In a few weeks the annual rite of spring planting begins. This year, farmers will plant more acres of genetically-modified soybeans than ever before. Government officials predict GMO soybeans will account for 54 million acres. Over the past few years, China has emerged as one of the biggest markets for the world's soybean crop. But new trade restrictions by China that target genetically-modified crops mean U.S. farmers may be losing a market.

	Richard and Delaine Scholljegerdes grow corn and soybeans on their farm just outside of Waseca, Minn. Despite some concerns about the use of genetically-modified seed, Scholljegerdes plans to plant GMO soybeans, because they'll bring in little more money. He says he doesn't plant GMO corn, because there's no difference in income. (MPR Photo/Erin Galbally)

Richard Scholljegerdes and his oldest son grow corn and soybeans just outside of Waseca. Around the end of the month they'll sow their fields - first with corn and then with genetically-modified soybean seeds. Scholljegerdes says they plant GMO soybeans because they get a little bit more money for their crop.

"We would not plant any GMOs if it wouldn't be financially beneficial, and that is a consideration," says Scholljegerdes. "We do not plant GMO corn because we haven't seen that to be a benefit, but in the case of soybeans it has been a benefit."

Farmers around the country seem to agree with Scholljegerdes. The federal government estimates GMO soybeans will make up 74 percent of the crop this year.

China purchased approximately $1 billion worth of American soybeans in 2001. But this year, China is reconsidering whether it will buy any GMO products. By harvest time, the China market may be gone.

Al Ambrose is a vice president at Harvest States, which ships Midwestern-grown soybeans all over the world. Ambrose says China's policy shift will affect the profitability of soybeans on a global level.

"With the U.S. and South America both ramping up production dramatically over the past decade - if one of your major importers becomes less of an importer while supplies are still increasing, you're going to have a negative impact on the world price for soybeans," says Ambrose. "Minnesota is the third-largest soybean producing state in the United States, and our prices are going to go down with the rest of the world price service."

	China is one of the largest importers of U.S. soybeans. See chart. This year, however, China says it will place new restrictions on genetically-modified soybeans, meaning a big drop in U.S. soybeans purchased by China. Some 74 percent of America's soybeans are genetically-modified varieties. (Photo courtesy of USDA)

In the past few years, China has worked hard to ramp up its own production of soybean meal and the fertilizer diammonium phosphate. As a result, China doesn't buy much of either anymore from the United States. And that's not all.

Recent reports indicate China has a glut of domestically-produced corn. That's led many experts to believe China's latest policy shift isn't really about genetically-modified crops. Instead, Chinese officials may be using it as an excuse to stop importing soybeans and grow more of their own.

Iowa State University professor Dermot Hayes says the big losers will be farmers in other countries. That's because farmers in South America who plant GMO soybeans can't rely on government subsidies to stabilize their prices. As a result, their crops will cost more on the world market. Hayes says thanks to government subsidies, American farmers should be OK.

"Producers should be indifferent - as long as the government maintains the program that compensates them for the reduction in market prices. So strangely enough, the industry isn't affected as much as the average taxpayers," says Hayes.

U.S. soybeans will continue to roll into Chinese ports until the end of December. After that, imports will have to be accompanied by special certification that could mean months of delay. In the meantime, poor developing countries may soon be able to afford U.S. soybeans, because it's likely prices will begin falling on the world market.

Institute for Agriculture and Trade Policy