As the world’s only major producer of both transgenic and non-transgenic soybeans, Brazil has become fertile ground for businesses that test raw and processed soy to determine whether it’s genetically modified.

Following the lead of the United States and Argentina, Brazil now ships large quantities of gene-altered soy abroad. Though commercial cultivation of transgenic soy was only approved here last year, it already had gained a strong foothold here through illegal plantings.

But Brazil, unlike its two main soy-exporting rivals, still grows a large share of non-transgenic soy—about 75% of its crop. And the country appears determined to segregate this soy so it can be sold in markets,mainly in Europe, where consumer pressure for non-transgenic foods is strong.

The result has been a surge in soy testing. From 2002 to September of this year, the number of government-approved testing firms rose from 20 to 47.

Brazil clearly hopes that when it comes to genetically modified farm products, credible testing will allow the country to have it both ways. Says Sergio Mendes, vice-president of Anec, an association of Brazilian grain exporters: “Testing gives Brazil a wider variety of export markets for its soy, which is important in a country that exports 40% of the soy it produces.”

Not everyone here agrees. Critics who have raised environmental and health concerns about the government’s policy on bioengineered crops say it will be impossible to keep transgenic and non-transgenic soy segregated in the long term.

“The government, in legalizing transgenic soy last year, opened up a Pandora’s Box,” says Sezifredo Paz, executive coordinator of the Institute for Consumer Defense (Idec), a leading consumer-advocacy group here. “There exist so many avenues for the mixing of transgenic and non-transgenic products…Also, [grain] processors aren’t interested in investing in the infrastructure, such as separate storage silos, to make segregation possible.”

Two testing methods

So far, two main types of soy testing are being used in Brazil to determine whether soy is non-transgenic, or GM-free. Forty-two of the new testing labs here do fast and relatively cheap (US$3.50) analyses called Lateral Flow Strip tests. These strip tests are not always reliable, however, and so are only used for preliminary testing of soy in the relatively early stages of the soy-supply chain. And strip tests cannot be used on processed products such as soy meal because when soy is processed, the protein analyzed in the test is destroyed.

A more accurate and sensitive type of testing that does work with processed soy is Polymerase Chain Reaction (PCR), a form of DNA analysis in which concentrations of transgenic ingredients as low as .01% can be detected with 100% accuracy. Five labs here are authorized to do PCR, which costs US$250 per test and requires at least three days to complete.

Paraná state has become a prime focal point for soy testing in Brazil. Defying the 2003 federal decree permitting cultivation of transgenic soy, Paraná’s governor last year signed a law that prohibits the planting of gene-altered crops locally through 2006 and bans the shipment of transgenics into, through or out of the state.

Such a measure would have little impact if Paraná were a small player in the Brazilian soy industry. But Paraná is the country’s top soy-exporting state, and it’s home to Paranaguá, Brazil’s main grain port. So the state law, which has stayed in effect while undergoing court review, makes testing a must for a substantial share of Brazil’s soybean and soy products.

Although Paraná state accepts strip tests to determine if soybeans can enter the state or its port facilities (it also does its own follow-up strip testing), PCR tests are now required by most soy importers in Europe on account of a new European Union labeling law.

The measure, implemented in April of this year, requires that all food and animal feed containing transgenic ingredients in concentrations above 0.9% be marked as “containing GMOs.” European soy importers that do not require PCR tests generally label the goods as containing GMOs and then sell to clients who do not mind if the product is transgenic.

Demand for testing also is being driven by a Brazilian labeling law enacted last year. The measure requires that products containing more than 1% transgenic soy be marked accordingly.

PCR tests are typically conducted at the last step in the chain—in soy elevators before soybeans destined for the domestic market are transported, in crushing plants before soy meal earmarked for domestic consumption is transported, or in the holds of ships before the soybeans or soy meal is shipped abroad.

Control Union Brasil (Cub), the local arm of the Dutch-based Control Union World Group testing company, has seen demand for the strip tests it does in its southeastern São Paulo state lab increase dramatically. Nilton Nunes, Cub’s managing director, says that thanks mainly to Paraná’s prohibition on exports of transgenic soy, the company expects to conduct a total of roughly 10,000 of the tests this year as compared to just several hundred last year.

The company does not perform PCR tests. But Nunes says the number of these tests that it has farmed out to other labs has grown from fewer than two dozen last year to an estimated 50 or 60 this year, largely due to labeling laws and demand among some European buyers for soy imports that are GM-free.

“The government’s decree last year that legalized GM soy [for the 2003-4 crop] caused some European buyers to require more testing of the non-GM Brazilian soy they bought, because those buyers could no longer allege to consumers that they were unaware Brazil was producing GM soy,” Nunes says.

GeneScan do Brasil, the local arm of GeneScan Europe, the German-based world leader in molecular biological testing for transgenic material in food, animal feed and agricultural products, performs PCR testing and certification. Pablo Molloy, manager of the company’s São Paulo state branch, says that GeneScan is conducting 30% more tests this year than in 2003. He estimates the overall PCR test market in Brazil grew 30%-40% this year and that the strip test market increased even more.

GeneScan also goes beyond sample testing and conducts audits to certify that soybeans and soy products are GM-free through all stages of production. Such certification is intended to provide an extra measure of security for niche-market sellers who want to ensure—and advertise—that their products include no bioengineered ingredients.

Europe a key customer

Europe last year accounted for 55% of Brazil’s 19.9 million metric tons of soybean exports, while Asia represented 43% (the bulk for China), and South and Central America accounted for 2%. Of Brazil’s 13.6 million metric tons of soy meal exports, meanwhile, Europe accounted for 76%, Asia for 23% and South America for 1%, according to figures provided by Anec, the grain-exporters association.

Virtually all Brazil’s non-GM soybean and soymeal exports are shipped from the Paraná state port of Paranaguá or ports further north to Europe, with a small amount going to Japan, says Anec’s Mendes. The bulk of transgenic soybean and soymeal exports, meanwhile, leave from Rio Grande do Sul state, where an estimated 85% of the soy crop is genetically modified. Those transgenic exports go primarily to China and, to a lesser extent, other Southeast Asian countries.

Under the transgenics ban it enacted last year, Paraná state won’t even allow soy from its southern neighbor of Rio Grande do Sul to be shipped across its territory unless strip tests show the soy to be GM-free. Claspar, a state testing company, also conducts its own strip tests to reduce the risk of error and ensure compliance with Paraná’s ban.

“Brazil doesn’t currently have to segregate its GM and non-GM soy via separate truck and rail fleets and storage facilities because Rio Grande do Sul state produces and exports virtually all of Brazil’s GM soy, mainly to China, and other states produce and export virtually all of Brazil’s non-GM soy, mainly to Europe,” says Anec’s Mendes. “So soy segregation here is mainly geographical, not infrastructural.”

However, Felisberto Baptista, head of the Paraná state agricultural secretariat’s inspection department, acknowledges that increased planting of gene-altered soy in Brazil eventually will require more deliberate segregation—and, thus, still more extensive testing—of soy.

“When the government decided to legalize GM soy in Brazil, it was [setting in motion a process] that would cause the amount of GM soy grown to gradually increase,” Baptista says. “And that means more business for testing companies that are betting on the medium- to long-term growth opportunities.”

Impact of European labeling

While Paraná’s ban on transgenic soy clearly has encouraged testing, another key factor are the labeling laws—and the importance some European food sellers in particular attach to presenting their products as GM-free.

To avoid alienating consumers leery of transgenics, a number of European food companies willingly buy soy whose price is higher on account of the added cost of testing for genetically-altered material.

These companies use Brazilian soybeans or soy derivatives in foods ranging from soymilk and soy-based fruit juices to chocolates and tofu. Some meat producers also cater to Europe’s anti-GM consumers by advertising their use of GM-free soy meal animal feed.

Among the beneficiaries is Imcopa, a large Brazilian soy crushing and processing company that supplies niche-market clients, nearly all of them in Europe. Based in Paraná state, Imcopa annually exports over 1.5 million metric tons of soy products, mainly soy meal. These products are subject to PCR tests and also are formally certified as GM-free by a Brazilian lab.

Enrique Traver, Imcopa’s managing director, says European pork and poultry farms buy non-GM soymeal animal feed so they can sell to supermarket chains—Tesco in Britain and Carrefour in France, for instance—that don’t want to label these meats as containing GMOs.

Going the extra mile

The concern is shared by large food multinationals such as Nestlé, Kraft and Unilever. These companies not only pay a premium to ensure products they sell in Europe have been tested for trangenics, they also take the extra step of having their European products formally certified as GM-free.

Such screening, though, is not the norm.

“While we have niche-market clients who are willing to pay a premium for Brazilian, non-GM products,” Traver says, “most European importers of Brazilian soy are not willing to pay a premium and don’t require certification.”

International food giant Cargill, Brazil’s biggest soybean exporter and its second-biggest soymeal exporter, ships some 4 million metric tons of Brazilian soybeans abroad annually, some 65% of which go to Europe and 35% to Asia. Cargill also exports 2 million metric tons of soy meal annually, all of it to Europe.

An export manager at Cargill’s operations in Brazil says Cargill does a considerable amount of in-house strip testing, then ships the positive-tested soy to China and other markets that accept GM soy.

The non-transgenic soy goes to Europe, says the executive, who declined to be quoted by name. He adds that with the EU labeling law in effect, growing numbers of European clients will request that PCR tests be done in ships’ holds before their soy leaves port.

“We expect more and more buyers will have an increasing amount of the Brazilian soy they buy from Cargill PCR-tested to avoid having to label it as ‘containing GMOs,’ ” the Cargill executive says.