Can grain handling IP systems work with GMOs?

by Emily Wilson
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The concept of identity preserved grains is not new to the U.S. grain industry. For decades many different commodities have been handled through a single receiving system and stored in designated bins or silos.

"The I.P. system, as it currently exists, evolved to assure the delivery of a specific grain with high end-user value characteristics," said Dave Krejci, executive vice-president of the Grain Elevator and Processing Society, Minneapolis, Minnesota, U.S.

"I.P. is segregating specialty grains from ‘commodity’ grains, so it doesn’t become comingled, and then channeling it through the marketing system to the end user," he said. "You assure delivery of the specialty grain [desired characteristics] by applying accepted sampling and testing protocols."

Krejci believes that existing I.P. systems as they currently exist won’t work as a solution to exclude genetically modified grains.

"In the current market environment for GMOs, grain handlers are being asked to assure that end users are not getting something," he said. "And I.P. as it has evolved doesn’t function well to exclude something. It’s the old axiom that you can’t prove a negative. We don’t have the ability to assure absolutely that GMOs don’t exist in a specific grain shipment. Testing for GMOs cannot assure that GMOs do not exist, only that it does exist."

Krejci raised issue of the inadequacy of existing I.P. systems to segregate genetically modified grain at a recent national conference on the GMO issue. The conference, "Knowing Where It’s Going: Bringing Food to Market in the Age of Genetically Modified Crops," was held Sept. 11 in Minneapolis and was sponsored by the Pew Initiative on Food and Biotechnology and the Economic Research Service of the U.S. Department of Agriculture.

The conference brought together leading agricultural economists, consumer advocates, technology providers, grain handlers, food manufacturers and others to share their perspective on the challenges currently facing many players in the food supply chain.

Topics included the many steps grain takes in the marketplace before it reaches the consumer’s dinner plate, the challenges of product segregation and the ramification for producers and consumers, how public and private systems can certify that product identity has been preserved, and the costs and benefits of preserving the identity of bulk commodities through marketing channels.

The speakers on the latter panel included Nicholas Kalaitzandonakes, Department of Agricultural Economics, University of Missouri, Columbia; Dirk Maier, Department of Agricultural and Biological Engineering, Purdue University, West Lafayette, Indiana; and Ruth Kimmelshue, North American Grain and Oilseeds, Cargill Inc., Minneapolis.

Krejci, who was in the audience, said he believed the best way for the grain industry to deal with GMOs may be to set up a system similar to organic foods, which involves a paper trail of certification going all the way back to the seed.

"The concept of organic would work for GMOs but that doesn’t mean the consumer groups won’t test and sample," Krejci said.

He added that there was no was to assure that a shipment contains no GMO material unless farmers can produce the grain in isolated situations. Even then, there is no guarantee that the seed they are planting is 100% GMO-free.

Every grain handler has had the experience of receiving a truckload of soybeans with corn in it, Krejci said. "The grain handling infrastructure is so large and complex that agonizing over how we guarantee delivery of non-GMO is beyond the realm of what is operationally feasible."

REEXAMINING THE SYSTEM. During the panel discussion on the costs and benefits of preserving the identity of bulk commodities through marketing channels, Maier, who is a professor in the Department of Agriculture at Purdue, said the unexpected controversy over biotechnology-based crops has forced the U.S. grain production and marketing system to examine how it would handle large amounts of specialty (non-commodity, trait-specific) products.

"Market analysts have been predicting growth of specialty markets, but few foresaw that the avoidance of transgenic characteristics, as opposed to the promotion of special properties, would be the initial driving force," he said. "Market preferences and export requirements associated with transgenic crops have created new marketing opportunities, but also have placed additional burden on the entire grain supply system. To capture the full benefit of future trait-specific crops, which may or may not be transgenic, the U.S. grain industry — from producer to consumer — must be prepared to ensure quality while retaining economies of scale and efficiencies for all operations.

"Specialty markets, also referred to as identity preservation, channeling, value-added, and other similar terminology, involve production and distribution networks more complex than our hallmark high-efficiency, non-differentiated commodity market. The additional resources required for specialty markets generally increases with the difference in value between the product and its alternative commodity."

Specialized marketing is more easily understood at the handler level and beyond, than at the producer level, Maier noted.

"Many moderate-sized producers regard niche production as their edge in maintaining viability in the face of declining commodity margins," he said. "However, producers face special risks in the conversion from commodity trading systems to product marketing networks."

He said that nearly all of the purity risk falls on production agriculture in maintaining isolations, clean equipment, genetically pure seed, and other considerations. In addition, the introduction of specialty traits challenge traditional formats of agronomic data and communication. Third-party sources, such as public yield trials, are beginning to include quality performance in evaluations, but the impact of environment and other factors is largely unknown relative to quality factors. "Stability over growing conditions and stresses have long been key components of high yield, but now the potential for yield and trait impact exists," he said. "This will need to be documented in an organized way if costs and benefits are to be determined and quality certification is to be implemented.

"From a marketing perspective, trait-specific grains run counter to the traditional sell-anytime marketing patterns of commodity markets. The costs of constructing new storage, gentler handling systems, and potential lost arbitrage because of physical delivery requirements are likely to be substantial (in excess of 10% or more of the crop value)."

Larger farms also may be a negative factor, Maier said, as the complexity of specialization and segregation expands with the volume and diversity of the production areas involved. "For these reasons, trait-specific grains, especially those with much increased user value, are likely to present refocusing opportunities for smaller operations, assuming operators are willing to specialize and gain the necessary skills needed for quality-assured specialty grain production and delivery," he said.

An emerging concern related to specialty grains marketing is the development of quality certification systems that are intended to lead to control over the product, and establish barriers for entry of competitors. "Clearly, individual producers or handlers at various levels may not be able to participate in multiple quality systems, possibly mutually exclusive systems," Maier said. "Thus, a national effort is needed to achieve agreement on operating procedures within the grain production, handling, and transportation system that would provide some standardization among options before market practice is solidified.

"A public third-party source of technical information would be more easily accessible to producer-based programs as well as to commercial entities."

Maier said this national effort should identify the operational costs, risks, institutional constraints, and quality control points for specialty grain marketing systems, and their size sensitivity, and design a coordinated education program that would help market participants adopt process-verified, documented specialty grain management practices.

"Creation of standard operating procedures and economic analysis/decision tools for farm and commercial grain handling facilities will be crucial if producers and handlers are to participate in the added value of trait specific grains."

Maier said a large-scale shift toward specialized grain markets would affect nearly all phases of grain production and distribution — risk management, crop insurance, and hedging practices; collateral values for credit and financing; warehouse laws and inspections; grain grading procedures; legal documents and dispute resolution; arbitrage; and physical grain operations — and could result in some not-so-obvious costs at the grain producer and handler level.