Follow Up: The GMO Labeling Debate Continues

The GMO labeling debate continues on, now almost eighteen months after the 2016 bill was signed to require food producers to disclose genetically engineered or genetically modified ingredients on the labels of consumer products.

The debate at this point centers around new legislation in Congress that the big lobbying groups, such as GMA (Grocery Manufacturers of America), are advocating for which will allow some loopholes to the disclosure of genetically altered ingredients.

This week in the news, the GMA suffered a setback when Nestle decided to join The Campbell Soup Company and withdraw from the GMA over the issue. Nestle and Campbell Soup disbanded their membership in the group over this contentious issue of GMO labeling.

Both Nestle and Campbell Soup favor more transparent disclosure of genetically modified or engineered ingredients. In a previous article I produced, the decision by The Campbell Soup Company to make a full disclosure of GMO ingredients before it was required by law brought significant traction and attention to the legislation that eventually gained passage in 2016.

The GMA group wants less transparency in the process, and the opinion of the Nestle and Campbell Soup is that direction will damage the relationship with the consumer more than just disclosing the presence of GMO ingredients up front. The average consumer today has far more information available to them and many shoppers are significantly more health conscious than in prior generations.

However, at the same time, some consumers do not care about GMO or genetically engineered ingredients in their food. Some consumers have a favorable view of GMO ingredients and feel they are safe. Many consumers are making purchasing decisions strictly based on price, and they cannot afford to stretch their budget to buy products that do not contain genetically engineered ingredients.

The other force at play here is that depending on the type of grocery item on the list, the non-GMO versions are either difficult to find or do not exist. The second most important attribute to shoppers in grocery channel surveys after price/value is time/convenience. The average shopper has a very busy lifestyle and most people have what they would term “time sensitivity” and that is a huge component in some shoppers just doing the “grab and go” without reading labels.

It should be noted that the majority of Americans have a negative opinion of GMO and genetically altered or engineered ingredients in food products. It has become an issue where the consumer is making purchasing decisions based on that one factor, which makes the labeling transparency crucial.

Some food companies have noted sluggish sales of certain product categories and are rapidly designing alternative versions that are either organic, gluten free, soy free, or GMO-free.

The current legislation regarding GMO labeling has a few different options for the food producing company with regard to the design of their label deck. The first option is to highlight the ingredient(s) that are genetically modified and then put a disclaimer below the ingredients list that the highlighted items are made with genetic engineering.

The second option is to place an asterisk next to the ingredient(s) that are modified or genetically altered and then below the ingredient list have a similar disclaimer as option one: made with genetic engineering/modification.

The third option is to not highlight or asterisk any individual ingredients on the label and put some type of bold or highlighted statement reading: this product contains ingredients made with genetic engineering.

Then what is known in the industry as “option four” which is going to become more prevalent on packaging and label decks for companies who want to be less transparent about their ingredient statement. This option allows the food producer to put the disclaimer of the genetically altered or engineered ingredients on a document that can only be found if the consumer scans the QR code on the package.

The lobbying and special interest groups for the GMO free or those against the use of genetically engineered ingredients in our food products have several issues with this option for disclosure.

The first point of contention being the obvious one, the consumer has limited time and yet they are going to have to scan a QR code on individual packages and then read the disclosure statement to determine whether or not it is genetically modified, that is an unrealistic expectation.

The other major point of concern is the elderly, the economically disadvantaged, and those with other physical handicaps do not have access to the technology needed to scan the QR code to find this information.

The option four labeling is also being used on items that the average consumer would not anticipate being genetically engineered: such as grapes, certain types of juice products, and bottled spices. This option, just at face value, seems dishonest to the consumer as well.

The role of the QR codes in the labeling of food products and disclosures in any future legislation remains to be determined. It is definitely going to be one point of contention moving forward.

The labeling of food products and GMOs took another on another aspect in the news this week, with a major news organization publishing a story based on the results of a study published in JAMA where scientists analyzed the effects of the pesticide called Roundup.

The study found that people living in Southern California in recent years have had an increased level of glyphosate in their system which is the active ingredient in that pesticide product (see my earlier article on the effects of this product and the food supply) it is increased about 500%.

The study in Great Britain of the effects of glyphosate on rats demonstrated an increased level of liver disease and liver cancer. This is something that the scientists will monitor in California with their study participants. In fair balance, it is not known whether the increased levels in Southern California are due to the ingestion of foods with higher levels of GMOs, or if the participants breathed in particles of the pesticide from nearby farms.

The use of pesticides, herbicides, and genetic engineering has altered our food and our crops. It is trending in lockstep with an increased rate of illness in Americans from higher rates of cancer, to autoimmune diseases, autism, Parkinson’s disease, and dementia.
The American public should have the right to know if the products they buy to feed themselves and their families contain ingredients that are genetically modified or altered. It should be up to the consumer to make their own choices based on having all the facts in front of them.

The debate on GMO labeling and whether or not genetically modified foods are safe will continue on, and what is left is for you to decide which side you will be on.

The Commodification of Water

Many people living in America and other Western societies tend to take for granted the resources that we have at our fingertips which require little to no effort to obtain. One of those resources is also the most critical one: access to water.

I have fallen victim to this situation myself, having lived in America my entire life, never having to think about where my next glass of water would come from, or if I had enough water to take a shower. I simply turn on the tap and have access to safe, clean, unlimited drinking water.

However, as my previous experience covering the severe drought conditions that have plagued the American West have taught me, not everyone in America has had that same access to water as my experience has afforded me. The limited supply of water in states such as California and Nevada, the dangerously low levels of supply at reservoirs such as Lake Mead, and the changes in the levels of snowfall in the Rockies have prolonged the severity of the drought. The associated snowpack melting in the Rockies is what serves as one of the main supply points for the Colorado River and other Western rivers which feed into Lake Mead.

The access to water is also severely limited in certain areas of the world from Developing World areas in Africa and South America; to areas with booming populations and commerce such as China, India, Russia, and parts of Southeast Asia.

The simple fact is that the demand for water is very strong and the available supply of safe, clean water is low in comparison. Then, the projected demand over the next several years demonstrates that this demand curve is only going to enhance the demand for water, and that creates the classic supply and demand scenario that has Wall Street as well as other commodity experts speculating about one big idea: the commodification of water.

Buying & Selling A Life-sustaining resource

This idea at the core is both controversial and extremely complicated, while at the same time contains far reaching potential consequences. The financial markets buy and sell commodity positions on all sorts of materials from cattle, to coffee and even orange juice. The thought of that sort of trading with water is unthinkable to some, and a natural progression in the trade of a valued commodity to others.

The rationale behind these feelings is pretty self-evident, water is needed for survival where other commodities are not. The thought process around water and the access to water is different too, with many people (especially in the Western societies) feeling that they are entitled to water, or that water should be provided and not bought and sold on an exchange. Those feelings are all understandable.

However, water is currently sold on commodities markets in the form of ETF (Exchange Traded Funds) types of arrangements. In fact, for all those out there that saw the film, The Big Short, starring Christian Bale, Ryan Gosling, and Steve Carell which revolved around the housing bubble bursting and the economic crash that followed. The real-life character Bale depicted in the film, Dr. Michael Burry, has already began focusing his purchasing efforts on buying commodity positions in water.

Dr. Burry was ahead of the curve on the housing market with the swaps and CDOs, and now is focused on water which is a scary proposition. The current ETF structure places various products having to do with water such as the makers of pumps, filters, or irrigation systems with those who make equipment for water utilities. The Palisades Water Index, Dow Jones U.S. Water Index, ISE-B&S Water Index, and the S&P 1500 Water Index are a few of the most well-known funds that deal with water related trading activity.

In North America, this issue has come to the forefront with the controversies surrounding Nestle and other bottled water companies being able to utilize water supplies from Indian reservations in California while the state is on a water restriction. I covered that issue as well as the drought impact on Lake Mead so I have read countless reports and studies about the water supply in the domestic United States.

Another controversy surrounding Nestle was the purchase of a large water utility in Canada which serves the public. It is a dangerous potential precedent which led to protests and a call for a boycott of Nestle bottled water in Canada. The company also has outbid locals in Ontario for use of well water supplies for the purposes of bottling water, and Nestle has a permit to take water from an Ontario watershed during a drought restriction in that part of Canada. These incidences have outraged the locals and has initiated much the same argument as I posed with my prior work on Nestle in California: should they be allowed to sell water for a profit during a drought? It raises some serious questions.

Check and Balance

The commodification of water is also very complicated and is viewed by some in the investing and commodity trading sectors as a scenario which will never reach full realization. This is due largely to the reality that water is regulated by utilities which are operated, in whole or in part, by the state or the county. The municipal and county government or state level government involvement in the water supply is seen as the major deterring factor to essentially “check and balance” the trading of water as a commodity.

While the role of government may be factor in the U.S. and some other countries, it is certainly not the case in every country that is either dealing with water scarcity now, or will have an issue with the supply of water in the future. The financial market news site, The Street, reports that infrastructure spending for water supply related projects is estimated at $22 trillion over the next 20 years. That spending figure is just to maintain the status quo and does not account for new demand areas in growing population centers which I mentioned earlier.

That same piece done by The Street goes on to explain that the future investment strategy with regard to water will involve the infrastructure companies. The rationale around that statement makes sense because most of those same companies are diversified, therefore they will be involved with other infrastructure projects in other industries, not just with water related projects.

The thought of brokers or other “power elite” types buying positions in the supply of water is a downright frightening proposition for many in the general public. Furthermore, there are those who had no idea that the trend toward the commodification of water was even on the horizon, which is part of the impetus behind my choosing to write this piece.

Frightening & Intriguing

The reality is that water scarcity is a real issue confronting our future. It will impact supply and demand to a level that speculators will take a run at investing in positions at least in the ETFs involved. The response of other Developing World countries and emerging market countries, such as the BRICs countries I mentioned earlier, remains to be determined. They may decide to privatize the supply of water, in a country like China they will most likely implement measures where the supply is completely controlled by the national government, and Russia could fall somewhere in between. That portion of this scenario bears watching.

The commodification of water is also seen as both frightening and intriguing at the same time: frightening because it is a life-sustaining resource that most people feel should not be consolidated into the hands of a few wealthy individuals or entities, and intriguing from the investment perspective because there is no substitute for water like there is with certain other commodities.

The argument could be made that other natural resources such as oil and gold are traded as commodities, but the converse side is that neither of those resources are critical to sustaining life which water is most certainly. There are others within the investment world which feel that the buying of positions relative to the market on water may be essentially a bunch of noise. This is because the investors and those making valuations have difficulty in measuring the profitability of the private companies involved in the water industry.

Moreover, there is a sentiment that water is strictly a niche commodity investment and does not have the return rate needed to be a stand-alone investment. All of these factors will serve as the backdrop to the future where water will be in decreased supply and increased demand, unless some other method or technology comes along relative to the desalination of saltwater. That would “change the game” dramatically given the immense amount of saltwater that could be utilized.

In the end, the debate over whether or not a life-sustaining natural resource such as water should be traded as a commodity will continue. The potential for water scarcity for nearly half the population of the globe will also be a pressing issue in the future. Should water be traded as a commodity? Should it be exempt? Should industry titans such as Nestle be allowed to profit from resources that could serve local populations and not serve their bottom line?

Those questions will face us now and in future, with drastic and far-reaching consequences.

(Background and some statistics courtesy of The Street, Investopedia, U.S. News & World Report, Forbes.com, and CNN.Money.com)

California In Drought – Nestle Bottles Water?

The severe drought conditions being experienced in the West have been a source of concern for several months and have shown no signs of improvement. There are mandatory fines in California, Nevada, and other western states for watering lawns or washing down driveways. The agricultural consequences of this drought have been devastating to California with reports of crops lost.

 

The job market in California has been impacted as well with farming and other agricultural related jobs down across the board. The drought has effected small towns in the desert valleys and big cities near the coast, with nearly 95% of the Golden State’s population in some sort of water restriction.

 

Here on my blog, Frank’s Forum, I have covered the impact of the drought on Lake Mead and the subsequent water supply issues for Las Vegas, parts of Arizona, and Southern California. One of the “mega themes” of my blog is the environment and issues of sustainability, so this issue falls into both of those categories.

 

The media has reported recently about another controversial aspect dealing with the sustainability of water amidst the catastrophic drought gripping California at this point and that is the continued practice of Nestle to bottle water there for export to other states.

 

The issue is a highly charged and polarizing one with some viewing the activity by Nestle as wrong or unfair; and others viewing it as a necessary job creator and supplier of a healthy beverage alternative.

 

Current Conditions

The estimates from well-respected environmental science groups are that the Western states have lost 63 trillion gallons of water during the drought. This is driven primarily by the effects of climate change on the supply sources which in turn feed the reservoirs in those states.

 

In California, three major reservoir areas have been dramatically impacted by the drought conditions plaguing that huge state:

  • Trinity Lake = 29% capacity
  • Shasta (fed by Sacramento River) = 30% capacity
  • Oroville = 31% capacity

The City of San Jose recently instituted a city-wide water restriction policy for the over 982,000 residents of California’s third largest city. The restrictions include a fine of $500.00 for washing down a driveway.

 

Sacramento and other large cities throughout California have similar water restriction policies in place. The reservoir supply levels are so drastically low, that these policies are necessary to better protect the remaining supply of this dwindling and essential natural resource.

 

In my research, the local websites for news in California are covered with advertising for lawn replacement services promoting sales of synthetic grass products.  It is only natural that conditions dictate a market for other businesses to provide their products or services which are driven by the demand for those products; in this case due to the unfortunate severity of the drought conditions.

 

Many California residents have ripped up their lawns rather than watch them wither away and die because they cannot use the water to nurture their grass and other landscaping. This action also has a conservative effect in that the synthetic surfaces will obviously help retain water supply levels for use for drinking or other critical functions.  These same residents have varied opinions on the fact that one giant food and beverage company is still allowed to bottle water for sale while everyone else is dealing with shortages of this resource.

 

The Nestle Dilemma

 

The bottled water division of Nestle’, the world’s largest food company, has several brands under its umbrella. In the California desert, in Millard Canyon which is about 80 miles east of Los Angeles, is the site of the water source for Nestlé’s Arrowhead Natural Spring Water and Pure Life water brands.

 

The site is located on the Morongo Indian Reservation and is considered a sovereign nation therefore it does not have to comply with state laws concerning the drought restrictions on water. Nestle entered into a 25 year agreement with the tribe sometime around 2001-02.

 

Under the terms of this agreement, Nestle pays the tribe for the water it extracts from the site. An ancillary component of this arrangement is that the source site is exempt from local oversight and is not legally obligated to disclose the water amounts being utilized for the manufacturing of their product.

 

The reports from local residents are mostly negative toward Nestle because those communities are dealing with water restrictions, sewage issues, and disruptions in their water service. It is understandable that they would be upset that just down the road a huge corporation is drawing out water to bottle and export to other states across America.

 

The State of California has 100 bottled water facilities located within its borders, and their operation has been largely unaffected by the drought. The majority of the other water facilities have a different situation than the Nestle facility in Millard Canyon. Those production facilities have to report their water consumption activity to a state level agency. The water conservation restrictions are handled by the county level or local authorities, and they are essentially cut out of the situation when the bottled water manufacturers deal directly with the state agency in Sacramento.

 

It is important to mention that the other bottled water manufacturers have strong feelings regarding the Nestle deal at Millard Canyon and have aired those grievances to the media. The general consensus is that all the bottled water and beverage manufacturers should be held to the same standards for reporting their respective usage at all the facilities located in California.

 

This activity begs the question: Should the bottled water companies be allowed to proceed when the rest of the California is under such dire water restrictions? Should Nestle be allowed to bottle water in an essentially completely unregulated scenario on a Native American Indian reservation?

 

Meanwhile, CNBC published a very well done piece on this subject which explains how much water is used to make soft drinks, scotch whiskey, and other beverages.

 

In my own professional background working in the food and beverage industry and dealing with bottled water companies, I know that it takes water to make water. In order to make 1 liter of bottled water it takes 1.39 liters of water that is due to the amount lost during the various stages of processing.

 

In addition, it should be noted that the packaging used, which is also made in California, the PET plastic and the various other plastic bottle packaging uses a significant amount of water in the production process. In a place where water is in a critical level shortage it has raised debate over whether it is appropriate for this activity to continue.

 

 

Green Water

 

The bottled water industry is a $12.2 billion dollar empire and California is a state strapped with debt and other economic problems, making this situation even more problematic on a variety of levels.

 

Local residents also note that Nestle has a reputation for moving into small towns and communities and draining the area of all the water supply, “down to the last drop” as one resident explains, and then moves on to the next town.

 

Many groups of concerned residents and environmental conservationists maintain that this sort of activity by Nestle and other large beverage manufacturers involved in bottling water should be regulated and curtailed as soon as possible.

 

If California were to get involved in a regulatory measure against the bottled water manufacturers, it would constrain further the economic difficulties of this state in a post recessionary period that has been very difficult. However, the larger ethical questions raised and the ecological impact involved has become the central focus of the debate in the Golden State at this point which has become more important than the economic issues involved.

 

Nestle responded to some of these allegations but did not comment on the questions regarding their past practices of extracting a source to the end and then uprooting out of the respective community. The company did, in fair balance, raise the point that if they were to cease operations then the people of California would be forced to choose an alternative beverage such as soda, iced tea, or beer. The company spokesperson focused on their commitment to providing healthy choices through bottled water and that they have strict environmental standards in place to remain compliant with California laws.

 

The Nestle plant, it was noted, was designed to prevent damage to the local groundwater supply. Though the details to how it is designed specifically were not disclosed.

 

The Morongo facility is on tribal land, and they are not bound to disclose information on the water usage levels there. However, for those residents that maintain that it creates jobs, the detractors would point out that the facility employs 250 people.

 

Sustainability

 

The fact remains that water is a precious natural resource and it needs to be safeguarded and protected during times of drought or supply shortage. The concurrent theme running through this situation is that of the effects of climate change.

 

In my previous work covering the dire situation at Lake Mead, the largest water reservoir in the United States, it is apparent that climate change is having a dramatic impact on the mountain streams which feed the Colorado River, which in turn supplies Lake Mead.

 

The changes in temperatures and environmental as well as atmospheric conditions coupled with the increased westward population migration trend in the United States, and the result is a significant problem with potentially dangerous consequences to a huge number of people. The impact of climate change and migratory patterns of several species of birds including the changing temperatures being tied to the deaths of these animals has also received increased media attention this week.

 

In Nevada, the state and local government agencies have worked diligently on programs focused on sustainability of the water supply through the reuse and recycling of the water in their system. Some reports I researched detailed the proposals currently pending in California regarding similar measures, though some members of the population are hesitant about the recycling processes involving wastewater, so it remains a work in progress.

 

I believe that recycled water technologies are going to account for a large amount of the innovations moving forward as a method to deal with the effects of climate change. The system currently in place to provide water service to residences and businesses in many regions of America leaves some room for improvement and increased focus on sustainability.

 

The question remains: Should Nestle and other beverage conglomerates be allowed to bottle water for export to other states during severe drought conditions where residents are dealing with restricted access to water?

 

That debate will continue to be a part of our national conversation but the role of climate change in this scenario cannot be overlooked. The larger question of our role in environmental stewardship will also continue to frame a much larger argument in the months to come.

 

(Background information and statistics courtesy of CNBC, USA Today, The Associated Press, and the International Bottled Water Association)