JULIO DE CASTILHOS, Brazil -- Along Brazil's remote southern border with Argentina, a battle over contraband is raging.
Government inspectors raid storage sheds and conduct on-the-spot lab tests. Tipsters have a toll-free hotline to rat on smugglers. Police burn fields and seize sacks of seeds.
The target isn't cocaine or heroin. It's soybeans.
In one of the strangest twists in the dispute over genetically modified food, the government of a Brazilian state has gone to war with its farmers over their use of soybeans altered to permit use of a certain herbicide. And while the dispute is rooted in local politics, it touches on international business: the efforts by multinational food companies to meet demand, especially in Europe, for food free of "GM" ingredients.
That's because unlike the U.S. and Argentina -- the two other top soybean producers -- Brazil hasn't yet approved the planting of bioengineered beans, and thus has emerged as the world's premier source of the regular kind. So food companies, which use soybean oil or soybean meal in everything from chocolate to tofu, have been turning to Brazil's beans for their non-GM product lines.
Favored Fowl
Indeed, European supermarkets cite their use of Brazilian soybeans as evidence that their product lines are "non-GM." One British chain, Iceland Group, even says it imports its frozen chickens all the way from Brazil because there they can peck at feed made of conventional soybean meal.
But a visit to the big soybean-growing state of Rio Grande do Sul suggests that Brazil's soybean supply isn't quite as claimed by marketers. Many farmers here openly plant genetically modified soybeans, with or without federal sanction.
The European Union, which requires labeling of GM foods, plans a limit of just 1% bioengineered residue in any ingredient for foods to avoid the label. But agriculture officials in this Brazilian state estimate that 13% of its 7.5 million acres of soybean fields are growing a genetically modified crop this season. Farmers put the percentage higher still, and they note that these GM soybeans are routinely mixed with conventional soybeans before shipment abroad.
No Guarantees
European importers who've traveled to the region recognize there's a problem. "It is obviously something that concerns me," says Sonny Arora, managing director of Soya International Ltd. in Manchester, England, which imports more than 15,000 tons of Brazilian soy a year and supplies it to supermarket chains for their private-label goods. He says lab tests on Brazilian soybeans in the past year have found "some contaminated product." And a spokesman for Cargill Inc., which sells Brazilian soybean oil and meal, says, "We have been aware for some time that there are no GM-free guarantees, if you like, on Brazilian soya."
Braulio Dias, a specialist on the issue at Brazil's federal environmental-protection agency, says national officials are confident that "the great bulk of the harvest isn't transgenic." Some experts say GM soybeans have made few inroads in the farm lands of western Brazil. But the agriculture secretary of Rio Grande do Sul, whose office has become a kind of clearinghouse on the issue in Brazil, says he has reliable information that GM is being used in other states besides his. In fact, the secretary, Jose Hermeto Hoffmann, says his state may have less transgenic soybean than the others, which aren't enforcing the law.
The gulf between Brazilian farmers and their European customers is wide. Farmers here shrug when asked about the GM controversy. They don't seem to believe that consumer demand for non-GM food is rising as a result of environmental groups' warnings that GM crops could have unintended effects. Mention the anti-GM group Friends of the Earth, and they think of a local farmers' organization by the same name -- one that advises farmers on the advantages of GM seeds.
A Cost Issue
What the farmers know for sure is that their competitors across the border in Argentina are permitted to use the new seeds -- and thereby reduce their production costs -- while they aren't. With world soybean prices at unprofitable, 25-year lows, "we have to lower costs because we're at the end of our rope economically," complains Hilario Ceolin, mayor of the town of Estrela Velha. His is one of several communities that have passed measures defying the federal and state governments and declaring legal the bioengineered crops, known here as transgenicos.
Brazil's soybean squabble arose earlier this year after the federal Agriculture Ministry approved use of Monsanto Co.'s "Roundup Ready" soybeans. These beans, thanks to a bacterium gene inserted by Monsanto, can survive a dousing by Roundup herbicide, also made by Monsanto. Farmers say that by using Roundup, they can avoid more-expensive weed-killing chemicals and cut their overall herbicide costs by 20%.
But environmental activists fear that these soybeans' resistance to Roundup could somehow spread to neighboring plants, leading to out-of-control "superweeds." Brazil's chapter of Greenpeace, along with a consumer group and Brazil's environmental-protection agency, won a court ruling in August that halted use of the seeds pending an environmental-impact study, which is expected to take at least a year. An appeal by Monsanto has yet to be heard.
In Rio Grande do Sul, many farmers aren't waiting. They've been growing genetically modified soybeans for two or three seasons, from seed originally smuggled across the border from Argentina. They won't say who supplies the seed. "Bags of it just fall from trucks and people plant it," jokes farmer Fabiano Scapin. He says he doesn't use it but knows plenty of people who do.
The farmers might have gone on this way with impunity but for a political shift. Thirteen months ago, the state narrowly elected as governor Olivo Dutra, from the leftist Workers Party. Although GM soybeans hadn't been a campaign issue, the party's new agriculture secretary, Mr. Hoffmann, soon got a briefing on them from Greenpeace. Told of the GM backlash in Europe, he went to France and Britain to gauge its force, and says he returned convinced that bioengineered soybeans were a dead-end street for Brazilian growers.
Few listened to him. "We were ridiculed in the media for talking about transgenics," Mr. Hoffmann says. "It sounded like a crazy thing."
Surprise Inspections
With the seeds' status in limbo as the planting season began last month, the state government moved to halt their use. It launched an informational campaign with thousands of colorful posters that say, "Transgenicos. Don't Plant This Idea." They list a hotline to report violators.
The most controversial part of the program has been its inspections. Teams from the state Agriculture Ministry began showing up on farms with test kits designed to determine within minutes whether soybeans have had a gene added. Under federal law, a farmer could face one to three years in jail for possessing such seeds.
Farmers, who largely voted against the Workers Party, see this as Big Brother behavior. "The government acts as though it's worse than planting marijuana," says Paulo Pigatto, a farmer from the town of Julio de Castilhos, who says he planted a little more than 100 of his 1,800 acres with GM seeds.
But Marta Elena Angelo Levien, head of the inspection program, says ensuring that regular soybeans are planted is a "matter of national security." She adds: "It's a technology that is dominated by a few big businesses forming a cartel. By adopting transgenicos, Brazil would become dependent on an oligarchy for food technology."
Authorities burned soybean seeds that had been seized in a farm-supply shop late last year. They also destroyed some plants grown during the prior gubernatorial administration at a state-run experimental farm. When state inspectors first visited Julio de Castilhos, they found transgenic soybean seeds on six of the first seven farms they checked, says Elgart Egon Renner, a farmer and agrarian consultant who says he uses them, too.
Bean Bust
Then one morning last month, a federal police cruiser and three cars from the state agriculture ministry's office appeared in front of Forgiarini Barbecue, a restaurant in the shadow of local grain elevators.
Word that a soybean bust was coming down traveled fast in this dusty town, where farmers walk about with cell phones clipped to their jeans, and tractors bump up and down the cobblestone streets. Soon about 100 producers had gathered near the restaurant parking lot. Forming a convoy of pickups, they tailed the authorities as they started their inspections.
About six miles from the town center, the soybean sleuths decided to abort their mission. They made a U-turn and headed back, with the convoy of farmers still dogging them. The officials finally pulled over at the edge of town and engaged in a tense, hourlong standoff with farmers.
"We asked them to read to us the warrant to search lands, and they wouldn't," says Mr. Renner, the farmer.
It wasn't the only such incident. For 30 hours, angry farmers in the town of Tupancireta practically held inspectors hostage. "We did let them go to the drugstore and to the supermarket, but we wouldn't let them step on our land," says farmer Jorge Moraes. Soybeans, he says, "are our great weapons for the future. The inspectors are risking their life going on people's property."
The fight has spilled into the state assembly, which is still controlled by a conservative party. "We are at an impasse, a showdown between farmers and the government," says Elvino Bohn Gass, a Workers Party legislator whose office walls are emblazoned with anti-GM fliers and a big Che Guevara banner.
Two weeks ago, busloads of angry farmers poured into Porto Alegre, the state capital, to protest against the inspections. For hours, they milled around outside the assembly building while, across the street, a dozen Greenpeace activists stood in front of a yellow placard listing the names of pro-GM legislators beneath the words: "Congressmen who could make you a guinea pig for transgenicos."
Conspiracy Theories
One farmer, Rudinei Cherubini, was convinced the GM opponents were part of an international conspiracy to keep Brazil from getting the new seeds. "Europe doesn't want us to use trangenicos because European companies that produce herbicides will lose market here," he said.
In contrast, the opponents suspect that the pro-GM farmers are secretly financed by Monsanto, although they, like Mr. Cherubini, offer no proof. They say they find it strange that the company, which has sued some U.S. farmers for planting beans they had grown from Monsanto seed instead of buying new seed each season, hasn't taken any legal action in Brazil. A Monsanto spokeswoman says the company has asked Brazilian authorities "to take appropriate legal measures to stop" such practices here and will wait for the results of an investigation to know whether there is any infringement of its patent on the soybeans.
On Dec. 8, state legislators voted 28 to 13 to halt the farm inspections. The bill said they could be carried out only by the federal government, which has shown little interest in doing so. But the Workers Party governor has vowed to veto the bill. He also has announced a $5 million subsidy program for farmers who swap their GM seeds for conventional ones.
So the soybean saga in Brazil rolls on. Mr. Renner, the pro-GM farmer and consultant, argues that ignorance of science is behind much of the fear of transgenicos. "All of us are transgenic," he says at a table at the Forgiarini Barbecue. "After we are born, we receive vaccines to make us resistant to disease, so we ourselves become transgenic."
But Maria Guazzelli, an agronomist who favors organic farming and opposes GM seeds, sees things differently. The arguments, she says sadly, have "become too emotional to be anything connected to science."
Write to Steve Stecklow at steve.stecklow@wsj.com and Matt Moffett at matthew.moffett@wsj.com
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