined with the seed of a subsequent crop.

It has been proposed that the management of herbicide resistant canola volunteers is best controlled in-crop (Harker et al. 2006). Further, it is reported by Beckie et al. (2004) that with appropriate weed management strategies, all single or multiple herbicide resistant volunteers that might form can effectively be managed on-farm using herbicides with alternative modes of action. For example, glyphosate resistant volunteers can be efficiently controlled with the herbicides metribuzin or 2,4-D .

Maize is highly out-crossing but is not known to form feral populations, does not have any weedy relatives and only rarely forms volunteers (Warwick and Stewart 2005). Gene flow from the pollen of Bt maize into non-GM maize has been investigated with the authors concluding that current isolation distances used for GM maize are sufficient to manage potential outcrossing (Ma et al. 2004).

Soybeans are generally not considered to be a serious volunteer weed problem (Owen 2005). Although some closely related soybean species exist, introgression of GM traits has not been reported either due to the lack of closely related species growing in soybean production areas or they do not have a competitive advantage to be a threat to agricultural production (Owen 2005). Further, soybean is almost exclusively self pollinated (Owen 2005).

Cotton has been grown in Australia for over 200 years. Approval for the introduction of GM cotton in Australia required a risk assessment of the environmental impact, including potential to become a weed and any effects on Australian native cotton species. None of the Australian native species are considered weeds and their distribution is relatively sparse and contact with GM cotton is rare (Brown et al. 1997). Further, cotton is predominantly 120 self pollinating and any hybrids that have been artificially formed between Appendix 6 GM crops — extent, economics, and effects on human health and the environment cultivated cotton and the native cotton species are completely sterile and therefore the risks of genes from GM cotton escaping into the endemic species is considered negligible (Constable et al. 1998; Fitt 2003). No natural hybrids between GM cotton and the native species have been reported (Fitt 2003).

Herbicide-tolerant GM and non-GM canola are considered to have a range of wild relatives that also grow in their areas of cultivation and hence pose a potential threat to agricultural production (reviewed by Beckie et al. 2003; Beckie et al. 2006; Hall et al. 2005; Légère 2005). In Canada, there are four wild species that have the ability to cross with canola: bird’s rape otherwise known as field mustard; wild radish; wild mustard; and dog mustard (reviewed by Metz et al. 1997; Rieger et al. 1999). Concerns raised by opponents of GM crops relate to a possible fitness advantage that might be conveyed onto these weed relatives, which also have the ability to further outcross and disseminate the trait(s) and hence cause inappropriate environmental impact (Rieger et al. 2002; Snow 2002).

The frequency of gene flow from GM canola to wild relatives was examined in both glasshouse and field experiments and indicates that the probability of gene flow from GM canola to a weedy relative is very low (for example, Warwick et al. 2003). Enrichment of any herbicide-tolerant weeds that might be generated is also considered unlikely to occur and persist in the environment unless a herbicide selection pressure was applied (Crawley et al. 2001). Therefore, any herbicide resistance gene that moves into non-agricultural environments would not increase the fitness of a plant in a natural environment where it is unlikely to be treated with herbicide (Crawley et al. 2001).

Rieger et al. (2002) quantified, at a landscape level, gene flow from herbicide- resistant non-GM canola to nearby crops not containing herbicide resistance genes. This study provided the first evaluation of gene flow on commercial scale canola fields and sampled a range of environments over one-third of Australia. The authors found that pollen flow occurred at a very low frequency with less than 1 per cent observed between adjacent commercial canola fields. Herbicide resistance was not detected in canola fields more than 3 kilometres from a source field.

The impact of 10 years of commercialisation of herbicide tolerant crops in Canada was recently reviewed (Beckie et al. 2006). The authors did not observe marked changes in volunteer canola weed problems associated with herbicide-tolerant crops (GM and non-GM), except in reduced till systems when glyphosate was used alone to control canola volunteers. In this case, several weeds with inherently high glyphosate tolerance tended to associate with the continuous use of glyphosate (Harker et al. 2006). This ‘evolved’ weed resistance is not attributed to GM traits, but due to selection pressure associated with herbicide application per se. This is generally considered to be of greater environmental concern than resistance in related weed species caused through gene flow (Beckie 2006).

Both GM and non-GM herbicide resistant crops allow farmers to manage many difficult in-crop weeds in a cost effective manner (Brookes and Barfoot 2006a). However, management of herbicide tolerance amongst agriculturally important weeds remains an important challenge for modern agriculture (reviewed by Beckie 2006). Data to date suggest that concerns associated with herbicide resistance (as a result of the use of herbicide resistant GM and non-GM crops) 121 Review of the moratorium on genetically modified canola in Victoria

are more related to crop management practices to control weeds than as a result of the herbicide resistance trait itself (Beckie 2006).

Impacts on diversity and natural habitats The impact of herbicide resistant crops on weed diversity has also been studied in field crops of GM beet, maize and canola and revealed that weed diversity was not affected (Heard et al. 2003). In Canada, a reduction in weed diversity has not been demonstrated (Beckie et al. 2006).

A major concern raised by opponents of GM crops is the potential for traits to invade and naturalise in natural habitats and affect landscape diversity. Some concern was raised about reports that GM material from GM corn was found in Mexican land races leading Mexican authorities to cease growing commercial GM corn (reviewed by Hodgson 2002). Despite concerns, no long term introgression of GM traits into wild populations leading to the extinction of any wild species has been reported. This may be, in part, explained by the observation that the transition of vegetation from agricultural landscapes into natural habitats is usually gradual and with distance comes less risk (Sanvido et al. 2006). Furthermore, it is suggested that herbicide-tolerant GM crops are no more likely to be invasive in agricultural fields or natural habitats than non- GM plants and that a selective advantage for GM crop volunteers is not likely outside agricultural production areas (Crawley et al. 2001).

A6.5 Ecological benefits of GM crops

A number of studies have considered the ecological benefits associated with the introduction of GM crops (for example, Ammann 2005; Beckie et al. 2006; Benbrook 2003; Brookes and Barfoot 2006 a and b; Constable et al. 1998; Dale et al. 2002; Fernandez-Cornejo and McBride 2002; Fitt et al. 2004; Knox et al. 2006; Marvier et al. 2007; Sanvido et al. 2006; Vadakattu and Watson 2004). These reports indicate that the numbers and amount of pesticide applications have significantly reduced in every country where Bt cotton has been adopted and more broadly a significant reduction in environmental impact associated with GM crop adoption. Direct environmental benefits have been reported such as reduced effects to non-target organisms (Head et al. 2005; Marvier et al. 2007; Torres and Ruberson 2005) and reduced leachate into ground water (FAO 2004). Flow-on benefits from reduced pesticide applications includes a reduced risk to human health and safety through chemical exposure and application (Hossain et al. 2004; Warnemuende et al. 2007).

A6.5.1 Global reduction in pesticide use through GM crops GM crops have contributed to a significant reduction in the global environmental impact of production agriculture (Brookes and Barfoot 2006b). Since the introduction of GM crops, the use of pesticides in agriculture has reduced by 224 million kg of active ingredient and the overall environmental impact has reduced by 15.3 per cent.

The volume of herbicide use in GM soybeans has decreased by 51 million kg with the overall environmental impact decreased by 20 per cent. It should be noted that in some countries, such as in Argentina, the adoption of GM soybeans has coincided with increases in the volume of herbicides 122 used relative to historic levels (Trigo and Capp 2006). This largely reflects Appendix 6 GM crops — extent, economics, and effects on human health and the environment the adoption of reduced tillage production systems with their inherent environmental benefits (Brookes and Barfoot 2006b; Trigo and Capp 2006).

Major environmental gains have also been derived from the adoption of GM insect-resistant cotton with a 95.5 million kg reduction of insecticide and a 24.3 per cent reduction in environmental impact. Additional environmental gains have also come from GM corn and GM canola (Brookes and Barfoot 2006b). In corn, pesticide use has decreased by 43 million kg and the environmental impact decreased due to a combination of reduced insecticide use (4.6 per cent) and a switch to more environmentally-benign herbicides (4 per cent). Similarly, in the canola sector, farmers have reduced herbicide use by 6.3 million kg (an 11 per cent reduction) and the environmental impact has fallen by 23 per cent, primarily due to a switch to more environmentally- benign herbicides (Brookes and Barfoot 2006b).

Benbrook (2003) stated that overall pesticide use in the United States actually increased by 50.6 million pounds (approximately 23 000 tonnes) through the adoption of GM crops from 1996–2003. It was suggested that the average amount of herbicides applied per acre planted to herbicide resistant varieties increased over the period compared with the first few years of adoption, whilst Bt varieties reduced pesticide use by 19.6 million pounds (8900 tonnes). These data have been widely criticised as the amount or toxicity of the active ingredient has not been taken into account. When these are considered, pesticide use rates in the United States on corn, soybeans and cotton has declined by 2.5 million pounds (1100 tonnes), despite an increase in the total amount of herbicides applied to GM soybeans (Fernandez-Cornejo and Caswell 2006). In addition, the switch from the pre-emergence herbicide metolachlor to glyphosate in soybean production has had a huge benefit to the environment that cannot be measured in terms of the amount of active ingredient alone. Instead, the benefits are measured in a decline in groundwater contaminants and a reduction in risks to human health and safety (Cerdeira and Duke 2007). Similar benefits might be expected in Australia through a reduction in the use of triazine‑based herbicides. It has also been reported that the switch to glyphosate has helped foster soil conservation practices such as the use of reduced tillage agriculture, leading to additional benefits through reduced soil erosion, decreased on-farm fuel consumption, and improved wildlife habitat (reviewed by Duke 2005; Fawcett and Towery 2002).

A6.5.2 Benefits of GM cotton in Australia The first, single gene, Bt cotton, marketed as INGARD®, was made commercially available in Australia in 1996. In 2002, a two-gene Bt cotton was introduced in Bollgard®II varieties followed by a rapid phase out of INGARD® varieties after the 2003-04 season. The two-gene varieties were seen to provide greater efficacy and resilience against the risk of insects developing resistance to the effects of the single Bt gene varieties (Bates et al. 2005; Roush 1998).

The environmental benefits of reduced insecticide use associated with GM cotton adoption in Australia have been assessed (Knox et al. 2006). An environmental impact quotient (EIQ) was used to assign a potential hazard value to the agricultural pesticides used in cotton production. The EIQ assesses farm worker, consumer and environmental risk and then combines these to provide an EIQ value for a particular pesticide (Kovach et al. 1992). The 123 environmental impact of a pesticide can then be determined by multiplying Review of the moratorium on genetically modified canola in Victoria

the EIQ by the amount (kg/ha) of active ingredient. Results from an evaluation of the environmental impact associated with GM and non-GM cotton indicated that the shift in pesticide use has led to more than a 64 per cent reduction compared with non-GM cotton. The average environmental impact for 2002-03 and 2003-04 for non-GM cotton was 135 kg active ingredient per hectare compared with 28 kg active ingredient per hectare for the two-gene Bt cotton variety (Knox et al. 2006).

In 2006, the Gene Technology Regulator issued licences (DIR 059/2005; DIR 062/2005; DIR 066/2005) for the phased introduction of GM cotton containing resistance to the herbicides glyphosate and glufosinate ammonium in addition to the two Bt genes. The associated changes in crop management could result in a further reduction in environmental impact compared to non-GM cotton.

A6.6 Conclusions

Cognisant of the need for rigorous nutritional and safety assessment, regulatory agencies worldwide have established case-by-case risk assessments to evaluate potential impacts of GM food crops on human and animal health and the environment. Concepts and principles for safety have been developed by international organisations such as the World Health Organization (WHO), the Food and Agriculture Organization (FAO) of the United Nations, the Organisation for Economic Co-operation and Development (OECD) and the Codex Alimentarius Commission. In Australia, the Office of the Gene Technology Regulator (OGTR) has developed a risk analysis framework that describes the principles of risk analysis used to assess GM applications with respect to protection of the safety of human health and the environment (see appendix 4). Food Standards Australia New Zealand (FSANZ) examines any differences between an existing food and a new GM product (that is, an assessment of ‘substantial equivalence’). FSANZ assessments investigate toxicity, any tendency to provoke an allergic reaction, the stability of the inserted gene, whether there is any nutritional deficit or change, and unintended effects of the inserted genes, such as changes in known naturally occurring toxins. A GM food will only be approved for sale in Australia and New Zealand if it is as safe and nutritious as its conventional counterparts.

The introduction of GM crops has provided a number of benefits to those farmers and countries that have adopted them. These include new agronomic traits that have overcome several production constraints leading to improvements in productivity and profitability. Further benefits to the environment from changes in crop management are also being realised. However, the adoption of GM crops has also raised some new challenges for agricultural management: stewardship and ongoing rigorous case-by-case assessment of the safety for human and animal health and the environment are fundamental in ensuring the sustainability of agriculture and the environment into the future.

124 Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman

ACIL Tasman was commissioned by the Victorian Department of Primary Industries to analyse the economic impact of the GM canola moratorium from 2004–2008, and to analyse the impacts of two future policy options:

• an indefinite continuation of the current moratorium

• allowing the moratorium to expire at the end of February 2008.

A cost–benefit analysis (CBA) was prepared to inform the Panel of the Review of the moratorium on GM canola in Victoria of the impact of the current moratorium and what future costs and benefits are likely to be associated with extending the moratorium or, conversely, allowing the moratorium to expire. The results are presented in three broad parts and summarised in box A7.1. These were:

• an assessment of the impact of the moratorium between 2004 and 2008

• the costs and benefits of continuing the moratorium until 2016 (a practical approximation of ‘indefinite’)

• the costs and benefits of allowing the moratorium to expire in February 2008.

A7.1 Methodology

ACIL Tasman (2007a) sought to identify a wide range of costs and benefits, and to quantify those where there was a high level of confidence in the assumptions. It should be noted that the GM technology will have different impacts on farm businesses depending on their circumstances and management expertise. As with any new technology, farm managers will use the technology in ways not currently anticipated and modify farming systems to optimise the benefits of new traits, as they become available. The evolutionary nature of the technology and farming systems makes definitive statements about the technology problematic.

Fundamental to the CBA approach was the definition of a ‘counterfactual’ scenario which outlines the situation without a moratorium. To accommodate the wide range of costs and benefits and to take account of the counterfactual, a partial canola industry model was developed to explore on-farm impacts of currently licensed GM canola, likely adoption rates, GM canola production and consequential supply chain implications.

Integral to this model was a gross margins analysis of six distinct canola types, each with its own unique mix of on-farm costs and benefits. The gross margin analysis determines net benefits of growing a variety in terms of dollars per hectare, that is, after accounting for variable costs. Gross margins for different scenarios were assessed across the projection period (2004–2016).

125 Review of the moratorium on genetically modified canola in Victoria

Box A7.1 Key points from the cost–benefit analysis

This cost–benefit analysis (CBA) is essentially a comparison between the potential costs of foregoing the certain weed management opportunities and yield improvements that GM canola varieties offer, and the possibility of higher average canola prices if the moratorium on GM canola were extended in Victoria.

The analysis found that a substantial and sustained increase in the price Victorian farmers would receive for their non-GM canola — if the moratorium were extended — is unlikely. By comparison, the cost of foregoing the herbicide management technology available with the current GM canola varieties is likely to be substantial.

In aggregate, the current moratorium has already imposed a small cost upon Victoria, with a larger cost inevitable over the next few years, even if the current moratorium expires and is not replaced. The net cost of a continuation of the moratorium beyond 2008 is larger.

• The direct cost (in net present terms) of the current moratorium is approximately $60–65 million.

• The direct cost of extending the moratorium from 2008 to 2016 is approximately $110–115 million.

• The direct cost of the moratorium for the full period 2004–2016 is approximately $170–180 million.

These results are only the direct costs and benefits of the currently available conventional and GM canola production systems. They understate the total costs of the current moratorium and its possible extension, as many of the GM canola benefits are indirect and apply to the whole farming system and to the broader economy.

A continuation of the moratorium would also deny Victorian farmers the potential use of a range of next generation GM canola traits such as environmental stress tolerance, improved oil qualities and a wide range of high value new industrial and human health traits. The next generation of canola traits are likely to be considerably more valuable to Victorian farmers than the current traits.

The impacts of the moratorium presented in ACIL Tasman (2007a) are those that can be quantified with high levels of certainty within the scale of this project. A net benefit of this size — should the moratorium be allowed to expire — will have additional flow-on effects to research and the broader Victorian economy.

Three of the canola types modelled were the three mainstream non-GM canola varieties currently grown throughout Victoria, namely conventional, triazine-tolerant (TT) and imidazolinone-tolerant (IMI). The other three were the OGTR-licensed varieties of GM canola that would be the first to be used if the moratorium were not in place (Roundup Ready® open pollinated, Roundup 126 Ready® hybrid and InVigor®), each with different weed control management Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman regimes and yields (see table A7.1). If grown, each variety has a unique mix of on-farm impacts, including impacts on herbicide types (and costs), yields, fertiliser requirements, labour productivity, oil content of seed, cost of seed, machinery requirements, rotational impacts (yield in crops grown in the year(s) following the canola crop as part of a rotation), and on‑farm storage and transport costs.

The assumptions used in this analysis are based on the expected performance of each of the six canola production systems in the situation in which they are likely to be used. For any one property with a given set of growing conditions, the outcome may be quite different. For instance, TT canola has an inherent yield penalty of between 10–30 per cent (Robertson et al. 2002). However, when used in high weed pressure environments, the yield of TT is likely to be equal to 100 per cent of what the conventional yield would have been. The assumptions in table A7.1 reflect ACIL Tasman’s (2007a) estimate of the state averages for Victorian canola where it is likely to be grown. The higher yielding GM varieties are a function of the hybrid vigour that only two of the three GM types could confer.

Table A7.1 Key yield and seed assumptions

Assumptions Conventional TT IMI RR-OP RR-H InVigor® Relative yielda 100 95 100 100 120 120 Relative grain pricesa 100 100 100 100 100 100 Relative seed costsa,b 100 100 100 100 150 150 Oil content (%) 42 40 42 42 44 44 Technology fee/royalties 0 0 0 25 60 0 ($/ha)c

Legend: TT = Triazine-tolerant; IMI = imidazolinone-tolerant; RR-OP = Roundup Ready® open pollinated; RR‑H = Roundup Ready® hybrid. a Relative yields, grain prices and seed costs reflect the relative values between the variety and conventional canola in any given season, expressed as a percentage. The actual yields, prices and seed costs for each variety vary by year and are a function of seasonal and market conditions. b Excluding royalties. c $A per hectare (2007).

The result of these assumptions — after deducting input costs — is a series of GM canola gross margins. A summary of these gross margins relative to the average gross margin on non-GM canola is presented in table A7.2.

Table A7.2 Performance of GM canola types relative to the average of non-GM canola

Gross margin gain RR-OP RR-H InVigor® All GM types Gross margin gain before technology 71.3 141.5 69.9 94.2 access costsa ($/ha) Gross margin gain after technology 46.3 51.5 39.9 45.9 access costsa ($/ha) Gain that goes to technology access 35.2 63.6 42.9 51.3 costsa (%)

Legend: RR-OP = Roundup Ready® open pollinated; RR‑H = Roundup Ready® hybrid a Technology access costs comprise additional seed costs, technology fees and royalties 127 Review of the moratorium on genetically modified canola in Victoria

The gain from using the GM canola relative to the conventional — on average — is significant. However, these increases in gross margins do not include a wide range of indirect whole farm benefits and costs, such as improved machinery utilisation, simplicity of management, rotational effects and additional hygiene costs. These indirect impacts are likely to be taken into account when the farmer considers what he or she is prepared to pay to use the technology. ACIL Tasman (2007a) anticipates that the technology access costs (additional seed costs and technology fees and royalties) could be set as high as 50 per cent of the anticipated gain in gross margins. The ACIL Tasman (2007a) estimates of the technology access costs are based on their estimates of the direct and indirect farm-level benefits of the technology, and what has occurred in other markets. It is not based on any advice from the technology companies.

The cost to the farmer of accessing the technology may not be entirely lost to the Victorian economy. As the CBA deals with existing and licensed varieties, the research and development costs into those varieties represent a sunk cost (that is, the cost has already been incurred). A significant proportion of the technology fees could be reinvested in research and development of new GM varieties in Victoria. Therefore, the capture of the technology fees by the technology owners is not likely to be totally lost to the state and part of it should be treated as a transfer. For the purposes of this CBA, it has been assumed the 75 per cent of the technology fee is available for reinvestment in Victoria in areas such as employment and plant breeding.

The gross margins analysis predicts what the on-farm impacts of the six canola types would have been if they were grown, but it does not indicate whether they would have been grown, whether they will be grown in the future, and hence it cannot, alone, quantify the state-wide impact of the moratorium.

To estimate these production responses, ACIL Tasman (2007a) developed adoption curves for each of the six canola types. In developing these adoption curves, three distinct policy scenarios were considered.

• Scenario 1: No moratorium. This is the base case scenario where a moratorium was never in place, and adoption of GM canola followed.

• Scenario 2: A moratorium in place until 2008, and then removed. This is the scenario that will occur if the current moratorium expires, and is not replaced or extended.

• Scenario 3: An ongoing moratorium, covering the whole projection period (2004–2016). That is, the Victorian canola market develops without any GM canola and adoption is zero.

These three adoption scenarios, applied to the six different canola types, were used for the CBA.

The impact of the current moratorium is the difference in net present value (NPV) between scenarios 1 and 2, and the impact of the continuation of the moratorium is the difference in NPV between scenarios 2 and 3. The overall impact of an on-going moratorium for the whole of the projection period (2004–2016) is the difference in NPV between scenarios 1 and 3.

128 Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman

The technology adoption rates (see figure A7.1) used in the CBA are based on:

• farmer attitudes to GM technology based on knowledge of market acceptance, weed pressures currently being dealt with, flow-on rotation benefits, and supply chain costs

• likely government policy had the moratorium not been introduced in 2004

• the companies’ GM canola release policies in 2004 and 2008

• GM canola seed availability.

Figure A7.1 Adoption rates for GM canola under scenarios 1 and 2

By combining the gross margins analysis with the three adoption scenarios, ACIL Tasman (2007a) estimates past and present canola production in Victoria, in terms of hectares, tonnes and dollars. With these production estimates for the three scenarios, approximate dollar figures can then be placed upon the impacts of growing the different mix of canola varieties that occurs under the three scenarios.

In addition, with a forecast number of tonnes of canola produced and therefore moving through the Victorian supply chain under the different scenarios, ACIL Tasman (2007a) were able to estimate post-farm impacts, such as transport and segregation costs.

A7.2 Results

In aggregate, the current moratorium has already imposed a small cost upon Victoria, with a larger cost inevitable over the next few years, even if the current moratorium expires and is not replaced. The net present value (NPV) of a continuation of the moratorium beyond 2008 is larger again.

129 Review of the moratorium on genetically modified canola in Victoria

The total direct cost (NPV) of a moratorium from 2004–2016 is estimated to be approximately $175 million, reaching $29 million per year by 2015. This comprises:

• $63 million for the current 2004–2008 moratorium, with most of this impact ($55 million) to be realised after 2008.

• $112 million for an extension of the moratorium from 2008 to 2016.

In addition to these direct costs, ACIL Tasman (2007a) anticipates that there is a range of substantial indirect benefits of the technology (that is, indirect costs of continuing the moratorium). They are:

• Increased machinery efficiency gains particularly due to a reduction in the variety of chemicals used on the farm which would reduce the frequency of spray-rig cleaning, spray-rate changes, chemical inventory management and chemical-use training.

• Reduced use of chemicals that are generally of a more toxic nature with subsequent environmental and social benefits, for example, Norton (2003) estimates a reduction of over 640 tonnes of triazine chemical usage in broadacre farming in Australia.

• Increased conservation farming practices (largely captured in gross margins through lower cultivation costs). This may lead to flow-on improvements in soil structure, carbon retention, reduced stubble burning, and less erosion and sediment deposition into local waterways.

• Increased simplicity and ease of farm management which has been a significant factor in the adoption of herbicide-tolerant crops in the United States (Fernandez-Cornejo and McBride, 2002).

• A significant reduction in chemical costs two, three and four years in the crop rotation after GM canola (Pratley and Stanton 2007, unpublished) and increased yields from subsequent crops due to the legacy of improved weed control.

• Greater flexibility in crop selection once crop seeding has commenced.

• Reduced weed seed burdens and associated farm hygiene costs (including contractor costs such as header and windrower clean downs).

The annual costs of the current moratorium peak in 2010 at $14 million per year, while the costs of any future moratorium progressively rise through the projection period to reach approximately $29 million per year by 2015. The major drivers of these results are the reduced yield (and hence farmer income) as a result of the moratorium, the increased costs imposed by more herbicide costs and the related increase in cultivation expenses. The upside of the moratorium — or the downside of GM canola — is largely found in the cost savings from no technology access fees, fewer spray applications, reduced fertiliser requirements and lower transport, storage and handling expenses (both on-farm and post farm).

130 Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman

The majority of the results are driven by on-farm impacts. The average on-farm gross margin for canola production alone (that is, excluding rotational benefits in following years) of the three non-GM varieties is around $45 per hectare lower than for the three GM varieties across the projection period.

In a season with average rainfall, for a Victorian farmer producing an average of 300–400 hectares of canola, a gross margin increase of about $45 per hectare is worth an additional $13 500–18 000 of income per year.

The year‑by‑year differences in gross margins range from approximately $68 per hectare in a year of high yield and average prices, to negligible differences in a drought year. The results are therefore sensitive to climatic conditions. ACIL Tasman (2007a) estimates that the 2006 drought more than halved the impact of the moratorium in that year. This outcome is because many of the direct benefits of GM canola — in particular, for the higher yielding varieties — are only experienced in average to good seasons.

The capacity to express the GM traits is also a key adoption rate driver. Farmers will only pay higher seed costs and technology fees if they are confident that the benefits will outweigh the additional costs. Thus, if weed control using conventional techniques is effective, a farmer is less likely to pay for access to GM technology. Similarly, if the yield benefits of hybridisation are unable to be expressed due to short growing seasons or unreliable rainfall, a farmer is unlikely to purchase hybrid GM varieties.

The result of the analysis is that the continuation of the moratorium comes at a significant cost. If the moratorium were lifted, canola producers would be likely to earn an additional $110–115 million between 2008 and 2016. This income would be largely spent and flow through the Victorian economy, increasing the state’s gross domestic product (GDP). Above and beyond GDP impacts, there would be a rise in employment, real wages and (probably most notably) exports and resulting improvements to balance of trade. Modelling these flow-on economic effects was beyond the resources of the project.

A7.3 Key sensitivities

The results of the model are highly sensitive to some of the input assumptions. The results are most sensitive to the adoption rate of GM canola. An increase in the timing of adoption of GM canola, such that a maximum adoption rate was achieved one year earlier, results in an increase in cost of an overall moratorium to 2016 of $18 million.

Results are sensitive to the assumed future price of canola, with a 10 per cent increase in the forecast future price of canola increasing the cost of an ongoing future moratorium by $10 million.

The results are also sensitive to the assumption that grain prices, excluding the oil content premiums, are the same across all varieties. It is unlikely that the commercial release of GM canola would have caused the average price of Victorian canola to fall or that consistent and widespread non-GM premiums would have eventuated (for the bulk commodity). Based on the adoption rates shown in figure A7.1, GM canola would have accounted for only 34 per cent of total production by 2007. This would still provide enough non-GM canola for EU export markets which had an effective moratorium on GM canola seed 131 Review of the moratorium on genetically modified canola in Victoria

at that time. In addition to the quantity of non-GM canola being produced being sufficient to satisfy sensitive markets, the domestic canola price was at a significant premium to international prices for much of the time between 2004 and 2008, which would have masked any non-GM price premium that may have occurred in the domestic market.

It is possible that, given the introduction of GM canola into Victoria, a small market will emerge for non-GM canola which will attract a premium sufficient to cover the additional cost of segregation (of keeping the non-GM canola segregated from the GM canola). However, as this non-GM market is expected to be small, the total production of conventional canola is likely to exceed the demand for non-GM canola. Thus, the margin above the segregation cost that could be achieved by non-GM producers, who market their canola as such, would be small as conventional canola producers could easily supply the market and would compete any margin away.

As mentioned previously, the results are quite sensitive to the assumption that the price of all canola grain varieties is the same. Should, for example, the per tonne sale price of GM canola be 18 per cent less than that of non-GM canola in a market free of GM canola, the cost of the moratorium is reduced to zero. In other words, the cost of the reduced grain prices will have cancelled out the benefits (such as higher yields and reduced chemical inputs). Should the differential be greater than 18 per cent, the impact of the moratorium becomes positive (or there is a net cost to the introduction of GM canola). However, in such a situation, the inferior gross margins of the GM varieties to the non- GM varieties would make adoption of GM technology by the farmer highly unattractive, meaning the need for a moratorium is greatly reduced, if not non‑existent. A moratorium preventing the use of GM canola is only required insofar as people are wanting to otherwise use GM varieties.

The assumption as to what proportion of the technology access fee remains within the state is challenging. It depends upon unknown variables such as:

• to which state or country to attribute Monsanto or Bayer CropScience revenue from Victorian GM canola seed sales

• the extent to which the costs incurred in bringing the GM seed to market is already a ‘sunk’ cost

• the extent to which technology access revenue will ultimately be reinvested back into Victoria (for example, through research and development of locally adapted GM seed varieties in the future).

For the purposes of the model, ACIL Tasman (2007a) assumes that 75 per cent of the technology access costs remain within Victoria. Had this figure been 100 per cent, the overall cost of the moratorium would have been $17 million larger, while if it were 0 per cent, the cost of the moratorium would be $50 million less (that is, $125 million).

Because 75 per cent of the technology access costs is assumed to remain within the state (and therefore largely represents a transfer rather than a loss), results are not particularly sensitive to changing the cost of introducing GM canola. For example, even with a doubling of the technology access costs, the cost of the moratorium is reduced by only $23 million. On the other hand, with 132 Appendix 7 Summary of the cost–benefit analysis undertaken by ACIL Tasman no technology access costs, the cost of the moratorium rises by only 17 per cent.

There are four primary assumptions underpinning the treatment of segregation costs in the Victoria supply chain.

• In the long run, segregation of non-GM canola from GM canola is only likely to occur if there is an economic incentive to do so (that is, the price differential between GM and non-GM canola outweighs any cost of segregation).

• While GM canola production is less than the production of non- GM canola, it is likely that GM canola will be handled separately to conventional canola and incur additional segregation costs, until such time as GM canola becomes dominant (that is, constitutes more than approximately 50 per cent of the market).

• GM canola growers are likely to be held accountable for any economic loss that they could cause through increased adventitious presence (AP) levels in non-GM canola and other grains, and therefore will take steps to minimise the risks commensurate with the possible economic impact they may have.

• Supply chain costs for other grains such as wheat, barley, and pulses handled in the supply chain are negligible and have not been included in the cost–benefit analysis. Other reasons why these costs have not been included is that a tolerance of 0.9 per cent AP level was introduced during the current moratorium, and that there is considerable GM material already being consumed in Victoria by livestock industries. Therefore, the supply chain is already dealing with GM AP risks.

For the purposes of this analysis, it has been assumed that there will be a small market for non-GM canola that will pay a sufficient premium to compensate for the additional costs associated with segregation.

Based on Foster’s (2006) results and international comparisons, it has been assumed that the segregation costs per tonne for non-GM canola will be $14, for a small proportion of the market attracted by any price premium. This segregation cost is made up of approximately:

• $13 per tonne on-farm segregation costs which includes cleaning, certified seed cost that would otherwise not be incurred because farmers would have saved some seed, general farm hygiene and labour costs.

• $1 per tonne additional bulk handling and storage charges.

These costs are assumed to be borne by the non-GM farmer as segregation costs would only be incurred if they could be passed on to the consumer (that is, there is a sufficient market premium for non-GM canola to cover additional segregation costs). GM farmers are likely to incur a smaller segregation cost, largely to avoid the risk of their seed getting mixed with that of non-GM and subsequent risks of damages. In the model, standard transport, storage and handling costs are therefore only applied to non-GM farmers in a state where 133 Review of the moratorium on genetically modified canola in Victoria

GM is not allowed. In this way, segregation costs, whether they are borne by GM or non-GM farmers, are therefore a cost of GM (or their avoidance is a benefit of the moratorium).

In order for the costs of segregation to outweigh the benefits of GM, overall transport, storage and handling fees would have to approximately double.

A7.4 Conclusions

In aggregate, the current moratorium has already imposed a small cost upon Victoria, with a far larger cost inevitable over the next few years, even if the current moratorium expires and is not replaced. The net cost of a continuation of the moratorium beyond 2008 is larger.

• The direct cost (in net present terms) of the current moratorium is approximately $60–65 million.

• The direct cost of extending the moratorium from 2008 to 2016 is approximately $110–115 million.

• The direct cost of the moratorium for the full period 2004–2016 is approximately $170–180 million.

The impacts of the moratorium presented in ACIL Tasman (2007a) are those that can be quantified with high levels of certainty within the scale of this project. If the moratorium were allowed to expire, a net benefit of this size would have additional flow-on effects to biotechnology research and development, and the broader Victorian economy.

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