STARLINK DEBACLE GETS WORSE
Three more telling items on the Starlink crisis as Korea joins Japan in concern over shipments. If you haven't got time to read all the articles, have a look at the extracts to sense the enormity of what's occurring. But first a word or two from Dr Paul Rylott, Seed Manager at Aventis:
"I was across in America and looking at this technology in action and you actually saw some farmers with some real smiles on their faces"
"We’ll grow a GM crop at a distance away from a non-GM crop, so the
people that want non-GM can buy non-GM, and the people that want GM can
buy GM. The two will not get mixed up. Everybody will have
the right to choose."
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"Iowa State University professor Charles Hurburgh said last week
that it is entirely possible traces of StarLink will show up nearly everywhere
in Iowa due to cross-pollination and commingling on farm and at elevators."
[Starlink] will make it extremely difficult if not impossible for the commodity markets to function properly in the coming year, said Roger G. Ginder, Iowa State University economist. The proper functioning of commodity markets, he pointed out, is particularly crucial to the grain elevator sector and its liquidity.
Iowa legislator Ralph Klemme, who planted 25 acres of an unapproved gene-altered corn that turned up in the food chain, said on Tuesday he was not fully informed of the restrictions in growing the corn. Klemme, Republican chairman of the Iowa House agricultural committee, said he would not have grown StarLink corn had he known that other corn varieties should not be grown within a 660-foot ``buffer zone'' to avoid cross pollination.
The lack of trust resulting from this incident could push the identity-preserved grain market back by several years
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Feedstuffs - 6 November 2000
StarLink may cause liquidity problems for elevators - by Sarah Muirhead, Editor of Feedstuffs
The partial approval of StarLink for use in animal feed but not in food, and the subsequent commingling of the grain with a large fraction of non-StarLink corn produced this past growing season, will make it extremely difficult if not impossible for the commodity markets to function properly in the coming year, said Roger G. Ginder, Iowa State University economist.
The proper functioning of commodity markets, he pointed out, is particularly crucial to the grain elevator sector and its liquidity.
Ginder said it really isn't possible to accurately estimate the level of StarLink commingled corn in elevator inventories. "Elevators may not know for sure themselves. Elevators typically learn they have it when a positive test occurs in a shipment," he said.
"The StarLink situation creates some potentially serious problems with the use of warehouse receipts to create liquidity in the grain elevator and processing sector," said Ginder. He explained that at the core of warehouse receipts is the ability to substitute one lot of grain for another lot of like quantity and grade. That being the case, he said, receipts of U.S. No. 2 yellow corn imply that stored grain meets the grade standards established for U.S. No. 2 yellow corn and that the corn is merchantable for all normal commercial uses and purposes.
The U.S. No. 2 yellow grade designation permits one inventory to be substituted for another inventory of the same grade without regard to and use (feed, food, industrial products or export). Limitations on the use of StarLink grain in human food channels should prevent its designation as U.S. No. 2 yellow corn, said Ginder.
Considering that StarLink was registered under the condition that it would be kept separate and not enter food channels, Ginder said the commingling of StarLink with non-StarLink U.S. No. 2 yellow corn results in the entire commingled inventory assuming those same limitations. Grain depositors who delivered corn without StarLink will receive grain with a more limited market and almost certainly a lower value when they withdraw the commingled StarLink product, he said.
To date, Ginder pointed out, the commingled StarLink product has not been recognized in U.S. grade standards.
With the discovery of StarLink in taco shells at a time when harvest
was nearly complete across the Corn Belt, many elevators were unaware that
the U.S. No. 2 yellow corn in their bins had been commingled with StarLink
and would not meet the U.S. No. 2 grade standard, said Ginder.
Even those elevators that designated a segregated feed mill location for delivery of grain produced directly from StarLink seed were unaware that cross-pollinated grain or improperly channeled StarLink were entering their other facilities, he said.
"In some cases, warehouse receipts for U.S. No. 2 yellow corn were issued to depositors by the elevator without any knowledge that the actual grain in the bins would not meet this grade standard due to StarLink contamination. Those elevators are now in the position of assuming the responsibility for providing holders of those receipts with grain that meets the U.S. No. 2 yellow grade. Although the grain the elevator holds in inventory may meet that standard according to current U.S. Department of Agriculture grade definitions, the depositor will not be able to use that grain for all uses and may take a substantial discount. This will result in a financial loss equal to the cost of locating, acquiring and transporting the non-StarLink grain to either the depositor or the elevator if it attempts to satisfy those receipts with grain suitable for all uses," said Ginder.
The situation, he said, could be made even worse for elevators if a significant price gap between the StarLink and non-StarLink inventories develops. Ginder predicts that if the quantity of grain testing positive for StarLink is relatively large and is brought to market as livestock feed in an accelerated time frame, it is likely that the market for this grain will be depressed. He noted that elevators do indeed have strong incentives to bring the commingled StarLink inventory to market as soon as possible so not to incur the storage and interest costs of holding it.
Even the fact that the Chicago Board of Trade and federal warehouse regulators are not differentiating between grain containing StarLink and grain without it is of little help in addressing the problems elevators face, said Ginder. He explained that it is not a question of how the futures contract is defined nor a question of how warehouse receipts are written. Rather, he said, it is a question of how the users of grain treat corn without StarLink compared to corn with StarLink. It is the end-use market that will make the distinction, he said.
With StarLink in the system, merchandisers of grain can no longer simply select the best market for the grain in the future, sell for delivery at that time and hedge the sale in the futures market, said Ginder.
There are three policy initiatives Ginder believes would be useful in minimizing the current problems in the grain handling and processing sector resulting from StarLink. They are:
* Establishment of an origin testing of shipments for non-feed uses -- the design and implementation of an origin-testing program that is acceptable to processors and exporters would help to identify lots containing StarLink earlier in the channel, something that is especially important, he said, when rail shipments are involved and significant added cost results from the rejection of shipments at destination points;
* Establishment of non-zero tolerance for StarLink -- where there is scientific evidence to support it, there should be non-zero tolerances established, he said, noting that even very low tolerance levels of 1 or 2% would be helpful in reducing the fraction of the crop that is affected, and
* Establishment of a price floor for commingled product -- the limited
uses for the inventories of grain containing StarLink create a need for
risk management options, said Ginder. He pointed out that this is especially
true if the amount of grain that must be moved into the livestock sector
large and/or there are some feeders who do not participate in these channeling efforts. Elevators with large commingled inventories will need some kind of price floor in order to borrow money and hold inventory that is not easily hedged. Thus, Ginder said, some kind of Commodity Credit Corp. loan program where the elevator could forfeit commingled grain would be extremely important in maintaining liquidity and managing the presently unknown level of price risk associated with StarLink corn.
Copyright 2000, The Miller Publishing Company, a company of Rural Press
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Feedstuffs - 6 November 2000
Grain elevators, handlers caught in middle of StarLink confusion - By Sarah Muirhead,Editor of Feedstuffs
Grain elevators and handlers in the Corn Belt are finding, through no fault of their own, that the StarLink fiasco has put them in a perilous situation with grower customers and processor and feeder markets.
As a result, most are now testing all outgoing, and even some incoming,
corn shipments. The costs of the tests, which run about $6 each, are presently
being picked up by Aventis CropScience, the marketer of StarLink corn,
but, nevertheless, representatives from the grain and feed industries
told Feedstuffs last week that the requirement to test for the Cry9C protein is burdensome. The actual test takes only about 10 minutes, but then there is the added time necessary to purify the grinder after every test and the added cost associated with running the test. Testing of a 110-car rail unit, for instance, can be quite a project, said several grain and feed industry representatives.
The overall cost of the StarLink incident to an individual grain elevator could run from thousands to even tens of thousands of dollars when all costs associated with testing, segregation, loss of markets and customers, new market development and price discounting are taken into account, they said.
Corn exporters in the Pacific Northwest last week said they were aware
and concerned over the events surrounding StarLink but that since they
were still unsure as to the limitations and restrictions of Asian buyers,
they were not routinely testing corn shipments. Some exporters did report
tagging of certain loads with statements indicating the grain on board was not intended for food use.
The lack of trust resulting from this incident could push the identity-preserved
grain market back by several years, said Bob Zelenka, executive director
of the Minnesota Grain & Feed Assn., Minneapolis, Minn. Zelenka
said in Minnesota, where some 35,000 acres of StarLink corn were
planted this past growing season, the grain is still moving, but elevators and grain handlers are having to go the extra step to assure trucks and railcars won't be turned back at the point of destination.
Essentially, all manufacturers in the food processing and corn sweetener industries, as well as some in the ethanol industry, are saying no to StarLink corn and have adopted measures to ensure the variety is not used in their products. Most, if not all, are testing all incoming corn shipments or requiring their suppliers to do so.
Archer Daniels Midland Co. (ADM), one of the largest purchasers of corn in the U.S., has had a StarLink testing program in place since Oct. 9 for all inbound corn at its corn processing plants and grain elevators. ADM is using a rapid test that requires each truck or railcar to be tested from two samples of 400 kernels each. Each sample, the company said, must show a negative result.
This procedure, ADM said, results in a 95% confidence level that the
level of StarLink corn present is 0.38% or less and a 99% confidence
that the level of StarLink present is 0.58% or less. The
company said the goal of the program is "to provide companywide testing of all corn supplies to ensure we are able to segregate and direct grain to the appropriate markets."
In addition to the test procedures, ADM said it has received from Aventis the state and county locations where StarLink was planted as well as data concerning specific elevators where farmers may have delivered StarLink corn.
ADM said it remains supportive of biotechnology developments but, at
the same time, recognizes that consumers have choices in the food products
they consume and that consumer demand creates the market for agricultural
products. The company is encouraging governmental authorities worldwide
to establish compatible and practical standards and encourages the development
of appropriate testing methods that can be incorporated into identity preservation systems.
At a meeting set for late November, the Environmental Protection Agency (EPA) will consider public comment on a proposal from Aventis to exempt StarLink from EPA's food tolerance requirement. Industry representatives said a tolerance level for food use or full food clearance for StarLink would help alleviate the pressure that grain elevators and handlers are now under. They added that for the grain industry, the sooner a tolerance is set the better.
In Nebraska last week, grain and feed industry leaders as well as state
government officials met with representatives from Aventis to learn more
about the reimbursement protocol the company is offering producers and
elevators. The problems there are largely confined to the eastern one-third
of the state.
"We have to come together to see how to get through this," said Patrick Ptacek, executive vice president/chief executive officer of the Nebraska Grain & Feed Assn.
Ptacek said elevators in Nebraska are being very vigilant about what is coming in. He said the milling industry in the state is demanding testing of all corn they buy. In Minnesota, Agriculture Commissioner Eugene Hugoson last week called for Aventis to take all measures necessary to compensate farmers and others who have suffered losses due to the problems with StarLink corn. Hugoson said that regardless of what EPA decides to do about the food tolerance requirement, Aventis must be prepared to compensate farmers and others who have suffered financially from the StarLink situation.
"Whatever action is taken should not only minimize the losses of market participants but, most importantly, maintain public confidence in our regulatory process," said Hugoson. "Biotechnology shows too much promise for food production throughout the world for it to be lost due to Aventis' marketing miscalculations."
Hugoson called upon Aventis to establish a user-friendly claims system to allow recovery of losses without turning to the court system. He said such a claim system would be the fairest and most efficient in the long run.
"This episode will have repercussions for Minnesota's grain industry,
but it also provides us an opportunity," said Hugoson. "We can use
this as a motivation to transform our grain industry in a way that will
allow it to better respond to changing technology and consumer demands
differentiated products. It's time we moved beyond a simple commodity system." Hugoson said he plans to gather a working group from all segments of the industry, including producers and retailers, to work together to help find ways to make the grain system work better.
In minimizing the affects of the StarLink situation, Hugoson suggested that producers and others make sure they keep good records. If contracts are involved, he said, payments and losses should be documented. Likewise, seed receipts or seed bags should be saved. If discounts were received, the market price along with the price received should be documented. Any correspondence relating to any aspect of planting, sale or handling should be kept, he said.
Growers who have doubts about the possible StarLink content of any of their grain should test it, said Hugoson. If they find positive results, they should deliver only to approved sites and should not try to hide it. If they knowingly sell corn that tests positive for StarLink, they face possible liability for any grain with which their grain was commingled, he said.
If growers are storing their grain on farm, Hugoson said they need to
separate StarLink and non-StarLink corn. Growers should also keep
their eyes open for profit opportunities for
identity preserved grain, he said.
In Iowa, where StarLink was grown on nearly 135,000 acres, the grain
handling industry is operating under the assumption that Aventis is going
to reimburse all losses associated with StarLink, said Ed Beaman, president
and chief executive officer of the Agribusiness Association of Iowa
(AAI), Des Moines. Beaman and his group told Aventis of this expectation in a recent letter requesting compensation for documented cost and/or loss of revenue with regard to all aspects of managing StarLink corn through the customer and marketing channels, including, but not necessarily limited to, loss from testing, storage segregation, shipping and loss of market opportunities. AAI asked Aventis and its seed distribution partners to provide immediate and complete grower records and the number of units sold.
In a news flash sent out last week, Beaman told AAI members to "document, document, document" all losses associated with StarLink, including transportation costs and delays, demurrage, movement of grain within a complex for segregation purposes, testing, lost marketing opportunity costs and shipping costs associated with having to ship less than the optimum size train. "This document should be no less complete than what you would prepare for your auditors and/or attorneys," said AAI. "If, for example, you are informed by a grain buyer that your StarLink is worth less than StarLink-free grain, ask for a letter confirming the difference. If you are turned down at a market because you cannot guarantee StarLink-free, ask for a letter outlining why you were turned down."
Iowa State University professor Charles Hurburgh said last week that it is entirely possible traces of StarLink will show up nearly everywhere in Iowa due to cross-pollination and commingling on farm and at elevators. Iowa is projected to produce a total of 1.8 billion bushels of corn this year.
Across the U.S., StarLink was grown on 350,000 acres in 2000. Last year, some 250,000 acres were planted to StarLink. In 1998, when the variety was first approved for feed use in the U.S., 10,000 acres were planted.
For the grain industry as a whole, StarLink is creating a tremendous amount of nervousness and concern. In the words of a grain industry representative who asked not to be identified, "It is a huge problem -- a problem that is taking on a life of its own."
Other grain and feed industry representatives agreed, saying each day they learn of a new situation or concern related to StarLink. It is a day-to-day issue for us, they said.
Copyright 2000, The Miller Publishing Company, a company of Rural Press
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Iowa legislator-farmer cries foul over StarLink - by K T Arasu, Reuters
CHICAGO, Nov 7 - Iowa legislator Ralph Klemme, who planted 25 acres of an unapproved gene-altered corn that turned up in the food chain, said on Tuesday he was not fully informed of the restrictions in growing the corn.
Klemme, Republican chairman of the Iowa House agricultural committee, said he would not have grown StarLink corn had he known that other corn varieties should not be grown within a 660-foot ``buffer zone'' to avoid cross pollination.
He said European pharmaceutical giant Aventis SA , which engineered StarLink corn, told him the corn was approved for use only as animal feed but failed to inform him that a buffer zone was needed between the corn and other varieties.
Corn planted within 660 feet of StarLink corn run the risk of cross pollination that could leave them with characteristics of StarLink, which contains a protein that could trigger allergic reactions in humans. In the more than one month since the discovery of StarLink corn in taco shells, 300 kinds of taco shells, tortillas, chips and tostadas have been recalled from U.S. grocery stores and restaurants because of StarLink contamination.
The discovery of the corn in food products in Japan have slowed corn exports to the Asian nation, the top market for U.S. corn, leading U.S. authorities to assure Tokyo that corn bound for Japan would be tested for StarLink.
Aventis has acknowledged that about 12 percent of this year's StarLink crop, or 9.6 million bushels, had been commingled into the food chain and that it would need four years to flush out all the corn.
``The biggest problem is that we were not told of the 660-foot buffer strip,'' said Klemme, who plants corn and soybeans in his 550-acre family farm in Le Mars, about 220 miles northwest of Iowa capital Des Moines.
Of the 340,908 acres of StarLink corn planted this year, Iowa had the
most with 134,910 acres.
``There's too much danger of cross pollination. If the wind is just right...why couldn't it (buffer zone) be 700 feet,'' he told Reuters in a telephone interview.
When contacted, a spokesperson for Aventis CropScience, the U.S. unit
of Aventis SA, declined to comment on Klemme's claim. She however said
the company was working with farmers and grain handlers to pay all costs
associated with moving StarLink and corn commingled with StarLink to
Klemme said Aventis employees visited him on Oct. 4, soon after the StarLink issue hit the headlines, to inform him that he should keep the corn separate from other varieties. ``I kept the StarLink in a separate bin and the bin was not full. The company then agreed to let me fill the bin with corn from the buffer strip and consider all of it as StarLink.''
Klemme said the company had agreed to pay 25 cents per bushel extra for the commingled corn. He said there were about 8,000 bushels of StarLink commingled corn on his farm. He said he had no intention of selling the corn this year. ``I want to carry it into the new tax year,'' he added. Klemme said he would not seek compensation from Aventis so long as he ``breaks even'' on the StarLink corn.
Klemme said he would support any move by Washington legislators to introduce
a law that only permits the sale of crops that can be used as both food