German, Scottish ban on GM crops could lift food prices

Luke Graham, special to CNBC

Plans by Scotland, and possibly Germany, to ban genetically modified (GM) crops could prove a boon for farmers of conventional crops in these countries, but could also put further research at risk, analysts say.

As a result of the ban, producers of non-GM crops in Scotland may see prices rise if demand remains strong and other countries switch to producing GM crops, according to Hamish Smith, a commodities economist at Capital Economics.

"If demand for non-GM crops remains strong, then producers in the likes of Germany and Scotland could see the prices of their crops rise if the supply of such crops falls due to other countries shifting production towards GM crops," Smith said in an email to CNBC.

Daniel Acker | Bloomberg | Getty Images

GM crops have their DNA modified using genetic engineering, usually with the intention of increasing agricultural productivity by creating plants that are less vulnerable to pests and disease.

Land allocated to GM crops around the world has increased by 6.3 million hectares to 181.5 million hectares in 2014, a rise of 3.6 what? from 2013, according to the International Service for the Acquisition of Agri-Biotech Applications, a non-profit organisation which promotes GM and biotech crops.

However, concerns exist about GM crops because of fears that they could harm biodiversity. Greenpeace describes GM crops as "genetic pollution" and is concerned that GM organisms could breed with natural organisms, which may contaminate the environment.

A European Union law introduced earlier in the year gave member states the right to opt-out of EU-wide approvals of new GM crops. This would prevent the crop being grown in that country.

So far, the only GM crops approved by the EU include strains of maize, rapeseed, cotton and soybean that are resistant to certain herbicides and pest insects.

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Early in August, Scotland announced it would opt-out and Reuters reported last week that Germany would follow suit, citing a letter it viewed from the German agricultural minister.

"Scotland is known around the world for our beautiful natural environment - and banning growing genetically modified crops will protect and further enhance our clean, green status," said Richard Lochhead, Scotland's rural affairs secretary in a press release announcing the ban.

"There is no evidence of significant demand for GM products by Scottish consumers and I am concerned that allowing GM crops to be grown in Scotland would damage our clean and green brand, thereby gambling with the future of our £14 billion ($22 billion) food and drink sector."

However, banning GM crops comes with its own risks, a spokesperson from the U.K. Science Council told CNBC.

"Banning the use of the technology is a strong disincentive to doing the research - both researchers and investors/funders prefer to work in an environment where the technology is likely to be taken up rather than banned so this is likely to impact on Scotland's current research strengths," the spokesperson said via email.

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