On September 12, Cargill, a major commodity trading and processing firm, filed a lawsuit in a Louisiana state court against Syngenta Seeds for selling genetically engineered MIR 162 (also known as “Agrisure Viptera®”) seed corn to farmers. China has not yet approved importation of corn containing MIR 162, so U.S. exports to that country of corn and corn products have come to a halt. Demand for U.S. corn has fallen. Cargill believes its losses exceed $90 million.

Syngenta’s view? “Syngenta believes that the lawsuit is without merit and strongly upholds the right of growers to have access to approved new technologies …”. The company’s position is that it has been legally selling seeds containing MIR 162, a trait that provides useful insect resistance, to U.S. farmers since 2010. Other major corn importers – including Japan, South Korea, Mexico, Colombia and the European Union – have approved importation of corn with the MIR 162 trait. Syngenta has been seeking approval in China since March 2010. MIR 162 has not raised any health or environmental safety issues.

Cargill’s view is that Syngenta has rendered U.S. corn supplies ineligible for export to China. Corn containing MIR 162 has spread throughout the U.S. marketing system to the extent that it would be expected to be present in any ocean vessel loaded for export:

“Cargill is a supporter of innovation and the development of new GMO seed products. But we take exception to Syngenta’s actions in launching the sale of new products like MIR 162 before obtaining import approval in key export markets for U.S. crops. Syngenta’s actions are inconsistent with industry standards and the conduct of other biotechnology seed companies.”

China’s decision to inspect imports for MIR 162 has led to the rejection of several corn cargoes since November 2013. In January 2014, the National Grain and Feed Association (NGFA) and the North American Export Grain Association (NAEGA) issued a joint statement urging Syngenta not to sell seed with the MIR 162 trait for planting until such time as China had granted the required regulatory authorization. Syngenta continued to sell MIR 162 for planting in 2014. NGFA followed up in April with an economic analysis indicating that grain-handler losses from MIR 162-related trade disruptions in the 2013–14 marketing year would amount to between $1.0 and $2.9 billion. In addition, the study estimates a $1.1 billion loss to U.S. corn farmers in 2013–14 due to an 11-cent-per-bushel decline in the price of corn in response to reduced demand.

As recently as September 2013, USDA had projected Chinese corn imports of 7.0 million metric tons (MMT) in the 2013–14 marketing year. The final figure now is expected to be about 3.5 MMT, with most of the decline representing lost sales opportunities for U.S. corn. Exports to China of distillers dried grains with solubles (DDGS), a co-product of ethanol production, also have stopped due to MIR 162. In 2013, China was the largest foreign buyer of DDGS, accounting for one third of U.S. exports–more than 3 MMT. Loss of this much business genuinely hurts the corn sector.

So why is China being so difficult regarding importation of MIR 162? That country has a process for reviewing and approving biotechnology products that often has worked fairly well; lack of progress with MIR 162 is noteworthy. Perhaps the most likely explanation is that China’s domestic corn production has been expanding rapidly. The crop in the world’s second-largest producer has grown 37 percent over five years; USDA projects it to reach 217 MMT for the harvest now underway. (By comparison, the current U.S. crop is projected to be 365 MMT.) Chinese policies have had the effect of raising domestic corn prices to more than twice the level in the United States. Farmers have responded to that strong incentive by boosting output, and the government has kept the market price from falling by buying and storing surplus supplies. The Chinese government now has the dubious distinction of holding 77 MMT of corn in its grain stocks, some 40 percent of the world’s total.

Given this rather awkward juxtaposition of flawed policies and market realities, it isn’t hard to imagine Chinese officials looking for ways to discourage corn imports. After all, the price gap between domestic and world prices creates a strong commercial incentive to import. Delaying approval of the MIR 162 trait makes most of the world’s corn supplies ineligible for importation into China.

Now, back to the lawsuit. There is no commercial agreement between Cargill and Syngenta, so Cargill can’t sue for breach of contract. Syngenta made a conscious decision to market MIR 162 despite knowing that such action had the potential to cause large losses to others involved in the supply chain. Does that constitute a legitimate basis for this legal action? It’s unclear, but the disgruntlement of Cargill and other grain handlers is not difficult to understand. Stay tuned as this case works its way through the court.

Stepping back a bit from the specifics of this situation, it’s reasonable to ask whether Syngenta can maintain a successful long-term biotech seed business if it insists on acting primarily to maximize its short-term earnings. Yes, the company no doubt spent several years and millions of dollars in developing MIR 162, so its interest in commercializing the technology is obvious. But the potential benefit to Syngenta from marketing MIR 162 in the current year likely would be measured in millions of dollars. The loss in value to the rest of the agriculture/​food supply chain–including farmers– is being measured in billions. The potential costs could multiply quickly due to Syngenta’s decision to allow limited planting in 2014 of a newer trait–Agrisure Duracade–that is not approved for importation by either China or the European Union. Syngenta seems to be rolling the dice.

Corn prices have fallen 35 percent in the past four months and are now at their lowest level since 2010. Low prices may prompt farmers to question the wisdom of seed companies acting in ways that reduce demand for corn. At a minimum, selling MIR 162 and Duracade under these conditions seems like a questionable strategy for promoting customer satisfaction. Syngenta may yet conclude that building a constructive relationship with growers over time could prove to be of more value than a year’s earnings from selling seeds not approved by importers.