GMO crop use may boost food costs - Chicago Fed CHICAGO, Dec 27 (Reuters) via NewsEdge Corporation - Use of genetically modified (GMO) crops in the food system will likely increase handling and processing costs and retail food prices to some extent, a Federal Reserve Bank economist said on Monday. In a quarterly letter on the farm economy, Chicago Fed agricultural economist Mike Singer said biotechnology and GMO crops hold great promise to improve the environment and better human health. "However, concerns over the safety of these foods and the environmental impact of genetically enhanced crops have risen dramatically in recent months," Singer said. "Though it seems highly unlikely that the continued development and use of these products will be banned, labelling and perhaps additional regulation may increase costs in the food system and, ultimately, affect retail food prices." GMO crops, which in recent years caught on widely with U.S. farmers, usually contain genes inserted into seeds to help the plant withstand herbicide applications, diseases or serious crop pests such as the European corn borer. More than a third of U.S. corn and more than half U.S. soybeans were planted to GMO seeds this year, before a firestorm of consumer protests led many food processors and distributors in Europe and Asia to call for GMO segregation, further testing and labelling. Disputes over the safety and evaluation of GMO crops contributed to the breakdown of the latest World Trade Organization talks in Seattle earlier this month. Singer said that given the level of consumer concerns and their effects this year on food processors, it was likely that next year's GMO crops in the U.S. will have to be segregated, tested, labelled and further regulated -- all adding to costs that would be pushed further down the food chain. "The problem today is one of infrastructure, i.e. most farmers, handlers and processors are not prepared to segregate grain," he said, noting that segregation will demand either considerable downtime during harvest or purchase of additional equipment and storage devoted to keeping GMO identity intact. "Either approach entails a significant additional cost," Singer said. "Complete segregation may be all but impossible," he added. Singer said that by next year's harvest testing procedures and standards must be developed, "perhaps similar to standards already in existence for levels of foreign matter allowed in various commodities." Singer said it would be no surprise to see a reduction in plantings of GMO crops next year by U.S. farmers. "Many may decide to reduce the amount of GMO seed planted because of concern over price discounts and demand uncertainty," Singer said.