GMO Contamination-Price Effects in the U.S. Corn Market: StarLink and MIR162
36 Pages Posted: 6 Dec 2017
Date Written: October 28, 2017
We examine the actual price impact of genetically modified grain contamination events. This paper contributes to the literature by examining the price effects of multiple genetically modified contamination events in the U.S. corn market. Using the relative price of substitute method and time-varying cointegration, we identify two primary structural breaks most relevant to the corn contamination events, StarLink and MIR162 events. Our results support the StarLink event’s large effect on corn prices found in the literature, but the price effect attributed to MIR162 is less clear. The break in prices near the MIR162 event, which was attributed to China’s rejection of the contaminated corn, emerged three months prior to the import ban. The magnitude of the price change was influenced by changes in U.S. corn and sorghum supply, and the EPA’s proposed reduction of the ethanol mandate. Expansion of sorghum exports and subsequent increased corn production also likely kept the pressure on corn prices. While China’s import ban on MIR162 and DDGSs may have resulted in delayed and cumulative changes in prices, the evidence suggests that the subsequent downturn in the U.S. corn market was more likely influenced by other domestic supply and demand changes.
Keywords: corn, sorghum, cointegration, GMO
JEL Classification: Q13, Q11
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