CGCI 1

Marketing to the “GMO Sensitive”

Lynn ClarksonClarkson Grain Co., Inc.

August 2006lynn@clarksongrain.comwww.clarksongrain.com

Supply Chain Isolation & Verification

CGCI 2

Perspective – happy clients

Why IP? Product distinction Process distinction Market access -

GMO Traceability

To get what you want when you want it and avoid what you do not want!

Speaker perspectiveIP system, not commodity system

Key factors Contract production Protected production Segregated storage 3rd party verification

by tests and process audits

CGCI 3

Dear client, what do you want?

I want X plus I want to avoid

all GMO events Some GMO events

I want A particular GMO

event A set of GMO events

I want to be informed -tolerances

0.0000% Mr. Han 5.0000% Mr. Tamai

CGCI 4

GMO challenges in pleasing client

Contract standard – tolerance

Prove compliance Seed Production Storage Handling and Shipping Transfer of ownership

The most disciplined systems involve layered, overlapping, certified segregation audits and testing protocols.

Every step involves costs and risks.

Who pays? The Consumer

CGCI 5

GMO tolerance - examplesGoal - max 0.1% GMO Official Europe Market Europe Challenge of multiple

standards encourages default to toughest standard

Increases costs for all

Provides alternative market

Korea Official - Zero Market - Games Process path – More

games

Unapproved (RiceLink) Perfection 0.0…

00%? Impossibility System wide risk

CGCI 6

Prove GMO Compliance Testing techniques – client

choice PCR (lab) ELISA (lab & field tests) Bio-Assay (lab)

Sampling/Testing protocols Single/multiple event

focus Critical points Statistical validity

Compliance: when, where?

3rd party systems for verification/certification

Testing services Verification services Certification services

Goal: Keep the client. Develop trust in certified, traceable system, dampen reliance on “THE TEST”!

CGCI 7

Seed tolerance for 0.1% client Very difficult to

acquire appropriate seed. Breeding pools no longer pure. Who will guarantee? Cost?

Extreme isolation Geographic regions Geographic

separations Testing

By lot By farm

Seed must be under 0.1%. The level of GMO presence becomes more concentrated as move from seed to production to delivery. Our seed goal is 0.025% max. That is becoming VERY difficult.

CGCI 8

Production challenges Cross pollination by

wind or insect Human carryover on

machinery or tools Planters Combines

Field segregation barriers

½, 4, X miles Harvest/test/discard

outer rows to GMO compliant markets

CGCI 9

Storage Scattered production

with challenge to consolidate without contaminating

Farm storage: US, Other Commercial gathering

centers Dedicated 100% Segregated by

Test Affidavit Statement

CGCI 10

Handle, Process & Ship

Handling Bins Conveyors Conditioning system Testing equipment

Processing Process aids Admixtures Preservatives

Transportation (cleaned/segregated)

Containers (20 MT) Trucks (22 metric

tons) Rail cars (100 MT) Barges (300-1400 MT) Ships (50,000 MT) Receiving facilities

Dust control Human error

CGCI 11

Japanese Program - Pure Green ©

Seed: Sample/lab test Field: Visit and stake Harvest: Sample/lab test Storage: Sample/lab test Consolidation:

Sample/field and lab test

Vessel: Sample/field and lab test

Container simplest Barge reasonably simple Ship increased complexity

CGCI 12

Risk – rejection (cost unknown at start)

Within IP system

Seed – costs depend on rejection rate, contract premiums

Production cost depends on Yield drag – balance with $$ Pest control –balance with $$ Management detail – $$

Storage costs depend Single-user storage Multi-user storage

Process/handle/deliver Yeasts, stabilizers, …

CG Experience

Cost of verification Depends on the level of rejection. That level is not known until program complete.

Major cost: rejection at buyers receiving plant.

Negotiated effort toward 3rd party certify Transfer responsibility as

early in process as possible Test and accept before

shipping Agree on which test

controls National collaboration

would help

CGCI 13

Solution & Conundrum

Genetic Purity PuraMaize™

Breeding breakthrough by Hoegemeyer Seeds

Legally required genetic markers??

Organic Puzzle Process definition Avoid or embrace

tolerances and testing??

GMO Labeling

CGCI 14

Trend Boosters

Genetic engineering will offer more market choices distinguished by ingredient quality, process aids and production advantages

Buyers will want/accept No GMO events Some but not others All GMO events

Means increased market complexity, segmentation, testing and verification!