GM Crops - Invest or Not?
Updated: Feb 2, 2021
GM Crops - Invest or Not?
Written by: Teo Kang Qi
Introduction to GM crops
Genetically modified crops, also known as GM crops, have caused a debate on whether it brings benefits or harm. The production of GM crops involves the use of microbiological technology to increase the total yield of the crops, improve resistance to diseases and to improve the overall food quality.
As of 1999, Singapore has an interest in the use of GM crops. In April 1999, the Genetic Modification Advisory Committee was formed to ensure public safety and pave the way for the commercial use of GM organisms and products. It was expected that GM products will exceed US$500 billion in about 15 years (as of 1999) and Singapore aims to obtain US$25-30 billion share in this market. As of 2020, 43 GM crops have been approved in Singapore (Asia Pacific Biotech News, 1999). GM crops currently sold in Singapore consist of alfalfa, canola, cotton, maize, potato, soybean, and sugar beet (Singapore Food Agency, 2019).
Cost-Benefit Analysis of GM crops
On the left of the equation: costs. The cost of producing GM crops are high due to the advanced technology needed.
There is also an ongoing debate over GM foods. GM foods are also nicknamed ‘Frankenfoods’ by many. Although 90% of scientists believe that GM foods are safe, only 1/3 of the consumers share this belief (The Business Times, 2018). The common concerns are mostly towards unwanted changes in nutritional value and potential toxic effects (McPhetres, 2019).
In 2012, a research article surrounding the use of GM corn to feed rats was published by a French molecular biologist, Gilles-Éric Séralini. In his two-year studies, he had reported an increase in tumours among rats. The research publication was soon the centre of attention and photographs from the article of treated rats with large tumours were widely circulated by the media. Its legitimacy was soon questioned after it was pointed out by experts that the growth of tumours in rats is more likely to be part of its natural aging process (Entine, 2014).
On the right side of the equation: benefit. In a Meta-analysis of the impacts of GM crops, 147 data related to the outcomes of GM crop use was studied.
Figure 1: Impacts of GM Crop Adoption
Source: Klümper & Qaim, 2014: A Meta-Analysis of the Impacts of Genetically Modified Crops
On average, the use of GM technology has a 21.6% increase in yield and 36.9% decrease in pesticide use. Most importantly, the adoption of GM technology has a 68.2% increase in farmer profit. With the increasing need for higher yielding crops, having more GM crops may achieve the target of having 70%-100% more food by 2050 by supporting the growing population (Klümper & Qaim, 2014).
With GM foods competing with traditional food, consumers have to exercise their market power. Through market competition, considering both cost-and-benefit and risks, if GM foods fail to appeal to consumers, producers will sustain a subnormal profit or loss in the long run. This will cause GM foods to be removed from the market.
On the other hand, if certain GM foods survive the competition, it means that it is accepted by some consumers. Thus, market competition can be a proxy for policy makers, allowing a country to know if it is rational to invest in the market.
If GM foods are more expensive than traditional food and it still survives in the market, that means that there is a demand for such GM foods. If GM foods are cheaper than traditional food and yet GM foods are still losing market share under this condition, it means that non-GM foods are preferred (Chen, 2006).
Demand and Supply of GM food and Organic food
Figure 2: Demand and Supply of GM food and Organic food
Source: Smyth, Kerr, & Phillips, 2015: The Unintended Consequence of Technological Change: Winners and Losers from GM Technologies and the Policy Response in the Organic Food Market
On the right side of the graph, it represents the market of a particular organic crop.
Without the competition of GM variety of the crop, producers of the organic crop have to compete with producers of traditional crops.
On the left side of the graph, it represents the market for the organic variety of the same crop. When GM foods are not labelled, consumers would be unable to find out if they are consuming GM products. Depending on consumer choice, if the consumer prefers not to consume GM products, they may choose to buy GM-free products. This will cause the demand curve of organic food to rise while causing the demand curve of GM food to fall (Smyth, Kerr, & Phillips, 2015).
Should Singapore Invest more in GM crops?
A nationwide survey was conducted in 2011 with 600 respondents. While many were not clear on what GM foods were, more than 50% of the respondents agreed that GM foods have better quality and would consider purchasing it (Khew, 2016).
The global GM crops market is expected to exhibit a compound annual growth rate (CAGR) of 8.7% in terms of revenue. The unique features of GM crops to be resistant to diseases and yet increase yield is able to fuel the growth of this market. Several companies have been investing and researching growth strategies, such as product launches, to support the growth of this market (Coherent Market Insights, 2020).
In order to be a rational investor, there should be updated information of the market. Singapore aims to obtain US$25-30 billion share in the GM foods market and yet, the latest survey of GM foods was conducted 9 years ago. GM food has potential to survive in the Singapore market. However, it is not mandatory to label GM foods in Singapore. With proper labelling, the demand of such products will then be known and then, policymakers will be able to know if it is rational to invest in the market (Singapore Food Agency, 2019).
Chen, C.C.H (2006). Labeling genetically modified food: Comparative law studies from consumer's perspective. Retrieved from SMU Research Collection of School Law.
Entine, J. (2014, June 24). Profile of Gilles-Éric Séralini, Author Of Republished Retracted GMO Corn Rat Study. Retrieved from Forbes.
Genetically Modified Crops Market to Reach USD 37.46 Billion at a CAGR of 8.7%, Globally, by end of 2027. (2020, March 4). Retrieved from Coherent Market Insights.
Khew, C. (2016, April 1). Facts, not fears, the key to dealing with GM foods. Retrieved from The Straits Times.
Klümper, W., & Qaim, M. (2014, November 3). A Meta-Analysis of the Impacts of Genetically Modified Crops. Retrieved from Plos One.
Labelling on Genetically Modified Food. (2020, August 14). Retrieved from Singapore Food Agency.
McPhetres, J. (2019, May 24). Genetically modified food: Would you eat it if you understood the science behind it?. Retrieved from University of Rochester Newscenter.
Singapore’s Growing Interest in Genetically Modified Foods. (1999). Retrieved from Asia Pacific Biotech News, Vol.3, No.18, pp 446.
Smyth, S., Kerr, W., & Phillips, P.W., (2015, June 16). The Unintended Consequences of Technological Change: Winners and Losers from GM Technologies and the Policy Response in the Organic Food Market. Retrieved from MDPI.
The debate persists over GMO foods. (2018, April 24). Retrieved from The Business Times.