primarily for food or feed. Although Australia 9s Gene Technology Regulator has approved GM canola varieties for commercial release, state government moratoriums have prevented farmers from taking up the option to grow these GM varieties. However, the future commerciali- sation of GM canola in Australia remains a possibility.<br><br> The potential commercialisation of additional GM crops in Australia raises ques- tions for the organic farming sector: » What are the implications for Australia 9s organic farm exports ? » What will be the economic consequences of implementing GM material avoidance measures ? » Will those consequences be different if nonzero thresholds are set for the unintentional presence of GM material ?<br><br> These questions are addressed in this report against the potential commercialisa- tion of GM canola in Australia. It is expected that the analysis contained in this report will contribute to the policy making process about the future of GM crop- ping in Australia, particularly when addressing the issue of the coexistence of organic farming systems with GM cropping. This research was funded under Australia 9s National Biotechnology Strategy.<br><br> The key objective of that strategy is to provide a framework for government and key stakeholders to work together to ensure that developments in biotechnology are captured for the beneR t of the Australian community, industry and the environment, while safeguarding human health and ensuring environmental protection. Phillip Glyde Executive Director May 2007 iv organic farming » abare research report 07.11 acknowledgments This report has beneR ted greatly from assistance provided by a number of sources. The authors particularly wish to acknowledge the information contributions of a range of people involved in the organic industry, including industry organisations, certifying bodies, and producers and processors.<br><br> The Australian Quarantine and Inspection Service also made an invaluable contribution as the provider of Australian organic export data. The authors also wish to thank staff of the Biotechnology Policy Section of the Australian Government Department of Agriculture, Fisheries and Forestry, and Max Foster, Ben Buetre, Lisa Elliston, Terry Sheales and Don Gunasekera of ABARE for providing valuable comments on an earlier draft of this report. Funding for this report was provided by the Rural Policy and Innovation Division of the Australian Government Department of Agriculture, Fisheries and Forestry, using funds provided under the National Biotechnology Strategy.<br><br> v organic farming » abare research report 07.11 contents summary 1 1 introduction 5 2 overview of the organic industry 7 production 7 organic market 8 price premiums 12 3 treatment of GMOs in organic standards 15 GMOs in organic standards 18 unintended presence of GMOs in organic production 21 4 impacts of GM canola on Australian organic producers 24 overseas experience 25 potential costs and beneR ts in Australia 29 case studies 3 potential impact of GM canola adoption 30 5 concluding comments 37 appendix A speciR c treatment of GMOs in organic standards 39 3 Australia 39 3 International 44 references 49 vi organic farming » abare research report 07.11 box 1 certiR cation standards in Australia and Australia 9s main organic trade partners 15 R gures A location of certiR ed organic farms 7 B market value of organic food and beverages, 2003 9 C Australian certiR ed organic production, 2003 10 D destinations of Australian organic exports 11 E Australian organic exports, by commodity 12 table 1 minimum and maximum farmgate price premiums for organic food, European Union 2001 13 1 organic farming » abare research report 07.11 summary » Genetically modiR ed (GM) broadacre crops have been grown commer- cially since the mid-1990s. GM crops have been adopted in the Americas, Europe, Asia, Africa and Australia, with signiR cant areas of GM crops being grown relatively close to conventional and organic crops. Some consumers demand food that is free of GM material, even when the GM material has been approved for human consumption.<br><br> The possibility that GM material may be inadvertently present in organic and conventional products has motivated assessment of the possibilities for coexistence of GM, conventional and organic farming systems. » Organic standards in countries to which Australia exports organic products will also have implications for future trade patterns. In particular, an EU proposal to establish nonzero thresholds for acceptance of the unintentional presence of approved GM material in organic products has the potential to affect Australian organic trade.<br><br> » This report contains an overview of the treatment of genetically modiR ed organisms (GMOs) in organic certiR cation standards in Australia and Austral- ia 9s main trade partners in organic products and an assessment of the potential economic impacts on the domestic organic industry of the adoption of GM canola crops in Australia. organic industry overview » The world organic market is a niche market. Global and Australian organic farm production has grown rapidly in recent years, albeit from small bases.<br><br> Despite this growth, the organic sector remains a relatively small element of the total agriculture sector. Globally, only 0.74 per cent of agricultural land is esti- mated to have been under certiR ed organic management in 2005. In Australia, an estimated 2.5 per cent of agricultural land is certiR ed organic.<br><br> Much of Australia 9s certiR ed organic land is pastoral land in the low rainfall zone. » While lack of data prevents a complete assessment of the value of organic production, organic products have been estimated to account for around 1 33 per cent of the value of food sales in countries that have the largest organic food markets. Organic food is estimated to have constituted around 0.5 per cent of the value of Australian food purchases in 2003.<br><br> 2 organic farming » abare research report 07.11 treatment of GMOs in organic standards » Australia exports organic products to the main global organic markets, the United States, the European Union and Japan. While organic standards in Australia and these markets are generally well aligned, proposed changes to EU standards have implications for trade in organic products. A summary of organic standards in Australia and overseas is provided at appendix A.<br><br> » The main conclusions from the analysis of the treatment of GMOs in the organic standards most relevant to Australian organic producers are: " All standards prohibit the intentional use of GMOs in organic agriculture. " All standards seek to minimise the level of adventitious presence of GM material in organic products. Australia 9s domestic standards for adventi- tious presence tend to be more stringent than the national standards that apply in Australia 9s main organic export markets.<br><br> This raises two issues. First, Australian certiR ed organic products are likely to be accepted in export markets as they exceed the certiR cation requirements for organic products in overseas markets. Second, the additional stringency of Australian standards may result in Australian organic production costs being relatively higher than overseas organic production costs.<br><br> Hence, while Australian organic products are likely to have access to export markets, their price competitiveness may be reduced. " Organic standards do not treat substances prohibited in organic produc- tion consistently in terms of their unintentional presence. The standards generally have nonzero thresholds for the unintentional or unavoidable presence of non-GM prohibited substances, such as petrochemical pesti- cides and herbicides, but do not stipulate a nonzero threshold for GM material.<br><br> While the notion of unintentional presence thresholds for GMOs has been raised among organic industry stakeholders, debate on the desirability of such thresholds is ongoing. " The EU proposal to implement a 0.9 per cent acceptance threshold for the unintentional presence of approved GM material in organic products raises the prospect that, in the future, there may be signiR cantly different standards for organic certiR cation in Australian producers 9 main markets. 3 organic farming » abare research report 07.11 impacts of GM canola on Australian organic producers » Assessment of the feasibility of organic and GM coexistence is important to the organic sector in Australia and globally.<br><br> This is because certiR ed organic farming standards prohibit the use of GMOs. The organic certiR cation of prod- ucts that unintentionally contain GM material is also prohibited in Australia. While GM cotton and carnations are already grown in Australia, the potential commercialisation of GM varieties of other crops, such as canola, raises the prospect of an increased risk of GM material being found in organic products.<br><br> » An assessment of the potential impacts on Australian organic agriculture of the commercialisation of GM canola in Australia was undertaken for this report. The assessment consisted of a search for evidence of the impact of GM crop- ping on the north American organic sector; examination of simulation studies of organic and GM crop coexistence in the European Union under existing and proposed organic certiR cation standards; and application of the results of overseas studies to the Australian agricultural environment under existing certiR cation standards. » The main conclusions from the assessment of the potential impacts of the commercialisation of GM canola on the Australian organic production sector are: " If GM canola were commercialised in Australia, the direct impacts on organic canola production in Australia are likely to be negligible.<br><br> The provisions under the Australian organic certiR cation standards require that organic production is isolated from the production of nonorganic products, including GM canola. " Only very small amounts, even none, of organic canola oil and organic canola meal were produced in recent years. This indicates that the organic livestock industries use suitable feed other than organic canola meal.<br><br> This suggests that an introduction of GM canola would have minimal impact on the organic livestock industry. " The impact on organic honey production is expected to be minimal. This is because GM canola is most likely to be planted as an alternative to conventional canola, which is also unsuitable for organic honey produc- tion.<br><br> Planting a crop not permitted in organic agriculture in place of conventional canola, which for residue reasons cannot usually be grown in the vicinity of organic hives, would have no additional effect on organic honey production. 4 organic farming » abare research report 07.11 " While this study concludes that the commercialisation of GM canola would be expected to have very little, if any, direct impact on these organic sectors in Australia, this conclusion does not extend to the poten- tial impacts of commercialisation of other GM crops. This is because this conclusion is largely based on organic canola being absent from Australian organic agriculture.<br><br> Commercialisation of GM varieties of crops more extensively grown in Australia as certiR ed organic would be more likely to have a direct impact on Australia 9s organic sector. 5 introduction Organic farming and the farming of genetically modiR ed (GM) crop varieties are both important in global agriculture. In 2006, global plantings of GM crops totalled 102 million hectares, while around 31 million hectares were under organic management.<br><br> Organic farming was practised in 120 countries, while GM crops were grown in 22 countries (Willer and YusseR 2007; James 2006). With the expansion of both organic and GM farming and the incompatibility of GM crop- ping with certiR ed organic farming methods, the issue of coexistence of these two forms of agriculture is increasingly important. Experience of commercial GM cropping in Australia is limited.<br><br> Currently only GM cotton and carnations are grown commercially in Australia. Over 90 per cent of Australian cotton was from GM varieties in 2005-06 (Cotton Australia 2006). There is also a possibility that GM canola may be commercialised in Australia in the future (Apted, McDonald and Rodgers 2005).<br><br> Globally, the organic agriculture sector has addressed the issue of genetically modiR ed organisms (GMOs) in agriculture by developing standards that prohibit the intentional use of GMOs in organic agriculture and by implementing measures designed to avoid the presence of GM material in organic agricultural products. In most countries that have certiR ed organic production systems, the organic sector maintains a zero tolerance stance on GMOs. This raises the prospect that organic products produced according to the organic standards, but unintentionally containing GM material, may lose their organic certiR cation.<br><br> This is likely to result in economic losses to producers of organic products. In response to this situation, the European Commission has proposed thresholds for the unintentional presence of GM material in organic products. It is proposed to allow products to retain their organic certiR cation if unintentionally present GM material is below certain low levels.<br><br> This proposal is discussed further in chapter 3. The potential commercialisation of additional GM crops in Australia raises the following questions: » Are there likely to be implications for Australia 9s organic exports ? 1 6 organic farming » abare research report 07.11 » What will be the economic consequences of implementing GM material avoidance measures ?<br><br> » Will those consequences be different if nonzero thresholds are set for the unintentional presence of approved GM material ? The purpose in this report is to address these questions in relation to GM canola by examining the treatment of GMOs in organic certiR cation systems and assessing the potential economic impacts on the organic industry of the adoption of GM canola crops in Australia. 7 overview of the organic industry production world CertiR ed organic agriculture has grown rapidly in recent years.<br><br> Land under certi- R ed organic management worldwide increased from about 23 million hectares in 2002 to more than 31 million hectares in 2005. While organic farming has been expanding globally it still accounts for only a small proportion of total agriculture. CertiR ed organic land accounted for only 0.74 per cent of world agricultural land in 2005.<br><br> Globally, a large proportion of the certiR ed organic farming area is located in Australia. SigniR cant proportions of certiR ed organic land are also found in the European Union and Argentina (Willer and YusseR 2004, 2007). Much of the certiR ed organic land in Australia is located in low rainfall pastoral lands and principally involves the grazing of beef cattle on extensive areas of unimproved pastures.<br><br> From a global perspective, it is perhaps more meaningful to note that the majority of certiR ed organic farms are in Latin America and Europe (R gure A; Willer and YusseR 2005). The number of certiR ed organic farms worldwide has increased from about 398 800 in 2002 to nearly 633 900 in 2005. Over the period 2002 305 the largest increases in the number of certiR ed organic farms were in Asia (80 per cent), Africa (70 per cent) and Latin America (40 per cent) (Willer and YusseR 2003, 2007).<br><br> Australia Australia produces a range of organic products, including grains and pulses, fruit and vegetables, wine grapes, meat, honey, edible oils and proc- essed food, and some nonfood prod- ucts such as cosmetics and wool. As there is no census of organic farming location of certified organic farms figA Latin America 33% Asia 12% Canada/US 3% other 4% Australia/New Zealand 0.4% Africa 22% European Union 26% 2 8 in Australia, there are no precise data on the size of the sector. Nevertheless, there are some (highly variable) estimates that can be used as a guide.<br><br> In 2003, the certiR ed organic land area in Australia was estimated to be 7.9 million hectares, with 75 per cent of this land located in Queensland and about 20 per cent in South Australia (Halpin 2004). The majority of the certiR ed organic area in Australia is located in the Channel Country region of south west Queens- land and north east South Australia. Organic beef, a signiR cant proportion of which is produced in the Channel Country, represented around 0.5 per cent of Australian beef production in 2003, while organic sheep meat constituted around 0.5 per cent of total Australian lamb and mutton production (Halpin 2004).<br><br> Other studies have suggested that the area certiR ed for organic production is larger than that indicated above. One recent study estimated that in 2005 there were around 12 million hectares under organic management in Australia (Willer and YusseR 2007). In another paper, the area under certiR ed organic manage- ment in Australia in 2003 was estimated to be 12.5 million hectares (ACO 2004).<br><br> These two estimates indicate that 2.5 32.8 per cent of Australia 9s agricultural land is under certiR ed organic management. In 2003, there were an estimated 1511 certiR ed organic farms in Australia (Halpin 2004). Around 72 per cent of these farms were involved in vegetable and fruit and nut production, around 22 per cent were involved in beef produc- tion and around 15 per cent were involved in the production of grains, including cereals, pulses and oilseeds (farms can be classiR ed in more than one industry).<br><br> This number of organic farms constitutes around 1.2 per cent of the total farms in Australia. Willer and YusseR (2006) estimated that there were 1832 organic farms in Australia in 2005-06, while the Biological Farmers of Australia (BFA) esti- mated that Australia had 2220 certiR ed organic farms in 2004 (ACO 2004). organic market world The world organic market is a niche market.<br><br> Sales in 2005 are estimated to have reached A$44 billion. About 95 per cent of the market is in north America and western Europe, while Japan and Australia account for most of the remaining share (Willer and YusseR 2007). The market share for 2003 is represented in R gure B (Willer and YusseR 2005).<br><br> organic farming » abare research report 07.11 9 While organic production is increasing in many countries, the main markets for organic products remain in the afS uent developed economies. The United States has the largest market for organic products, estimated at A$16.5 billion in 2003. In Europe, most organic sales occur in Germany and the United Kingdom 4 in 2003 these markets were valued at A$5.4 billion and A$2.8 billion respectively.<br><br> The Asian organic market was valued at A$0.8 billion in 2003, with Japan consti- tuting the majority of this market. About 99 per cent of the Oceania organic market is in Australia 4 this market was valued at A$370 million in 2003 (Willer and YusseR 2005). These markets account for the majority of organic sales; however, organic food constitutes only 1 33 per cent of total food sales in these markets (FAO 2001).<br><br> Global demand for organic products is increasing, with the greatest demand for organic products being observed in north America and western Europe. Demand in north America has grown strongly, at around 21 per cent a year in the R ve years to 2002. The organic markets in western European countries are also expected to continue to expand, though at highly variable rates estimated as low as 1.5 per cent to 11 per cent.<br><br> Although they remain relatively small, the Australian and New Zealand organic markets are estimated to be growing at around 15 per cent a year (Willer and YusseR 2004). fig B A$billion 5 2.5 7.5 12.5 17.5 10 15 20 2003 market value of organic food and beverages, 2003 Oceania Asia North America western Europe organic farming » abare research report 07.11 10 organic farming » abare research report 07.11 Australia domestic market The organic food and drinks market in Australia is a niche market. Sales of organic food and drink in Australia, at an estimated A$370 million in 2003 (Willer and YusseR 2005), were equivalent to about 0.5 per cent of Australian retail food sales in that year.<br><br> In 2003, vegetables were the most important products in volume terms, followed by cereals and then fruit and nuts (R gure C; Halpin 2004). imports While Australia produces a range of organic products, imports of such products are an important source of supply. Australian imports of organic products were valued at A$13 million in 2003 (Organic Monitor 2004, cited in Halpin 2004).<br><br> Half of the imports of organic food and beverages are in processed form and include biscuits, breakfast cereals, chocolate and pasta. Imports of nonfood items, such as organic cotton and personal care products, are also increasing. Most Australian imports of organic products come from New Zealand, the United States and the United Kingdom.<br><br> Imports from the United States include soups, vinegar, rice drinks and tomato products, such as tomato sauce, tomato paste and pasta sauces. Organic imports from the United Kingdom include chocolate, biscuits and breakfast cereals, while New Zealand is an important source of organic kiwifruit, carrots and onions (Halpin 2004). fig C kt 40 20 60 80 100 120 Australian certified organic production, 2003 meat (dressed weight) fruit and nuts cereal grains, pulses and oilseeds vegetables 11 organic farming » abare research report 07.11 exports Australian exports of organic products were valued at an estimated A$50 million in 2000 (Australian Trade Commission 2006).<br><br> Australia mainly exports organic products to the European Union, Japan, Switzerland and the United States. In the period 2001 303, over 50 per cent of Australia 9s exports of organic products were destined for the European Union and around 17 per cent for Japan, while Swit- zerland accounted for 13 per cent. Only about 5 per cent of Australia 9s organic product exports went to the world 9s largest market for organic products, the United States (R gure D; AQIS 2006).<br><br> According to export data provided by the Australian Quarantine and Inspec- tion Service (AQIS), the volume of organic product exports varied signiR cantly during the period 2001 303. The greatest volume (37 470 tonnes) was exported in 2001. In 2002, export volumes dropped to 16 195 tonnes.<br><br> In 2003, Australia exported only 409 tonnes of organic products. This substantial drop in the volume of organic product exports was caused mainly by drought. Cereal grains, mainly wheat, averaged over 70 per cent of the volume of Australian organic exports during the period 2001 303 (R gure E; AQIS 2006).<br><br> About 10 per cent of the volume of organic exports during that period was oilseeds and oilseed products, mainly sunS ower and canola seeds and oil. Fruit and vegetable exports accounted for 7 per cent of the total, while meat and wine accounted for 3 per cent of the volume of certiR ed organic exports; honey accounted for 1 per cent (AQIS 2006). fig D kt 4 2 6 8 10 12 destination of Australian organic exports annual average 2001 303 other Singapore New Zealand United States Switzerland Japan European Union 12 organic farming » abare research report 07.11 Over half of Australia 9s exports of organic cereals were destined for the European Union, while Switzerland and Japan each accounted for around 20 per cent.<br><br> The European Union was also the main destination for Australian organic oilseed prod- ucts, taking about 60 per cent of the total. The second most important destination for Australian organic oilseed products was the United States, which accounted for about 30 per cent of exports (AQIS 2006). About half of Australia 9s organic fruit and vegetable exports were destined for Singapore, about 30 per cent were shipped to the European Union and about 10 per cent to the United States.<br><br> Approximately, 40 per cent of exported Australian organic meat was shipped to Japan, about 30 per cent to the European Union and 15 per cent to the United States (AQIS 2006). About 95 per cent of exported Australian organic wine went to the European Union. The European Union was also the main destination for Australian organic honey, with the United Kingdom and Germany being important markets for these exports.<br><br> Those two countries purchased almost 70 per cent of total Australian organic honey exports. price premiums Price premiums for organic produce are an important consideration in assessments of the potential impact of GMOs on the organic agriculture sector. Organic price premiums are necessary to encourage the shift from conventional production methods to organic production methods.<br><br> fig E kt 6 3 9 12 15 Australian organic exports, by commodity other honey meat wine fruit and vegetables oilseeds cereal annual average 2001 303 13 organic farming » abare research report 07.11 If a product is organically produced, but cannot be marketed as organic, the producer will generally be forced to accept the price that is offered for the conven- tionally grown product. Where the presence of GM material in organic products results in the suspension of organic certiR cation for those products the loss of the organic price premium constitutes a direct cost to the producer. Costs of this nature are discussed in greater detail in chapter 4.<br><br> Price premiums for organic products are likely to be a reS ection of growing demand for such products combined with differences in supply costs between organic and conventional products. In the case of organic farm producers, price premiums provide the necessary incentive to meet the requirements of certiR cation and to recoup higher unit costs of production. Although there is a general lack of publicly available data on prices for organic products, some limited data are available.<br><br> One study has found that the price premium for organic products is generally 20 340 per cent of the price of the conventionally produced alternative (FAO 2001). A more recent study shows that the price premium for organic products varies over time, between countries and between products. For example, the farmgate price premium for organic broccoli in the United States in the period 2000 304 is estimated to have varied between 99 and 133 per cent, and the premium for organic carrots at between 75 and 117 per cent (Oberholtzer, Dimitri and Greene 2005).<br><br> The price premium for organic products in Japan also varies signiR cantly, but generally is between 20 and 30 per cent (FAO 2001). table 1 minimum and maximum farmgate price premiums for organic food, European Union, 2001 minimum maximum % % wheat Italy 19 Netherlands 189 apples Italy 2 Denmark 333 potatoes Sweden 71 Italy 239 pork Germany/Austria 45 Netherlands 132 beef Denmark 17 Spain 190 eggs Austria 25 Great Britain 329 milk Denmark 19 Great Britain 129 Source : European Commission (2005). 14 organic farming » abare research report 07.11 EU price premiums for organic products at the farmgate in 2001 ranged from 2 to 333 per cent (table 1).<br><br> Generally, price premiums are smaller in countries where the organic market is relatively well developed, such as Austria, Denmark, Sweden and Italy (EC 2005). On the Australian domestic market, organic produce can receive a substantial price premium at retail. For example, in 1999 and 2000, organic cereals and live- stock products were estimated to attract a premium of 50 375 per cent, while fruit and vegetables were estimated to attract a premium of 50 360 per cent (Willer and YusseR 2005).<br><br> One study reported that the average retail price premium in Australia for organic food products in 2003 was 80 per cent (Halpin 2004). The study found price premiums greater than 100 per cent for wholemeal S our, muesli, olive oil, spaghetti, beans, zucchini, carrot, hard cheese and minced beef. The fact that price premiums are obtainable in the organic market is an indication that consumers in this niche market value organically differentiated products more highly than conventional products.<br><br> Among the drivers of consumer demand for organic products are health concerns related to conventional production methods and biotechnology in agriculture (FAS 2000). Hence, the expansion of domestic GM cropping may strengthen domestic demand and returns for organic products, especially if producers are not able to segregate conventional and GM outputs. At the same time, some exporters of Australian organic products are concerned that Australian organic products will be perceived to be less attractive in export markets if they are produced in an agricultural environment that also contains commercial GM crops.<br><br> This perception could reduce returns to growers. 15 treatment of GMOs in organic standards In order to market certiR ed organic products in Australia, producers must meet Australian organic standards. Similarly, if Australian producers wish to export their products as certiR ed organic, they must meet the standards that apply in the relevant export market.<br><br> If a producer has products marketed in more than one trade jurisdiction, compliance with the standards in those jurisdictions is likely to be important. For example, if a domestic producer can market their product as organic both in Australia and export markets under the same organic standards, they will face no additional production costs associated with meeting the standard required of exports. An overview of the certiR cation standards of most importance to Australian organic producers is provided in box 1.<br><br> While the possibility of further commercialisation of GM crops in Australia provides a reason for examining the treatment of GMOs under domestic organic standards, the fact that Australia engages in international trade in organic prod- ucts provides motivation for comparing the treatment of GMOs under Australian organic standards and the organic standards of Australia 9s main organic trade partners. box 1 certi6 cation standards in Australia and Australia 9s main organic trade partners Organic certiR cation of agricultural products is an indicator that those products meet a certain organic production standard. CertiR cation plays an important role in domestic and international trade.<br><br> It is a means by which organic products are differentiated from conventionally produced and GM products and is a signal to consumers that a price premium is likely to apply to the product. Organic certiR ca- tion also reduces transaction costs for marketers and consumers by providing a recognisable and consistent signal that the product has been produced according to a process that meets well deR ned standards. This signal means that the organic attributes of these products do not have to be speciR ed for each transaction (Dimitri and Oberholtzer 2005).<br><br> 3 continued... 16 organic farming » abare research report 07.11 box 1 certi6 cation standards in Australia and Australia 9s main organic trade partners continued The standards that underpin organic certiR cation are typically process based. The standards do not specify the characteristics of organic products, but specify the char- acteristics of the methods by which the products are grown, harvested, processed, packed, stored and shipped.<br><br> The standards may also stipulate how organic products are labelled. Regulation of certiR ed organic production occurs at international, national and subnational levels. At the international level, the International Federation of Organic Agriculture Movements R rst published an organic standard in 1980 (IFOAM 2002), while the Codex Alimentarius Commission developed international guidelines for organic production in 1999 (FAO 2003).<br><br> These documents provide a framework for certiR cation bodies and organisations setting standards around the world to develop their own certiR cation standards. The frameworks deR ne the minimum requirements for organic certiR cation (IFOAM 2005). Some countries, including Japan, the United States and the European Union, have introduced organic standards that are regulated by law.<br><br> In other countries, such as Canada, governments provide guidelines for organic certiR cation, while in some countries there are no speciR c standards governing organic certiR cation. A number of different organic standards are potentially relevant to Australian organic producers, depending on where they intend to market their products. The linkages between the main certiR cation standards in Australia and in Australia 9s main organic export destinations are vitally important to Australian producers 9 access to export markets.<br><br> Australia Australia has a regulated organic certiR cation system that applies only to exports of certiR ed organic products and a voluntary system of certiR cation for domestically marketed organic products. The export certiR cation system is an industry and government co-regulatory system. Under this system the Australian Quarantine and Inspection Service (AQIS) accredits organisations that are authorised to certify organic and biodynamic produce destined for export (Halpin 2004).<br><br> Under this system, organic products are certiR ed according to the Australian National Standard for Organic and Biodynamic Produce (OIECC 2005). The Australian National Standard forms the certiR cation basis for equivalency agreements between Australia and some other countries. In particular, this facilitates Australian trade in certiR ed organic products with the European Union.<br><br> Japan and the United States do not recognise the Australian National Standard continued... 17 organic farming » abare research report 07.11 box 1 certi6 cation standards in Australia and Australia 9s main organic trade partners continued 4 they accredit Australian certifying bodies that are then able to certify Australian exports as meeting the national standards in those countries. Seven bodies are accredited to certify Australian organic exports, the largest of these in volume terms are the Biological Farmers of Australia (which has a certifying arm called Australian CertiR ed Organic) and the National Association of Sustain- able Agriculture Australia.<br><br> Other accredited certifying bodies are: the Biodynamic Research Institute, the Organic Food Chain of Australia, the Organic Growers of Australia, Safe Foods Queensland, and Tasmanian Organic Products (May and Monk 2001; Safe Foods Queensland, personal communication, 2006). In addition to certifying organic products for export under the Australian National Standard, these organisations also certify domestically marketed products under their own standards, which are at least as stringent as the Australian National Standard (McCoy and Parlevliet 2001). European Union Labelling of agricultural and food products as organic in the European Union is governed by regulations (EEC) no.<br><br> 2092/91 and (EC) no. 1804/1999. These regulations set the basic requirements for organic production, labelling and marketing in the European Union.<br><br> Each member state is responsible for interpreting and implementing the rules, as well as enforcement, monitoring and inspection. Since December 2005, a consistent mark of identiR cation for organic products has been compulsory (Dimitri and Oberholtzer 2005). The European Commission has established a list of countries that have organic standards equivalent to the EU standard, meaning that certiR ed products from those countries can be marketed as organic in the European Union without the need for additional certiR cation or accreditation (FAO 2001).<br><br> The Australian National Standard is recognised as equivalent to the EU standard, which means the European organic market is accessible to Australian products without additional certiR cation. United States The US National Organic Standard (NOS) was implemented in 2002. CertiR ca- tions under the NOS are conducted by certiR cation agencies accredited by the US Department of Agriculture (USDA 2005).<br><br> Although the Australian National Standard has not been recognised as equivalent to the NOS, certiR cations under both the Biological Farmers of Australia and the National Association of Sustainable Agriculture Australia standards are recognised by the US Department of Agriculture as being equivalent to the NOS. This allows continued... 18 organic farming » abare research report 07.11 GMOs in organic standards A comparison of the standards for certiR ed organic production in Australia, the United States, the European Union and Japan, as well as the international stand- ards and guidelines, indicates that all adhere to the same principles and general criteria for organic production.<br><br> Although this observation can be made generally, there are some speciR c differences between the standards in terms of how they deal with synthetic inputs such as herbicides and pesticides, veterinary medical products and GMOs. Given the possibility that Australian agriculture could signiR cantly increase its utilisation of GMOs in the future, the treatment of GMOs under the various organic standards is important for the future of Australia 9s organic exports. box 1 certi6 cation standards in Australia and Australia 9s main organic trade partners continued these two organisations to certify organic exports with the NOS certiR cation mark (USDA 2006).<br><br> Japan In April 2001, the Japanese Agricultural Standard (JAS) was amended to include updated criteria for organic certiR cation (Ito 2004). The JAS organic require- ments are based on the Codex guidelines for organic agriculture. According to this standard all products labeled as organic must be certiR ed by a Registered CertiR - cation Organisation and must display the JAS logo and the name of the certifying organisation (FAO 2001).<br><br> In March 2006, changes to the JAS initiated the requirement for Registered Certi- fying Organisations to apply for accreditation under the amended JAS. Previously accredited organic certifying organisations are able to continue to certify existing product streams and producers until the end of 2007. The Biological Farmers of Australia certifying body, Australian CertiR ed Organic, is the only Australian organi- sation currently accredited by the Japanese Ministry of Agriculture, Forestry and Fisheries under their new accreditation regime.<br><br> The National Association of Sustain- able Agriculture Australia and the Organic Food Chain of Australia are able to certify exports under their pre-existing accreditation and have also applied for accreditation under the new accreditation regime (AQIS 2006; NASAA 2006; OFC 2006). 19 organic farming » abare research report 07.11 Generally all seven standards (Australian National Standard, Biological Farmers of Australia standard, National Association of Sustainable Agriculture Australia standard, EU standard, US standard, Japanese standard, Codex standard) analysed in this report prohibit the intentional use of GMOs in organic produc- tion and seek to minimise the unintentional or adventitious presence of GMOs in certiR ed organic products. While the standards are based on the same principle of zero tolerance to GMOs in organic production, there are some speciR c differ- ences between standards that are potentially important.<br><br> Appendix A contains GMO related excerpts from the organic standards. The Codex standard is included in the following comparison of standards as it provides a global standard that may form the basis of national standards yet to be developed in potential Australian organic export destinations. use of GM seeds in organic production The use of GMOs and GMO derivatives in seed for sowing is prohibited in all seven standards.<br><br> In addition, the Codex standard, the three Australian standards and the EU standard specify that seeds for sowing for organic production should be from plants grown in accordance with organic production criteria for at least one generation and in the case of perennial crops, for two growing seasons. treatment of GMOs in animal feed The use of GM products and their derivatives in animal feed is prohibited in the Australian National standard, the BFA standard, the National Association of Sustainable Agriculture Australia (NASAA) standard and the Codex and EU stand- ards. The draft Japanese standard for organic livestock production prohibits the use of GMOs produced using recombinant DNA techniques, as livestock feed.<br><br> While the US standard does not include any speciR c reference to the treatment of GMOs in animal feed, it clearly speciR es that the use of GMOs in any aspect of organic production is prohibited. use of veterinary medicines derived from GMOs All three Australian standards and the EU standard speciR cally prohibit the use of GMOs and their derivatives in veterinary medical products. The Codex, United States and Japanese standards do not include any speciR c reference to the treat- ment of GMOs in veterinary products, but these standards clearly specify that the use of GMOs in any aspect of organic production is prohibited.<br><br> 20 organic farming » abare research report 07.11 In the interests of animal welfare, all the standards allow veterinary use of prescribed drugs or antibiotics when treatments permitted under organic certiR ca- tion standards are ineffective. After treatment with veterinary medicines prohibited under the organic standards, products from those livestock cannot be sold as organic. parallel genetically modi3 ed and organic production All three Australian organic standards specify that GM crops and livestock are not permitted under a parallel production system on an organic farm.<br><br> A parallel production system is one in which certiR ed organic farming methods and conven- tional methods are applied on the same farm. Parallel systems are usually only permitted when a farm is converting to certiR ed organic production methods. The other standards do not clearly specify their treatment of GMOs under parallel production systems.<br><br> buffer zones The NASAA and BFA organic standards specify a 10 kilometre zone around organic crops, within which any GM crop is deemed to pose a risk of transferring GM material to the organic crop. This is in contrast to the buffer zone measures for other prohibited substances, for which minimum distances of 5 metres and 15 metres respectively are stipulated. The Australian National Standard does not specify buffer zones for crops, but does specify that organic honeybee hives must be sited at least 5 kilometres from any GMOs or their products.<br><br> The NASAA and BFA organic standards also specify that honeybee hives must be sited at least 5 kilometres from conventional agriculture sources of nectar and pollen, GM crops and other possible sources of honey contamination such as urban areas and waste sites. The US standard does not specify the size of the buffer zones that are required to minimise the risk of contact with prohibited substances. However, it does stipulate that buffer zones must be sufR cient in size or have other features, such as wind- breaks, to prevent the possibility of unintended contact with prohibited substances applied to land adjacent to a certiR ed organic operation.<br><br> The EU standard does not specify buffer zone distances for crop production, but does specify that beehives used for organic honey production should be sited such that pollen, nectar and honeydew sources within a 3 kilometre radius of the hive conform to the organic standard. The Japanese organic standard does not specify buffer zone distances. 21 organic farming » abare research report 07.11 The Codex standard does not address buffer zones for crops, but does stipulate that the relevant certiR cation body must identify zones where honeybee hives should be placed, to avoid potential contact with prohibited substances, GMOs or environmental contamination.<br><br> conversion period All seven organic standards examined for this report specify a two or three year conversion period for farms converting from conventional to organic production. During this period, production methods must be in accord with the certiR cation standards, but products cannot be marketed as organic 4 they must be marketed as either 8in-conversion 9 or as conventional products. Under the NASAA and BFA organic standards and the Australian National Standard the period to convert from GM production to organic production is R ve years.<br><br> The EU, US, Japanese and Codex standards do not specify a separate requirement for the conversion period from GM cropping to organic production. unintended presence of GMOs in organic production current standards While all seven standards examined for this report stipulate zero tolerance for the intentional use of GMOs in certiR ed organic production, they are generally less clear in their treatment of the unintentional presence of GMOs in organic products. The treatment of unintentional presence of GMOs in organic production is an important issue as the increasing use of GM crops increases the risk that organic crops will contain GM material.<br><br> This material is most likely to enter organic crops through pollen drift from neighbouring R elds, commingling during harvest and post- harvest handling or as a result of GM material in organic seed stock. Generally, the standards refer to the adventitious or unintentional presence of GMOs in terms of the principle of minimising the risk of contact, but they do not provide speciR c guidelines to follow in order to minimise the unintentional presence of GM material in organic products. In keeping with the process based criteria for organic certiR cation, the overseas standards examined do not generally require that organic products be tested for the presence of GM material unless there is a reason to believe that organically produced products came into contact with prohibited substances.<br><br> 22 organic farming » abare research report 07.11 The NASAA and BFA standards differ from the other standards analysed for this report, in that they do stipulate that testing of organic products for the presence of GM material should occur when there is an identiR ed risk that contamination may occur. In addition, these standards provide some guidance on what constitutes a risk of unintended presence of prohibited material, although the standards are not comprehensive in that regard (appendix A). These standards, as well as stipulating that organic products that contain GM material should not be certiR ed organic, also stipulate that the producer of those products may have their organic certiR ca- tion withdrawn if that is deemed appropriate by the certifying body.<br><br> The stringency of the Australian standards potentially disadvantages Australian producers, who may face the costs associated with the loss of organic status for their products and their farms, under circumstances in which their international competitors face no such cost. This potentially reduces the trade competitiveness of the Australian organic sector. None of the standards stipulate an allowable threshold for the unintended pres- ence of GMOs in organic products.<br><br> Although the EU standard allows for the establishment of a maximum allowable level for the unintentional presence of approved GM material in organic products, no threshold has yet been estab- lished. The treatment of GMOs under the standards is signiR cantly different from the treatment of other prohibited substances such as petrochemical pesticides and herbicides. The unintentional presence of other substances prohibited in organic production is generally allowed, provided certain low threshold levels are not exceeded 4 usually 5 310 per cent of the relevant food standard maximum residue limit.<br><br> Not only is the absence of a tolerated level of unintentional presence of approved GMOs an inconsistency in the organic standards 9 treatment of prohib- ited substances, it is also a potentially costly stance. This issue is discussed further in chapter 4. proposed changes In keeping with the EU standard 9s provision for a threshold for the unavoidable presence of approved GM material in organic products, the European Commis- sion has proposed a regulation that introduces such a threshold.<br><br> The proposal is for a 0.9 per cent threshold for the adventitious presence of approved GM material in organic products and a 0.5 per cent threshold for approved GM material in organic seeds for sowing (European Commission 2005). If accepted, this proposal would align the treatment of the unavoidable presence of approved 23 organic farming » abare research report 07.11 GM material in organic products and conventional products in the European Union. It would mean, if the presence of the approved GM material in the organic product was unavoidable, if the threshold was not exceeded, and if the approved GM material were approved in the European Union, that the organic status of the product would be retained.<br><br> The implications of nonzero thresholds for the adventi- tious presence of GMOs in organic products are discussed in the next chapter. 24 impacts of GM canola on Australian organic producers As noted in chapter 1, Australia has commercial GM cotton and carnation crops, but has no commercial GM crops grown principally for food or feed. Despite several varieties of GM canola having been approved for commercial planting by the OfR ce of the Gene Technology Regulator, no GM canola has been planted on a commercial scale in Australia because of state and territory government moratoriums.<br><br> Approval to commercialise a GM food crop in Australia, added to the rapid global uptake of GM crops, presents a strong possibility that GM food and feed crops may be grown in Australia in the future (Apted et al. 2005). The current standards for certiR cation of organic production (as detailed in chapter 3 and appendix A), and overseas experience of the coexistence of GM, conven- tional and organic crops, suggest that an increase in the scale and scope of GM cropping in Australia, and elsewhere, may affect the organic sector.<br><br> This is examined in this chapter. Owing to a lack of Australian experience in the coexistence of GM and organic food and feed crops, and a relatively small body of Australian literature directly related to this subject, this report has drawn on overseas information sources. In particular, this report draws on the north American experience of coexistence of GM and organic crops (including canola) as well as a number of European studies on the potential impact of the commercialisation of GM crops (including canola) on conventional and organic agriculture.<br><br> To assess the potential impacts on the Australian organic sector of the commer- cialisation of GM canola, the potential costs and beneR ts that are likely to arise as a result of the introduction of GM canola are examined in this report. The costs and beneR ts are examined for different levels of acceptable adventitious presence of approved GM material in certiR ed organic products 4 a zero tolerance level, such as applies in Australia currently, 0.5 per cent tolerance for seed for sowing and 0.9 per cent for organic products for consumption, as has been proposed for implementation in the European Union. The impacts of these adventitious presence thresholds are examined in case studies for the organic canola, beef and honey sectors.<br><br> 4 25 organic farming » abare research report 07.11 overseas experience north America The north American experience of the coexistence of organic and GM crops has been mixed. In this section, the GM and organic coexistence experiences in Canada and the United States are summarised. The Canadian organic canola experience, as detailed below, indicates that there are signiR cant risks of organic canola products inadvertently containing GM mate- rial, especially when organic and GM canola crops are grown close together.<br><br> These risks exist mainly in: contamination of seed for sowing; pollen drift from GM crops pollinating organic crops; commingling of organic and GM canola seeds at the harvesting, transport and storage phases of the supply chain; and commingling of materials in the processing phase. The impacts of the commercialisation of GM canola have been subject to legal scrutiny in Canada. An action was brought against Monsanto and Bayer Cropscience in Saskatchewan, alleging that the introduction of GM canola had damaged the organic canola industry.<br><br> The Court of Queen 9s Bench in Saskatoon found the allegations of damage were not proven 4 not only was no evidence proving damage tendered in the case, but there was evidence that the Canadian organic canola industry still existed despite the widespread adoption of GM canola varieties (Law Society of Saskatchewan 2005). One recent study into the coexistence of organic, conventional and GM crops in north America concluded that it was not possible to determine the impact of GM canola on the production of organic canola in Canada. The study exam- ined production trends and available evidence on the incidence of unintended presence of approved GM material in organic canola crops and the economic impacts of mitigation measures initiated by organic growers.<br><br> The study found that organic canola was still produced in Canada, despite the widespread adoption of GM canola varieties. Although the production of organic canola had declined in recent years, the study found it was not possible to identify GM canola as the cause of the decline (Brookes and Barfoot 2004). Canadian organic agriculture statistics show that around 860 hectares of organic canola was planted in 2005 (Macey 2006).<br><br> This is around 0.02 per cent of US Department of Agriculture estimates of total Canadian canola area for 2004-05. The estimated peak in Canadian organic canola plantings is reported to have occurred in the late 1990s, when organic plantings peaked at 0.09 per cent of 26 organic farming » abare research report 07.11 total Canadian canola plantings (Brookes and Barfoot 2004). This is equivalent to around 5000 hectares of organic canola, based on estimates of total Canadian canola (rapeseed) area contained in the US Department of Agriculture 9s produc- tion, supply and distribution database.<br><br> While the reduction in organic canola area in Canada is coincident with increased areas planted to GM crop varieties, it is clear that the area utilised for certiR ed organic cropping is also increasing. The Canadian organic sector reported a 17.5 per cent increase in organic crop area in 2005, with the area of organic cereals growing by 16.5 per cent to 154 000 hectares. In addition, there were increases in the area of oilseeds (other than canola and soybeans) and strong growth in the size of the organic beef and broiler sectors, as well as in the number of organic beehives (Macey 2006).<br><br> This suggests that the commercialisa- tion of GM canola has not unduly hampered the development of these segments of the organic sector. Another indication that broadacre organic farming has been able to survive despite the commercialisation of GM canola is the dominance of Saskatchewan in Canadian organic broadacre production. Saskatchewan is a major producing area of conventional and GM canola, accounting for around half of Canada 9s canola production in 2005 (Saskatchewan Agriculture and Food 2006; FAS 2006), while also accounting for 75 per cent of Canada 9s organic broadacre cropping area (Macey 2006).<br><br> The US experience of GM and organic crop coexistence has been mixed. A survey of 1034 US certiR ed organic growers in 2002 found that cultivation of GMOs had affected a signiR cant proportion of organic farms. Survey respondents indicated that they had implemented measures that were potentially economically costly, such as increasing buffer zone size (19 per cent of respondents), adjusting planting times (15 per cent) and changing cropping locations (9 per cent).<br><br> A signiR cant proportion of respondents (27 per cent) indicated that they had been asked to arrange GMO testing of either inputs or outputs, with 2 per cent of respondents reporting positive tests for unintended presence of approved GMOs (Walz 2004). The survey also asked respondents to indicate whether they had borne direct economic costs as a result of the existence of GMOs in agriculture. A relatively small proportion of respondents (8 per cent) indicated that they had 4 4 per cent indicated that they had borne the cost of GMO testing, while 2 per cent indicated bearing the cost of lost sales (Walz 2004).<br><br> A recent study that reviewed trends in the production of organic corn and organic soybeans in the United States found that plantings had increased despite the 27 organic farming » abare research report 07.11 adoption of GM varieties of these crops. The area planted to organic corn has increased from 17 000 hectares in 1997 to 38 000 hectares in 2001, while organic soybean plantings increased from 33 000 hectares to 71 000 hectares over the same period (Brookes and Barfoot 2004). However, the study was not able to quantify the impact of measures undertaken by organic producers to avoid GM material coming in contact with organic crops.<br><br> It was also not able to deter- mine whether the presence of GM varieties had constrained the growth in organic production or whether the presence of GM crops had motivated the increase in organic production as a result of increased demand for organic products. Despite the study 9s limitations, mainly the nonavailability of data, the authors concluded that organic, conventional and GM crops were successfully coexisting in the United States (Brookes and Barfoot 2004). European Union Although the European Union has little experience of commercial GM cropping, with the exception of GM maize principally grown in Spain (60 000 hectares in 2006) (SeedQuest 2007), the feasibility of coexistence of GM, conventional and organic crops has been the subject of a number of studies in Europe.<br><br> As a result of the lack of data on the actual impacts of GM crops on conventional and organic crops, many of the studies have relied on simulations to estimate the potential impact of GM crops in European agriculture. A number of studies have examined the feasibility of and costs involved in having non-GM crops meet speciR c thresh- olds for the unintentional presence of GM material. These studies are reviewed below.<br><br> One European study examined the costs of organic rapeseed (hereafter referred to as canola) farms meeting 0.1 per cent and 0.3 per cent thresholds for the unintentional presence of GM material (Bock et al. 2002). The study simulated a number of different GM contact mitigation measures under two scenarios; the R rst being that 10 per cent of canola crops in the surrounding district were GM varieties and the second being that 50 per cent of the canola crops in the district were GM varieties.<br><br> This study found that, in the European farming context, it would be possible for producers of both organic canola certiR ed as seed for sowing and organic canola for oil, to produce crops that complied with the thresholds. The study estimated that to achieve compliance, changes to farming practices would be necessary 4 these changes were estimated to cost 194 euros per hectare. The study also examined the costs associated with monitoring non-GM crops for the presence of GM material.<br><br> It was estimated that a monitoring system suitable for a small farm growing organic canola under a GM adventitious presence tolerance threshold of 0.1 per cent would cost 112 euros per hectare. With indicative insur- 28 organic farming » abare research report 07.11 ance costs of 39 euros per hectare, the overall cost to organic canola producers of remaining below the 0.1 per cent threshold for the unintentional presence of GM material was estimated to be 345 euros per hectare 4 equivalent to 35 per cent of the typical organic canola gross margin, or 20 per cent of the farmgate price for that crop (Bock et al. 2002).<br><br> Interestingly, the estimated costs under the 0.3 per cent threshold were estimated to be the same as under the 0.1 per cent threshold for the same farm size. Given that it might not be possible to guarantee freedom from GM material if GM varieties are grown in the vicinity of non-GM varieties and given that 0.1 per cent was the practical lower limit of detection of the presence of GM material at the time of the study detailed above, these estimates provide an indication of the cost of producing a European organic canola crop that is approximately free of the unintentional presence of GM material (Bock et al. 2002).<br><br> A Danish study into the viability of organic and GM crops coexisting under Danish conditions came to similar conclusions. The study considered farms with average R elds of 5 hectares, under a range of scenarios for the level of GM crop adop- tion. The study assessed the economic costs of maintaining a level of unintentional presence of GM material in organic crops below the level of detection 4around 0.1 per cent.<br><br> The authors of the study concluded that GM and organic crops could successfully coexist, with an 11 per cent increase in average production costs for organic canola. Additional costs for organic maize silage were calcu- lated at around 1.5 per cent of the average production costs for conventional maize silage (in the absence of GM maize), the same as the additional costs estimated for organic cereal production. The additional costs for certiR ed seed production were calculated to be lower than for production destined for food and feed; and for some crops (including R eld beans and lupins) there were no addi- tional costs (Tolstrup et al.<br><br> 2003). If the proposal to establish a 0.9 per cent acceptance threshold for the uninten- tional presence of approved GM material in organic products is accepted in the European Union, the costs detailed above would be expected to fall. This is because less stringent standards typically require less stringent mitigation measures to be adopted; and these measures are typically less costly.<br><br> 29 organic farming » abare research report 07.11 potential costs and beneB ts in Australia The potential costs and beneR ts that Australian organic producers might face if a GM food crop were commercialised in Australia are discussed below. The poten- tial costs and beneR ts for Australian organic producers will be examined more speciR cally in the case studies discussed later in this chapter. The case studies analyse the potential impacts of the commercialisation in Australia of GM canola on the Australian organic canola, beef and honey sectors.<br><br> potential costs The potential costs faced by organic producers if GM canola were commercial- ised in Australia can be categorised as: » the costs associated with avoiding the presence of GM material in organic products » the costs associated with GM material being present in organic products. avoidance costs Avoidance costs are dependent on the particular circumstances of organic producers, especially the types of product that they market and the level of risk of GM material being unintentionally present in their farm outputs. These costs also depend on the permitted level of adventitious presence of approved GM material in organic products.<br><br> For crop producers, typically,

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