A changing market for grain handlers: industry faces challenges
June 01, 2004
by Emily Buckley
The grain storage and handling industry faces continued challenges in trying to keep up with food safety issues, logistics limitations and security demands
For WG’s annual look at developments in the grain storage and handling industry, we’ve gone to one world’s largest players in the global cereals industry — Archer’s Daniels Midland.
Jim Voigt, vice-president of operations and engineering for international grain facilities spoke with WG about the most pressing issues facing ADM and grain operators worldwide. He discusses technology developments, market and consumer trends, changes resulting from the growth of genetically modified grains and new security demands at ports.
Voigt currently oversees grain operations in South and Central America and co-coordinates engineering for new construction, acquisitions and upgrades in these regions as well as in Mexico, Europe and North Africa. He also is directly involved in implementing health and safety programs, food safety and environmental programs. He formerly oversaw United States grain operations for ADM’s country elevators, terminals, river terminals and port facilities.
KEY OPERATING ISSUES
Employee retention, logistics, regulatory and food safety issues are some of top issues facing ADM and global grain storage facilities, said Voigt, who qualified his comments by noting that these issues can change rapidly.
"With factors such as globalization, industry consolidation, geopolitical issues, economic issues, food safety issues, advancements in plant genetics and breeding, technological advancements, and changing consumer preference and demand, the grain industry is going through constant change and is trying to re-invent its position and function in the marketplace," he said.
Still, there are some common issues holding facility operators’ attentions.
Finding, training and retaining qualified motivated people is becoming more and more challenging for facilities around the world.
"The cost of labor is going up much more rapidly than margins for handling grain," Voigt said. "The industry must promote itself and the career opportunities available to continue to draw talented people into the network. In developing areas, such as Brazil, the industry growth is so large that it has long since exhausted the labor pool of trained labor and companies are required to operate with management at the local level that may have very limited experience."
Logistics is an area that has always been important to economic success in the grain industry, but it is even more critical today. With the U.S., E.U., Australia, Canada, South America and other surplus grain producing countries relying on exports to help sustain their agricultural economies, Voigt emphasized that the recent high ocean freight cost has had a detrimental effect.
He also noted that the deteriorating condition of the lock and dam system of the Mississippi and Illinois Rivers does not bode well for the future of grain transportation.
"In Brazil and many other places in the world, …the lack of a developed and maintained network of roads and railroads and the lack of a viable waterway system to move commodities greatly impacts the effectiveness of the industry," Voigt said. "Port logistics also create huge bottlenecks in shipping and receiving in many places in the world."
Voigt also noted that industry consolidation is making it more and more critical that an elevator be part of a network that can provide worldwide access to markets. Achieving efficient operations is also an issue in many older facilities that are unable to compete against facilities with newer technology. An example, he said, would be comparing costs of older, labor-intensive terminal train loading elevators against the new, highly efficient unit train loaders.
A growing amount of health, safety and environmental regulations, particularly in developing countries, is beginning to require changes in operating procedures and capital investment in many grain facilities worldwide, Voigt also noted.
Food safety is definitely a hot topic, especially for those handling soybeans as the new E.U. genetically modified organism tolerances go into effect.
"Where most of the world accepts a tolerance of 3% or less on the GMO trait in beans, the E.U. is now at .9% or less," Voigt said. "This creates a necessity to handle grains differently depending on your marketplace."
Government and/or consumer concern and reluctance to have GM products in the food supply in Europe, Japan and other places continues to be a major issue for the industry.
"This consumer pressure is being put on the food manufacturers who in turn are discussing with their raw material suppliers how to deliver a product to the marketplace that consumers feel is safe," Voigt said. Detailed and documented Identity Preservation systems with features of ‘traceability’ and labeling are now becoming more common, and some customers are requiring their grain suppliers to become ISO certified or have a HACCP program.
But the lingering questions of implementing these certifiable IP, ISO or HACCP programs still need to be addressed. (This issue is one of the many to be addressed at the global symposium of the International Grains Quality Conference, to be held July 19-22, 2004 in Indianapolis, Indiana, U.S.)
"While it is not necessary to have these programs in many markets, the need to develop them is growing," Voigt said. "Each operator must look at their portion of the marketplace and see what their customer or end-user is demanding in the way of these programs."
And that is exactly what ADM did.
"Here at ADM, we have looked at the different markets we supply and have developed programs that respond to each of those separate needs," he explained. "We have in some cases instituted a very detailed IP program that allows for traceability and segregation from the producer to the processor or end user. Some of these programs are self-administered, and in others we are using an independent agency to certify our programs. We also have other locations that have implemented ISO or HACCP programs, again depending on customer requirements."
These programs are typically being implemented at ports, large terminals and locations that are supplying directly to a food processor. The great majority of ADM’s country elevators have not had a need to put these types of programs in place, he said.
Of course, increased operations cost and facility design limitations pose problems. Most facilities worldwide do not have the capability of segregating many products at the same time, nor do they have separate receiving and handling systems to dedicate to specific products. Voigt said this is especially true in Brazil where the typical country elevator has one or two large storage structures in the range of 20,000 to 90,000 tonnes of homogeneous product.
But Voigt has seen reluctance by some end users demanding these programs to pay a premium for these services, which typically include extra sampling and testing procedures as well as detailed documentation. "The margins in the grain handling industry do not allow one the luxury of absorbing higher operating cost without some type of compensation for services rendered," he said.
MAJOR TECHNOLOGY DEVELOPMENTS
Several technology developments have greatly improved handling operations over the years. Voigt noted the industry has seen labor reductions, safety and operation efficiency improvements from developments with automation, enclosed belt conveyors and enhancements in monitoring systems for equipment, level indicators and grain temperature.
In particular, he pointed to improved sampling equipment that is more accurate, has greater repeatability and can be done remotely to allow faster grain receiving times.
He described a system he observed in Argentina where the complete sampling and testing procedure is automated. When a truck arrives at the elevator, it is issued a magnetic ID card similar to a credit card, he explained. The truck driver then enters information into the computer system, such as noting who the shipper is and what commodity they are hauling. Drivers then proceed to the probing area where they scan their card to activate the probe.
The probe is programmed to take a sample from multiple points in the truck, and the probe design pulls separate samples from three different levels of the truck. The samples are delivered by a pneumatic system to the testing lab, where the three samples are first looked at individually to ensure the truck has been loaded uniformly and then the samples are combined to obtain the overall load grade of the truck. They also use automation to determine foreign material, oil and protein levels.
"No human hands touch the sample in the splitting process nor moisture determination," he emphasized. "The driver is then given a green light to proceed to his designated dump pit. He swipes his card to activate the system, which automatically sets up and engages, and tells him when to dump his truck."
GLOBALIZED GRAIN INDUSTRY
Voigt has been active for many years in the grain industry, and was the U.S.-based Grain Elevator and Processing Society international president in 2000-2001. This leadership position reinforced to Voigt the impact of globalization on the grain industry.
"In my tenure of leadership in GEAPS, one of the reoccurring questions from the membership was always, ‘what is going on in Brazil? Tell me about Argentina? What do you know about grain handling in China? What is it like in Australia? Is the grain industry different in Europe?’ When I visit these other countries, I get the reciprocal request to explain the grain handling industry and procedures in the United States.
"Globalization has truly occurred, and the elevator operators in central Iowa realize they are competing with the ‘silo’ in central Matto Grosso, and vice-versa. Everyone is trying to figure out where his or her strengths and weaknesses are in the world grain trade."
But Voigt believes there is a place in the market for those who analyze their capabilities and find their niche. This may require partnering in some type of marketing or logistics pool or becoming more intimately associated with a company that can provide these types of service globally.
"As the demand for grain and oilseeds grows worldwide, the industry must become more efficient to continue to be able to supply a bountiful and safe food supply," he said.
FACILITY SAFETY AT the FOREFRONT
The threat of terrorist acts — in particular those regarding the food supply — are being felt around the world. As a result, several new security laws relating to grain facilities, particularly exporting locations, have been enacted in the last two years.
In the United States, the Homeland Security Department’s Bioterrorism Act has required registrations and promotes regulations to be able to trace food and feed ingredients. Globally, the mandates of the worldwide International Ship and Port Security Code (ISPS) and Maritime Transportation Security Act are challenging to implement without incurring large increases in operating costs or capital expenditures, Voigt said.
"The impact [of security mandates] at the port level has been extremely burdensome," he said. "Plant security issues have required additional fencing, security cameras, guards and other security devices in response to vulnerability assessments."
Voigt said that employee screening and ID badges are becoming the norm, as are several other safety practices. Visitor screening and signing-in are being required, while access to critical areas of the operations is restricted. All property lines, landside as well as waterside, must be monitored and secured. Highly vulnerable areas such as control rooms and offices have restricted access and additional surveillance systems. Training and drilling of employees in security protocols is required and must be documented.
"The increased security will result in
additional cost," Voigt said. "The burden of access control in an open port is some-
thing that the industry will struggle with around the world."
THE QUALITY CHALLENGE
When it comes to maintaining the quality of grain in storage, Voigt says the challenge is the same now as it has always been — good management practices. "There is no room for the mentality of just putting grain in a storage structure and forgetting about it until a couple of weeks before we are going to load it out," he said.
He said "tried and true" basic operating procedures can still be very effective. He sees continued challenges in pest control, and encourages operators to be alert when working with some of the new grains resulting from crop research that do not have the same storage characteristics as their predecessors.