AgDM newsletter article, November 1999

Will an increased non-GMO demand harm the GMO market for corn and soybeans?

Dermot Hayesby Dermot Hayes, 515.294.6185,, Sergio Lence and Robert Wisner, Economists

Will an increased non-GMO demand harm the GMO markets for corn and soybeans?† In the short run, the answer to this question depends on the share of production that is non-GMO compared to the share of total demand for non-GMO products.

Non-GMO supply exceeds demand

Suppose the share of U.S corn supply that is non-GMO is 50 percent and the share of total demand for non-GMO corn is 30 percent.† In this case, there is a relative surplus of non-GMO corn and much of it will be used by individuals who donít care if the corn is non-GMO.† These individuals will not pay a premium or discount for non-GMO corn and producers who own GMO corn will not have to take a discount.

However, itís possible some customers who want non-GMO products will offer a premium to compensate the producer for segregating the crop, and for certifying the crop is non-GMO.† These premiums are very much like the premiums for high oil corn or white corn and reflect the emergence of a niche market for non-GMO crops.

Non-GMO demand exceeds supply

If the share of total demand for non-GMO crops is greater than the share of supply that is non-GMO, serious problems could emerge for GMO crops.† For example, suppose only 30 percent of the U.S. soybean crop is non-GMO but that 40 percent of soybean customers want non-GMO beans.† In this scenario, there is a surplus of GMO soybeans and some of the customers who desire non-GMO products will have to be given an incentive to change their minds.† The only way to do this is to offer these customers a discount to buy the GMO crop.

In the first example, the surplus of non-GMO crops did not cause problems because this surplus ended up being consumed by a customer that didnít care whether the product was non-GMO.† In the last example, the consumer would prefer the product be non-GMO.† Processors will be forced to develop a price schedule that reflects the relatively low value of GMO soybeans in the market.† Producers who own GMO soybeans will find they are in a buyersí market and the discount will be applied to all GMO soybeans and not just to the proportion of GMO soybeans that are in surplus.

Estimating non-GMO supply and demand

At harvest-time, the share of consumers who want non-GMO crops is uncertain.† If this share grows, and if there is some possibility that it might exceed the share of the crop that is non-GMO, it wonít make sense to store GMO corn unless it can be purchased at a discount.† Hence the mere possibility that problems might emerge may be enough to cause problems to emerge.† This points to an immediate need for accurate estimates of the shares of production that are non-GMO and the likely share of demand for non-GMO crops.

Corn supply and demand

Estimates presented in the article (Potential Market for Non-GMO Corn and Soybeans -- Bruce Babcock -- Nov. 1999) suggest that an upper limit on the consumption share of non-GMO corn is about 37 percent with the most realistic scenario at about 20 percent of the total.† The supply scenario indicates that about 65 percent of the corn acreage was planted to non-GMO, but given the caveats on co-mingling in the previous section, letís assume a worst-case scenario where 30 percent of the available supply is non-GMO and 37 percent of the customers want non-GMO corn.

Table 1.† Estimated Non-GMO Corn Supply and Demand





Best Case










Worst Case




This suggests that 7 percent of the customers will need to be offered a discount to encourage them to purchase GMO corn.† The customers who switch will likely be corn processors who choose to use GMO corn and target that portion of their gluten feed and meal production to domestic users.† There is a ready market for corn gluten in the U.S. livestock industry and this suggests that the necessary discount would not be very large.† If we use the more realistic scenarios discussed in the previous two sections, about 20 percent of the customers will want non-GMO corn while more than 50 percent of the available supply is non-GMO.† This suggests that discounting of GMO corn will not be necessary.

Corn premiums

The size of premiums paid for non-GMO corn will be market determined, depending on the supply of such corn, and willingness of consumers to pay for it, as well as costs of identity preservation. As the figures above indicate, resulting premiums will depend heavily on the final percent of the supply that is useable non-GMO corn. If the potential demand for non-GMO corn exceeds the available supply, it could result in substantial premiums. The size of the premiums is unknown, since at some price substitutions will occur. In the other case, modest premiums might be expected for non-GMO corn. With the non-GMO demand that currently exists, discounts for GMO corn are not anticipated, but the demand picture is fluid. Premiums being reported for non-GMO corn in some markets reportedly have been in a 10-15 cent range.

Soybean supply and demand

For soybeans, seed industry reports suggest that 30 to 45 percent of the available supply is potentially non-GMO.† The market share for non-GMO soybeans estimated above is 32 percent if the U.S. export markets for soyoil and soymeal both switched over to non-GMO.† However, the soybean varieties approved in the U.S. also are approved in Europe, and it is therefore not likely that the entire EU market will switch. If 7 percent to 10 percent of customers ask for non-GMO soybean products, the market should handle the situation quite easily.† If EU food retailers and consumers decide to reject meat from animals fed GMO soymeal, the GMO discounts will emerge.

Soybean premium

Like corn, soybean premiums will be market determined, and will depend considerably on the useable percentage of supply that is non-GMO. Recent trade reports indicate premiums have been in a 5 to 35 cent range for non-GMO soybeans at some markets. At this writing, the main part of the soybean export demand that is transitioning toward non-GMO is the food use in Japan, which is about 174 million bushels or 6 percent of the currently forecast 1999 production. South Korea, the EU, and Mexico are other markets to watch closely for GMO/non-GMO developments. Together, these three areas accounted for 64 percent of the 1998-99 U.S. soybean exports. The EU market was nearly twice as large as either Japan or Mexico.

Long-range perspective

In the long run farmers will be able to adjust the share of production that is non-GMO to suit the needs of the market.† The relative prices of GMO and non-GMO crops will reflect differences in production costs.†

For example, if GMO soybeans cost 10 percent less to produce and market, the lower cost will be reflected in price differentials between GMO and non-GMO soybeans.† The share of total production that is non-GMO will depend on the share of total demand for the non-GMO crop at this relative price.† In the scenario just described, if 40 percent of consumers are prepared to pay a 10 percent premium for non-GMO soybeans, about 40 percent of production will eventually be non-GMO.† Some sectors of the grain-handling infrastructure will specialize in GMO crops and others will specialize in non-GMO crops.


|Ag Decision Maker Home Page|