Grain prices have increased somewhat during recent weeks, as the U.S. Department of Agriculture scales back its harvest estimates. Several factors, however, both domestic and international, could influence supplies and prices through the next year.

USDA and industry analysts generally have expected a strong increase in corn exports this year based on demand projections and reduced production in China, another important corn exporter. That export demand has not yet developed, however, and part of the reason likely relates to the controversy surrounding genetically modified organisms or GMOs.

The GMO issue has made headlines across the United States this fall, particularly after corn from the Starlink variety, genetically modified for pest resistance, found its way into various food products. Starlink corn has EPA approval for feed use, but not for use in human food. Many of our export customers, however, including Europe and Japan are even more strict in their regulation of GMO grains, banning their use in feed as well as in human foods.

Iowa State University economist Robert Wisner notes that through Oct. 19, U.S. corn exports since Sept. 1 and outstanding unshipped sales were five percent less than a year earlier. Sales are particularly slow in Pacific Rim markets including South Korea, Japan, and Taiwan. Dr. Wisner says Japanese regulations prohibit use of Starlink for food and feed use. They impose zero-tolerance standards and violators face fines and jail sentences. Starlink corn was, however, found in at least one food product in Japan. Loss of confidence in U.S. grain exporters to isolate GMO grains from the supply could lead Japan to seek its grain supplies elsewhere.

Dr. Wisner also notes that Tyson, the world's largest poultry producer, has indicated that it will not feed Starlink corn to chickens. Negative demand pressure on Starlink corn could cause some regional differences in U.S. corn prices. The variety was planted more widely in the Western Corn Belt than in the East, which could lead to price premiums in eastern states. Dr. Wisner says reports have shown some Starlink-co-mingled corn being sold at substantial discounts to non-Starlink corn.

The GMO issue also has affected soybean exports. Over the last two years, Dr. Wisner says, the U.S. has essentially lost the once-large European Union market for soybean meal. GMO concerns may have been a factor behind that loss of export demand.