RIO DE JANEIRO, Brazil - Consumers may soon have serious cause for concern if agricultural powerhouse Brazil allows sales of genetically modified (GM) crops. Supplies of staple foods such as soybeans might never be the same again. (ref.2021)

Brazil, a leading world producer of soybeans, coffee, sugar, beef, corn and orange juice, is one of the world's last bastions blocking the advance of GM crops despite fierce lobbying from powerful multinationals such as U.S.-based Monsanto.

Brazil's soybean fields are already riddled with unknown amounts of beans -- estimated by some analysts at up to 60 percent in the key southern crop areas -- which are grown from modified seeds smuggled in from neighbouring Argentina.

But if Brazil were to permit the widespread cultivation and sale of genetically modified soy, which might still take many months due to the country's labyrinthine legal system, the global balance between modified and unmodified beans might change forever.

LUCRATIVE EUROPE MARKET KEY FOR BRAZIL'S SOY EXPORTS

This could have an enormous impact on exports of soybeans from Brazil, the world's second largest grower, as it would very likely lead to losses in the lucrative European market where safety-conscious consumers often prefer to buy non-GM foods.

"Europe is the principal buyer of Brazilian soy," said Cesar Borges de Souza, former president of the Brazilian Association of Vegetable Oils Industries (Abiove).

"Europe's preference for conventional soy means that they will look to Brazilian products first. So in market terms, this is a big advantage even if they are not paying an explicit premium for conventional soy," he said.

More importantly, perhaps, a pro-GM stance from Brazil would put it on a much more equal export footing with the hemisphere's other main producers Argentina and the United States -- both of which plant more than half their crop with GMO beans.

According to U.S. Department of Agriculture forecasts, Brazil should grow 41.5 million tonnes of soybeans in 2001/02, compared with 75.1 million tonnes in the U.S. and 27.0 million in Argentina -- together, nearly 80 percent of global output.

If Brazil's government were to adopt a pro-GM policy, modified beans would also dominate world soy exports as the top three producers would account for an expected 52 million of a total 57 million tonnes of exports forecast for next season.

Brazil's non-genetically modified soy commands a premium over GM material especially in health-conscious markets such as Europe and Japan -- and some U.S. processors with customers in Europe will spurn their obvious source of supply and pay extra for non-GM beans.

The European Union purchased over half of Brazil's total soybean and soymeal exports of more than 22 million tonnes between January and September this year.

"Brazil is exporting more and more soybeans compared with the U.S. and Argentina because people want GM-free food," said Mariana Paoli, campaigner at Greenpeace Brazil, which wants a moratorium on the development of GM food crops until their safety has been properly researched.

FARMERS LURED BY LOW COSTS, SEED SMUGGLING RIFE

Apart from the premium paid for their produce in Europe, Brazilian farmers are attracted by the savings offered by GM soybeans as they require less application of herbicides, and less fuel to power machinery for routine field operations.

The financial rewards may have already moved the GM issue in Brazil beyond the power of the courts and the government.

Some of Brazil's soybean fields, especially in the south, are said to be rife with GM seeds smuggled across the land and river borders from Argentina, where the use of GM technology is widespread among the country's farmers.

In Rio Grande do Sul, Brazil's southernmost state bordering Argentina and Uruguay, GM soy accounts for some 60 percent of planted area: double the levels seen last year, according to Brazil's Seed Producers Association (Abrasem).

"Profit margins for the certified seed producers are shrinking. It is a life or death issue for the seed industry," said Abrasem's director Joao Henrique Hummel, adding that the illegal traffic had crippled conventional seed suppliers.

Annual production of registered seed had slumped to 100,000 tonnes in Rio Grande do Sul from 300,000 tonnes just three years ago, he said. Rio Grande do Sul is Brazil's third largest soy-growing state after Parana and top grower Mato Grosso.

Industry sources have said the government is either turning a blind eye to the smuggling, or simply unable to prevent it.

MONSANTO, GOVERNMENT, CONSUMERS LOCKED IN LEGAL BATTLE

The legal battle over genetically modified crops has raged in Brazil for years.

The wrangle between the government, which is broadly in favour of GM farming, and consumer lobby groups has been dragging through the country's courts for years as each new incident emerges to revive the issue once again.

Last year, Brazil barred several shipments of Argentine corn and wheat to its southern ports while laboratory tests for GM material were conducted. Brazil imported nearly all its eight million tonnes of wheat from Argentina in 2000/01.

Early this year, more than 1,000 impoverished farmers stormed a biotech research centre owned by Monsanto in Rio Grande do Sul to protest against GM crops, pulling up fledgling corn and soybean plants at the company's experimental farm.

In July, the Agriculture Minister was reported to be poised to give Monsanto the green light to market and sell GM soybeans. But he was forced to beat a speedy retreat when reminded that the issue was still subject to a legal injunction.

The government favours GM farming techniques, which it says should cut costs, raise productivity and help keep Brazil as a leader among the world's food exporters.

For its part, Monsanto has been lobbying hard in government circles to secure authorisation to sell its soybean varieties, which have been bio-engineered to withstand the company's Roundup Ready herbicide, on the Brazilian market.

While Roundup Ready soybeans are the furthest along the bureaucratic trail towards approval for sale, Monsanto is still completing a five-year environmental impact study in Brazil, which was ordered by the local courts in 1998.

Analysts say a ruling on the GM issue may emerge later this year and even if it goes against Monsanto, appeals could still be lodged in Brazil's Supreme Court -- which would drag the process out for many more months.

Anti-GM campaigners say a decision in favour of Monsanto might include new reference terms for studies into the impact on the environment, human and animal health, as well as food labelling, safety, and the segregation of GM and traditional crops.

"It's a very slow process. Approval certainly won't be in time for this year's harvest, possibly for 2002 or 2003," said Flavio Roberto de Franca, analyst at grains and oilseeds consultancy Safras e Mercado.

"But the question seems to be when, rather than if, approval will be given," he said.

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