IP GRAINS - GROWING, HANDLING, STORAGE

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George Flaskerud NDSU Extension Economist Sept.
22, 2005 http//www.ag.ndsu.nodak.edu/aginfo/cropm
kt/cropmkt.htm
IP GRAINS - GROWING, HANDLING, STORAGE MARKETING
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(BioTechConf.ppt)
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Organization

• Overview
• Production
• Segregation
• Traceability
• Tolerances
• Testing
• Country Elevators
• Situation
• Modification
• Volume Implications
• Labor Costs

Source of Information Benjamin Henry Thesis NDSU,
July 2005 "Marketing Mechanisms to Facilitate
Co-Existence of GM and Non-GM Crops"
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Overview Identity Preservation

• IP, segregation, traceability, tolerances
  testing are all interrelated
• IP applicable to specialty crops, GM crops
  organic production
• IP is an alternative system of procurement,
  management trade
• Involves identifying crop features to preserve
• Facilitates commercialization of GM products
• Increases costs to cover segregation, testing,
  ...
• Tradeoff between costs risks
• Premiums must be generated to cover costs
• Affects growing, handling, storage marketing

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Overview GM Production

• Growing importance of biotechnologies in Ag and
  agribusiness
• Crops corn, soybeans, cotton, canola
• Issues
• Benefits costs yields
• Consumer acceptance
• International trade
• Nations divided
• Pro US, Arg, Canada, China, Brazil
• Con Europe, Japan, ...
• IP conducive to commercialization

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Production

• Detailed records
• Seed identity, planting date, field location
  size, inputs used, harvest date, yield, bin ,
  and delivery person, date vehicles used
• Samples kept at the farm throughout marketing
  chain until final buyer is fully satisfied
• Added costs
• Record keeping sample storage
• Cleaning equipment bins
• Build new structures for proper storage
• Costs incease as tolerance levels tighten
• Vertical integration/coordination a possibility

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Segregation

• Isolation of like products with particular
  attributes
• New organizational structure emphasized
• Problems
• Adventitious commingling
• Loss of conventional elevator efficiency
• Storage handling constraints
• High costs as number of grains received increases

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Traceability

• Transmission of specified information concerning
  the identity of a product to the next agent
• One step back one step forward system
• Breadth, depth precision impacts
• Key points
• From seed to consumer
• Vertical coordination
• Information flow
• Additional costs premiums

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Tolerances and Testing

• Most important area in co-existence of GM
  non-GM
• Tolerance improve quality mitigate risk
• Testing verify that tolerance levels not
  violated
• Precautionary principle test loads "thought to
  be" non-GM
• Tests for GM material
• Strip-test 95 confidence level, 7.50/test
• PCR 99 confidence level, 120/test
• Cost-risk tradeoff depends on tests, testing
  locations and tolerance levels

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Country Elevators

• Survey conducted (Benjamin Henry study)
• Physical characteristics bins, pits,
  capacities, certifications
• Current segregation, testing other IP practices
• GM crops currently handled
• Variety declaration
• Analysis based on survey results
• Engineering-economic model by Hurburgh
• Model combined with _at_RISK software to analyze
  modification costs, volume implications and labor
  costs

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Survey Results

• Response Rate of 5 ? 43 respondents but
  only 40 usable surveys

Region Total Number of Elevators Responding Elevators Responding Elevators
Region Total Number of Elevators (Number) ()
North-Dakota 412 24 6
South-Dakota 89 7 8
Minnesota 222 10 5
Montana 66 2 3
Total 789 43 5
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Survey Results Crops Varieties Handled

• Wheat, Soybean, Corn
• ? Most Largely Handled Crops .

• Bt corn, RR corn RR soybeans
• ? Most Largely Handled GM Varieties .

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Survey Results Physical Characteristics

• Large Number of Bins
• ? Large Number of Pits
• ? Large Loading, Receiving, Load-out
  Track Capacities

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Survey Results Policies on Quality
Handle IP grains 18
Request proof 57
Handle GM grains 89
Sufficient capacity to segregate 100 of GM crop 23
Request variety declaration 19
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Survey Results Certifications Testing

• Elevator Certifications
• 20 Elevators Approved ISO or/and HACCP
• 10 Anticipate Getting Facility Approved

• Deliveries Tested
• Protein Moisture Test Weight Dockage ? 93
• Test for Falling Number Vomitoxin ? 34

• 20 of elevators ? Test for GM content or
  Variety
• ? Mostly at Receipt

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Survey Results Testing (cont.)
Bushels per test Average Cost of Classic Test
Mean 1,540 2.69
St Dev 1,474 6.45
Min 150 0
Max 5,000 25
  Value Managers Time (/hr) Labor cost (/hr)
Mean 37 11
St Dev 30 7
Min 0 1
Max 100 28
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Survey Results Segregation Constraints
No Constraint Minor Constraint Major Constraint
Data transmission Time Cost of modification
Samples storage Testing equipment cost bins
Accounting and record keeping Risk testing error IN  
  Risk testing error OUT  
  Loading capabilities  
  Load-out capabilities  
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Survey Results Segregation (cont.)
  Vol. Segrega-ted Estimated Cost of Segregation (/bu) Cost of Modification ()
Mean 36 0.07 195,713
St Dev 35 0.08 428,377
Min 0 0.01 0
Max 100 0.30 1.5M

• Estimated Cost of Segregation
• Smaller for Large Elevators ? 6 c/bu VS 12 c/bu

• Cost of Modification
• Major Constraint to Effective Segregation
• Smaller for Large Elevators

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Survey Results Segregation (cont.)

• Cost of Segregation
• 90 Handling-Related . ? Importance of
  Cost of Modification
• 95 Volume Based . ? Importance of Volume
  Tested or Handled

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Correlations Between Input Variables and Cost of
Segregation
0.76 Cost of Modification - 0.48 Grain
Tested - 0.11 Volume Grain Handled
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Impact of Modification Costs on the Cost of
Segregation

• 50 of observations ? Less than 8 cents per bu

• 65 of observations ? Less than 10 cents per bu

• 75 of observations ? Less than 12.5 cents per bu

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Cost of Segregation Versus Changes inVolume of
Grain Handled
50,000 bu ? lt16c/bu
100,000 bu ? lt13c/bu
250,000 bu ? lt11c/bu
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Cost of Segregation Versus Changes inVolume of
Grain Tested
10,000 bu ? lt 40c/bu
50,000 bu ? lt16c/bu
100,000 bu ? lt13c/bu
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Impact of Different Labor Costs
Increase of 5 /hour Labor Cost ? Increase by 0.5
cents Cost of Segregation
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Summary of Survey Analysis

• Success or Failure of Segregation System depends
  upon Ability of Elevators to Implement at Lowest
  Cost
• Segregation Already Implemented by Most
  Elevators .
• Implementation of New Segregation Practices not
  too Costly
• Large Volume Handled Tested ? Lower
  Segregation Cost .
• Premiums for Quality should be High enough to
  Offset Extra Costs of Segregation

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