Changes in GMO priorities/activities in the past 12 months are principally:

• the political impact of the green lobby,
• the growth of consumer organic food demand,
• the technical awareness of the consumer,
• a changing role of the retailer/supermarket,
• Legislation on the run is also in a catch-up with the cost implications not really understood until implementation. Being led by Europe and watched by the rest of the world.
• Business driven by ethical policies. Ethical positioning will require certification and will give added bonus.
• Financial market rewarding GM free with share price.

Identity Preservation is a process which if recognised, must by its inherent nature, require the players in the value chain to work cooperatively and share information beyond the immediate supplier or receiver. Information transparency within a chain will be an imperative based on the end product demand for QA management and price discovery.

Capitalisation and investment issues will continue drive the players to seek a dominant role in the chain – this is one matter to be resolved early in the alliance. Identify the value-add component of each player, and players either acknowledge or recognise these and accept or discard accordingly.

There are three distinct IP/QA systems or alliance options developing:

• The industry based generic IP/QA system which is genuinely commodity based and similar to GrainGuard. This will be seen as an initial stage for growers and those will generally seek some form of premium and although it may be promoted as investing in a ‘ticket to the game’, the program will be hard pressed to demonstrate benefits to growers
• The third party generic commodity scheme which is essentially a QA process such as the ISOs or SQFs will be available but again will lack specific ownership on a longer term basis.
• The specific IP system which could be developed for say a regional or niche group will generate an ownership and longevity as well as premium benefit opportunities for all parties. Cargill Grain has just released a corn product called Innovasure (www.innovasure.com) which is driven by the trader with specific markets, contracted growers and high premiums. I feel confident that this structure will be more successful in the long term. Perhaps the industry-based product could be used as a template to assist these commodity groups like the Walgett Coop or the WA Noodle Growers etc but branded accordingly.

  Indication that there is no real preparedness for development of a single system in the industry without any Federal directive. Lining up a range of ‘product-based’ programs which will immediately set up competition and many systems that don’t link between countries. Lessons from over-servicing of QA systems in the UK don’t appear to be a recognised issue.

  Doesn’t appear to be enough awareness or consideration of integration within the value chain and certainly not entertaining the environmental requirements swelling in Aust.

Traceability of any component within a commodity supply chain is the basic parameter for a quality assurance development, and Identity Preservation (IP) is the name given to the overall package. One of the activities which will see significant investment will be the necessary computer software packages to manage and track the ‘cob to customer’ activities.

The software will need to work with each stage of the supply chain and be tailored to specific needs from production to transport to processing and retail. The system must have the capacity for joint ownership and input with relevant access and again control will be an issue.

The recently released CBH Q Track system may have already crossed this boundary of ‘control’ and will run into difficulty if not adequately shared with the downstream/upstream partners. Products such as this need to be designed to work with the alliance for a competitive advantage outside the chain and not for dominance of the chain.

IP traceability will be hard pressed to reach establishment in Australia due to several issues such as no demonstrated or perceived benefits and a cost imposition for growers and will be unable to cost compete on a commodity basis.

The opportunity is for niche groups or marketers but more likely with non-food direct products like nutraceuticals, starch requirements, specific milling opportunities or seed contracts etc.

Driven by the cost squeeze on the market end and traditional investment in bulk storage, grain handling companies are driven to pool and aggregate commodities as a strategy to drive efficiencies and reduce the cost to the grower. This is a direct contradiction to a concentration on investment by R&D, seed development companies and processors to constantly meet specific consumer needs with specific quality varieties, production packages and niche markets which require segregation and quality management.

The issue will not resolve while the investment remains at bulk infrastructure and cost reduction priorities. Door is open for small niche handlers, on-farm storage facilities and supply chain alliances.

The grower’s position and interest in Identity Preservation will be the need to improve the constantly squeezing margins. The opportunity remains to develop a price benefit for quality and niche market through meeting customer need. Being positioned with a specific value chain should lead to preferential access to information, advice, inputs and markets and also receive commensurate improved returns.

IP to date has been driven by the end market processors or retailers seeking specific requirements. Growers are starting to recognise that by implementing an IP/QA system, they will be positioned to competently seek and negotiate appropriate markets.

There will opportunities for service companies/agricultural departments to supply a range of services to growers including facilitation skills, service contracts, compliance services and market scanning.

In developing the IP systems, little mention has been made of environmental considerations. Part of the ISO 14000 development would be ideally suited to this as a practical addition.

There was an extended scientific debate about the testing procedures on offer or under development. Considerable disagreement over standards and the speed of development of laboratory confidence. Sounded a bit like the VHS/Beta video war in the early days, vying for market leadership. Companies were focussed on PCR and consider this the standard, consequently disregarded the ELISA and strip tests. This was clearly biased by the corporate imperatives of the relevant speakers. Note that there is further relevant NIR technology on the horizon. It will be interesting to see the response of the large verification companies (SGS and Veritas) to the IP issues.

The whole process and quality of sampling procedures is clearly the determining factor for quality of testing. Reporting standards need to be developed universally. There is competition over acceptability of testing in the market – issue will be the food processor users will lose confidence if disagreement is rampant, especially with market competition.

There is no role for government sector investment in development of testing procedures, the corporate sector is flat out investing. Similar to Precision Agriculture issues, information and application communication is the priority.

Imperative to have a reliable form of measurement of the quantifiable values associated with the IP product, without this there can be no value-added component. Customer demand for quantifiable information will drive continued investment in reliable testing.

One of the impediments to the implementation of IP in Australia is the long established ‘grain trader’ mentality of the majority of buyers, where it business is to buy and sell with a margin as a middle person. Discussion on quality has not transgressed beyond meeting a protein requirement, oil content or contaminant levels.

Support of the quality system from seed to store has not been recognised and the traditional culture will take a time to change. The newer niche market operators will lead the charge inhibited by the statutory constrictions.

European organic food boom, demand growing at 25-40%/year, organic sector up to 5% so imports are required leading to trust issue thus need for IP. Supermarket margin pressures will also drive organics, as there are premium prices in the consumer market.

Consumer organics are not environmentally driven but tied to quality. Need to look behind to find the driver, and that’s who is receiving the premium – the supermarkets. One essential feature of difference in organic produce is the lack of longevity and so it must be close to market, therefore opportunity for regional markets.

The issue with quality is that regulatory certainty is required and this will need testing for clarity, this will provide an opportunity for investment in the diagnostics.

IP and traceability incurs significant additional cost – up to 15% with the impact stronger at trading and processing stages however, rapidly diluted downstream. Largest impact to cost is the trigger level percentage of GMO. Largest cost is with purchase of more expensive materials and at all stages additional cost is larger than net return. Thus a premium price is imperative.

Cooperative arrangements are required with the downstream operators who will need to understand the consequences of specific market requests upstream and look for a lower cost IP trading infrastructure. Investigate the market dynamics, as this will determine the way forward such as vertical integration, formal alliance, alternative supply etc.

Costs of being non-GMO include an increased cost of ingredients, slower innovation to crop development, foregoing the potential reduction in pesticide use and increase in crop disease and toxins. Costs of segregation will be higher.

Essential for the regulators to understand the economic consequences of proposed legislation. About one third of the world has legislation for GMO without protocols for testing. Food companies have been charged with being responsible for managing the GM legislation. Different country regimes for legislation is adding cost to the labelling, ingredient input and materials sourcing.

GMO free battle is a perfect tool for anti-corporate groups to play. Consumer groups can smell blood in the water and will drive hard at the multinationals. Predicting disruptions to the food supply over next couple of years.

Brand management and reputation is King for food companies – they will do anything to protect and drive the branded-food products. One of the short responses is go non-GMO, this will be fraught with problems in the longer term but will again provide another tool for the anti-lobby when levels can’t match tolerance levels.

Currently there is a market for IP and this will grow rapidly in the short term, however when GMO landscape shifts to acceptability will the re-labelling to promoting specific benefits impact on the IP investment?

Freiberg Publishing Company

Publisher and Conference Convenor

www.agbusiness.com

IP systems have the potential to inject an element of entrepreneurism into agriculture.

Frustrated that US farmers are locked into ‘subsidy’ farming.

Agra Europe

Editor-in-Chief, Tunbridge Wells, UK.

www.agra-europe.com

Agra Europe publishes 35 newsletters on various aspects of European and world agriculture and fisheries and organises about 30 allied conferences each year. As a journalist covering this industry for decades Faulkner has considerable in-depth knowledge and insight into the current agbiotech and regulatory situation in Europe.

GM ideological warfare lead by media, lobby groups and organic agriculture hostility from no direct advantages, GM arrived by stealth, health trust issues with BSE, imposition of US culture and high population density.

GM scapegoat for hidden agendas like opposition to intensive ag, global companies. Higher population density impacts on consumer response, viz GDP/head US $32,200, France $23,300, Portugal $10,800, Hungary $4,200. Will not go away; consumer are tiring of GM scare stories, contamination issues.

Confusion for consumers on top of domestic issues like less time for food preparation, farmers specialising, wealthy consumers condemning intensive farming and demanding organic. Consumers don’t understand issues; do not understand difference between GM and biotech traditional non-GM, crops approved and new varieties not yet known.

Organic food boom, demand growing at 25-40%/year, organic sector up to 5% so imports are required leading to trust issue thus need for IP.

Demand for GM free food, promoting premium free food, retailers locked into this and so retailers endorsement of GM free, suggest responding to customer demand. Retailers have a position of trust as unpaid food quality adviser to public and they are determined not to lose this position.

New legislation Directive 99/220 covering varieties amended by 49/2000, set 1% threshold for labelling. Problems include no authorised testing methods or test cases

Novel food regulation and now novel feeds legislation.

Testing is a nightmare, variable results, consumers want more safeguards, increasing array of traits.

Honeymoon period before tests implemented. Way forward is for direct benefit GMs like medical, environmental benefits which would combat greens and consumer trust is fragile and needs no more scares.

Q: GMs in range of process components for medical matters are happily consumed, why the issue of food.

A: Risk chosen as opposed to risk imposed suggested as the issue. Untangling of political versus business.

CDC Capital Partners,

London, UK

Markets in the agribusiness value chain and supports expansion capital and management and invests in emerging expertise.

‘Engine’ companies Mexico, Argentina, Brazil and Nigeria.

Business driven by ethical policies, eco-OK, environmentally benign forestry to deliver premium. Declared non-GM. City ascribes to these higher values and partner companies have to give business principles undertaking. Financial market rewarding GM free with share price. Ethical positioning and required certification gives added bonus.

Infrastructure investment – crop storage and segregation, loading facilities and transport activities. Internet applications and innovative equipment. Eg. On-line commodity consulting, monitoring intensive operations also phytomedicines.

Current environment for emerging markets include legislative confusion, poor official enforcement, tendency to process raw materials close to home, growing health awareness, run down infrastructure and substantial opportunities.

Illinois Crop Improvement Association

CEO,

Association of Official Seed Certifying Agencies (AOSCA)

www.indianacrop.org

The Indiana Crop Improvement Association Inc. exists to deliver unbiased, needed services to customers in the seed, grain, food, and related industries. As a non-profit, self-supporting agency, ICIA objectively carries out various seed programs including seed certification, laboratory testing and other quality assurance programs.

Reviewing infrastructure required for IP.

Official IP Grain Certification. Developed standards and guidelines, project administration and program governance with participating agencies.

Provide Official Certification Issues as well as related contractual QA services. Primarily soy, corn and more recently wheat. Who pays: US grain originators, Japanese trading houses, US processors and seed companies.

Emerging issues for certification include: value in public certification systems for the majority of needs rather than private system development, producer alliance movement to capture value-added benefits, facility certification, process certification (ISO concept) and research collaboration.

Q: In the next 5 years will we have a plethora of IP/QA systems?

A: Already there, but AOSCO is hoping the demand for a transparent system will be an opportunity but looking for collaboration. Some synergies or cooperation potential.

Strategic Diagnostics Inc

Global Business Director, Newark, Delaware

Since 1995, Strategic Diagnostics Inc. (SDI) has been providing protein-based test methods to identify GMO traits, plus oil and expressed protein output traits, which are approved for use in Europe and Japan.

Risks in managing IP:

• Challenges in determining the quality attribute at the exchange point.
• Cost recovery big dilemma
• Development of both field and laboratory attributes
• Too late to do anything with a positive test
• Consumers really only interested of test at source.
• Discrepancies with laboratory satisfaction.

Sampling issues – framework, which traits and minimise business risk.

• Representative, various guidelines, based on final foods rather than field requirements. Buyers and sellers risks and with a 1% tolerance the ‘buyers risk is exacerbated and lots accepted will reduce.
• Improve by increasing sample size or number or improve analytical process. Include accuracy, precision, reproducability, lab variability, and sample preparation.

GMO Detection Methods 3 basic methodologies; strip, Elisa and PCR (Polymerase Chain Reaction: 2 step process, firstly a recognition step followed by an enzymatic reaction)

Elements of QA/QC plan

• Analytical testing and sampling frequencies: need to reach agreement on requirements with customers, management of duplicates and replicates and split samples.
• Co-mingling at each exchange point means the need to reduce the number of docking points. List the number of points beginning to end.
• Protein tests are well used and robust. SDI tests. Validation processes now being developed. Method to test manufacturers kits. Currently developed for corn, soybean and canola.

Genetic ID

Fairfield, Iowa

www.genetic-id.com

Dr. Fagan has spent more than twenty years in both cancer research and detection of genetically modified crops and foods, including seven years doing research in molecular biology at the National Institutes of Health, prior to founding Genetic ID.

Genetic ID is an international leader in crops genetic testing, and is working with many countries and companies in establishing its testing systems worldwide.

Several tools available like testing tools, traceability systems, QA/QC systems, and third party certification.

Genetic ID has laboratory alliances and licensees (include Aust bio-test) which provide:

• Tests - Real time Quantitative, varietal ID, Threshold screening and triple check semi-quantitative PCR.
• Certification - Integration certification (with logo) to bridge produce/consumer confidence will demonstrate commitment to quality, product differentiation, compliance, reduces liability, increases market share, third party independent, minimise producer cost/ maximise consumer confidence.
• Information products - Info tech system provides rapid traceability and convenient sourcing. Identifies weak points and concentrates resources at these locations.

Characteristics of GM testing: Detects all GM, provides quantitative info, max reliability and reproductivity and works with a wide range of foods.

Protein detection using amino–acid test or PCR test, pros and cons will need both. PCR bit like a word search using primers (triple checking using 3 primer sets). Promoted reliability of lab tests.

GeneScan Europe

Freiberg, Germany

www.genescan.com

GeneScan Europe AG is offering IP programs that combine process-oriented IP measures (segregation, trace-ability, documentation etc) with DNA and protein based analytical testing. This system approach enables stringent control over the genetic identity of the product.

IP has a potential for adding value through the chain. Organisational and physical measures which can each be traced. Testing essentially goes in and asks the yes/no question, a positive response will then require quantification.

Quantity report is based on percentage of GMO based on percent of DNA isolated not of total volume. Relative against absolute percentage. Worked on number of genomes in the sample which will change the denominator and increase the percentage report.

Unexplained variation is inter and intra lab variation primarily caused by sampling and sampling preparation, then extraction techniques, PCR routine and reference materials (based against what? – there are no standards). May depend on number of GM insertions.

Sampling effort is more important at production source.

The perfect test:

• Complete in less than 10 minutes
• Inexpensive
• Sensitive, accurate, reliable and reproducible
• Internationally validates
• Detects all commercial events

Biochips- specifically prepared for use for GMO and pathogens and a primary test for GM and then to PCR test.

Are there no standards in the test report formats?

Consolidated Grain and Barge

Manager market development, Mandeville, Louisiana

www.cgb.com

Consolidated Grain and Barge is owned jointly by Zennoh, the National Federation of Agricultural Cooperatives in Japan, and Itochu, one of Japan's largest trading companies, and is one of the early leaders involved in international trade in value-added crops, and in tracking those crops throughout the grain shipping and delivery system.

Stitzlein's current responsibilities focus on identifying end-use attributes, measurement technology, grower contracts and programs, and seed industry cooperation.

Question for IP is to understand as a supplier do we add value or add cost?

Commodity versus IP.

Commodity is generic, number of varieties mingled, and standards. Volume factors, no reward for better quality and OK to blend leading to standard grade factors. Commodity shipments are easier to use and cheaper.

IP much more specific by origin or type, specs based on end user’s needs. Terms are negotiated. Programs tailored to end uses, suppliers willing to be flexible. Downside is the added cost. IP needs to be able to validate shipments, more planning, when things go wrong - difficult to find a replacement.

Require more coordination and commitment, longer lead times for planning and yield risks need management. Promote further and more rapid continuous improvements.

Supply chain has incremental costs.

Customers require time to differentiate the issues so require choice between IP and commodity activity. While debate on GM rages buyers change supply points. Labelling requirement costs reduce opportunity.

How long will GM be an issue? How long will this drive IP. IP is growing but not yet that large (around 1% in US to date).

Future opportunities: modified starches, neutraceuticals, high product needs, food grade and non-GM.

Concepts for successful integration of IP: user has to capture enough value, user willing to share intro, separated production, storage and delivery adds cost, harsh specifications, premiums are capped, competition for international suppliers, defining customer different values, not everyone should do the same, identify comparative advantage, commodity is still basic system, new genetic tools with better genetic values but will consumers accept tools, third party verification issues, add costs.

Understand user value and create more value.

This company would be a worthwhile contact for a case study to follow up for any lessons and practical implementation. Quite pragmatic about the issues.

Cropland Genetics

Northern Products Manager

www.croplangenetics.com

Croplan Genetics is the seed division of Cenex-Harvest-Land O'Lakes. Croplan Genetics has a "More Value Added" (MVP) Identity Preserved program to add more value to the farmer. The company is currently contracting Cheetah Canola which produces a mid oleic low linolenic oil, plus NuSun sunflowers, high oil corn and food grade soybeans.

Quality, price, availability and functionality to add value. All segments of business have to support and be part of the process. Inclusivity of chain – in-house failure is more likely than out-house.

Profitable for all and equality of share. Poor marketing is more likely to cause failure than production.

Contract requirements: Act of God clause, spread risks with production in different production areas and clearly define discount and premiums early.

Consumer demands more detail about food, special functionality, specific traits for consumer and processor and manage the emotions and then science.

The company covers the full range of services from seed supply to market buyer. Employs 450 agronomists to provide grower support but they also act as market research team as to what’s required and available for market. Runs a grower electronic tracking system and although unhappy with current tracker will replace with more functional system.

Cybercrop.com

CEO

www.cybercrop.com

CyberCrop.com is a business-to-business e-commerce hub for producers and buyers in agriculture. The company's Internet site offers a neutral, real-time exchange for cash commodities, including corn, soybeans, wheat and milo (grain sorghum).

The CyberCrop.com cash grain exchange is the first of its kinds. By participating in the exchange, both buyer and seller may extend the reach of their traditional markets, and have the opportunity to increase operating, transaction and cost efficiencies.

Grain cash exchange - neutrality, 12% grower penetration in 3 months (by acres)

Personalised portal with market data, commentary and analysis and customised new and weather. Products: Calculate best bid, Counteroffers, FOB Farm Bids, Delivered Bids and instant massaging. Working on adding Crop insurance, logistics.

The system will provide more alternatives and allow for customised market site – free to grower.

Buyer benefit: access more customers, reduce transaction costs, 24 hour secure contract and improve quality.

Value Preserved applications: simplify contracting based on quality, logistics, pricing histories, efficient channel to reach growers.

Funded by buyer transactional cost (penny a bushel).

Good innovative site, not unique but will allow for bolt on to a grower portal. Worth a look for the information, interesting to note the company has employed journalists to add an information and research component.

Adjunct as a business unit for something like a ProFarmer.

Agricultural Information Technologies

President, Iroquois, South Dekota

www.identitypreserved.com.

Agricultural Information Technologies is an innovator in the identity preserved crops category. They have created hardware, software and database management tools to accurately and efficiently track value-added crops and products -- and provide detailed documentation -- all the way from producer to processor.

They have a significant commitment to Internet-based systems that allow easy access for all participants from any location.

They currently have relationships with major food processors, seed companies, feed manufacturers and universities.

Challenges to implementation for processors, distribution channels and producer, technology can provide solutions: simple, cost effective and robust.

Manufacturer of innovative tools for agriculture – basic management tools

Information services: increase awareness of IP potential, educate respective parties to roles and responsibilities and needs of others in chain. IP handbook and news.

Tools: communication commences with paddock mapping as the basis for tracking and crop identification. Also developed a ‘postmark signpost’ as a sign with standard marker with electronic mark. Tracking tools like world data for protocol compliance, automate collection of pedigree information need to be collaborative and integrated.

Croptouch – a pipe device is a data scanner for monitoring.

VoiceFile – in field recorder via phone stored for further info.

Identification tools like TraitCheck (GMO test), SeedTag is a database of seed traits used a verification tool.

IP Integration has an issue of integration of different systems with players in the chain requiring centralised documentation etc.

IP Track – centralises protocol creation, pedigree characteristics and accounts for level of segregation, multiple device input and international functionality.

Sourcingdirect.com

President, Minneapolis, Minnesota

www.sourcingdirect.com

SourcingDirect.com is one of the first Internet-based commodity exchange systems, and is described as an "advanced cash commodity digital exchange."

The company is involved in Internet trading in a variety of commodity areas including food, feed, and pet food additives and ingredients... including an innovative new program involving value-added crops.... all based on the Internet.

Websites can be either a research tool, a communications tool or can be used to create common marketplace clusters.

3 types of Internet markets: storefronts (advertising gateways), Auctions (one-way auction with downside for risk) and Pure Exchange (brings together willing buyers and sellers with product offering description and 2 way communication).

Internal operations, External Trader/Broker, Pure Exchange and Digital Trading Pit.

Critical issues for success: accessible network, unlimited dynamics, honesty, information must be safe and secure and adapt to the ‘humanics’ (learns, negotiates, informs, closes and remembers).

The Future: Workflow processing, electronic marketplace and database of customers.

The exchange will function but will not replace the relationship between client and supplier.

This presentation demonstrated where the virtual marketplace will go over the next few years. Diversity of distance and rural sociology will restrain this application.

Aginfolink Global

Macon, Georgia

www.aginfolink.com

AgInfoLink Global Inc. is a global operating company which designs & develops secure, high quality, low-cost data tools to collect, transport and analyse information on individual units of production throughout the entire supply marketing chain.

AgInfoLink Global also delivers the services to implement these tools.

By providing the tools to allow management of individual units of agricultural production, rather than aggregating individuals into groups;

AgInfoLink Global has demonstrated increased producer efficiencies, increased the value of the commodity, and provided advance food safety trace-ability from conception to consumption.

BSE has led to the lack of confidence of the industry/science by the consumer. Suggests that if the industry commences down the journey of IP and tracking and does not follow through, the consumer reaction will be very damaging.

Value-based marketing delivers supply chain advantages like product flow matching, improved quality and food safety control, collects and analyses information and is more responsive to customer need.

Tracking livestock will deliver a range of information like health, feed management, genetic background, ownership records and pre and post harvest activities. Enable production goal setting. Allows for a ‘virtual vertical integration’.

IP starts with in-field capture with a high degree of accuracy in a rugged environment, it must be affordable and usually with low-skilled staff.

RFID (radio-frequency ID) tools. Traditionally people want to invest in technology but want and will wait for longevity however technology improvements are changing too quickly to retain this culture.

Verifiable audit trail into individual animal manager software. Producer tradition has suggested when the item is sold off-farm, then considered end of responsibility. A negative perception with IP is potential liability for wrongful commodity delivery will be traced back to the producer.

IP cost structure could inhibit implementation as low cost and rapid information transfer is required. The goal is to collect and share appropriate information amongst all players in the chain from Conception to Consumption.

The system is being transferred for grain management.

Rabobank

Vice-President, Food and Agribusiness Research-North America,

Dr. Cacho's research focuses on strategic agribusiness industry analysis, including consultation on development of an agribusiness B2B commodity exchange.

She is the first industry person to serve as Co-chair of the American Agricultural Economics Association's Industry Committee.

Traditionally, value-added and IP characteristics were intrinsic for processing or end-use, these have now become the market driver.

Consumer focussed organisations took the lead and demanded non-GM based products as a precautionary measure (eg MacDonalds).

Rabobank has a GMO code of conduct for lending based on consumer and producer choice, communication between them and where possible look for better alternatives.

Most large companies fund themselves generically, allocating funds internally for specialised needs. This is exacerbated by corporate consolidation. Rabo is therefore not funding IP directly but certainly part of the activity and so have developed a keen understanding of the impact.

The quality of information component of Internet sites for agribusiness will determine success and failure.

AgStar Farm Credit Services

Vice-President of Business Development, , Mankato, Minnesota

AgStar is a Minnesota-based Farm Credit Financial firm that has developed an innovative financial/leasing program for IP crops

Erickson is experienced in the value-added crops industry, previously working for Optimum Quality Grains as the Director of Market Development for the U.S. and Canada.

Advances in biotechnology, information technology and analytical technology will allow further development of value-enhanced grains. Ultimately, success will be dictated by direct value of the trait to the customer, rather than value to the producer. Eg. Vitamin enhanced grains. Value needs to be sufficient to share in the value-chain. Costs/benefits are based on different factors for players – tangible and non-tangible.

Storage space management and cost inhibitors will impact on IP.

Lease assets (new or existing facilities, machinery, specialised equipment) – advantages include: less cash and working capital, tax deductible, payment to meet cash flow and transferability of assets. Example of a leased $100,000 storage facility worked out to $.01/bushel/year.

IP Grain Inventory Finance as a partner to the alliance or supply chain. 90% advance rate on hedged position and 60% on open positions or will work with price premium on contracts.

An IP system must have a ‘value measure’ at point of transfer.

Stone Carlie Investment Banking

St Louis, Missouri

Stone Carlie provides a wide range of investment banking services, including consulting, mergers & acquisitions, financial advisory services, and more.

This major investment banking firm is heavily involved in agribusiness financing, including value-added identity preserved projects.

Investment banking: Rule of entrepreneurism is ‘I’ll do it myself’ – wrong, seek professional help.

Role of Investment Banker: believe in deal, assemble the team, manage simultaneous opportunities, bring credibility, clarify strategies, bring concerted effort to the transaction, be your advocate, get the deal done and execute the process.

Recommended selling/strategic partnering process (see 6 Phases chart in papers), generally 12 weeks to understand outcome. Phase one is most important – determine what is required.

Recommended acquisions/strategic partnering process (see 7 Phases chart in papers), differences between buying and selling is more precise financial projections are required, deal terminology will differ and a more precise valuation is required.

International Soil

General Counsel and CFO, St Louis, Missouri

Kottmeyer is heavily involved in venture capital projects involving agribusiness and high technology and has helped source over $100 million in early stage funding for companies in the past 24 months, including value-added operations.

Kottmeyer focussed on the practical experiences of working with investment bankers from a client's perspective.

Investment funding is entirely process driven, regardless of whom you know.

Stages for funding:

1 - Lawyers, paper and numbers:

• Engage patent counsel
• Outside review of technology of R&D feasibility
• Business plans and financials
• Personal guarantees and money
• Master the regulatory environment

2 - Building interest form the bottom up. How does one build credibility even to get received:

• University, government expert
• State government
• Politicians, regulators and trade associations
• Industry leaders unlikely to fund your project – a dry run
• Potential customer’s prior statement
• Regulatory rules waiting to be used

3 - Review of where the money really is:

• Get an investment banker
• Strategic partnerships
• State and Federally funded/venture programs
• Industry friendly private venture funds

Process is everything…. do not cut corners, a faulty process will lead to missed opportunities, poor deal structure, owner looses business focus, suitor loses interest, deal loses momentum and owner mismatched to sophistication on other side of the transaction.

AgriCapital Corporation

Vice-President, , New York

AgriCapital is one of the world's leading investment bankers specialising in providing private capital investments exclusively to agribusiness.

Its investment are worldwide, and involve all areas of agribusiness, including the food, biotechnology and value-added industries.

Boutique investment bank focussed on agribusiness.

What start-ups should have:

• Solid business plan
• All homework complete
• Willingness to negotiate

What VC are looking for:

• Strong management team
• Competitive advantage
• Minimum size
• Appropriate capitalisation
• Attractive investment terms
• Defined exit strategy

Potential trends for VC money in agribusiness: nutraceuticals grain handling and processing, diagnostics and farm management and input supply (ag/contract services).

Arcadia International

Chief Executive Partner, Brussels, Belgium

Arcadia International is a European group of experts in agri-business and feed/food industries.

Dr. de Borchgrave presented an IP cost model and the economics for producing IP products, worldwide.

Issues: food safety awareness, EC regulation, consumer acceptance of product, retailer demands and feed producers concerns.

Agro-feed/food supply chain, an economic model of a pig case study.

1.Farming>- 2.trading>- 3.crushing>- 4.feed>- 5.livestock>- 6.meat

Identify cost components and typical drivers. Listed the baseline attributes such as the GM tolerance levels (1% as no labelling required), price purchase, trade logistics, processed feeds on farm and delivery of meat at ‘certified’ levels etc.

Reflects the IP cost dilution in the value chain.

Sensitivity analysis:

1. Farming stage

• Demonstrates high response to the trigger level. Reduce trigger to 0.2% and the IP cost increases 8x.
• Impact of number of genes is not as relevant most impact from extra cost of using PCR test as opposed to Elisa,
• farm gate price paid gives minimal response,
• impact of lost GM benefits to the farmer would require the farmer to claim a premium to compensate,
• high cost of dedicated farming practices resulting from larger loss of GM benefits (eg. Early harvest due to GM change).

1. Trading stage - smart logistics will contribute to cost reduction. Feasibility for large quantities so large scale operations required.
2. Crushing stage has a low impact to the economic system. Maximum impact of IP if cost allocation is shifted to trading by allocating 50% of IP cost to IP products. Commercial decision of cost allocation of IP.
3. Feed stage - feed composition and allocation of IP cost have significant impact. Ie. Substitution for 15% soya would result in 5 to 10% cost increase, assuming nutritional equivalence.
4. Livestock/meat stage is more traceability matter rather than IP. High sensitivity to allocation of traceability cost for livestock and meat.

Implications

• IP and traceability incurs significant additional cost – up to 15%
• Impact stronger at trading and processing stage, followed by rapid dilution downstream.
• Largest cost with purchase of more expensive materials
• At all stages additional cost is larger than net return
• Largest impact is the trigger level
• Operational arrangements could reduce costs
• Low cost IP trading infrastructure
• Cooperative arrangements are required therefore the downstream operators need to understand the consequences of request to up stream
• Essential for the regulator to understand the economic consequences of proposed legislation
• Need to review the timeframe for the cost drivers
• Investigate alternative crops or new raw material sources
• Investigate the market dynamics, as this will determine the way forward such as vertical integration, formal alliance, alternative supply etc.

Chapin Shea McNitt and Carter

Counsel, San Diego, California

Are premiums adequate for true IP process, is there full disclosure of risk to grower and who will accept liability for the foreseeable future?

Non-GMO standards needed (not GMO free). GMO free or 0%, 1% EU rule and Aust labelling legislation, 2% rule for seed growers and 5% for organics (joke). Buyer benefits for non-GMO are a driver.

Costs of being non-GMO include: increased cost of ingredients, slower innovation to crop development, forgo reduction in pesticide use and increase in crop disease and toxins. Costs of segregation will be higher.

In Denmark a study on GMO at 1% tolerance tested to 10% with a 3% level – players were surprised. (rounding up GMO is like herding cats.)

State Law GMO proposals: GM labelling, superfund style liability law, regulatory approval like permits and third party certification and this is pre-empted by Federal legislation.

Food producer liability: not using state of art technology, mislabelling, Food Co sues Seed Co for sale of unapproved-in-EU varieties, potential adverse consumer to ‘outing’ by activist groups.

Seed company contracts include: indemnity for grower negligence, limitation of damages to cost of purchase price, disclaimer of implied warranty. Growers beware as to the degree of risk you are accepting.

Keller& Heckman LLP Washington, DC

www.khlaw.com

Keller and Heckman LLP serves as primary regulatory counsel to numerous multinational processed food, beverage and ingredient corporations and trade associations.

Mansour is active in a variety of international public policy matters governing the food trade, and works closely with Congressional offices and U.S. government agencies.

About one third of the world has legislation for GMO without protocols for testing. Food companies have been charged with being responsible for managing the GM legislation. Different country regimes for legislation is adding cost to labelling, ingredient input and sourcing. Saudi-Arabia has introduced zero tolerance legislation and companies are withdrawing from the market. US is alone in not contemplating legislation.

EU strictness of legislation is regulators reacting to their poor record for BSE. GMO free battle is a perfect tool for anti-corporate groups to play.

Brand management and reputation is King for food companies – they will do anything to protect and drive the branded-food companies. One of the short responses is go non-GMO, this will be fraught with problems in the longer term but will again provide another tool for the anti-lobby when levels can’t match tolerance levels.

When GMO landscape shifts to acceptability will the re-labelling to promoting specific benefits impact on the IP investment?

Currently a market for IP and will grow rapidly in the short term.

Consumer groups can smell blood in the water and will drive hard at the multinationals. Predicting disruptions to the food supply over next couple of years.

Testing facilities:

Genetic ID

www.genetic-id.com

GeneScan

www.genescan.com

Benchmark

St Paul, MINNESOTA

Phone: 1 651 221 0283

Indiana Crop Improvement Association

www.indianacrop.org

Hypure Service Labs

PerkinElmer life sciences, Norton, OHIO

Phone:1 330 825 4525

IdentityPreserved.com

www.identitypreserved.com

Enviologix Inc

www.envirologix.com

CropVerifeye.com

www.cropverifye.com

Environmental Systems Research Institute

www.esri.com

Cybercrop.com – website grain information and trading

www.cybercrop.com