by Mark Friedman on Monday, Aug. 31, 2009 12:00 am
Ray Vester, who has been farming east of Stuttgart for more than 40 years, is one of the farmers whose fortunes were affected by the discovery of genetically altered rice in U.S. crops in 2006.
Three years after the government announced that genetically altered rice had contaminated U.S. rice crops, hundreds of lawsuits are still being filed, the loss to U.S. rice farmers has reached an estimated $1 billion or more, and rice producers have permanently changed their practices.
Since 2007, rice producers have been meticulously documenting all aspects of their crops to prove that any stray strains of the genetically altered rice that contaminated their crops are gone.
"We've got to do it in order to have a market for our rice," Robert Petter, president of the Arkansas Rice Council, said last week. "It was either do it or not have a market."
That still hasn't assuaged the fears of the European Union. The 27-country EU market remains essentially closed because it demands that U.S. rice be tested and certified that it is 100 percent free of genetically modified rice.
The EU officials' fears can be traced to August 2006, when the U.S. Department of Agriculture announced that trace amounts of genetically altered rice had somehow made its way into the U.S. rice supply.
Thousands of angry rice producers are still filing lawsuits in several U.S. District Courts across the South against Bayer CropScience of Research Triangle Park, N.C., which designed the genetically altered rice. The rice is resistant to Bayer's herbicide, Liberty Link. Plaintiffs' attorneys said in their lawsuits that Bayer wanted to develop rice that would survive spraying from Bayer's Liberty herbicide, killing weeds without damaging the rice crop.
This month alone, more than 200 separate lawsuits were filed against Bayer.
The damage done by the contamination is difficult to calculate, but some estimates put the losses for all U.S. rice farmers now at more than $1 billion, said Greg Yielding, executive director of the Arkansas Rice Growers Association.
"It was devastating," he said. "It's not just the Arkansas market. It was the market for the U.S. rice around the world."
In Arkansas, rice farmers planted about 1.54 million acres of long-grain rice, generating sales of more than $1 billion in 2005. In 2008, Arkansas farmers harvested 1.4 million acres of rice with a value of $1.5 billion. Most Arkansas farmers grow the long-grain variety of rice. Arkansas produces about half the rice grown in the United States.
Rice producers blame Bayer for allowing the genetically altered rice to escape from a test plot into the rice supply. A spokesperson for Bayer couldn't be reached for comment, but the company, in court documents, denies any wrongdoing.
Class Action Denied
A ruling last year in a Missouri District Court has helped fill the courthouse with cases. Judge Catherine Perry denied a motion by plaintiffs' attorneys to consolidate the hundreds of plaintiffs' suits into a class action. She wrote in her August 2008 order that the plaintiffs' claims varied too much to fit as a class action.
As the possible deadline for a claim to be filed neared this month, rice producers flooded U.S. District Courts.
In Arkansas, one single lawsuit has about 1,500 plaintiffs, which may be a record for a case not certified as a class action, according to one of the plaintiffs' attorneys, Paul Byrd of Little Rock. It is unclear how long these cases will take to get through the court system.
The USA Rice Federation is trying to persuade the EU to buy the U.S. rice, even if it contains trace amounts of the genetically altered rice, said Bob Cummings, senior vice president of the USA Rice Federation.
For the 2008 rice crop, 99.99 percent of the long-grain tested showed it was not genetically altered, he said.
"What we're saying to the EU is here's a test that's as sensitive as we can predict," Cummings said. "So it's time for you to remove your mandatory testing requirement ... because we've made a very good and very successful effort to get rid of the trait."
But some rice producers aren't holding their breath and don't think the EU will lift its mandatory testing anytime soon. "The EU has zero tolerance," Yielding said.
It's unclear how much the disappearance of the EU market has cost rice farmers. The market was less than 10 percent of the U.S. rice export market in 2005.
"There's no way to put a dollar value on what it would be because every year is different," said Chuck Wilson, the Arkansas field director for the USA Rice Federation. "You don't know what they would buy in a given year anyway, with or without that situation."
Still, the USA Rice Federation can't persuade most of the countries in the EU to buy U.S. long-grain rice without further testing, Cummings said.
It's too risky for a rice producer to sell to the EU because even if the rice passes tests in the United States, it will be retested in the EU countries, except for the United Kingdom, Cummings said.
"If a positive result turns up, the importer and exporter are left in a very difficult situation because the rice can't enter the EU," he said.
The brown rice export market to the EU had been 142,475 metric tons in 2005. By 2007, it was at 16,816 metric tons. However, exports rose to 21,827 metric tons in 2008.
Cummings said the federation was trying to get the EU to lift the ban on the tests because of the success of the documentation and the "very, very low levels of presence that are showing up" in the 2007 and 2008 crops.
One fear is that the U.S. rice has been out of the market for so long that it will be hard to win customers back. "It's going to be a challenge to get back into the market," Cummings said.
Once it's easier for rice to be sold in the EU, Cummings said, the federation would launch an advertising campaign and work with the wholesalers and retailers to "re-establish the U.S. presence."
2006 was gearing up to be a good year for rice producers.
"About every 10 years, you'd have a really good surge in prices where farmers could kind of reload financially and carry them into that next surge," said Ray Vester, who has been farming for more than 40 years just east of Stuttgart.
Other farm commodity prices were rising and rice prices also should have increased, he said.
Price estimates for the 2006-2007 season were on target for $13 per 100 pounds of rice compared with the $10 per 100 pounds it had been, according to a December 2007 report by Colin Carter, a professor of agricultural and resource economics at the University of California at Davis. He did the report for plaintiffs' attorneys, and it is filed in one of the lawsuits against Bayer in U.S. District Court in Missouri.
But the momentum for rice changed on Aug. 18, 2006. The Department of Agriculture said trace amounts of LLRICE 601, a genetically modified rice strain, had found its way into the rice supply, according to court documents filed in the case against Bayer CropScience. At the time, LL601 was illegal in the United States. In November 2006, however, the USDA's Animal & Plant Health Inspection Service deregulated the genetically engineered variety of long-grain rice.
"The Aug. 18, 2006, event hit the market like a big lead weight and suddenly changed the market dynamics and sent the rice futures down sharply," Carter wrote.
Within days of the announcement, the EU said it needed proof that the U.S. rice was 100 percent free of genetically modified rice. Other countries also put limits on U.S. rice.
The news hit just as the 2006 U.S. long-grain rice harvest was starting, hurting the entire sale of the crop and of the rice in storage at the time, Carter wrote.
U.S. long-grain rice exports declined by about 20 percent from August 2006 through July 2007, compared with the same period a year earlier, Carter wrote.
Even the countries that were buying U.S. rice used the announcement to demand lower prices, Yielding said.
"We took an immediate hit," Randy Woodard, co-owner of the seed dealer Cache River Valley Seed LLC of Cash, said last week.
The contamination was traced to two varieties of rice, Cheniere and Clearfield 131.
"Our Cheniere [seed] was locked down by the government for nine months," Woodard said.
He declined to say how much his company lost because it has sued Bayer.
Yielding, of the Arkansas Rice Growers Association, said the seed was worth more than rice.
"So you put all this work and all this money into seed, ... and then all of a sudden you can't sell that seed," Yielding said. "There was millions and millions of dollars lost by the seed people on this."
Carter reported that Cheniere was a profitable and popular variety in the South. In 2006, Cheniere accounted for 10.6 percent of the long-grain rice acreage in Arkansas, he wrote.
Yielding said some seed rice farmers reported losing about $45,000 each because they couldn't sell their Cheniere seed.
"They just had to take the loss," he said. "No one was there to bail them out."
Stan Jones, a rice farmer in Hoxie, declined to give an estimate on how much he had lost because of the tainted rice.
But he said that he had Cheniere seed worth $36,000 that he couldn't use. Instead, he had to buy seed at a cost of $300,000 to make sure it wasn't contaminated.
He said he knows of several rice farmers who said that they were driven out of farming because of the problems with the rice.
Jones said he had to cash in a $50,000 life insurance policy in 2007 or 2008 to pay bills because of the drop in revenue from his rice crop.
"We pay huge fixed expenses, expecting a better price for our product," said Jones, who also is suing Bayer. "And when the world didn't want to buy our rice, it damaged us. And it's not something you get over within one or two years. I think every farmer is still trying to recover from '06."
After the announcement about the genetically altered rice, farmers cleaned practically everything that touches rice to ensure that the tainted rice was out of the supply chain, Yielding said.
Petter, the Rice Council president, is also a farmer. He lives near Stuttgart and said that even though he didn't raise the two types of rice that were contaminated, he participated in the recovery.
"We have started out with a new foundation seed," Petter said.
He said everything involving the production of rice now is documented - from how much seed is bought to how many pounds per acre are planted.
"Whoever the first buyer is has to have that documentation before they will accept and purchase your rice farm," said Petter, who also is suing Bayer.
He said the farmers were willing to take the steps to ensure a market for their rice.
"We have done everything we can do to rectify the problem, regardless of who's at fault or whatever becomes of whatever lawsuit."
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