Overseas demand for U.S. feedgrains plays a key role in our domestic market and the prices cattle feeders pay for feed ingredients. This year, two major international food-safety controversies could result in higher domestic prices for soybean meal and lower prices for corn.

The discovery of BSE in a French cattle herd has led to a ban on feeding meat and bone meal to cattle throughout the European Union beginning Jan. 1, 2001. Soybean meal is a likely alternative protein source to replace animal byproducts in European cattle rations. Iowa State University Extension Economist Robert Wisner estimates that an EU-wide ban on feeding animal products could increase demand for soybeans by 140 to 160 million bushels, 5.0 to 5.8 percent of U.S. production. This could, he notes, drive the U.S. season-average farm price of soybeans up by about 30-to-50 cents per bushel if all of the additional demand is met by soybean meal. Influence on U.S. markets also will depend on production in South America, where producers are now planting their next crop. Dr. Wisner notes that soybean prices have risen about 30 cents per bushel in the last two weeks, largely in response to France's ban on feeding of meat and bone meal, announced earlier than the wider European Union ban.

Corn growers, and U.S. Department of Agriculture analysts, have predicted strong export demand for this year's near-record corn crop, but the issue of Starlink corn threatens to limit corn exports. Starlink is the name of a genetically modified pest-resistant variety approved for animal feeding in the United States but not for use in human food. Its discovery in several food products has led to a global discussion of genetically modified organisms and identity preservation of grain stocks. Dr. Wisner says Starlink continues to be a serious problem for Japanese buyers, since Japan's food regulatory agency bans its use for both feed and food. Japan, he says, has severe penalties for using Starlink, including jail sentences. Concerns over the ability of exporters to isolate Starlink corn or certify the genetic origin of corn supplies have disrupted exports to Japan and South Korea.

USDA, Dr. Wisner says, is working to develop a program to test and certify that corn is Starlink-free as it leaves U.S. ports, to assist foreign buyers in obtaining needed supplies. Meanwhile, U.S. corn exports and outstanding unshipped export sales are well below last year.