The United Nations yesterday offered its two cents on genetically engineered crops and left little doubt that it fully supports such research. The statement was a nice endorsement for the work of agribusiness giants such as Syngenta (NYSE:SYT), Monsanto (NYSE:MON), DuPont (NYSE:DD), Bayer AG's (NYSE:BAY) Bayer CropScience, and BASF (NYSE:BF). But the U.N. also noted that not enough is being done to create seeds that meet the needs of developing nations. This is hardly surprising, since producers in the developed, not the developing, world are agribusinesses' chief customers.
So, in the final analysis, the U.N.'s musings are little more than positive public relations for genetically modified (GM) foods. Or are they?
Maybe not. In coming years, it's possible that the developing world could become more of a market for GM seeds, so the U.N.'s endorsement may be a big plus for agribusiness. Currently, the U.S., Japan, and Europe subsidize some farm production. Protected by subsidies, farmers in these countries can boost yields and drive down prices without feeling the pinch of lower returns. Instead, developing countries are the ones that suffer, as low prices deter their agricultural development.
But the system may be headed for a change. Agricultural supports have been a hot topic in trade talks, and Europe recently offered to eliminate its export subsidies if others make similar moves. Theoretically, if subsidies go down and prices go up, more folks in poorer countries will be drawn into farming, meaning a new set of potential customers for GM seeds.
Evidence is already surfacing that suggests the Third World could be an eager customer. Egypt, for example, is using GM drought-resistant cotton. Last year, the country felt strongly enough about the crop to file a complaint with the World Trade Organization against the European Union for its ban against GM cotton.
It should be noted that cuts in crop subsidies could be a decade or more away. But given that creation of new seeds could also take as long, companies that focus now to meet the needs of developing world countries may be making a good bet.
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Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.
