Cargill fires first shot in legal battle over GMO trade responsibility

By Tom Polansek 15-Sept-2014

CHICAGO (Reuters) - Cargill Inc's [CARG.UL] lawsuit against Syngenta AG (SYNN.VX) over
rejections of genetically modified U.S. corn by China may be just the start of legal challenges
against global seed makers over trade with one of the world's biggest markets.
Trading giant Cargill said in court documents on Friday that it had lost more than $90 million
because Syngenta sold Agrisure Viptera corn, known as MIR 162, to U.S. farmers without first
obtaining import approval from China, which has turned away boatloads of U.S. crops
containing the variety over the past year.
The lawsuit will be a test case of who is ultimately responsible for such rejections that damage
international trade: the seed companies that develop unapproved GMO traits or the merchants
who sell grain that may be contaminated with it.
"Let's face it, it's dollars and cents," Illinois farmer John Brink said about the motivation for seed
companies that launch U.S. sales without approval from all major importers.
"If they can get it out there a growing season earlier, it's more money in the pocket, more money
for the company, more money for the shareholders."
Cargill filed its case as U.S. farmers are preparing to harvest their first crop of another GMO
variety of Syngenta corn called Duracade, which China has not approved for import.
Nearly 90 percent of corn in the United States, the world's top grains producer, is now
genetically engineered, according to the U.S. Department of Agriculture, as farmers embrace
technology that helps kill weeds and fight pests.
Approvals of the crops from importers are critical as the coming harvest is expected to be a
record 14.395 billion bushels - outstripping domestic demand of 11.855 billion, which mostly
goes to animal feed or ethanol production.
China is one of many countries that is cautious about GMO crops. Some consumers worry about
the safety of the crops for animal and human consumption, and there are concerns over their
impact on the environment, including increased resistance of weeds.
Farmers like Brink place the blame for China's rejection of U.S. corn containing Viptera squarely
on Syngenta. And global grain trader Archer Daniels Midland Co (ADM.N) has said it too is
considering legal action against the seed maker over the variety.
Illinois-based ADM "has not yet made a formal decision on what actions it will take,"
spokeswoman Jackie Anderson told Reuters in an email. "Wide-scale planting of traits that aren't
approved by key importing countries diminish the competitiveness of American grain and feed
exports," she added.
Bunge Ltd (BG.N), another major grain trader, did not reply to a request for comment.
Syngenta began selling corn seed containing MIR 162 to U.S. farmers in 2010 after winning
approval from U.S. authorities. China has been considering an application to approve the variety
for four years.
Cargill said in its lawsuit that approval from China for imports "typically takes two to three
years," while approval for cultivation can take longer. Syngenta had applied for both.
Beijing began rejecting U.S. shipments of corn containing MIR 162 in November, costing the
agriculture industry up to $2.9 billion, according to the National Grain and Feed Association.
RECKLESS CONTAMINATION?
Cargill's claims that Syngenta recklessly contaminated the U.S. grain supply by selling MIR 162
without import approval from China are baseless, Syngenta spokesman Paul Minehart said in a
statement.
Syngenta "strongly upholds the right of growers to have access to approved new technologies
that can increase both their productivity and their profitability," he said.
Cargill itself took a risk by agreeing to sell U.S. corn to China, knowing the variety was in
production, said a grain exporter for a rival company who asked not to be named.
"Any time you do business with China, there's a risk," the trader said. "You try to make your
trade with that in mind."
"Cargill, like any grain trading company, saw a margin and a way to make money," he added.
"They saw an opportunity and they went after it."
Farmers and grain merchants need to keep MIR 162 corn separate from other varieties to prevent
accidental shipment to unapproved markets. MIR 162 is approved for shipment to other major
buyers of U.S. corn such as Japan and Mexico.
Cargill has said it asked farmers to provide advance notice when they were delivering MIR 162
corn to its grain elevators. However, MIR 162 corn can still be found throughout the U.S. corn
supply, effectively closing the lucrative Chinese market to U.S. supplies, according to the
lawsuit.
"Syngenta should have never even sold it until it was approved," said Caleb Hamer, a farmer in
Black Hawk County, Iowa, who did not plant MIR 162 corn. "Asking us and then the end users
to keep it segregated is a whole can of worms that nobody wants to deal with."
For Duracade corn, Syngenta has teamed with grain merchant Gavilon, owned by Japanese
trading house Marubeni Corp , to work with farmers to keep the GMO crop out of unapproved
markets. The world's biggest traders, including Cargill and ADM, have said they will limit their
handling of Duracade corn because China has not approved it.
Dow AgroSciences, a unit of Dow Chemical Co (DOW.N), is awaiting U.S. approval to begin
selling Enlist, yet another type of GMO corn that is not approved for import by China. Dow
officials have said they may go ahead with commercialization in the United States even without
Beijing's approval.
Dow is "actively participating in industry-led initiatives, as well as directly engaging with the
appropriate regulatory authorities to secure approvals in China," spokeswoman Kenda Resler
Friend said.
Monsanto Co (MON.N), the world's largest seed company and top developer of GMO crops, did
not reply to questions about its crop commercialization policies. But Monsanto leaders have been
actively working to curry Chinese favor for GMO crops.
Exports of GMO crops, or crops that inadvertently contain traces of GMOs, have been a problem
in the past. Many foreign buyers of alfalfa from the U.S. Pacific Northwest routinely test U.S.
alfalfa supplies to make sure they do not contain GMOs.
U.S. processors and exporters became hypersensitive to issues related to GMO corn after a
variety unapproved for food use known as Starlink was discovered in a U.S. shipment to Japan in
2000. Sales to the biggest U.S. customers at the time Japan and South Korea dried up
overnight. The subsequent tracing, sorting, testing, separating and certifying of GMO cost the
industry millions of dollars.
(Additional reporting by Karl Plume and Carey Gillam; Editing by Eric Walsh)