Economic Aspects of Segregation between GM and Non-GM Crops in Italy

The worldwide area dedicated to GM crops has been steadily increasing over the last 20 years and, to date, more than 150 million hectares are devoted to these varieties (Tillie, Vigani, Dillen, & Rodríguez Cerezo, 2012). In countries where these technologies are available, the rate of adoption is generally high. According to the US Department of Agriculture (USDA, Foreign Agricultural Service [FAS], 2012a, 2012b), the United States, with 69.5 million hectares of GM crops planted in 2012, is the largest producer in the world. Brazil ranks second, with nearly 36.6 million hectares of GM maize, soybean, and cotton in the 2012/2013 marketing year. The adoption rate of GM soybean reached 85% in 2011/2012 (21 million hectares), whereas the share of GM cotton was about 32% (490,000 hectares) and that of GM maize was 67% (almost 10 million hectares). By July 2012, Brazil had 34 genetically engineered crops approved—19 maize varieties, 9 cotton, and 5 soybeans. Argentina, with 23.6 million hectares in 2011/2012, provides almost 15% of the total world production and is the third largest producer (USDA FAS, 2012c, 2012d). Although these data provide a clear picture of the adoption of GM crops around the world, assessing the size of non-GM production is more difficult. This value is not simply the difference between the total production and the GM one, as a non-GM crop is defined according to specific labels requiring thresholds for GM admixture and certifications of compliance. Production data of identity-preserved (IP) non-GM crops are even more difficult to derive; non-GM IP crops require stricter controls along the supply chain, third party certification, and a stronger commitment of all the parties involved. Therefore, most estimates rely on trade data, although they mostly provide upper limits rather than ranges (Tillie et al., 2012). The demand for non-GM crops has three main destination markets (EU, South Korea, and Japan) and remained stable over the last ten years. According to the European feed industry association (FEFAC), almost 15% of the EU compound feed production is certified as non-GM. Poultry is the sector with the strongest demand for non-GM feed, as a significant part of poultry meat is sold under some sort of quality labels (i.e., organic) requiring non-GM feeding. Moreover, soybean meal—for its characteristics—is hardly replaceable in poultry, piglet, and calf feeding, while cattle and mature animals can find more substitutes (Bertheau & Davison, 2011). The EU is almost self-sufficient for maize; only 10% of the internal consumption relies on imports (nearly 6.2 million of metric tons [MMt]), 75% of which are nonGM and originate mainly from Ukraine and Brazil (USDA FAS, 2012b). Instead, the EU is a net importer of soybeans and soybean meal, with non-GM varieties imported mainly from Brazil. Although the rate of adoption of GM maize and soybean crops in Brazil has been steadily increasing over the last few years, this country is still the largest world exporter of non-GM soybean Alessandro Varacca, Stefano Boccaletti, and Claudio Soregaroli Università Cattolica del Sacro Cuore, Piacenza, Italy This article assesses the food supply chain for non-GM soybean meal, with particular regard to the upstream stages between overseas producers, international trading companies, and their supply to Italian feed producers. Using transaction-cost economics as a methodological framework and the information collected from a set of interviews with industry representatives, we describe the organizational arrangements that agents adopt to minimize transaction costs. Consistently with theory, we examine the impact of uncertainty on the coordination arrangements. We focus on two dimensions of uncertainty—product-quality uncertainty and environmental uncertainty. We argue that the actual organizational arrangements between transactors are consistent with the theory that, whereas product-quality uncertainty and some degree of asset specificity would lead to vertically integrated forms of governance, environmental uncertainty operates in the opposite direction.