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 For IP Success go back to basics Sep 1, 2001 12:00 PM David Hest If you ask Todd Gerdes and Roger Shaw about the keys to success for identity-preserved (IP) grain, they will tell you it boils down to tried-and-true old-school business principles, with just a few new technologies added to help bring it off. You know the litany: Know your customers. Know your business and its resources. Know the market. Pay attention to details. The rewards of IP success — including stronger customer relationships and loyalty that results in higher sales of inputs and services — are refreshingly old-school, too, the IP veterans say. In fact, Gerdes, specialty grains manager for Aurora Cooperative Elevator Co., Aurora, NE, says that profits from extra sales of inputs and services to specialty crop customers outweigh profits from IP grains themselves. “I don't think you should go into this thinking you're going to make all kinds of money on IP grain,” he says. “If you have a 10-cent margin on conventional corn, you maybe can do 12 or 13 cents on specialty corn. Don't look for big IP profits. You are really doing it for additional input business.” Adds Shaw, who manages Dedham Co-op Association in Dedham, IA, “Our goal is to bring the producer a better bottom line. When we offer this opportunity, we expect to get the input sales as well, and we usually do.” The Aurora and Dedham co-ops are on opposite ends of the size spectrum, but the principles for success are the same. Last year, the Aurora co-op, with 22 locations across central Nebraska, handled 5 million bushels of specialty grains, about a tenth of total volume. The Dedham co-op, in contrast, has a single location and handled 400,000 bu. of specialties, 20% of total volume. The Aurora co-op currently handles nine specialty contracts: white, waxy, amylose, non-GMO and food-grade corn; tofu, natto and non-GMO soybeans; and popcorn. Dedham handles high-oil and non-GMO soybeans, as well as high-oil corn. IP basics: Know the customer Knowing your customer — both the grower and the processor — is the most critical aspect of an IP program's success, the managers agree. “Specialties are very much a relationship-oriented business,” says Gerdes. That means getting to know the capabilities of individual growers and the needs of specialty grains processors. “Very often it takes extra steps to be successful with specialty grains,” says Gerdes. “You have to build relationships with growers who are willing to take those extra steps. This forces you to get closer to your grower.” On the processor/buyer end, building a solid understanding of customer needs is key. “You have to build trust with the processor,” says Gerdes. “The first thing to learn about specialty grains is that there isn't an unending supply, and quality standards must be met. If you have a problem fulfilling a contract, you want to have a good relationship with the end user to help you handle the situation.” A willingness to learn new markets also is critical, adds Shaw. “It's a fickle industry. What works today may not work tomorrow. Most contracts are year to year. But as we further develop things, especially on the pharmaceutical end, I think there will be longer-term contracts.” Assessing storage and handling resources Another aspect of a successful specialty grain program is getting a grip on both internal and external storage and handling resources. Both managers say they prefer storing specialty grain on the farm until it is needed to fill a contract, both because of the logistical challenges of handling and segregating specialties and because they have found that farmers are better equipped to both condition and store specialty grains than are modern elevators. “On-farm storage is critical,” says Shaw. “We don't have capacity to segregate and store all our specialty grain. And on-farm storage takes a lot of the liability out of segregating grain.” Producer storage and handling facilities also solve a dilemma facing many elevators — namely, that facilities set up to dry and handle high volumes of grain reduce grain quality. “All of our processors want grain that is high-quality with few stress cracks,” says Gerdes. “Without modification, our facilities couldn't do that. From a specialty grain standpoint, producers are a step ahead of us. They are better set up to handle grain to actually enhance its quality.” Like other elevators getting their feet wet with specialties, the Dedham elevator has capitalized on an outmoded older wood elevator by giving it a new life for storing specialty grains. Today, the Dedham co-op's 175,000-bu. structure, with 19 bins averaging just under 10,000 bu. each, is dedicated primarily to non-GMO soybeans. (In recent years, the Aurora co-op also has dedicated one of two facilities in Aurora to specialty grains.) “With specialties like non-GMO crops, you can lose the whole thing just on the smallest of errors,” cautions Shaw. “We took a look at our facilities and how to use them to minimize the chance of error. An older elevator can now be an asset instead of a liability. In the past, the larger the bin, the better. Now, the more bins and receiving pits you have, the better.” Educate, educate, educate Both managers focus on educating contract holders and their staffs over the winter, during the growing season and again prior to delivery, which both elevators help manage with buyers' call contracts. Grower education needs depend on the contract. For example, when the Aurora co-op introduced a tofu soybean contract several years ago, it gave a slide presentation on tofu soybean production at winter meetings. “When you do something for tofu, you've got to be really careful,” says Gerdes. “Splits are a no-no. And we don't want to see a kernel of corn in there, so you have to make sure the field is absolutely clear of corn before harvest.” Preseason education programs also offer cross-selling opportunities. Since the Dedham elevator began segregating high-oil soybeans under a program with Ag Processing Inc. (AGP) two years ago, Shaw and his staff have been working with growers to educate them about varieties with the most profitable balance of yield, oil and defensive traits. This results in extra seed sales. At Aurora, some specialty contracts require growers to plant specific varieties handled by the co-op. Hiring an approved crop scout also is required for some contracts, which also brings additional business in the door. Maintaining purity For crops with stringent purity requirements, such as non-GMO, waxy or white corn, the companies work with growers before harvest and again before delivery to assure quality. For example, the Aurora co-op walks fields with new waxy corn growers to identify border rows cross-pollinated by conventional corn. “We mark the end of the conventionally pollinated rows with yellow ‘crime scene’ tape to remind growers to harvest and store cross-pollinated grain first and keep it separate from the waxy,” explains Gerdes. White corn typically allows 1% of corn to be another color. Again, that means working with growers to identify “contaminated” border rows. Both co-ops test some specialties on the farm to make sure of purity prior to delivery. In other instances, crops are tested after weighing, but before dumping. To determine oil content for high-oil contracts, both co-ops use near-infrared (NIR) machines, which analyze quality factors in 90 sec. or less. They also use appropriate GMO “strip” tests, which use indicator strips much like those in home pregnancy tests to check for the presence of specific GMO attributes. (For a list of companies selling GMO-testing products, see page 9.) Avoiding delivery mix-ups As harvest nears and the elevator prepares to begin delivering specialty grains to processors, Shaw holds a meeting with contract growers to review delivery procedures, including purity and quality tests that must be completed before a load is dumped. “We explain the flow of traffic and what they can expect for testing time,” says Shaw. “We tell them, ‘We will weigh you and probe the load, then you park here to wait for test results’ [which can take six to eight minutes for GMO strip-type tests]. We tell them what to expect so there aren't any surprises. They understand they can't dump and run.” Staff members also receive specialized training. Both co-ops designate a small group of employees to handle testing at delivery. “We take the margin of error out of it by keeping the number of people handling the tests small,” says Shaw. At both elevators, the entire elevator crew is schooled in strict procedures to avoid accidental contamination of a specialty bin. Using separate facilities, with designated pits for specific products, where possible, reduces the potential for mix-ups. A brighter future Both specialty grain managers believe that despite the challenges of integrating specialty programs into a commodity-based industry, handling specialty grains is worthwhile — and will become more important. “The GMO issue has slowed down some advancements,” says Gerdes. “But I think we are just beginning to understand quality traits that have higher value for certain markets.” “Many of us in the grain industry feel the trend toward grains and oilseeds with special traits will get stronger,” adds Shaw. “Down the road we may provide a corn that will help control a disease, or a type of grain for a certain type of hog. It's not going to lighten up.” Testing kits and services The following companies are listed on the GMO Grain Testing Directory of the Iowa Grain Quality Initiative Web page. For more information on grain quality testing, visit www.exnet.iastate.edu/pages/grain. Agdia Central Hanse Analytical Laboratory Centre Analytical Laboratories EnviroLogix Genetic ID, Inc. Medallion Laboratories Neogen Corporation Strategic Diagnostics, Inc. |
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