Innovation is a key driver for agriculture, but only when those innovations are successfully integrated into the global food system can the full benefits be realized.
But integration is complicated, especially as governments increase their scrutiny of new technology and start creating their own systems of regulatory approvals, said Randal Giroux, vice-president, corporate food safety, quality and regulatory, Cargill, during the Canadian Global Crops Symposium this April in Winnipeg, Manitoba, Canada.
“Some of our key trade partners are not coordinating with regulatory approvals, so we end up with differences in national timing, differences in the types of studies that have to be conducted,” he said. “As such, agricultural commodities without the export approvals are not fungible commodities. Just because they are safe, it doesn’t make them equal and allow them to flow freely in international commerce.”
Changes are coming socially, as consumers expect more from the food system, and politically as governments try to balance the science and the societal goals of agriculture policy, Giroux said.
“The technologies and the significant changes (in agriculture) have created incredible business opportunities but also produced and increased risks,” he said.
Commercializing technologies before they are approved in key export markets can significantly hamper the movement of commodities and erode the value of these technologies, Giroux said.
Grain price and quality are key drivers for domestic and international customers, and the bulk handling system provides that by efficiently moving grain from areas of surplus to areas of need. The system works, because it is based on several key factors: specific grain standards, fungibility, and safety assurance.
Fungibility, or sameness, is a critical component because it provides flexibility to move grain and oilseeds, he said. For farmers, fungibility lets them decide where and when to deliver their grain, and allows them to maximize profits.
“For those of us who originate and handle grains, fungibility is a key attribute to the efficiency of the supply chain,” Giroux said. “It enables us to substitute grain volumes, do arbitrage, and provides functionality to move grain around.”
Product safety always comes first, and the government has an important role to play, he said. Integration of genetically-modified (GM) products and technologies in the supply chain usually requires a national government framework.
“While some folks see regulations as barriers, these frameworks allow us to integrate technology with confidence and provides us confidence that what we are taking into our supply chain, what we are producing, what we are putting on our crops and what we are putting into our mouths, are safe,” Giroux said.
Government approvals that are consistent with international systems like CODEX, provide a certain level of assurance when trading in different parts of the world, he said.
“We have seen different international governments reinterpret those standards and in essence create a patchwork of standards,” he said. “That lack of harmonization creates significant challenges as we try to integrate those technologies into the global food system.”
Technology integration is facing more government scrutiny than ever before, Giroux said. High profile GM events and growing awareness of asynchronous approvals across governments has reinforced interest in testing and managing compliance.
“We’ve seen an incredible increase in detection capabilities and advances over the last few years,” he said. “Zero-tolerance policies for unapproved technologies have become common regulatory requirements.”
Governments are heavily invested in efforts to improve safety, sensitivity and speed of testing. The testing technologies also are more readily accessible, Giroux said.
“Decisions to use technologies that lack key export market approvals can create marketability issues for that producer, and if not managed properly by the technology owners, those unapproved traits can dramatically increase the risk and cost to the entire supply chain, including those folks who did not use that technology,” he said.
When technologies that are unapproved in key export markets are introduced into the supply chain, it reduces competitiveness by restricting access to markets where those products are not approved, reducing handling efficiencies and creates a challenge in finding a reliable supplier for products to key export partners.
“Less competitive in export positions is not in the best interest of Canadian agriculture,” Giroux said. “The best outcome for agriculture is to have both innovation and market access.”
One response to asynchronous approvals has been tighter control close to the production system. Technology owners have tried to channel products away from markets where they haven’t received approval, he said. But it has been difficult for them to demonstrate complete segregation.
“We’ve learned some valuable lessons over the last decade on the limits of the closed-loop supply chain. Generally speaking, if they’re not managed effectively, they leak,” he said. “Grain handlers and producers are left to clean up the system.”
Giroux said one lesson is that outcomes are more important than the process. It’s the horsepower, energy and diligence behind the programs that determine whether or not they work.
When a closed loop system fails, a little goes a long way. A very small amount of product can contaminate a large volume of commodities, he said.
Most importantly, testing is not a substitute for market approval. There have been instances of negative tests from elevator to vessel, but when the vessel arrives in the export market, the test is positive for that unapproved trait.
“Testing has a role in preservation, where we have reasonable tolerances,” Giroux said. “These testing programs do not help manage risks in zero-tolerance environments.”
Multiple conversations are under way on how to addresses these issues while supporting and encouraging both innovation and market access, he said. These discussions are built on the recognition that commercialization ahead of key export market approval creates unacceptable risk.
“Exporters and grain handlers are unlikely to accept all of the risks and costs that technology that is not approed in key export markets brings,” Giroux said. “When technology owners decide to commercialize early, grain handlers expect them to also own the risk; risk and reward should be paired and risk shared between technology owners and grain handlers in accordance with the relative rewards they receive.”
Now, a majority of the costs and risks end up with the grain handlers.
For example, a new product that caused market disruption in China had $80 million in economic value for the technology owner, seed sellers and select producers, according to a National Grain and Feed Association study from April 2014. But that same product cost $1.5-$2 billion in damages to producers, handlers and exporters.
“In this case study, U.S. agriculture lost significantly more than it made from this aggressive commercialization decision,” Giroux said.
To address these concerns and find solutions, it’s paramount that asynchronous approvals be addressed, he said.
“Integrating technology in global feed supply chain requires us to face this issue. The patchwork of approvals makes it difficult to manage and limits integration of technology,” he said. “Governments need to recognize that broad commonalities exist in their risk assessments.”
Innovation is critical to growth, but so is paying attention to the consumer, said Connie Morrison, senior vice-president marketing, Canada Bread Company Limited. The company is a leading producer and distributor of bread with 19 bakeries in Canada and 5,000 associates.
“Consumers are fickle; they don’t necessarily listen to science,” she said. “We have to pay attention to what they’re looking at and thinking about, and make sure we have the products to meet their needs.”
Consumers are changing, but what they say and what they actually do are sometimes very different. There are also two different demographics to be aware of: baby boomers and millennials.
“The boomers have all the money and the time. Those people are really important,” Morrison said. “Millenials are the future consumers, but the challenge is they are not a single homogenous group. They are very different in terms of life stages.”
Some have no money, while others are starting families. They are forming habits now that is going to have an impact on the future, she said.
Both groups are concerned about health and wellness, but in different ways. Boomers have likely had a life event and they are looking to make some adjustments in their lifestyle and what they eat. Millenials feel they like can live forever, Morrison said, so they’re less worried about nutrients and want less processed food and cleaner labels.
“These are all things they believe make healthier foods. It’s important to adapt our products to meet the needs of both of these groups of people,” she said.
Consumers also are expecting corporations to do the right thing; they want to know what the brand stands for and represents.
“Millenials don’t trust big business, big science, big brands,” she said. “They want local word of mouth to discover new things. They believe their family and friends on social media. It’s important to be transparent and to stand for something to build their trust.”
Government pressure is growing on food manufacturers more than ever before. Two of the most critical for the bread industry are sugar and sodium, Morrison said.
Sugar, because of obesity problems, has kind of become the new gluten. Morrison said Canada Bread is working to reformulate products with less sugar.
Sodium is more problematic because salt has such a critical role to play in bread making. Reducing it too much can cause quality issues, and consumers don’t like the taste.
“Salt provides flavor. We’ve tried to strike a balance and we’ve pretty much come down as far as we can but continue to give customers great quality products,” she said.
To keep the bread category healthy and maintain its status as the third largest grocery category in the country, Morrison said innovation is essential. This includes renovating products and bringing new products to market as often as possible, to create excitement.
Along with reducing ingredients like sugar and salt, Canada Bread is also examining adding ingredients such as flax and folic acid to white bread.
“White bread has been a villain but the reduction in Canada of neural tubal defects has been huge because of the enrichment of the flour that goes into white bread,” Morrison said. “We have to get that message out there.”
Canada Bread has been a supporter of the Healthy Grains Institute, an authoritative voice that can promote and define the health benefits of food and grains.
“We can’t do it; consumers won’t listen to us. It has to be a credible, third-party voice,” Morrison said.