Crop Production/Industries, Research and Development/Tech Change/Emerging Technologies,

Dye, Dan

English

Research Papers in Economics

Agricultural Outlook Forum 2000                                 Presented: Thursday, February 24, 2000
HOW GRAIN SHIPPING AND PROCESSING FIRMS ARE HANDLING
BIOENGINEERED PRODUCTS
Dan Dye
Vice President, North American Grain Group, Cargill, Incorporated
As a grain handler and primary processor of agricultural crops, our most important job is to make
connections across the global agrifood system – between farmers and the people and companies
that turn that grain into livestock feed, industrial inks, oils and plastics, and, of course, into the
consumer food products that sustain all of us. We try to bring both ends of the food chain closer
together – to help farmers gain a better understanding of what feed and food manufacturers want
and are willing to pay for, and to help feed and consumer food companies recognize what it takes
to produce the quality they seek.
Most of the time, producers and end users can rely on fairly clear market signals to help make
decisions about what to plant and what to buy. That’s not necessarily the case with genetically
enhanced crops today.
All the noise surrounding agricultural biotechnology has created an enormous amount of
uncertainty and confusion. What should farmers plant? How big is the market for conventional
grains? Will there be premiums for non-genetically enhanced grains? Will those premiums be
large enough to offset the higher production costs for conventional grains? Can the U.S. grain-
handling system meet the challenges of a market that seems to be shifting from a commodity
focus to greater specialization? Will the current debate over genetically enhanced grains cripple
future biotechnology research and development? And perhaps the trickiest question of all --
What do consumers really want?
I wish I could tell you that I had all the answers. Unfortunately, I don’t. But I can tell you how
our company is approaching these issues.
Cargill has been supportive of farmers who want to use biotechnology since the first genetically
enhanced corn and soybeans were commercially planted in the United States in 1996.   But a
couple of months ago, we decided that we owed it to our farmer customers to restate our position
– to try to take at least some of the uncertainty out of an uncertain market. We told our farm
customers that we would accept crops enhanced through modern biotechnology at our U.S.
grain-handling, oilseed processing and corn wet milling facilities for crops planted in 1999 and
2000.
Although our processing plants will accept only those grains and oilseeds that have been
approved in Europe, we will work with producers to find other markets for those few varieties of
corn that have not yet been approved. Our grain-handling facilities will handle all varieties
approved in the United States. We ask farmers who will be delivering varieties that have not yet
been approved in Europe or Japan to notify us so that we can channel those crops into
appropriate markets.We believe very strongly that farmers should have the choice and the option of planting and
marketing genetically enhanced crops, conventional crops and a wide range of specialty grains
and oilseeds. Cargill is participating in all of these markets, including the market for
conventional grain.
We are working with customers who are requesting conventional grain on a case by case basis.
We won’t guarantee that any shipment is 100-percent gmo-free. We will, however, work to meet
reasonable tolerances, and we will establish an identity-preserved, traceable system that
guarantees the source and the handling and shipping methods used.
Identity preservation is a traceable “chain of custody” that begins with the grower’s purchase of
seed and continues through the shipping and handling system. It is not the same as segregation,
which suggests completely separate marketing systems for genetically enhanced and non-
genetically enhanced grain. Such a system, in our view, is neither practical nor economically
viable.
On the other hand, the logistics of an IP system, while complicated and more costly, are doable.
Companies, like Cargill, have been involved in specialty grains markets for years, and we have
experience in using identity-preservation systems to capture increased value for the producer, the
handler and the final customer.
The genius of the U.S. agricultural system is that we are very, very good at moving huge
volumes of undifferentiated commodities from producers to consumers at an extremely low cost.
We understand commodity markets. We are fast, efficient and have well-established methods of
setting values and evaluating risks.
There are a number of customers who seem to believe that we can operate a niche market with
the same level of efficiency and low costs. We can’t. And today, the market for non-genetically
enhanced grain is essentially a niche market.
Conventional grains cost more to produce and, if they are to be identity preserved, require a lot
of special handling at the farm. To prevent inadvertent commingling with enhanced grains that
are now so pervasive throughout U.S. agricultural areas, planters have to be thoroughly cleaned
between fields. Farmers need to pay attention to field location and wind conditions to prevent
cross-pollination. Harvesting equipment and storage bins need to be thoroughly cleaned, and
farmers may need additional storage to identity preserve non-genetically enhanced crops.
Farmers need to be compensated for those additional costs.
Similar steps need to be taken at the country elevator or terminal. Separate bins have to be
prepared and cleaned. Trucks need to be dumped in the right pit. Pits, conveyers and loading
equipment need to be cleaned as do trucks, railcars or barges at every stage in the supply chain.
These extra steps reduce efficiency and raise handling costs.
Finally, transportation costs are volume driven and rise quickly for small, irregular shipments
that cannot be commingled with other grain.
Some customers are prepared to pay the additional costs for identity-preserved conventional
grains and oilseeds, but many are not.The biotech debate has made the job of connecting producers and the best markets at home and
abroad more challenging and more complex in the short term. But I believe the market ultimately
will sort out the signals. We just need to keep our heads and remember what it is that we are here
to do – to provide abundant supplies of safe, nutritious food to a growing world population.
At Cargill, we believe that biotechnology can be an important tool in helping us meet the central
challenge of this century – to feed several billion additional people without having to plow up the
most fragile lands on the planet to do it. We cannot force the technology on consumers, but if the
past few months have taught us anything it is that we as an industry – producers, grain handlers,
livestock feeders and food companies – must do a better job of promoting the benefits of modern
biotechnology.

HOW GRAIN SHIPPING AND PROCESSING FIRMS ARE HANDLING BIOENGINEERED PRODUCTS

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Research Papers in Economics