World Grain - March 2006 - 46

FEATURE: GM CROPS IMPACT STARCH INDUSTRY

GM maize feedstocks. However, the rigor
of IP procedures is far greater as the presence of even traces of GM material must
be prevented.
In fact, non-GM starch supply chains
are uniquely challenging since syrups
and starches have negligible protein content, making direct analytical testing of
GM material in any final product almost
impossible. Strict traceability is therefore needed to ensure the integrity of
non-GM starch supply chains.
ECONOMICS OF IP FEEDSTOCKS
IP and traceability of specialty and
non-GM feedstocks result in higher
procurement, production and handling
costs, beyond those incurred in commodity systems.
There are both direct and indirect IP/
traceability costs. Direct costs are payable and result from:
* An increased need for market
coordination and control, such as extra procurement costs and third party
certification fees;
* Changes in firm operations, such as
incremental costs from strict farm production practices, equipment cleaning
and product testing;
* Increased risks and liabilities, such
as testing risks and sourcing disruptions.
Indirect costs are non-payable and result from underutilization of production,
storage, transport and processing assets.
Just how high IP/traceability costs in
starch production are, however, has not
been known.
To quantify these incremental costs,
we model the operations of representative
U.S. wet mills producing specialty starches and their IP/traceable supply chains.
We use a hybrid industrial engineering/
economic simulation model called PRESIP, populated with data from operations
of cooperating wet mills in separate Midwestern U.S. locations. We report the IP/
traceability costs for selected specialty
and non-GM maize separately for contract growers and manufacturers in order
to clarify some important supply chain
interdependencies.
Farm IP costs vary by crop due to

their unique needs and required farm
practices. For non-GM corn, incremental transport costs and foregone profits
from non-use of GM hybrids represent
a large share of IP costs. Incremental
transport costs are incurred when hauling grain to the wet mill instead of the
nearest elevator.
Using specialty and non-GM hybrids

precludes farmers from benefiting from
GM technology. Unrealized profits include cost savings from more efficient
pest control practices permitted by GM
hybrids. Expenses for securing adequate
field isolation and planting protective
border rows add to the farm IP costs.
Interestingly, farm IP and traceability
costs varied widely across the various

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