UNITED STATES DEPARTMENT OF AGRICULTURE

WASHINGTON, D.C.

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ADVISORY COMMITTEE ON :

BIOTECHNOLOGY AND 21ST CENTURY :

AGRICULTURE (AC21) :

THIRTEENTH PLENARY MEETING :

:

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A meeting in the above-entitled matter was held on Tuesday, August 29,
2006, commencing at 8:30 a.m., at the USDA, 1400 Independence Avenue,
S.W., Washington, D.C. before:

Dr. Michael Schechtman, Designated Federal Official, USDA

Dr. Patricia Layton, Chairperson

[A P P E A R A N C E S]{.underline}

Abby Dilley, RESOLVE

Kathy Grant, RESOLVE

Cynthia Sulton, HW&W

[MEMBERS OF THE AC21 COMMITTEE IN ATTENDANCE]{.underline}

Josephine Hunt

Russell Kremer

Sarah Geisert

Carol Tucker Foreman

Duane Grant

Margaret Mellon

Michael Dykes

Sharon Wiener

Elizabeth Milewski

Lisa Zannoni

Adrian Polansky

Alison VanEenennaam

Kathleen Jones

Nicholas Kalaitzandonakes

Bradley Shurdut

Carole Cramer

Daryl Buss

Gregory Jaffe

Jerome Slocum

Marcia Holden

[PRESENTATIONS]{.underline}

[Page]{.underline}

Allen Williams 61

Don Cameron 88

Caren Wilcox 119

Lynn Clarkson 153

Nick Kalaitzandonakes 183

[P R O C E E D I N G S]{.underline}

DR. SCHECHTMAN: Good morning. Welcome everyone. This is the thirteenth
meeting of the U.S. Department of Agriculture\'s Advisory Committee on
Biotechnology in 21st Century Agriculture for AC21. My name is Michael
Schechtman and I\'m the Executive Secretary and Designated Federal
Official for the AC21.

To my left and right are our facilitators, Ms. Abby Dilley and Ms. Kathy
Grant from the organization, RESOLVE, and next to Abby, Ms. Cynthia
Sulton from the organization, HW&W, who are our partners and who make
the advisory committee process work. Our Chair, Dr. Patricia Layton, who
is also Chair of the Department of Forestry and Natural Resources at
Clemson University will not be in attendance today because one of her
faculty members died suddenly. She\'s attending a funeral today and
expects to be here tomorrow.

As provided for under the Federal Advisory Committee Act, as designated
federal official for the AC21 I\'ll chair the committee today in the
absence of Dr. Layton and will return those duties to her tomorrow.

I would like to welcome our committee members, about 15-16 of whom are
here at present, including one of our two new members, Ms. Sarah
Geisert, whom I will introduce in a few minutes. Welcome to our
discussion, Sarah. You\'ll get the introduction with all the other
members as well in just a couple of minutes. Our other new member, Ms.
Nancy Bryson, former General Counsel of USDA and now an attorney for
Venable, LLP, could not be here for health reasons but expects to be
here next time.

Let me mention that we\'ve had two members leave this committee since
our last meeting. Ron Olson, who only stayed on through this spring for
the wrap-up of the committee\'s most recent major work and Bob Herdt,
whose work schedule has made it impossible for him to continue with the
committee. We\'ll miss them both and we wish them well in their future
endeavors. We\'ll also keep them informed of future work products from
this committee.

I\'d also like to extend a welcome to our ex officio members of whom at
this point I believe only our two newest are here. I\'d like to welcome
them, Ms. Sharon Weiner from the Department of State. She\'s the senior
advisor for agricultural biotechnology there; and Marcia Holden, a
research biologist at the National Institute of Standards and
Technology, Department of Commerce. They replace respectively Madelyn
Spirnak and Vincent Vilker who have gone on to new positions and who we
also wish well.

We will, as usual, have a very full agenda so we ask that when the
meeting is in session conversations need to be limited to those between
members. The public will be invited to participate by providing comments
to the committee at USDA this afternoon between 3:30 and 4:45. For
members of the public who request to speak during the public comment
period, I will need hard or electronic copies of your remarks.

We\'ll be preparing the Minutes of this meeting and a computer
transcript of the meeting will also be available within a few weeks. We
hope to get the Minutes and all meeting announcements up on the Web. The
AC21 has a website linked to the overall USDA website. It can be reached
through USDA\'s new main biotech portal via the USDA\'s main website at
www.usda.gov by clicking on agriculture, then on biotechnology, then the
committee meeting. That\'s actually much easier than the e-mail site,
website rather.

For anyone with the press who may be in attendance, you\'re welcome to
speak to whomever you wish during the breaks of our meeting and before
or after the meeting itself. We ask that you not conduct any interviews
or request comments from members while the AC21 is actually in session.
I will be available for questions and comments at the end of each day of
the meeting and Dr. Layton will also be available tomorrow upon her
arrival.

I\'d like to request that all members of the AC21 as well as all members
of the audience and the press, should any be here, please shut off your
cell phones and beepers as well in the meeting room. Bathrooms are
located on either side of the patio just outside this door \-- women on
the near side, men on the far side.

For the information as members of the public, let me indicate that AC21
has two distinct charges from the Secretary in its charter. First,
examining the long-term impacts of biotechnology on agriculture and the
work of USDA, which the AC21 has interpreted to mean over the next five
to ten years and, secondly, addressing pressing specific biotechnology
related issues identified by the Secretary.

The committee has just completed a significant piece of work dealing
with that first charge and the resulting document entitled Opportunities
and Challenges for Agricultural Biotechnology, A Decade Ahead, will be
presented to the Deputy Secretary of Agriculture tomorrow morning.
We\'re very fortunate he\'ll be joining us and we\'ll look forward to
his thoughts as we move forward.

Today, we\'ll begin to work in earnest on the next work project fitting
under the second charge of the committee on the impact of coexistence
and considerations for agriculture. The committee will be working on
refining its charge after a series of presentations on some relevant
topics from a series of outside speakers and I\'ll have more to say
about the upcoming work later.

In the back of the room, rather just outside on the table where your
name tags may be found, there are documents for this meeting. Please
take only one copy. For this meeting we have fewer documents than usual.
There are a few background documents which include the official AC21
Charter, the AC21 Bylaws and Operating Procedures, a package of
biographical sketches of all the current AC21 members, all the new, and
the draft Meeting Summary prepared from the last, the 12th AC21 meeting
held on March 27-29th of this year.

We also have as background the two earlier reports that were developed
by consensus last year in 2005 on the table. Tomorrow after presentation
of the latest consensus report to the Deputy Secretary an additional
report will be placed on the table. That will obviously be an official
document. Specific for this meeting we have just a couple of other
official documents. First, the provisional agenda for this meeting.

Please note the committee members and members of the public that this
agenda is different from the one posted on the Web and sent to committee
members initially. It was rearranged to reflect that the Deputy
Secretary will be joining us tomorrow rather than today. And the second
document, a draft summary from a work group that met via conference call
on July 18th can provide some ideas to help frame the next work project
for this committee is the other document that\'s there.

We\'ll consider some of the points raised in that discussion later
today. Please note on the agenda for this meeting that there are breaks
scheduled this morning and afternoon. Also, on the agenda let me note
that we are planning for a period of one-and-a-quarter hours for public
comments from 3:30 to 4:45 p.m. today. We want to be as responsive to
the needs of the public as we can and we will see as the meeting
progresses how we need to structure that time.

Members of the public, if you wish to make a comment and you have not
done so already please be sure you have signed up on the door so that we
can plan that time. From USDA\'s perspective we have a few objectives
for this meeting. They are, first, to present the committee\'s consensus
report to the Office of the Secretary, in this case to the Deputy
Secretary, and to listen to his thoughts. Second, to introduce new
committee members. Third, to consider outside presentations, organize,
and begin work on the effects of coexistence issues on the development
and use of new crops derived through modern biotechnology.

I have one other current event to mention to the committee at this point
and I suspect you all are aware of it by now. On August 18th the
Secretary of Agriculture announced that there was a detection of an
unapproved transgenic rice variety in some long grain rice from the
South Central States. This so-called unapproved, though I realize that
the word is not exactly right, variety is very similar to other
genetically engineered varieties that have previously cleared U.S.
Government regulatory procedures.

And it has been determined to cause no environmental or safety concerns.
I note that this issue is relevant to members of this committee and some
may feel it\'s relevant to our upcoming discussions. If you can hold off
on asking for details on this issue for the moment I believe that the
Deputy Secretary will address this topic in the course of his remarks in
more detail tomorrow.

I should also note that the Secretary was scheduled to be in attendance
but he\'s been called away on travel and the Deputy will explain the
reasons for that to you when he speaks in his place tomorrow.

As I finish up these introductory remarks, let me add just a thought or
two about the project that you completed. There was a time not that long
ago when coming to consensus on even one report seemed like a forbidding
challenge for this committee.

Having now completed your third report, tomorrow will be the time for
the pleasant task of presenting this report to the Office of the
Secretary. This report was by far the biggest challenge of the three.
It\'s been worked on since the inception of this committee and it
touches on some really fundamental topics relative to agricultural
biotechnology.

I think you should all take pride in what\'s been accomplished and go
forward to build on that accomplishment using the same cooperative
spirit and careful attention to one another as you move on to your next
project. That having been said, I\'d like to consider to continue in the
same spirit and ask the newest member of our committee, Sarah Geisert,
to briefly introduce herself and tell us what she sees as her role on
the committee.

By the way, we don\'t typically ask the same thing of our new *ex
officio* members, but, I\'ll turn to Sarah first and then I\'ll ask
everyone around the table to just briefly introduce who they are and
their affiliation just very quickly.

So, Sarah, if we could start with you.

MS. GEISERT: Great. Well, glad to be here so thank you for the
invitation. I\'m Sarah Geisert. I\'m the lone Missourian in here. I grew
up on a farm outside of St. Louis right by the Missouri River; graduated
from the land grant university, University of Missouri, University of
Nebraska. I joined General Mills after graduating from Nebraska and have
worked in a variety of positions for General Mills and most recently
have taken on the leadership role for global regulatory and product
safety for General Mills.

I\'ve had the opportunity to work in the area of biotechnology since
about \'96 when first questions came up and look forward to
participating in this role. I think the key role that, you know, I look
to play and probably similar to Ron is to bring a perspective on how
these crops, as you further advance them in the supply chain, those
considerations that we take into account as we develop products and put
on the store shelves and clearly we\'re a branded food product company
and we use a lot of grains in our products and, so, our role is to
really kind of work with all of you to understand the marketplace
dynamics and to bring that perspective in place.

So, I\'ve been with General Mills for 23 years and I look forward for
the next couple of years to work with you all here.

DR. SCHECHTMAN: Thank you very much and good luck, Sarah. If we could
just quickly just go around the table so that people can be identified
for our new members and for members of the public. Just very quickly,
I\'m Michael Schechtman, Executive Secretary and Designated Federal
Official for this committee working with the Secretary\'s Office on
biotechnology.

MS. DILLEY: Abby Dilley with RESOLVE, one of the facilitators for the
AC21.

MS. SULTON: Cindy Sulton. I\'m with HW&W, also one of the facilitators
for AC21.

DR. HUNT: Josephine Hunt, Global Science and Regulatory Affairs at Kraft
Foods.

MR. KREMER: I\'m Russ Kremer. I\'m a diversified family farmer from
Missouri and president of Missouri Farmers Union and up the river and
two counties from you.

MS. GEISERT: My neighbor.

MR. GRANT: I\'m Duane Grant, Sarah, farmer from Idaho, sugar beets,
wheat, and a number of other crops.

MR. PUEPPKE: I\'m Steve Pueppke, assistant vice-president for research
and graduate studies from Michigan State and former faculty member at
the University of Missouri.

DR. DYKES: I\'m Michael Dykes from Monsanto. I\'m neither from Missouri
or Nebraska. Kentucky originally. I work for Monsanto Company and in
charge of government affairs.

MR. CORZINE: Leon Corzine. I\'m a farmer with my wife in Central
Illinois and I\'m current serving as the chairman of the National Corn
Growers Association.

MS. WEINER: As Michael mentioned earlier, I\'m Sharon Weiner. I\'m the
*ex officio* member of the State Department and as of two weeks ago I\'m
the State Department\'s senior advisor for ag biotechnology.

MS. ZANONNI: I\'m Lisa Zanonni. I\'m with Syngenta and I\'m responsible
for global biotech regulatory affairs.

DR. POLANSKY: Adrian Polansky, Secretary of the Kansas Department of
Agriculture. I\'m here representing the National Association of State
Departments of Agriculture.

DR. VANEENENNAAM: I\'m Alison VanEenennaam from the University of
California and I work in animal biotechnology and economics.

DR. KALAITZANDONAKES: Nicholas Kalaitzandonakes. I\'m Professor of
Agriculture and Economics at the University of Missouri.

MR. SHURDUT: Brad Shurdut, here in Washington, D.C. and I head up Dow's
global government and regulatory affairs.

DR. CRAMER: Carole Cramer and I\'m with the Arkansas Biosciences
Institute of Arkansas State University and I\'m a plant biologist.

DR. BUSS: I\'m Daryl Buss, Professor of Physiology and Dean of the
School of Veterinary Medicine at U.W. Madison.

MR. JAFFE: Greg Jaffe. I\'m director of the Biotechnology Project at the
Center for Science and Public Interest.

MR. SLOCUM: I\'m Jerry Slocum. I\'m from Northwest Mississippi and farm
corn and winter wheat, soybeans, and cotton. Run some grain elevators
there in three or four counties.

DR. HOLDEN: I\'m Marcia Holden and I\'m a research biologist and
biochemist from National Institute of Standards and Technology Chemistry
Laboratory in Gaithersburg, Maryland and I\'m part of the Department of
Commerce.

MS. GRANT: Kathy Grant from RESOLVE.

DR. SCHECHTMAN: And if we could catch the one person who walked in.

DR. MELLON: I am Mardi Mellon and I\'m with the Union of Concerned
Scientists.

DR. SCHECHTMAN: If I could ask everyone, the folks who have soft voices,
if they could all speak up a little more so the folks in the audience
will be able to hear, that would be helpful. So now I think we\'re ready
to move on to the next item on the agenda and that will be starting with
the summary of \-- a brief run-through of the summary from our last
meeting and Cynthia Sulton will be starting the discussion.

MS. SULTON: Just to summarize our discussion of the last meeting which
was March 27th through the 29^th^: after the introduction of our new
members the committee focused on completing the report that we\'ll be
presenting to the Secretary tomorrow so we focused on the completion of
the report examining the impact of agriculture biotechnology on American
agriculture and USDA over the next five years and then spent some time
determining the specifications and logistics for the presentation to the
Secretary for the approval by the committee.

Then Dr. Schechtman introduced two new topics and charges for the
committee, the first of which was what are the effects in terms of
planting decisions, markets, and rural communities of coexistence issues
on the development and use of specialty crops for non-food uses and for
quality enhanced crops. We then had two presentations, one by Dr. Greg
Landry, Director of the Products Commission and Compliance Division of
Pioneer Hi-Bred International and the second presentation by the
Honorable Adrian Polansky who is here with us today, Kansas Secretary of
Agriculture and an *ex officio* member of the committee.

That presentation was on state perspectives on coexistence and impacts.
The meeting continued with some discussion of the second charge that
will be before the committee this year and that is what are the \-- what
avenues of technology transfer or actions by USDA are most likely to
result in the production of biotechnology derived crops other than large
scale, commingled major commodity uses that would have the greatest
positive impacts on domestic markets, rural communities in the United
States and developing nations.

We again had two presentations on that topic, the first being one by Dr.
John Radin of USDA Agricultural Research Service on research efforts by
USDA Agricultural Research Service in specialty crops. The second
presentation was by Dr. Alan McHughen of the University of California at
Riverside on the Specialty Crops Regulatory Initiative.

After that there was some discussion by the members and an agreement
that we would have a work group to get together and try to develop the
scope for how we approach these charges and report back to the committee
at this meeting. And basically that was our meeting.

A lot of time spent on actually editing and completing the document. If
there are any amendments to the full summary I\'ll be open to them now
or you can send them by e-mail to Michael sometime in the next ten days
so that we can finalize the summary and post it.

Any discussion? Okay. If after this we will go ahead and put this on the
Web unless we hear from you in the next ten days. Thank you.

DR. SCHECHTMAN: A member of the press is in the audience. I just wanted
to note for you something that you will not have heard before which is
that the new report will be presented to the Deputy Secretary tomorrow
rather than today and so if that changes your schedule I just thought
I\'d \--

MS. DILLEY: It\'s going to be a really good meeting today though if you
want to stick around.

AUDIENCE MEMBER: Are you going to have presentations later on?

DR. SCHECHTMAN: Yes.

MS. DILLEY: Yes. Okay. I wanted to do two things just in terms of
looking, reviewing the agenda. I wanted to review. I think having the
summary from the last time since it\'s been, what, four months, March,
late March to now, it\'s been some time before we were last all together
and we did a lot at that meeting.

We completed a report that will be presented tomorrow to the Deputy
Secretary and we had two charges put before the committee and over the
course of the discussion there was a request of the Secretary for
Michael to go back and talk to the Secretary about perhaps choosing,
given the time frame was about a year to complete the charge, and
members feeling that the two charges were pretty significant, both of
them in order to really do them justice so a request as to whether there
is a priority between the two.

And over the course of, I think, a month or six weeks it was determined
to take on the coexistence topic first before the specialty products
topic or charge and then a work group came together to try and flesh out
a little bit more given that charge, a first brush with how to set up a
work plan trying to really understand what was being asked of the
committee and then put some thought into how to create the agenda for
this meeting.

So, there\'s been a lot of time in between and we\'ve had the
opportunity, the facilitators have had the opportunity to, I think since
the July 18th call, talk to several, if not all of you, in advance of
this meeting. And it was clear to us the evolution of the agenda needed
some time up front as well as over the course of these two days to
really figure out what are we doing and how are we doing it.

And, so, we wanted to take some time even before the presentations to
have a little of that conversation because in talking to each of you
it\'s clear people have different perspectives on what coexistence is,
what are we trying to accomplish with achieving coexistence or trying to
work towards coexistence or continue being in coexistence, different
diversified marketplace having coexistence and, so, we wanted to make
sure we had some time this morning to restart that conversation.

And one of the goals, as Michael as said, of this meeting is to by the
end of the day tomorrow when we adjourn to have a much better sense of
where different members of the committee are coming from in terms of
looking at coexistence and how we might going about meeting our charge
from the Secretary to continue, I think, with something we have in the
report actually about a diversified marketplace in the future where
there\'s opportunity for all different kinds of products to be in the
marketplace and what are some ways or tools or approaches to help
facilitate that.

So, trying to put some of the presentations we\'ll hear today and I\'m
sure there will be some interest in having additional presentations in
the future to meet our charge to complete the task at hand. So, I wanted
to provide that as background.

I think it\'s a good reminder. I think also in starting a new charge,
just a quick refresher on the ground rules because I\'m not sure we\'ve
talked about those for some time. I want to make sure they\'re still
relevant to the group\'s work. If we need to modify them we can do that.
They\'re hopefully just helpful to the committee to provide some ground
rules as to how we want to work together.

So, the ones we had developed I think all the way back on the 1st, this
being the 13th, that was obviously a while ago, but, in terms of overall
ground rules, just focusing on the task at hand and then discussions;
observe and respect time limits. It\'s not as big a committee as we\'ve
had in the past, the first iteration of the advisory committee, I think
which was closer to \--

DR. SCHECHTMAN: Forty.

MS. DILLEY: \-- forty people. So, fortunately we have a little more time
for people to talk, but, obviously being respectful of that, especially
given that we have a lot of presentations and I\'m sure people will have
a lot of questions. Staying in one conversation at a time and the last
one\'s going to overall be respectful of being tough on ideas and not on
people and organizations.

So, just being able to work collaboratively and collectively together.
Obviously, the committee is comprised the way it is to get diverse input
into a conversation that sometimes can be a little heated. We had
animated discussions, but, they can still be respectful of one another.

So, just wanted to put those out there and remind ourselves. I don\'t
know if anybody wants to make some comment, questions, or,
modifications, additions to those. We can certainly do that at this
point in time.

Any thoughts on the ground rules? Michael?

DR. DYKES: Just one clarification. Michael said something about a year.
Is this project going \-- are you going to set a hard and fast deadline
that we\'re going to complete this in one year or is that just kind of a
rough ballpark figure and then we\'re going to \-- because aren\'t we on
two year time tables?

DR. SCHECHTMAN: No. Our intent, the intent from the Secretary\'s Office
was that this is to be \-- and I\'ll talk a little bit more about this
in a few minutes \-- short, succinct, not looking for a very, very long
report and we\'re trying to do something that can be accomplished in a
year.

Now, we would like to have this done in a year. We\'ve had, as you all
know, deadlines missed, but, that\'s not our intent. Our intent is to
err on the brevity side if we can and, you know, we\'ll see how that
works as we go along. We\'re not intending to produce some long
document. We said that before and had some documents get way longer but
we\'ll see what happens.

DR. DYKES: I just raise that point because I think, going back to what
you\'re saying, Abby, and I think we should have that in the back of our
minds if we\'re thinking about the topics and the scope as to what\'s
going to be consistent with maybe a somewhat briefer report and maybe in
a year\'s time frame. We tend to be lumpers and so maybe as we think
about those we may already \-- we always want to ask ourself aren\'t
those three things there. That\'s really the same general topic.

MS. DILLEY: I\'m sure we\'ll come back to this in terms of developing
the work plan and some of the parameters within which the committee
needs to work. Any thoughts about the ground rules? Leon?

MR. CORZINE: To Michael\'s point, there are a number of us, our terms,
even though it was just announced recently, our terms are up in
February. Is your intent to keep this group together until we finish
this report even it goes, say, to June?

DR. SCHECHTMAN: I don\'t make those decisions as to who\'s on the
committee. The point is noted. We\'ll shoot to get the report done as
quickly as we can and we\'ll see what accommodations need to be made.

MS. DILLEY: It depends on how productive you are. Just kidding. Any
other questions? And I\'m sure we\'ll revisit some of the issues about
the charge and how the committee\'s going to take on this charge when we
get to that end. Michael\'s alluded to the fact he has a lot more
comments on the ones, but, I just wanted to make sure if there are no
other questions about the ground rules we\'ll use those as the working
ground rules if people are fine with that and proceed forward.

And just in terms of the agenda, it\'s the green sheet, if you\'ll pick
that up, is the colorful version from outside. We will spend some time
having Michael introduce the topic, the charge again and talking a
little bit about the work group session that met, I think it was July
18th, and you received a summary.

I think actually, Michael, the summary that\'s out there is only one
page so something happened in the copying which we\'ll have to figure
out at the break. And then we\'ll start with presentations beginning at
10:30 following a break. Then we\'ll have presentations through up until
lunch at 12:30.

I think a lot of these presentations, again, they\'re a first cut at
some of the topics that people had suggested during the work group
session. I\'m sure there will be other suggestions for other topics and
presenters at future meetings. We\'ll come back from lunch at 1:45 and
have additional presentations and then come back to the discussion of
not only asking questions about presentations and issues that come up
over the course of the presentations but also revisit the issue of the
scope of our charge and how we want to go about doing the work.

And then we have public comment period from 2:30 to 4:45. Again, a
reminder for those who are from the public. If you want to make comment
you need to sign in outside. There\'s a place to do that and we
encourage you to do that. And then and if it has been our tradition that
we make use of that time if it is not all used for public comment. Then
we have used that time, which has been very helpful, to come back to
some additional discussion among the committee to continue our work.

We\'ll adjourn no later than five today. And then we\'ll come back
tomorrow and start the discussions at 8:15, so just a little bit
earlier, 15 minutes earlier we\'ll start the meeting and do the \--
begin the discussion of the work plan and then we\'ll stop that in order
to present the completed report to the Office of the Secretary. The
Deputy Secretary will be here. And then take a break and then continue
back with our discussion of our work plan and how we want to go about
doing the work, what additional presentations we want for the next
session, whether we\'re going to do any discussion in between work group
conference calls and then conclude no later than four.

So, any questions overall about the general agenda and timing of things?
All right. Okay. So, Michael you\'re going to turn to \-- oh, did you
want Carol to introduce herself?

DR. SCHECHTMAN: Yes, yes. Carol.

MS. TUCKER FOREMAN: Carol Tucker foreman with Consumer Federation of
America. I apologize for being late. I had to come the greatest
distance, you know.

DR. SCHECHTMAN: Okay. Well, it\'s now time for the committee to turn to
its next challenge which was introduced at the last plenary session. And
this is on the topic that we\'ll call at least provisionally
coexistence. Generally speaking, what USDA wants out of your upcoming
discussion is consideration of coexistence issues among different types
of agricultural production and how they might be addressed or minimized
in the future.

At the last meeting, we set out one potential scope for consideration
for this question to be asked of the committee. The question focused on
future products intended for specialty uses and the presumed future with
peaceful coexistence in which there were a large number of varied new
biotech products on the market.

It was clear from the initial discussions that not all members of the
committee were comfortable with the suggested scope and the
presuppositions we made. We followed up with an open-ended work group
conference call on the subject on which we had seven committee members
participate. The summary from that work group call has been provided as
one of the meeting documents and I\'m told that the summary is missing a
page so we will get you an amended one tomorrow.

Nonetheless, rather than review the summary from that call in detail,
let me note that the concerns from the original formulation were
reiterated and mention a few of the other points. First, useful
observation was made that in order to look to the future one needs to
start by examining the present situation. That\'s what we intend to
focus on at this meeting and move to looking more into the future at the
next.

Second, some members do not believe that peaceful coexistence is a
realistic goal or have difficulty understanding the intended meaning of
the term. The committee will, in fact, meet to consider whether that
will be the term to which they\'ll refer in this work. Some members
believe that this question needs to be looked at very broadly, others
more narrowly.

The committee will need to consider how to articulate its scope of work
that addresses USDA\'s interest in the topic and is at the same time a
formulation that committee members feel is appropriate to their work.
There is no doubt that as usual considerable amount of effort will need
to go into terminology. Indeed, scope concepts brought out at this
meeting might stay to some extent a work in progress through the next.

Another question is whether and/or how to include consideration of
potential products in food crops intended for non-food uses or to refer
to them in a document as another question that you\'ll also need to
wrestle with. Let me reiterate a few considerations mentioned last time
that we\'d like you to keep in mind along the way.

A variety of crops are currently being grown, including biotech,
conventional non-biotech and organic products each with different
commercial specifications which, in turn, entail different agricultural
management and perhaps downstream decisions as well. We\'d like you to
look at this topic in the document that you prepare in a future-oriented
way, even recognizing that you don\'t all agree on what the future may
look like.

That\'s not going to be easy. Further, let me remind you that we\'re
still looking for a relatively short report, not a very long detailed
one, and we\'re hoping to have it completed in about a year. Also, we
think that it would be helpful if you all tried not to frame your
discussions specifically in the context of biotechnology versus
non-biotech products or versus organic nor should the report debate
whether agricultural biotechnology should or shouldn\'t be a part of
agriculture.

It is a reality and it should not \-- you should not revisit previous
discussions. We\'re not looking for any sort of paper that talks about
one kind of agriculture at the expense of another. We\'re looking for
solutions that help improve overall situations. This is not to say that
you shouldn\'t look at any issues raised in a broad context but I want
to emphasize that the information being requested by the Secretary\'s
office is practical information characterizing a potential or actual
problem, providing thought to what may \-- of what may or may not be
useful to consider in the future.

And, so, you should try to look at the topic in a practical way. Last
time we had a pair of excellent presentations relevant to this work from
industry and from state government. I think that the ideas offered by
Secretary Polansky who gave his remarks last time about a range of
potentially relevant considerations also provide a concrete list that
the committee may find useful as a jumping off point.

I\'m sure that you all will reflect on these thoughts and potential
parameters. To set the stage a little bit more for the discussion let me
provide just a few statistics that may help everyone think about the
issues. These are some statistics about ag production, biotech, and
organic.

Organic agriculture is, I believe, on the order of 2.5 percent of ag
production currently but it\'s perhaps the fastest growing segment of
agriculture. A considerable portion of organic production is focused on
serving local markets and restaurants and it\'s especially for fruits
and vegetables and often focused on seasonal uses of products.

I don\'t have specific statistics on how much of the product, but, I
think that\'s relatively a larger proportion than conventional
production. Hopefully, one of our speakers may be able to address that.

Biotech production is at present largely concentrated in grains and
oilseeds. As you all know, there has been a vast penetration in the
market for these crops. Eighty nine percent of soy this year, 83 percent
of cotton, 61 percent of corn. It\'s worth emphasizing that most of the
production of corn and soy is intended for use as animal feed, not for
food.

However, in one fruit crop, papaya, biotech production is significant on
the order of half of the production in the main growing area, Hawaii,
though I don\'t have the precise numbers and obviously papaya is not a
major crop.

For the major grain and oilseed crops in the United States for which
there are transgenic varieties of commercial production, organic
production is vastly smaller. In terms of acreages for organic
production and for total crops I\'m going to present you with what I
acknowledge as somewhat inadequate data. I have been able to put my
hands on 2003 numbers for acreages for organic production and I will be
comparing those with 2006 numbers for biotech and 2003 numbers for
organic. These are estimates, but, I hope that this is not going to be
too much "apples and oranges." You\'ll at least get the general flavor
for these numbers and I acknowledge there are limitations.

Of the roughly 80 million acres of corn grown in the United States in
2003 about 106,000 acres for about 0.13 percent were certified organic
versus this year, about 49 million acres in transgenic corn. For
soybeans, of the roughly 73 million acres, about 122,000 or about 0.17
percent were certified organic in 2003 versus this year, 65 million
acres in transgenic soy.

For cotton, of the roughly 13 million acres, 10,000 acres in 2003 were
about 0.08 percent were certified organic versus 10.8 million acres
transgenic this year. The acres not accounted for by organic or
transgenic in these figures constitute everything else, conventional
production, organic type production that was not certified, and
production using other agricultural systems.

It\'s worth pointing out though that for the other major grain crop,
wheat, which is used much more for food than feed, organic production
was relatively higher than for the other grains. In 2003, about 234,000
acres out of 62 million for about 0.38 percent and, of course, there are
no transgenic wheat varieties currently being grown commercially.

But, all of these numbers, which are an order of magnitude or so smaller
than the overall percentage of organic production, collectively indicate
that organic production makes a relatively larger contribution in fruits
and vegetables rather than in the particular crops in which biotech
varieties add such enormous penetration.

Soy and corn crops are grown in many states in the U.S. Obviously
they\'re concentrated in the Midwest and South in the areas known as the
corn and soy belts. Cotton is grown throughout the South from Virginia
westward on the East Coast all the way across to California. I don\'t
have information at this point on the distribution of organic production
but I suspect it may roughly follow the areas of fruit and vegetable
production. Perhaps our speaker will be able to address that as well.

But, obviously there is organic production all throughout the United
States as well. Now, I have been using the term coexistence, at least
for the purpose of this introduction. What I have meant is the ability
of farmers using different practices or supplying different markets to
product saleable crops in an economically viable way. What term you may
use and how you will all define it will, I\'m sure, be up for extensive
discussion.

As you\'re all aware, the USDA organic rules have a list of what are
called excluded methods. One of those excluded methods is genetic
engineering. So, genetically engineered varieties are not to be used in
organic production. However, all other appropriate organic practices
having been followed, should some pollen from a genetically engineered
variety on a neighboring field pollinate an organic crop, that crop does
not automatically lose its organic certification.

Whether it meets contractual specifications or consumer expectations
may, of course, be an entirely different matter. So, some of the current
practical issues that are relevant for organic and other non-biotech
farmers include the availability of seed that meets particular
specifications in terms of biotech content, the overall ability to
cultivate and produce products that may meet consumer and/or supplier
expectations, and, of course, what happens in case there are problems.

Obviously, that is not a complete list of the issues nor was it intended
to be. Now, these concerns though so far have been articulated most
specifically for the crops where biotech varieties have been most widely
adopted, that is, the previously mentioned grain and oilseed crops,
especially corn, though should genetically engineered varieties of fruit
and vegetable crops be developed and commercialized these issues would
obviously become more relevant there as well.

In thinking about this topic, please remember that USDA has broad
interests in supporting all agriculture, farmers and rural communities,
in supporting the industries that derive from it, and in protecting the
consumers and the environment.

Now, before we move on to some initial discussions on the charge, a
couple more thoughts. As I can tell from the conversations that I\'ve
had with several members and from reports back from the facilitators on
their conversations as well, members do have varying views on what this
topic should cover.

Let me indicate as I\'ve already mentioned at least twice so far that
because of our priority on a short, succinct report, we\'re interested
in what are relevant considerations and we do not want to sacrifice
progress on the report nor delay it appreciably by struggling to develop
consensus recommendations if that\'s the way the discussion is tending.
As always, we\'re happy to receive consensus recommendations, but, we
would rather get a lay of the land and then have you be able to move
onto new work with reasonable speed.

I think this topic will be as challenging as previous ones but I have
the same confidence both now by experience that you\'ll exceed on this
one as well. So, with that, I\'ll turn it back to the facilitators for
discussion and we can start to talk about how this topic will evolve.

MS. DILLEY: Before we jump into discussion of the committee, just a few
thoughts. We have until \-- we have a little less than an hour for a
preliminary discussion and I emphasize it\'s most likely preliminary
because I think it\'s going to take us a bit during the course of this
meeting to get ourselves grounded in terms of what exactly is the
charge, what the community has to do, and how can we best do that.

While I was thinking about this I was drawing on a couple of different
things. One is the meeting and the meeting summary looking at both the
discussion last March as well as the work group\'s discussion, the
conversations with different members, and also a workshop that I
facilitated and helped participate in that\'s the National Association
of State Departments of Agriculture and the Pew Food Initiative on food
and biotechnology sponsored in Colorado in early March and some of the
members also participated in that effort.

And a couple of things struck me in terms of that conversation and
looking at the charge to this committee. What I think I understand, and
obviously this is part of what we need to do in terms of talking amongst
the committee, is that what the committee\'s been asked to do is to look
at or discuss what tools do we think could help foster coexistence.
Well, the first part of that is to understand what do we mean by
coexistence and the parameters around what we\'re talking about in terms
of coexistence.

And one of the ways that coexistence was defined at the workshop or
offered, one aspect posed since I guess I found particularly helpful and
I think is very relevant to this committee\'s work, is that coexistence
is a journey, not a destination and that it\'s an aspiration and part of
that I think is where we ran into some comments about the initial
terminology we were using which was peaceful coexistence and my sense
was, and we talked a little bit about the meeting about \-- what we were
trying to talk about is really peaceful competition because there\'s a
huge economic market piece of this whole dynamic.

And participating in the market is not peaceful. It\'s competitive and
there is competition and so it was kind of an awkward terminology and
some would, particularly those who don\'t succeed in the marketplace, I
wouldn\'t think consider peaceful coexistence a reality.

So, it\'s trying to understand that the \-- or figure out that we\'re
talking about a diversified marketplace which as part of our previous
report we have a vision with a future of a diversified marketplace, so,
lots of different kinds of products, and by virtue of it being a
competitive marketplace there are tensions and then there are tensions.

There are some tensions that are going to exist because it is a
competitive marketplace but there are also tensions that aren\'t
necessary or productive in the marketplace and I think Secretary
Polansky identified some of those, talked a little bit about those in
terms of neighbor-to-neighbor conversations or tensions in growing
districts at a whole range of levels and then that wasn\'t the only
thing, but, also talking to some of the members talking a little bit
about that.

So, one of the aspects I think of the committee\'s work is to try and
figure out partly it is a journey, not a destination, where are we and
where do we need to go to potentially address or find tools that can
help alleviate those tensions that aren\'t very constructive or aren\'t
necessary, recognizing that there\'s always going to be some tensions
and by virtue of the marketplace it\'s not \-- we\'re not talking about
everybody who grows different things or want different things or
consumers, customers, and farmers holding hands in the marketplace
because it\'s competitive.

But, in terms of alleviating those tensions that aren\'t necessary I
think is where we\'re trying to focus our energy and effort and trying
to figure out how to do that we first need to talk a little bit about
what coexistence means to people and I think the presentations over the
course of today and tomorrow \-- today, I\'m sorry, we don\'t have
presentations tomorrow \-- just ours to the Deputy Secretary, are to
try, and I\'m sure there will be other presentations that people want,
will request for future meetings, but, what are some of the
opportunities and challenges that some of the speakers who are talking
today have seen in terms of navigating that marketplace or working
within that marketplace and what coexistence means to them and what are
some ways to either emphasize some tools that are out there already or
potentially some new tools.

And, Michael alluded to the list that Secretary Polansky had put out
during the last meeting which may be a jumping off point from where we
want to start and we may want to supplement that over the course of our
discussions and we may want to start someplace else.

But, those were some of the things that I was thinking about in terms of
different dimensions. I think the one other thing, the one other
definition I would put out there I found was interesting from the
workshop in March, was that it was preserving choice of farmers to grow
what they want to grow, customers to be able to purchase, customers in
terms of food companies, etc. to be able to find what they need and
purchase what they want to purchase, as well as consumers selecting what
they want to consume.

So, it was kind of that whole range of trying to foster that kind of
marketplace along different kinds of commodities. So, with that, I
wanted to spend some time talking about from the diversity of members on
the committee what coexistence means to you and the different aspects of
coexistence so we can start getting our hands around what does
coexistence mean to you and how we can set up, how we get to that point
of being able to offer some tools and some insights to where we are now
and how we can perhaps foster coexistence.

Carol, do you want to start that?

MS. TUCKER FOREMAN: I\'ve got one question first. Would you go back and
repeat what you said about competition there at the very beginning?
There was a term that \-- I\'m trying to make a list of terms and you
had one \--

MS. DILLEY: Peaceful competition?

MS. TUCKER FOREMAN: What was that?

MS. DILLEY: Competition. I think I had somewhat joked about the fact
that what I was hearing was really what we\'re trying to do which was a
conundrum as peaceful competition and that in and of itself, looking at
that terminology, I think, emphasizes some of the stresses, but, also
the hopes of trying to find tools to foster a diversified marketplace
where people are competitors but there are tensions and there are
tensions.

There\'s the rigors of the marketplace and there are rigors that don\'t
necessarily need to be there and, so, if we can sort through that and
figure that out that may be a contribution to the Department.

MS. TUCKER FOREMAN: Okay. Because the term has bothered me some from the
very beginning. I\'ve decided to look in the dictionary. Coexistence is
defined as living in peace with one another. So, peaceful coexistence,
especially as a matter of policy, peaceful coexistence is probably
redundant. So, I\'ll just offer that for a starter that maybe we ought
to find another term.

MS. DILLEY: Terminology, yeah. Greg, and then Michael.

MR. JAFFE: Since we\'re having a discussion about committee charge,
would you please read the committee charge on this to us or write it
down for us? I know I had asked it to be sent out and I know you sent
something out, Michael, yesterday and I\'m not sure that\'s the right
charge. I think you sent out the other charge because I wrote it down
last night when I got back. I wasn\'t in my office yesterday.

The charge you sent out was what avenues of technology transfer actions
at USDA are most likely to result in the production of biotech products.
I think that\'s the specialty crop charge.

DR. SCHECHTMAN: You\'re quite right.

MR. JAFFE: So, since we\'re going to have a discussion about this can we
please write it down or put it up on the screen because what we have is
the context but I\'d like to go back to \-- or at least I can have in
mind what was the original charge to be able to compare the context to
that.

DR. SCHECHTMAN: Okay. One reason that I did not \-- okay, the original
charge that was sent out, and, again, I am giving you this recognizing
that this is going to be modified based on \--

MR. JAFFE: I understand.

DR. SCHECHTMAN: \-- committee members had troubles with it. The original
charge was what are the effects in terms of planting decisions, markets,
and rural communities of coexistence issues on the development and use
of specialty crops for non-food uses and quality enhanced crops. And
already that was changed at the time of the last meeting to eliminate
the idea that it was being restricted to specialty crops and quality
enhanced crops.

That was the first point on the topic. I\'ve been trying to explain what
it is that USDA is looking for out of the topic. Basically, what are the
considerations that move towards, I think as Abby said, peaceful
competition, I think, is a pretty nice term for at least referring to it
at the moment.

I didn\'t want to put this up specifically. We\'re trying to get some
information on, you know, looking to the future, whatever that future
may be. How do we \-- you know \-- what are some of the things that we
should be thinking about if that process is going to promote the success
of all forms of agriculture, all the forms that USDA supports, products
that they have determined to be safe.

MS. DILLEY: Michael may have touched on this. My understanding was, and
obviously tell me if I\'m wrong, for me I kind of boiled it down to what
are some tools to foster coexistence of different types or approaches
that create a diversified marketplace. So, it\'s various. And was that
correct or is there more specific language?

I think part of why you didn\'t want to put up the original charge was
it\'s changed but also some of the language was becoming more
problematic than the message that you were trying to get across.

DR. SCHECHTMAN: Yeah, I think that\'s exactly right. The intent is to
try to see what tools foster what is more a clicheed "win/win" situation
and I apologize for sending out the wrong thing yesterday. My computer
having been dead for a few days I was rushing around at the end of
yesterday.

MR. JAFFE: That\'s okay.

MS. DILLEY: Michael and then Mardi.

DR. DYKES: I guess I wonder, I\'m down to where Carol is, I wonder about
the need for the word, peaceful. I mean, we had a charge on competition,
I don\'t think we have a mean-spirited competition, a consideration for
mean-spirited competition or warlike competition. I mean why can\'t we
just say what are the considerations in the market for competition for
agriculture. So, why aren\'t we just talking about considerations and
coexistence of various production methods.

It seems to me these are subjective things, whether they\'re peaceful to
you or not peaceful to you. I don\'t see that really being relevant to
our discussion. To me, what we should be looking at if we\'re going to
try to keep it brief is more to what you were saying, Michael, in my
view. If we look at the Department of Agriculture across all the
different production systems, across the different products, if you
will, that USDA\'s concerned with, if you think about additional
production systems coming into play that haven\'t been, say, the new
ones over the last ten years, what are some of the considerations that
things that USDA needs to be mindful of.

And if you think about all the different crops, all the different
production systems across the U.S. and all the different stakeholders
that USDA\'s concerned about from consumers to vegetable producers to
livestock producers to row crop producers. And we may not \-- if we\'re
going to keep it brief we may not get to answer all those things, but,
we might give some of the considerations that need to be \-- USDA needs
to be mindful of as they try to think about over the next two years, ten
years, or, whatever our time horizon is.

But, to me, the word, peaceful, I just don\'t see it as \-- I\'m with
Carol. I think it\'s redundant at best, subjective. I don\'t think it\'s
necessary. We don\'t need to qualify the word.

MS. DILLEY: Mardi?

DR. MELLON: Well, I\'m not sure actually if that\'s the case in the
sense that we are going to have various production systems going
forward. There isn\'t much we can do about that. There are impressions
about the relationships among different folks with different interests
in those systems, the consumers, the farmers, and others.

But, I think, you know, I think what we need is a clearer definition of
what the problem is, you know, coming from the Secretary of Agriculture.
I mean, we\'re putting a lot of public resources into this issue so what
has come to agriculture that constitutes the problem that we\'re solving
in some special way. I mean, I just don\'t \-- I see through the glass
darkly, you know, some ideas of where the problems might be, but, you
know, are the problems like the recent rice contamination, is that an
issue that we would want to be taking up? Is that a problem of the sort
that bother people or that is it the notion of the organic and it is
versus the biotech sector in the sense that organic is defined as
excluding genetic engineering as a method.

Now, you know, there is some tension there. Is that the major problem
and what is the problem? Is it that organic cannot move forward as fast
as we might like because of this inevitability of contamination or what?
I mean, I still \-- I\'m still struggling for what the Agriculture
Department, you know, sees as a problem so that we can really put
ourselves, you know, to the wheel of trying to solve it.

MS. DILLEY: Carol and then Jerry.

MS. TUCKER FOREMAN: Well, you mentioned the term organic in that
symposium in the spring about preserving choice across the food chain
that really appeals to me because there\'s nothing in the charge to the
committee either in our charter or certainly nothing in our charter that
says our interests are limited to advancing the interest of those who
produce agricultural products.

And if that\'s what this Secretary wanted why have such a diverse
committee. It\'s my understanding that you have diverse advisory
committees so that you can bring a wide range of perspectives to issues.
It seems \-- and I have been troubled all the way through our discussion
of this, both because it presumes, the context presumes that we would
have go to market in a major way some products that our previous report
suggested might not get to market and that the scenarios \-- well, in
the scenarios report we had three different kinds of scenarios, two of
which probably didn\'t assume, obviously didn\'t assume that we would
have a wide range of additional products on the market.

So, I want to start from the point of view that we will have and I have
real trouble starting from the suggestion that says my goal here is to
make sure that all farmers are successful. That\'s really not why you
have me on this committee and my group would fire me if they thought
that was what I was over here doing. If you\'re talking about preserving
the choice of farmers to raise whatever they want I think they\'re smart
enough to decide whether or not there\'s a market for what they\'re
growing; for food processors to be able to get the product that they
want to fulfill the market they think they have; and for consumers to
have access to the products that they want then it\'s got a much more
positive slant to it and it\'s one that I can be very comfortable with
because it covers the whole food chain. It\'s not redundant and it
speaks in more positive terms than the ones we\'ve been thinking about.

MS. DILLEY: Jerry?

MR. SLOCUM: Well, peaceful competition, peaceful coexistence is maybe a
laudable thing but rarely is competition peaceful, but, competition can
be governed by a set of agreed-to rules. Most competition is and
competition can certainly be governed by respect competitors have for
one another. And out here in the heartland where we\'re trying to
coexist, you know, my neighbor across the gravel road or my neighbor
across the barbed wire fence, we have to have a respect for each
other\'s rights and we have to have a respect for each other\'s concerns
and respect what each other\'s trying to do.

And, so, while competition can be peaceful, it can be respectful. I have
a question I have to make on that segment. Is there, Michael, any
precedent, legal precedent, with respect to this coexistence of organic
and conventional or organic and biotech or biotech and conventional? I
mean, it\'s a far-ranging thing and is there any legal precedent that we
need to be aware of before we venture into, you know, these murky
waters?

DR. SCHECHTMAN: I\'m not a legal expert. Hopefully at the next meeting
with this committee we will have an attorney on the committee who will
be able to do a lot better, give you a much better answer on that than I
can. There are certainly \-- if we\'re limiting to the question of, for
example, pollen drift, and that particular kind of question, there are a
number of different kinds of laws that have been \-- kinds of legal
structures that have been suggested by legal experts as possible avenues
that courts might rule, might use to rule on these particular bases.

To my knowledge, there haven\'t been those sorts of cases that have been
adjudicated at this point but when Nancy Bryson comes to the meeting
next time I\'m sure we\'ll be able to have a better answer on that. It
certainly is a relevant question.

MS. DILLEY: Russ?

MR. KREMER: Yes. First of all, Jerry, I respect that your term
respectful rather than peaceful. The experience of starting some farmer
owned co-ops from anywhere from organic goats milk to antibiotic-free
pork to sustainable forest timber, I can tell you that there never has
been a case, our side and the other side ever sat around the campfire
and sang Kumbaya. It\'s just peaceful. I agree, peaceful should not \--
is far-fetched.

I really also agree with this term, choices. I think if you look, and
this is from a farmer\'s perspective and this is an opinion from all
spectrums here from Mike Gravenstock, for instance, of the Federal
Reserve Bank to representatives at the Leopold Center that said, you
know, the outcome or the success of 90 percent of our farmers today, and
I\'m talking about the constituents and not the land mass (sic), you
know, depends on consumer choices and consumers choosing to drive a
marketplace where you have a very diversified selection, a lot of these
specialty products we\'re talking about.

I believe that \-- I mean, I\'d like to emphasize the need for
competitive markets in this area and, you know, a lot of times, for
instance, on the input side, when our family farmers or smaller
moderate-sized farmers go to the marketplace to find, for instance,
seeds that will fill the demand for a customer that wants that sort of
seed, you know, we\'ve been locked out of those choices.

For instance, a lot of our independent seed corn companies, because of
consolidation and concentration of the marketplace in seeds and other
inputs sometime have very little choices, you know, to purchase those
input and solve the needs of the consumer side. Concentration,
consolidation also is one of the \-- is very problematic in the
marketplace, the food marketplace, and that\'s from large retailers to
brokerage to distribution, etc.

And, you know, I think that this has a large effect, is very pertinent
to what we\'re talking about in this discussion as far as, you know,
coexistence is going to take place then certainly competitive markets
and the competitive market infrastructure needs to be ensured and I
think I\'d like to see that addressed.

MS. DILLEY: Okay. Duane and then Leon and then Adrian.

MR. GRANT: Well, I guess as I think about coexistence I think it\'s
important for the group to acknowledge that coexistence in agriculture
amongst competing production systems and amongst competing crops or
amongst producers who are intending to service different markets is not
a new thing. This is something we\'ve been dealing with for a long
period of time, decades at least, you could perhaps even say centuries.
I think that might be a little bit of a stretch though but definitely
for decades as the marketplace has become more sophisticated and
different buyers have specified different commodities.

We have learned to implement coexistence measures and they\'ve been very
successful. There are some principles that seem to mark coexistence
systems that are successful and one of those is that they are driven and
governed by the producers who have to abide by the rules that are set
up. I think one thing that marks the debate about coexistence today, if
not in this country then definitely in Europe, is that folks who aren\'t
directly affected by issues of coexistence have attempted to impose
themselves into the debate and have attempted to offer solutions for
coexistence that perhaps the principals, the farmers that are involved,
really don\'t see as relevant.

And, so, I think that as we attempt to wrestle with this issue it\'s
important to reiterate, to note that coexistence is operating out in the
field today. There are mechanisms that are very successful. Some are
simple crop agreements amongst farmers in regions. Some have the force
of law. In my state we have a coexistence issue that, just as an
example, it revolves around mint production and there are specific areas
that are five counties in the state wherein you can grow commercial
mint.

The rest of the state you cannot grow commercial mint by law. You can
grow seed mint in the rest state but you cannot grow commercial mint in
the rest of the state. There are specific reasons for that and it was
recommended to the legislature by a working group of producers who
understood the issues and the production community bought in because it
makes sense and now it has a force of law and if you plant mint outside
of those five counties the state will come in and make you tear it up.
That\'s how it works and it does work.

But, I think that just illustrates that the solution was driven from a
local level; it did, in fact, in this case end up with the force of law
but it was driven and bought into by principals who were responsible for
the coexistence. I think it\'s instructive also to note that Europe had
a long debate about this topic. In fact, it\'s still going on. But,
their solution so far has been to push it back to the Member States. It
hasn\'t been to try and legislate from the top down. They pushed it back
to Member States. It\'s amusing to look at what some of the Member
States have come up with.

The Netherlands has pushed the responsibility on its commission of
organic farmers whereas Italy has put it completely on the GM farmers
and imposed huge, up to 50,000 euro fines, and two years jail time for
violations. So, that\'s just kind of illustrative of how different
geographies view coexistence.

I hope we don\'t end up attempting to legislate and even presume that we
can come up with solutions from our perspective as representing a
national constituency that would fit in each of our member states, if
you will, because it\'s much too diverse of a marketplace and
environment to use that approach.

MS. DILLEY: Leon and then Adrian.

MS. TUCKER FOREMAN: Could I ask a question?

MS. DILLEY: Specific to that, his comments? Sure. Is that okay, Leon,
for Carol to ask Duane a question and then we\'ll go to you?

MR. CORZINE: Sure.

MS. TUCKER FOREMAN: Leon \-- Duane, you\'re not suggesting that we
don\'t discuss this issue, are you?

MR. GRANT: No, I\'m not suggesting we don\'t discuss it. If I go a
little farther, what I would suggest is that as a national body we
understand what the terms are and what the objectives are but that we
definitely defer to states or even more local governing bodies to
actually come up with an implement solutions on a more local, regional
level.

MS. TUCKER FOREMAN: We\'re a national committee.

MR. GRANT: Absolutely.

MS. TUCKER FOREMAN: Thank you, Leon.

DR. SCHECHTMAN: If I could interject one thing in there. I presume that
you\'re talking about solutions that are legal solutions in the form of
laws is what you\'re talking about. There may still be, you know, things
like encouraging communications, etc. that are \--

MR. GRANT: Definitely there\'s a role for encouraging communication. I
would never speak against that.

MS. DILLEY: Leon.

MR. CORZINE: Basically, to Greg\'s point and I\'m the same way as far as
what is our charge for this paper, but, the problem that we have is
first determining what the issues are and there are a couple of things
there. One, out there on the farm working it, allowing a neighbor that
grows a lot of organic, markets it well, we have an issue as far as
competition really. My organic neighbor is probably less of a competitor
than the neighbor that\'s growing what I\'m growing because he\'s
driving for a different market and he\'s getting a higher value for what
he\'s growing so if he has specific things that he does to grow that
specific crop and several crops.

So, we have that issue. We have the issue of, like Russell mentioned,
there are seed issues, but, part of the seed issues are if you increase,
for example, the seed purity which gets back to the Seed Act and some
things like that, if you increase that purity you\'re driving up costs
for the majority of the producers when it\'s not needed. So, do we
enforce that issue or do you try to just have an arrangement where you
let the marketplace sort of work it out and I would submit that it is.

So, you have those kind of issues going on. I hope that people here will
give farmers enough credit as far as growing for the marketplace. I\'m
not going to grow something I cannot sell just because it\'s fun to do.

MS. DILLEY: And not for long.

MR. CORZINE: That\'s right. I mean, we\'ve been able to \-- you know \--
the whole word sustain which sustain, if that\'s level that\'s not a
good thing because any business has to grow, you know, we aren\'t into
our sixth generation because we grew things that the marketplace didn\'t
want. So, I think we need to remember that.

And I think getting back to the point of how we come up with our charge,
I think we\'ve got to first maybe establish the baseline, where are we,
because the system really isn\'t broken like some \-- you know \-- if
you listen to this discussion, you think, my gosh, it\'s terrible out
there, nothing\'s working. Well, that\'s why we have presenters here.
And maybe we can\'t really determine our charge to the word until we
hear what our presenters have to say because we need to see what is out
there.

We\'re not all out there so you can buy up, but some of us are close to
that because my organic neighbor and I, our wives have coffee every
Saturday morning, and his wife thinks he\'s crazy and my wife thinks
I\'m crazy sometimes, see, so, we get together and drink a beer about
that once in a while. So, we are getting along. There are specific
markets that different farmers are trying to hit and I think we have a
good set of presenters to address that.

So, maybe we can\'t go any further and that\'s why I think it\'s very
important that we listen to what the presenters have to say and we
establish where we are today and then we figure out, okay, how do we
move forward? Because we can spend a lot of time talking about, you
know, I didn\'t like a lot of the language in the report from the work
group because it seemed pretty one-sided that things were broken and
things were a mess and we get into, well, will there be biotech
products. Well, there are bio \-- you know, all those sorts of things.

I don\'t think we need to raise our arms or we will spend a lot of time
discussing that and really not get anything.

MS. DILLEY: Certainly, we don\'t want to do that. I want to get Adrian
and then why don\'t we summarize some of the things that we\'ve heard so
far and it may be best to move on to the presenters or we may want to
talk a little bit more before we get to the presenters. Adrian, please.

DR. POLANSKY: I would concur, I think, listening to the presenters would
be helpful, but, I would just make a couple of just sort of general
comments and that\'s back to the word, coexistence and where that leads
us.

Respectful, respect, I think is important here because if we are to have
choice, whether we\'re producers, marketers, or, consumers there has to
be a respect that those consumers who prefer to buy organic can find
that marketplace. Also, there has to be at the other end of the spectrum
a respect for, say, those millions of people that are allergic to wheat
gluten, the crop that I produce, that cannot consume wheat products,
some of which get very sick, to exclude them from the opportunity some
day to have that choice to go to the supermarket and buy a wheat
product, whether it be bran or other products, that doesn\'t make them
sick.

If we respect those opportunities and we look at how do we coexist to
get there then I think we will have served the department and far beyond
very well.

MS. DILLEY: I saw some heads nodding, Adrian, while you were talking and
we\'ll go to you, Nick, in just a second, and that\'s where I was too in
terms of the terminology, respectful coexistence, and whether some of
the considerations that USDA should be mindful of and fostering a
diversified marketplace that preserves choice or farmers and customers
and consumers in that whole realm of respectful coexistence, I guess was
the terminology that was given to me.

I want to go to Nick, and then Mardi, and Carol, and then we\'ll
transition to our presentation. I\'m sorry, a break before we go to
presentation. I forgot about the break. Nick.

MR. KALAITZANDONAKES: So, I wanted to raise a couple of issues. We talk
a lot about preserving choices for producers, consumers, manufacturers,
and I\'m just curious that choice for consumers, manufacturers, and
producers for that matter is an issue mostly because we have, for
example, we okayed thousands of products every year in the supermarket
shelves so the question I would pose to this committee is, for example,
is it kosher to have to present consumer choice by bringing all our
organics from Chile? Does it have to be produced here in the U.S.? Is
the implication of what we are saying?

I mean, we are living in a global market. Manufacturers have the option
to go and buy cheap, in fact, many do, cheap vegetables, organic
vegetables from China. Is that kosher or is it outside of our
consideration? Do they have to be produced in Florida or California? So,
that\'s one issue in terms of preservation of choice.

Certainly, as an economist I think I hear the same thing go across which
is farmers always think about policy or needing policy when a market
failure happens and so a lot of people talk about markets kind of work
but others have brought the issue well. Maybe it\'s pollen flow or maybe
it\'s lack of institutional framework, the legal issue, and even
Russell\'s case, maybe the monopolistic structure of the market is
getting me out of production.

So, there could be, it\'s not clear that there are, but they could be
cases of market failure where somebody could make a respectful case for
why policy should be implemented, right? Beyond that, I think more or
less everybody keeps saying the same thing which is when markets work
maybe as getting into the issue of identification and problem solving
might not be a very good idea.

So, I think it\'s important to keep in mind where markets have a place
and where market failure might happen and recognize that policy in the
first place has an impact on that, so, coexistence in Europe is not the
same issue as coexistence in the United States in my book because we do
not have the same regulatory framework to begin with on labeling of
products and so on.

So, the regulatory framework in Europe of mandatory labeling and choice
makes the issue of coexistence and the possibility of externalities and
market failures therefore a very different issue in Europe versus in the
U.S. where we have a very different policy framework. So, there are a
lot of this overlapping issues that I think we keep picking edges of and
trying to put our hands around but I think having a framework to think
about, what exactly are we trying to tackle and signal the issues I
think would be very important in delivering a short, succinct, and
probably effective report.

MS. DILLEY: Okay. Thank you. Mardi first and then Carol.

DR. MELLON: I just didn\'t understand the notion why we would be talking
about gluten-free wheat in this conversation. I just don\'t understand
what that would have to do with coexistence. I mean, that is a market.
If there\'s a market for it it\'ll develop. There\'s a regulatory
system. We could talk about whether it\'s a good enough regulatory
system. But, I just don\'t understand where that would come in to this
discussion. I don\'t see it. I don\'t understand, I guess, the axis on
which that is one end.

DR. POLANSKY: Well, I think I\'ll use an example, I guess. I would,
personally as a consumer, if given the choice of purchasing the French
fries at McDonald\'s that had less pesticide than is currently that, you
know, a segment of consumers made it difficult for Monsanto to give me
that choice then I guess what I was trying to articulate is that we, as
consumers, truly need a choice and sometimes we\'re locked out of those
choices.

And my point was that we need to respect people that want to make a
different choice than one sector of consumers and in my view we don\'t
have that full range of choice now and that if we respect that there
should be that opportunity then I think that may be puts in the
framework of coexistence and choice.

DR. MELLON: I think it\'s a very important issue when we\'ve talked a
lot about. I\'m still \-- I mean, I think maybe we should wait for the
presentations, but, if that\'s the issue I wouldn\'t call that
coexistence, but, you know, I stand ready, other people may.

MS. DILLEY: I\'m sure we\'ll come back to it. In keeping with it\'s a
journey, not a destination, we\'ve kicked the tires around a little bit
and maybe it\'s time to have the presentations and then come back to \--
to working it through a little bit more but I wanted to get to Carol
before we take a break.

MS. TUCKER FOREMAN: I have a question and then a comment. Nick, I
thought you were going in an interesting direction. Were you going to
suggest that before we get too concrete we should look at what the
current situation is and then decide how we want to go?

MS. DILLEY: In terms of where there are market failures or potential
market failures?

MS. TUCKER FOREMAN: Yeah, yeah.

MR. KALAITZANDONAKES: I would guess that that\'s actually a pretty good
approach mostly because it gets you on some footing of choice to find
out what programs at least there are, if there are any, and where did it
come from. And then try to identify what potentially are the problems in
my view there because I think Michael talked to the issue of looking
into the future and on this paper.

So, I don\'t have a problem with that, but, I was also suggesting that
there might be, you know, some substantive issues that are more
important to deal with rather than just producing a laundry list.

MS. TUCKER FOREMAN: And you might divide between domestic and
international?

MR. KALAITZANDONAKES: Domestic and international market was just a point
that I was wanting to raise because we seem to be thinking that
everything has to be done with our borders closed and I don\'t think
that the world works that way.

MS. TUCKER FOREMAN: We\'d go over that if we got into an examination of
the current situation. My comment is, again, if the definition of
coexistence is living together in peace, I\'m not sure why respectful is
an appropriate modifier there. If you\'re living in peace one assumes
you\'re respecting somebody else\'s views.

I understand the term coexistence is one that has been used and with
which a large part of the agricultural community is comfortable and I
think that\'s part of the problem because some people see that word and
think General Mills is going to have to get sourced differently for the
product that it wants to sell in EU countries and what kind of
coexistence is that and what\'s the impact on organics and I think I\'d
like to explore where we are and hold off on deciding what it is we\'re
going to call this animal until I got a better notion of what the animal
looks like. Thank you.

MS. DILLEY: I\'m sure we\'ll come back to it. Why don\'t we take \-- it
looks like five after. If we could come back at twenty after and start
the presentations I\'d appreciate that. You have coffee over here. I
think people know where the restrooms are because we\'ve met here
enough. So, we\'ll see you back at twenty after.

(Whereupon, a brief recess was taken)

DR. SCHECHTMAN: Now that we\'ve begun our discussions in the usual
lively manner, it\'s time to follow up on the presentations from our
last plenary with a series of additional presentations to help
characterize the current situation. We will have five presentations
today, two from farmers, two from the organic side of trade, one, a
supplier, and the other a representative from the Organic Trade
Association, and the last from our own economist committee member.

We may have more speakers again the next meeting as well. Our first
presentation will be given by Allen Williams, corn farmer from Cerro
Gordo, Illinois whom I met several months back at the workshop on
coexistence. The topic of his presentation today is perspectives of an
organic and conventional corn farmer. You will recall that he was on the
agenda for our last meeting but was grounded by fog and never made it.

We\'re glad that the fog has lifted for this meeting and we welcome you
here, Allen. Thanks for coming.

MR. WILLIAMS: Well, it\'s only literally lifted and I\'m glad to be here
today. It\'s fun to be out of the fields, in the big city, and see what
life is here in this beautiful city. The sign doesn\'t lie. My name is
Allen Williams. I\'m from Central Illinois. I farm in the shadows of
what used to be known as the supermarket of the world, Archer Daniels
Midland. This is a photo of a portion of those very narrow farms.

How I might be a bit different, especially from the farmers in the area,
I not only farm conventionally but I also farm organically. About 25
percent of my operations are organic. The balance, conventional. I have
grown genetically modified crops in the past, do not presently.

It\'s real diversified for our area, but, maybe for some of your other
areas of the producers here it\'s not very diversified because it\'s row
crops primarily. What we do though is try to incorporate conservation
practices and return all around back to nature and here\'s a picture of
a restored prairie on our main farm which we\'ve restored about 15 years
ago.

It\'s a medium-sized operation. I know I\'m a larger operator
personally, but, I have a medium-sized operation with very small
equipment and we have a little larger equipment on the operation. What I
grew organically were row crops and cereal grains. Currently growing
blue corn, soybeans, and wheat or cereal grains and that can vary but
it\'s primarily wheat.

The blue corn farm primarily the end user is a chip manufacturer such as
Frito-Lay. I will send to a buyer such as Clarkson Grain who is
represented here today, but, they end up going into blue chips. Food
grain soybeans, well, they\'re either to soy milk or tofu. In the past
the soy milk\'s gone to Imagine Foods which is now owned by Haines. It
doesn\'t currently. And tofu, Nissan Sokai which is a cooperative in the
Pope area.

And cereal grains vary from year to year. This year we have wheat. Wheat
in the past has gone to a small milling company in our area, a single
mill. We\'ve grown rye which has been sold for organic seed or for rye
whiskey, organic rye whiskey, and barley for food sources.

(Discussion off the record)

MR. WILLIAMS: One thing I would ask, if you have questions for me my
hearing is very poor from driving an old tractor and the plow so quite
often I may not understand your questions as I have hearing loss.

On the conventional side I grow white corn, seed beans and yellow corn.
White corn goes \-- is under contract. It goes to an end user, El
Malabro (phonetic sp.) for chips and tortillas after growing through a
buyer such as Clarkson Grain and these particular ones do go through
Clarkson Grain. And seed beans are grown for two companies this year,
Syngenta and Grow Mart. Grow Mart\'s a regional company primarily in
Illinois.

Yellow corn is a very commodity type corn. It just goes directly to ADM.
There\'s nothing special about it, but, it is a traditional crop. So,
why choose \-- and I\'ll go through just some basic economics of why I
make these decisions and it\'s much more detailed than this, but, these
are some basics.

Provide white corn or yellow corn. What I believe is these are five-year
averages. White corn for me is the five year average yielded 174; yellow
corn, 183. But, as you can see, the price per bushel is quite different
giving the gross revenue tilt to the white corn. Expenses are very
similar, if not identical.

So, then, if you\'re going to do yellow currently there isn\'t a GM
yellow. On corn, why go GM or conventional and this is comparing
YieldGard with two events. One is the corn borer BT event and the other
is western corn rootworm BT event. And the column here on your left is
the retail price. The column on the right is my actual price and
they\'re pretty similar but you can see currently these are the prices.
What you would compare is the price of the seed and price of the
insecticide that would replace that event of the YieldGard and it gives
a slight tilt to the conventional and that\'s why you\'re seeing corn
not being currently accepted in our area as soybeans are.

It\'s quickly being accepted even more because insect pressure seems to
be more of an issue in our area. Soybeans is a totally different issue.
The GM event on soybeans has been around for many years. I used to grow
\-- I grew them the first two years they were available. They\'re
Roundup soybeans which, as you know, would tolerate a non-selective
herbicide such as Roundup for conventional soybeans and the very same is
accorded for the price of the seed and the price of the herbicide that
would take the place of that GM event, there\'s a huge benefit to
growing GM soybeans. And that\'s just economics.

There\'s also a very weed-free field. In our area, which is very
competitive, that\'s an issue for farmers. They want a beautiful field
so their landowners are proud of it and then there\'s an economic fit as
well. If you\'re slightly smaller than an average operator in our area
this will generate close to \$8,000 more revenue for you on your
operation just growing a GM soybean.

So, that\'s why in our area GM soybeans are in the 90 percent range. Why
organic? I mean, you can make money doing that, why grow organic? I
started in 1991 actually with a project that wasn\'t organic. It was
reduced herbicide. But, I was also close enough to be involved in a
research experiment with Illinois Stewardship Alliance in cooperation
with the University of Illinois and this is URL for the six year study
if you cared to look it up.

But, they compared the economics, the environmental impact, and the
social implications of organic, of conventional, and what they hoped
ended up being what they call the more sustainable reduced tillage
system. It was very low tillage. And that\'s what\'s called modified
no-till in this case.

Very similar source. Very similar topography. It\'s very similar
nutrient bases in the soil. It was an ideal situation for the study.
They compared the economics. The environmental part was using the
universal soil loss equation which the results are here over a five year
period. They also had automatic sampling devices in ground and surface
water to collect any nutrients or pesticides that came off these
systems.

As you can see in the five-year average here the conventional ended up
with a net return and net return is before land costs so don\'t let that
be misleading. About 183 for conventional. This particular conventional
farm is a very good one, one of the better ones in our area, so, it
should have been a good comparison of conventional.

The modified no-till was generated at 194. So, that would lead you to
believe that organic would be a good system to at least work at. The
soil loss also favored the no-till but organic came in under the
conventional. And this is tons per acre that\'s lost. No, no, no, flat
areas so it\'s hard to believe you could lose five tons per acre in a
flat area.

But, the main reason why I went organic is I could see a huge growing
demand for consumers. They were making choices about what they wanted to
consume not only for themselves but their families and that appeared to
be a growing market and it\'s proven to be that way for more than one
reason.

Michael asked me to discuss briefly six different points. One is how I
took advantage of market implementation. Started out with this \-- I
told you earlier that a program to reduce pesticides, it\'s called The
Better Life Program for Pioneer Seeds. It was implemented several years
ago where you received a premium soybeans if you grew them without
herbicides so we did that for two years and it was quite easy doing it
at that time so I wondered if I could do this for soybeans why not just
go ahead and do it for corn as well when organic got almost double the
price for the soybeans.

So, I knew to get the top premium need to be food stuffs, not feed
stuffs. So, I went with organic soybeans for tofu and soy milk and
popcorn. The popcorn worked great until the report came out that
popcorn\'s not healthy for you and it actually wasn\'t the popcorn. It
was the hydrogenated oils they used in theaters. But that blew the
popcorn market so I had to go into something different which was blue
corn.

And blue corn was just starting out. I contracted with Clarkson Grain
who was really developing that market in the area and ended up going to
a blue corn, soybean, wheat location. And also there was an increase
over this period of time, this five or six year period. There was an
increase in demand as the GM crops came in place for organic because
that was an alternative to a production method that was still being
questioned by not only consumers but some processors.

What are the difficulties encountered at least in the organic growing.
Labor\'s one of them. This is a group of researchers from the University
of Illinois advisory committee for their research project and they
asked, well, we\'re going to come out to your farm and we ought to be
able to help you. So, you can see what I did. I said, this is the way
you can help me best today.

That, with any labor, I encountered keeping the labor in the past and it
wasn\'t long before this is what I saw. Now, what we\'re discussing
here, one of the biggest problems in our area is Canada thistle in an
organic system. It\'s extremely hard to control. And we had several
hours discussion on different methods to reduce Canada thistle. And this
looks like a pretty pristine field to most people and it\'s early in the
season, but, you see these stalks of grass and they don\'t look
significant, but, I can tell you, this time of year, they look
significant and it\'s not pretty at times.

And we were fortunate not to have rainfall practically every week this
year which didn\'t allow labor to get in and weed these soybeans and it
can be ugly in places. Pest control\'s the other issue, at least in the
organic system. This is \-- we use mechanical means of weed control and
hand labor rather than herbicides. And as you can see here this may not
look that bad to you, but, believe me, this would be ugly this time of
year.

So, Michael also asked for compatibility of the different approaches.
But, really, between the two systems they\'re pretty compatible. We\'re
growing the same crops, corn and soybeans. The processes are pretty
similar as well. We use a nurse spreader rather than a fertilizer
spreader. These cultivators and local hand labor instead of herbicides
and crop rotations instead of insecticides. But, what organic does is
demand more attention to management and quality because that\'s what
you\'re really doing, you\'re sowing a product that\'s quality-based.

This is just to exemplify how they\'re the same. We use the same plow in
both systems. With the organic system we just merely power wash it,
disconnect anything. This is an insecticide applicator, fertilizer tank
and applicators. We disconnect them, wash them, power wash them, and
still use the same thing. On tillage, on the organic system we may run a
tillage till like this in the spring three or four times just to get a
perfect seed bed with no competition from weeds while on a conventional
system you only use it once. So, you\'re using more fossil fuels if
you\'re organic but not the pesticides.

And harvesting is almost identical. Here the harvester\'s harvesting
soybeans. The big difference is the clean out. You might think we almost
have disassemble a combine like this to go organic. We\'ll take up to
eight man-hours to clean a combine out to make sure it\'s fairly
seed-free even though we don\'t grow GM crops.

And some people think, well, if you go to this extent, I mean we\'re
actually rebuilding the internal components of this combine, but, no,
it\'s not that bad. You just aspirate it and clean up. So, is there a
problem in the area with coexistence. From a standard \-- from a
farmer\'s standpoint in our area, there is not at this time and the key
to that is communication.

GM crops, which the big issue is corn, require about 20 percent of
conventional corn along with our GM corn in the same field. Now, most
farmers honor that. Some don\'t. But, if you can communicate with your
neighbors and try to get that 20 percent next to your organic crop well
ahead usually there\'s no problem. I\'ve only ever had one load rejected
because of GM contamination.

But, with GM corn coming more predominant in our area there is the
increased threat of pollen and that can vary year to year. It can vary
variety to variety. I\'ve seen in our area pollen drift as much as a
mile and a half. I\'ve seen borders as much as 60 feet be adequate. So,
it can just depend from year to year. But, that can be a problem and
will be more of a problem in the future.

So, what are the different methods and tools for the different systems.
Now, paperwork is the main thing. Organic, my God, the paperwork never
ends. And this is my son\'s first experience with paperwork. And we
start with affidavits. Any time a piece of equipment goes from a
conventional to the organic side, there\'s an affidavit to back up every
particular operation, cleaning, whatever it is. This is one for
transportation equipment and the final one is an affidavit for the
combine equipment. So, we have to have documentation to support every
action we take to be able to prove that we did segregate these
adequately.

This is the start-up. It goes way beyond this all the way to the organic
annual inspection. So, will organic crash and burn in our area? I don\'t
know. From a farmer level we\'re able to coexist very well. Where
organic exists though in a sea of biotech corn and I can\'t answer that
question but I hope so.

This is actually a picture of our prairie. We do an annual burn and burn
half of it to control non-native species. But, if it isn\'t surviving in
our area it will somewhere. This is a photograph of Argentina. It\'s
McCain Company that grows potatoes down there. And they would love to
take on our organic operations if we\'re unable to in our area.

So, I\'m not concerned about consumers not having the ability to choose
what they want. It\'s just what do you want to grow and it will be grown
somewhere because the market will demand it. Any questions? Yes?

MR. PUEPPKE: Would you say a little bit about the manure and where you
get it and whether there\'s paperwork and issues of that sort?

MR. WILLIAMS: Manure\'s not required to be organic in our organic
operation. We import chicken litter from an inorganic layer and apply it
raw for nitrogen, primarily phosphorous for corn and wheat. We also
receive area varied manure and composting as a supplement to our fields
that aren\'t quite as productive as others.

As far as documentation goes, we\'re required to document the
application of manure just like fertilizer is. We have to have EPA
documentation for EPA, keep records of the environmental effects, wind,
water, in that area at that time. We also have to have it tested every
year, have it tested for composition.

DR. VANEENENNAAM: Yes. I was wondering if you could talk a little bit
about you said you had a load that was rejected due to contamination.
Could you explain the load that was rejected; was that a contractual
basis, was it a piece \-- what happened?

MR. WILLIAMS: That\'s the only time I\'ve ever had a load rejected and
that wasn\'t on our organic crop. That was actually on a conventional
floating (sic) crop we were growing under contract for Archer Daniel
Midlands. It was a contamination in the seed and it was seed from a
biotech company but that\'s probably immaterial. It\'s the only load
that I\'ve ever \-- we stored the different varieties of seed with a
different structure so we knew exactly where it could have been.

What we did was lost fifty cents per bushel; had to unload that on the
conventional market. So, it went with any other brand of ready bean.

DR. VANEENENNAAM: So, it was conventional soy, the seed was contaminated
that was trying to go to a GE free market that they did some test and
found there was a presence in there?

MR. WILLIAMS: That\'s correct. Contamination at the seed level which we
weren\'t aware of. We usually test the seed but it got by me.

DR. HUNT: You talked about communication being very important for the
success of conventional with all of your neighbors. Could you talk a
little bit to the kind of communication, the kind of information that
you\'re sharing?

MR. WILLIAMS: Well, we\'re very competitive in our area especially and
yet we\'re very respectful of each other. I\'ve heard that term already
this morning and that\'s a good term to use. And because of that we
often will help each other when we have problems and one of the problems
could be future contamination and it can work the other way.

My blue corn could cross-pollinate with a conventional variety going
into Archer Daniel Midland and that\'s considered damage. It\'s not raw
material. It\'s not off color. It\'s damaged. So it can work both ways.
But, communicating throughout the season, explain what you\'re doing,
communicating with service suppliers such as fertilizer applicators,
pesticide applicators, so they know what you\'re growing in the area;
aerial spraying or ground spraying, they can make sure they have a
buffer away from your crop and you have a buffer as well.

Is that clear enough?

DR. HUNT: Yeah. I just was trying to understand all the different
aspects on which you\'re communicating, what kind of information you\'re
sharing and does your neighboring farmers have a way your next farmer
and the next one beyond that?

MR. WILLIAMS: Usually fields \-- the average field is approximately 80
acres which is maybe a quarter mile by a half mile so usually a one
field buffer is adequate even for corn pollination so if you speak with
your adjoining neighbor, say if I\'m growing a blue corn, then I know my
neighbors has corn next to that, I should make that decision, do I want
to continue corn there or do I do a different crop and if he is growing
corn, ask if he\'d be willing to put his conventional buffer next to my
corn.

So, if there is cross-pollination I at least don\'t have that GM event
in my seed. Conventional, again, will be a problem. So, that\'s the type
of thing. It\'s using prior planning, prior to the winter, prior to any
input selections when you communicate with your neighbors surrounding
the organic fields.

MS. SULTON: Mardi?

DR. MELLON: Two questions. One is, where do you get your seed and do you
test your seed yourself? I mean, do you pay for tests in order to assure
yourself that it hasn\'t been contaminated?

MR. WILLIAMS: I attempt to raise my own seed because I feel best if I
can do that. It\'s the purest and it\'s using the most economical way.
But, you\'re able to buy seed from a conventional source if it\'s not
available for organic system. They prefer you buy organic seeds. So, I
do all three of those. I save my seed up, my organic seed up, my
conventional seed.

If I have a contract for a particular variety of organic production that
I can\'t find organic I may have to grow a conventional market. If I do
that I will usually put a rigorous scrutiny under that variety for
testing and my local elevator has the analyzer test you can test your
seed and I have done that, yes.

DR. MELLON: And do you test for approved events or do you test for
events that haven\'t yet been approved?

MR. WILLIAMS: I just test for that event in that particular crop and
it\'s usually on corn it may be a BT event, GM event.

DR. MELLON: Just one BT event?

MR. WILLIAMS: Two. It\'ll pick up both, the corn borer.

DR. MELLON: And then my more general question. You said pressure, pest
pressure on corn is increasing in your area. Why do you think that the
pest pressure\'s increasing?

MR. WILLIAMS: I\'m not certain. I think it\'s a migration of pests
primarily. One of the pests that we\'ve recently had is Japanese beetle.
And from year to year it can vary just like weed pressure can vary. It
was fairly high this year. Corn ringworm though and a BT event won\'t
help Japanese beetles. The BT event that we\'re concerned as for corn is
ringworm beetle and corn borer. I think corn borers actually is reduced
because of genetic modified corn in our area that\'s helped reduce that
pest in the recent future. Ringworm migrates and gets close to the area
and we have a corn variant now that lays its eggs in soybeans instead of
corn. And that just continues to get worse and I don\'t know why.

We\'re just hoping it doesn\'t vary into the wheat which would really be
a bad aspect of the organic system.

MS. SULTON: Russ?

MR. KREMER: Yeah. A couple of economic questions. When you were showing
us your net income on the different categories and today, you know, I\'m
wondering whether that included government programs. For instance, the
loan deficiency payments actually favors, you know, higher yielding type
of crop situations than organic for instance. Did those net income
figures include government payments?

MR. WILLIAMS: They do not.

MR. KREMER: They did not. Okay.

MR. WILLIAMS: And that would skewer slightly in years where it was a low
price to the equation system.

MR. KREMER: Okay. A little bit. Somewhat. The second question is, on the
comparison between conventional and GM soybeans, did that include a
premium for the non-GMO soybeans? In our country we get about 42 cents a
bushel more. Did that include that in that statistic?

MR. WILLIAMS: It did not. That\'s 50 cents in our area but that\'s still
an offering it up to the advantage to GM soybeans. You need to at least
75 cents in our area to break even.

MR. KREMER: Okay.

MS. SULTON: Nick.

MR. KALAITZANDONAKES: In the same vein, you talked about, a good bit
about the management demands for that organic products have, the
paperwork and so on. When you presented the figures for gross revenue,
net revenue, did you price your management?

MR. WILLIAMS: Did not. It wasn\'t significant.

MR. KALAITZANDONAKES: Can you give me a sense of how much more do you
think management costs might be between the two systems?

MR. WILLIAMS: No, I really can\'t. The paperwork portion primarily falls
on my shoulders. I\'m a retired accountant so I love numbers so to me
it\'s not, but, it can be to some so much that they regret even doing
it. But, I can tell you they\'re substantial. I can tell you it\'s
probably more than 100 percent than our commission as far as paperwork
management and planning as well.

I don\'t own a lot of ground. But, what we do own is organic. And I
offer to all the landowners who I rent from, cash rent, a financial
incentive if they want to grow organic. Two have taken me up out of
eight landowners. But, still, it\'s not enough to offset these pristine
weed-free fields in the area and that\'s a decision that they make and I
respect that decision. That\'s fine with me whichever way they wish to
go.

But, I found in my area the return per acre\'s been about \$50 per acre
more on the organic system and that far exceeds any management and
paperwork that I have to include.

MS. SULTON: Michael Dykes.

DR. DYKES: Just two or three questions. I don\'t \-- I can\'t see the
size from where I am, but, what\'s the \-- I can\'t see much difference.
What\'s the size \-- how many acres are you farming? Maybe you had it
but I didn\'t see it.

MR. WILLIAMS: No. I have 1,700 acres, 400 of it is certified organic.

DR. DYKES: Another question. You had mentioned the communications with
Josephine about talking to the farmers and putting the 20 percent
buffer. I\'m assuming you\'re talking about the refuge for BT crops?

MR. WILLIAMS: That\'s correct.

DR. DYKES: Just to be clear to everybody in the room. That is the EPA
refuge requirement. One last aspect of that. As you listened to the
discussion we had this morning, as you\'re out there \-- I enjoyed your
presentation. As you\'re out there in your thinking about this from the
farmer perspective who\'s grown conventional, who\'s growing organic and
who has grown the biotech crops, what do you see and what advice would
you give to the Department as you look ahead to the next five years on
this issue of coexistence?

What are the things that you would encourage this committee to think
about as we deliberate over the next twelve months and, fortunately or
unfortunately, you won\'t be here to visit the big city and to think of
that every time but that may be a good thing, but, anyway, what words
would you have for us as a committee from your perspective of the things
that need to be thought about and this whole charge of advising the
Department and the Secretary of coexistence?

MR. WILLIAMS: Geographical locations can alter. I guess the comment on
that that in our area peaceful coexistence already exists among
operators. I don\'t think from a farmer that it really is an issue at
this point. Where I see it as an issue is in lawmakers and policymakers.
What they\'re going to decide is acceptable, what\'s not, and how
they\'re going to allow this peaceful coexistence if that\'s the term
you wish to use to help.

One of my biggest fears though is the seed supply. I can see the
contamination of seed supply coming quickly and organic producers having
a very small supply of seeds to choose from and that\'s probably my main
concern. And I don\'t think you need to lower seed standards on all
seed, just on conventional seed, organic seed. If 90 percent of the seed
grown in our area is GM seed, then 5 percent is enough, that\'s fine. I
don\'t see why you can\'t have two. I have a very simple approach of
balancing why you can\'t have two standards for the different types of
seeds.

MS. SULTON: Leon.

MR. CORZINE: Alan, well, as you know, I\'m just on the other side of
that ADM plant just a few miles. And we have, as I\'ve mentioned to the
group, I have a friend that also grows organic foods as well. Could you
expand a little bit for the group for you on your 1,700 acres, the 400
that is organic, what you do, the temporal differences I assume, we
haven\'t visited much, but, in the corn issue, different planting dates
and your system, I mean, you touched on with showing your field
calibrator that you worked the ground and you do that and you had said
for weed control and that\'s what my neighbor does and so you get into
when your conventional corn is plow needing your organic corn is knee
high or whatever and so you don\'t have the pollen flow issue I\'m
assuming.

Could you expand on that one a little bit and then also back to the
contract. When you contract, your contracts, are they what specifies
what percentage of an adventitious presence or that is allowed or like
percent of GM that is within tolerance for those contracts, those kind
of things? Could you talk on that briefly?

MR. WILLIAMS: Sure. That is one of the tools you can use. There\'s
different planting dates on corn because of the pollen drift issue.
Where I saw pollen, example, I experienced pollen drift that went a mile
and a half. That is where the corn was planted early in the year the
same time and they flowered about the same time and I was aware of the
situation, but, it did happen.

We use, yes, different planting dates is one tool you can use and in
general, conventional planted crops would be much earlier than organic
planted crops for the simple reason that you\'re trying to control the
weeds mechanically so you\'re going more than one time and till that
soil and try to eliminate flushes of the weeds prior to planting to help
you in that weed control.

A secondary, maybe primary reason to do that would be the pollen drift
issue and that would help a lot with that. Speaking about the weed
control, on the organic, what we would do is make three trips with a
rotary hoe. That\'s a mechanical method with three trips with a combine
in them so it weeds soybeans handily. So, the economics favor
conventional agricultural. Herbicides are a lot cheaper than hand labor
cultivation.

But, the revenue difference pays for that and I\'m sorry, what was the
\--

MR. CORZINE: On the contracting because it\'s an issue of something gets
rejected it has to do with percentage of tolerance, those kind of
issues.

MR. WILLIAMS: If it\'s not in the contract it should be because that\'s
an important issue and, yes, it has been in the contracts and that
depends on where that product goes. If it\'s going to Japan or Europe or
what the consumer wishes because often that contracts to fill a specific
need or demand and Lynn Clarkson will be able to shore that up.

MR. CORZINE: Just a follow-up. Do you use global positioning on your
harvester to help keep track of your fields, what comes and goes into
your different grain storage?

MR. WILLIAMS: We use global positioning. That\'s a funny thing. I said
organics going back to the past, but, we use the highest tech methods
available on our organic, actually more than conventional. We\'ve used
global positioning probably for six or seven years now. Use it on
everything to track us, to guide us, guidance systems on our cultivators
and sprayers so, yes, we use any tool available if it\'s economic to use
that tool for the organic and the conventional and even more so for the
organic because there\'s so many trips across the field.

MS. SULTON: We want to get to our next speaker. We have three more sets
of questions from Alison, Steven, and Michael. Okay.

DR. VANEENENNAAM: I\'m just curious with your hand labor that you need
to use on your soybeans. Is that a difficult pool of labor to get when
you can\'t get the university to do it for you?

MR. WILLIAMS: That was difficult. No, I\'ve been quite fortunate. When I
started out \-- when I was a child that\'s all I did all summer long was
weed soybeans and it started my farming career actually. There was some
point when the old folks discontinued doing that. And it really didn\'t
matter what the wage scale was. They just discontinued doing that work.
At that time I had to use migrant labor. Probably used migrant labor for
three or four years, maybe five even, and then we started getting a
large Hispanic community or population in our local community later on
so that currently and for quite a few years now has brought the use in.
I\'m quite lucky to have found adequate labor and good, hardworking,
honest people and I\'ve paid them well.

But, no, it hasn\'t. It\'s an issue. It hasn\'t been an issue for me but
I know for other organic growers it\'s been a big issue to find labor
because they haven\'t had that source of labor there then.

MS. SULTON: Steven.

MR. PUEPPKE: You mentioned the issue of landlords, some of whom
presumably are absentee. Their children or grandchildren are farmers
living far away who retain land ownership. To what extent are their
decisions driven purely based on how much money they can get this year
versus any other issues relative to their interactions with you?

MR. WILLIAMS: Unfortunately, it will well become, in my opinion, a
short-side as far as economics go, but, very little. You know, the two
landowners that have asked me to put their land into production, one was
a very wealthy doctor from Salt Lake City and he just thought it was the
right thing to do. He liked being able to speak with his colleagues and
tell them that\'s the production system he had and he\'s quite proud of
it.

The other is even more interesting. That\'s a group of three heirs, one
of which are farmers we know about, and they are conventional biotech
farmers, but, likewise, they love to be able to claim they have this
organic farm in Central Illinois. And they\'ve been quite \-- and
that\'s an organic farm by the way. And they\'ve been quite pleased with
the results. And the soil analysis, we do soil analysis every two to
three years, and the organic just comes back better every time, very
homogenous and very slow organic matter growth, but, organic matter\'s
hard to change. So, they\'re very pleased, both of them very pleased.

MS. SULTON: The last question from Michael.

DR. DYKES: Yeah. I just wanted to follow up on the question Leon was
asking. On some of your contracts, can you share with us what some of
the specifications are on some of your organic contracts as it relates
to percentage allowable for biotech, for example, or pesticide residues?
Can you share with us some of the tolerances and allowances and
specifics with different organic crops?

MR. WILLIAMS: That again depends on where that product is growing in the
world and whether it\'s 9/10th of 1 percent in Europe or 5 percent in
Japan. It\'ll depend on the end user. And I don\'t know the specifics of
every contract, but, there are those and Leon might be able to remember
some of his contract, but, usually, the main point is quality, purity,
and the person contracting wants great access to be able to see the
fields and its own call. They want to be able to call that crop in
whenever they want it.

So, what an organic producer has to have is on site storage to be able
not only to store and maintain the quality of that product.

MS. SULTON: Thank you very much.

(Applause)

MS. SULTON: Michael, would you like to introduce our next speaker?

DR. SCHECHTMAN: Thanks very much, Allen. It was a very interesting
presentation. Our next presentation will be given by Don Cameron who is
a diversified farmer growing a number of different crops around Helm,
California. The title of his presentation is perspectives of an organic
conventional and biotech farmer. Welcome, Don, and thank you for coming.

MR. CAMERON: Thank you. Give me a minute. I\'d kind of like to look
through the slides myself. Well, I\'ll introduce myself. My name is Don
Cameron and I farm in Central California. My topic is, is coexistence
really possible? We\'re located in Fresno County which is in the central
part of the state. We farm about 5,500 acres. Of that, 550 acres are in
organic production. We have biotech crops that average usually around
900 acres. Conventional acreage is 4,050.

I\'ve been farming since 1981 and have a background in farming. We\'ve
been organic farmers since 1993. We got started initially with some
ground that was near a chicken raising facility and we were afraid to
use pesticides near the field and didn\'t want to risk any damage to the
poultry operation. And I\'ve been in biotech farming since 1998. We
started with Roundup Ready cotton.

The crops we grow, we\'ve got alfalfa, cotton, and corn that we grow
organically and biotech. We also have canning tomatoes we grow
conventionally and organically; carrots, onions for processing
conventionally. We grow lettuce seed and we basil seed organically,
lettuce seed conventionally and organically, paprika, chilies, prunes,
wine grapes, walnuts organically, almonds, pistachios conventionally,
and various seed crops.

We\'ve grown organic cinch seed (sic) which is a very prevalent. We
actually grew conventional guayule seed one year. We have a little bit
of artichoke for seed. We have coneflower for seed. We have prairie
aster seed and it goes on and on. We have a lot of different things.

Let\'s start talking about coexistence. Okay. What does it really mean
to me? It\'s been interesting. Everybody, I guess has their own version
of what coexistence means to everyone here. To me, I mean, it\'s pretty
straightforward. It\'s the ability to grow similar organic,
conventional, and biotech crops on the same farm area without affecting
one another. I mean, that\'s our goal. We\'ve been doing it quite a
while and we feel that we\'re successful doing it.

We did it before the term coexistence really came into use. And I tried
to show some pictures of what we do. If anyone has any questions about
any of what you see up here, go ahead and ask while we go through it
because it\'s probably a little different than corn and soybeans.

I feel that the coexistence is very crop-dependent. Every crop that we
grow is different with a pollination. We have cotton. And I\'m going to
concentrate on the ones that we do biotech and organically. The cotton
is self-pollinated. There can be insect pollination but cotton is
self-pollinating. The alfalfa is self-pollinating and insect pollinated.
Corn is wind pollinated.

The bottom line is as a farmer we need to know the life cycle of each
crop that we grow. We need the plowing period, the pruning period, and
how far pollen could travel because we do a lot of seed crops and it has
nothing to do with organic, biotech, or anything else. It has to do with
variety separation. We have organic basil seeds that we put about a half
mile apart because they\'re different varieties, they\'re different
coloration, different traits, and so each crop that we grow has
differences and we really need to be aware of them.

With cotton, it\'s self-pollinating. We separate. We have physical
separation, usually 30 feet or more, and when it comes down to it it\'s
the buyer that we sell to is interested in the organic process more so
if it\'s 100 percent biotech free. This is pima. We grow organic pima
cotton. We were the only organic cotton grower in California and I
understand that there\'s another one that has come into the market this
year.

Just a little note about, you know, our harvest. All of our equipment
prior to going into an organic field for the feeders, as was discussed
earlier, has to be cleaned. The pollinating equipment really hasn\'t
been an issue, but, the harvest equipment, we usually will either start
there or we\'ll clean our harvester the same as was talked about
earlier. The harvester does need to be clean and the locations need to
be separate for the storage of the cotton and the ginning seed
separation. We monitor it from the time we plant until the time it gets
delivered to our buyer.

Our buyers, conventionally, we sell to the local brokers for either
spinning within the U.S. or any more of the majority of the cotton crop
in the United States is exported. California has always been a leader in
exported cotton because of our high quality throughout the world.

The organic we sell direct to the mills. We\'ve been dealing with one
mill in Switzerland and we\'ve got a lot of inquiries from Southeast
Asia, Japan, India, and Pakistan which is where the majority of the
world\'s spinning is done.

The biotech facility is the same as conventional. We receive no price
differences or special designation by the buyers when we sell the cotton
other than the organic. They look \-- and even the organic, it\'s
quality-based. We\'re required to have the same quality. We have the
same projections in organic as we do for conventional cotton which is
really a difficult issue because we can\'t defoliate our cotton. Up
until this point, we have to wait for a freeze to pick the cotton with
the leaves to create green spinning which the mills don\'t want so
California\'s in the process of get two to three grains on your crop and
then you might get a freeze that will threaten and it\'s usually
sometime in late November.

Our alfalfa that we grow, alfalfa is self or insect pollinated. We
usually separate our fields by at least 30 feet which is usually our row
width. We have to be able to designate our organic fields with some type
of preparation between them and any conventional fields that we have.
The alfalfa that we grow is kept in storage in the hay and it\'s usually
kept prior to blooming so there\'s really little chance of change in
growth in the conventional, the organic, or the biotech alfalfa.

The equipment must be purged prior to harvest. Prior to planting our
planter must be cleaned. We have to document. We talked about
recordkeeping. Organic, I think organic farming is a matter of
recordkeeping. We tend to spend a tremendous amount of time with
recordkeeping and inspection. Our alfalfa buyers for the conventional,
we have the local dairy, we have feed lots, and occasionally we have the
horse industry who wants to buy.

For the organic, our buyers include the local organic dairies and beef
producers. Also, occasionally we have goat milk producers and even a
little bit into the horse market, but, that\'s pretty rare. Overall, it
either goes to the dairies or the wheat producers.

The biotech area, feed lot, horses. We actually have people requesting
us because it is weed-free. There\'s no noxious seed. It\'s just a
cleaner product, better nutrition because of that. We\'ve got \-- on the
organic, our first cutting of organic alfalfa hay is still along \--
matter of fact, it\'s the darker of the stacks that\'s right there. We
went and we tried to shred the wheat we planted during last fall. During
the spring we have a tremendous number of weeds, a lot of weed pressure.
We came in, we just mowed the fields, just try to get rid of the weeds.
We still had a lot of weeds come through and we can\'t find a buyer.

I even gave away 50 bales just to see if somebody could use it but the
weed pressure can be so bad that you can\'t market its crop. I don\'t
know what we\'ll do with it. Probably mulch it somewhere. That\'s the
issue with alfalfa.

We move on to corn. Pollinated from the wind or actually or if we don\'t
get a lot of wind in California sometimes it just falls free. For
separation distance, usually an eighth of a mile or more. But, we also
separate by planting date, two to three weeks apart. You can see on the
picture on the left there, we had two different planting dates for corn
and really what this field was, the corn on the right had originally
early in the season been planted to conventional sweet corn, consumption
sweet corn.

The field on the left, the portion of the field on the left was planted
at a later date to Roundup Ready corn. The field that you see now
growing on the right on the side of the slide there got planted to
Roundup Ready corn. So we actually had two crops of corn on the piece on
the right and then the left, that biotech corn right along side the
conventional sweet corn, but, due to the different pollination periods
we had no contamination at all.

For buyers who are interested in the process, the growing organic crops,
with the corn, let\'s see we grow \-- this slide on the right is the
organic sweet corn. We\'re trying to develop a market for that right
now. We put in a total of 80 acres and the same thing, we plant four
acres every 7-10 days so that we\'ll have a continuous supply of sweet
corn from July all the way through late October. It\'s just another
market we\'re trying to develop right now.

It\'s a very challenging market. As you can see with the planes, we\'ve
sprayed. I think we\'ve sprayed the organic sweet corn more than any
crop we\'ve grown. It\'s the one issue we had with it. About the corn
for buyers for the \--

DR. VANEENENNAAM: Don?

MR. CAMERON: Yes?

DR. VANEENENNAAM: You might just want to clarify what you were spraying
with.

MR. CAMERON: Oh. We were spraying with BT. We were also spraying with
the pyrethrum that\'s made from chrysanthemum. And we still have had
serious problems with the corn earworm. Part of the goal of the organic
sweet corn is that, you know, you can cut the end off the ear and put it
in a plastic package and hopefully eliminate most of that, but, our
pressure has been extremely high this last summer and we\'ve left a lot
of it. A lot of it goes to cattle feed. I don\'t know what they do with
it but it couldn\'t be packaged because we\'ve had more damage in the
middle of the ear on the end and that\'s spraying on a three to a five
day schedule.

And I guarantee when you have pieces that are four and five acres the
crop duster does not want to come spray that without charging you for
about 40 acres so economics kind of play in this and we\'ll see if it\'s
profitable or not at the end of the year. We have other issues with it
too but it\'s been a real challenge.

The buyer for the conventional and we\'ve had human consumption grain to
go for the tortillas. We have feed grain that goes to the feed lots. And
we have the local dairy with silage. For the organic, we have the
grocery stores and the produce stores that are interested. And there
have been definitely demand there. We have a lot of business there but
it\'s a real challenge to be able to produce it.

And human consumption grain. And in the biotech we have been selling the
silage to the local dairy and there\'s also the possibility of feed
grain as well. Corn, you probably know corn much better than I do, but,
our contracts have been more stringent for the conventional human
consumption corn than for organic consumption corn. It\'s kind of odd. I
kind of felt like a little bit of the conventional corn we have greater
distance restrictions than the organic. And that may have changed since
I last looked at one of these contracts.

MR. SLOCUM: Don, is that because biotech is a bigger issue?

MR. CAMERON: For conventional?

MR. SLOCUM: Yeah.

MR. CAMERON: I think, you know, I\'m not sure if it was just different
companies have different requirements but I think maybe they were a
little more aware of the method that comes out but I think they\'ve been
probably in the corn business either longer or have a better feel for it
or didn\'t want to take, I guess, any type of risk associated with it
and it may have been due to the market.

MR. SLOCUM: So the product was more important than the process?

MR. CAMERON: Right. Coexistence is not just about organic and biotech
crops. I\'ll give you a real quick example and it\'s not even touched
upon really. You have corn A implanted with trait X; conventional corn B
planted with a trait W; both are planted within 25 feet of each other.
Both have similar maturity, pollinating period. Both are planted within
a week of each other. At maturity corn A has a slight pollen drift into
corn B. We\'ve talked about this exact thing was mentioned earlier, but,
corn B buyer rejects the first load of corn sent from the border in
field B due to the presence of trait X in corn B.

Is it possible, do you know the answer? Definitely, yes. This was just
kind of showing what can happen. This is an intentional white and yellow
corn to get a bi-colored corn. You have your silk and each strand on the
ear of corn is doing very well but as each strand goes down to a kernel
and you have to have a pollen grain to grow a pollen tube from the end
of the silk down to the kernel to get pollination and if you had two
different colored corns you end up with white and yellow corn in the
seed.

Go back to the example. What are the traits in corn A that was found in
conventional corn B? Those organic blue corn. And what was the
conventional corn B? White consumption corn. So, you know, it can
happen. Pollen flow really isn\'t just in biotech crops. This is
something, you know, pollen flow is a factor that any modern farmer is
aware of that we\'re dealing with whether it\'s an organic crop or a
biotech crop and we\'ve been dealing with it for a long time and we\'ve
been doing it well.

It\'s just one of the things that we expect in what we do every day. For
challenges, the farmer needs to know the biology of the crop that
they\'re growing, which I think they do. I think that there wouldn\'t be
farming if they didn\'t. And the crop cross-pollinates. You need to know
what the life cycle is.

You need to know how and when pollen is shed or is available. You need
to cooperate with neighboring farms. You need to talk to them. We send
out letters every year to all of our neighbors. We talk about organic
production, where we\'re going to have it, and what crops we\'re going
to be growing.

And really with our certifier requirement we do this, but, we do it
anyway, and I mean I look around at our neighbors and see what crops
they\'re growing near us, I think it\'s just common practice that
growers do on a day-to-day basis.

One of the real challenges I see, and we talked about this earlier, is
seed production. You know, should be following the strict regulations
for seed production. There\'s established buffer zones, boundaries,
distances that are laid out, but, I feel that seed production is the
most important source of meaningful contamination and I think that was
brought out already by the previous speaker.

Most seeds are hybrids that are not kept by the farmer for replanting,
with or without biotech traits. For crops in California, we have to
plant certified seed. We can\'t save our own seed. Except for the corn,
you\'re looking at hybrids that you\'re not going to be able to save. If
you save them they won\'t be any good.

There\'s a few seeds that we would actually consider saving and it could
be a problem, but, we either plant seeds that are supplied by a grower
we\'ve contracted with or a non-organic seed because organic seeds are
difficult to obtain. We use conventional seed on biotech or the organic
but untreated, no pesticides, no insecticides.

Our challenge is still pollen risk. Plantings must be made with two
goals in mind. We have to have physical separation which means we need
to research and determine what\'s acceptable separation for each crop.
Our planting dates must be modified. We have to determine the effect of
pollination period and plant according.

You can see, these are several different organic seed crops that we grow
on the slides there. And some of them, like the lettuces we grow from
lettuce seed, and we\'ll have four rows of one variety and two feet away
we\'ll have a very similar variety with another maybe ten rows followed
by we have eight to ten different varieties of lettuce within 10-12
acres in one of our fields.

So, it really depends on the crop you\'re growing and what you\'re
trying to accomplish because many of these really don\'t have any
cross-pollination. You don\'t think about it. It\'s not even considered
with the variety that we have.

In summary, I think precautions need to be made for any crop. Seed crops
are definitely more critical. I think you have to have a coexistence
mind set that really, you know, you have to understand, you know, accept
that we can succeed in doing it. We talked about the management that\'s
involved. It\'s extremely much more difficult to grow some of the
organic crops than the conventional or biotech crops.

We touched on it earlier, but, it just boggles the mind sometimes the
labor that we put in. We spend over a thousand dollars an acre hand
weeding basil crops, cilantro crops, and cotton we spend over \$400 an
acre. Our reliance upon\-- really it\'s migrant labor or right now with
the immigration policy it\'s turned into a big issue in California.
There were times when I couldn\'t get enough people to hand weed some of
the crops we were growing. That was earlier this year.

There was just too much competition for the crops. They\'d rather go
pick cantaloupe, tomatoes, fresh market tomatoes, anything else than be
bent over all day on their hands and knees pulling weeds out of organic
cilantro or basil.

Anyway, we need to get back on track here, but, we need to be prepared
to have a transparent farming operation. We bring different groups onto
our farm, show them what we\'re doing. We do a stable cotton project,
Patagonia. We just had a group from Korea coming in this coming Saturday
that wants to talk about organic cotton production.

We\'re open, we\'re not hiding anything. I believe, you know, if you can
be an organic grower your integrity is on the line and more so I think
your reputation for what you do. I mean, if you want to farm organically
cheap it can be done very easily. But, that\'s not our goal.

When we negotiate contracts we need to know what the buyer expects
before we plant. I wouldn\'t sign a contract that said that the crop
would be a hundred percent GM free. I wouldn\'t go down that road. I\'d
make sure that there was room for adventitious presence in the crop and
I\'d discuss that before we even put seeds in the ground because it\'s
as important as knowing what price you\'re going to receive for your
crop.

Farms can segregate and market organic, biotech, and conventional crops.
We\'ve done it, we\'ve been doing it for since 1998 when we\'ve been
doing the separation between organic and conventional since 1993 so I
think it\'s rather than fighting over which system is better, we feel
that there\'s a choice, that the growers should have a choice and the
consumer should have a choice and that it can be done and it could be
done successfully.

Like I said, we\'re proof that it can be done. So, coexistence is
possible. Like I say, we\'ve been doing it before we even realized what
we were doing. Thank you for your time.

(Applause)

MS. SULTON: Jerry. Jerry, you could start the questions.

MR. SLOCUM: That was pretty fascinating because you, like Allen, farm in
one of the most intensely competitive areas in the United States, the
highest price farmland, some of the most intense competition, some of
the best producers and best marketers.

In your operation you\'re roughly 10 percent organic. Can you stretch
that number bigger if you wanted to? Could you become 50 percent organic
if you chose to?

MR. CAMERON: We could come \-- we could go a hundred percent organic.
The problem is the risk. The yield difference from year to year can be
tremendous. The economic risk. Not only that, the labor that would be
involved to develop the larger percentage organic. We\'d have a real
problem. We have \-- we\'ve had crews, 50 to 100 people out in an
organic field before.

I mean we use other measures besides just hand labor. We\'ll
pre-irrigate, we\'ll germinate weeds. We have to irrigate. You know, it
never rains in California. We have to get the weeds germinated. We tend
to use more water on an organic crop. We\'ll go through and disk or
cultivate several times more prior to planting. We may use a propane
flamer that will actually burn the weeds prior to the emergence of a
crop we\'re growing but sometimes the timing isn\'t right and it
doesn\'t work and the weeds can take over a field within a real short
period of time.

We\'ve had to abandon crops because of weeds ahead of us. It wasn\'t
economical to go in and try and clean them up. You know, when we get 100
degree weather and moisture and we can\'t get into a field because we
just irrigated it you couldn\'t take off the grain.

MR. SLOCUM: So, practically speaking, with all those considerations,
risk, and extraordinary extra management and labor constraints,
practically speaking, on this 5,500 acres, 10 percent about all the
organic you\'re interested in doing?

MR. CAMERON: Probably so. We may look at a slight expansion but, to be
honest with you, in the last six months we\'ve seen a lot of interest in
organic again. When we began in organic there were a lot of buyers that
weren\'t reputable and that\'s since changed and now we have legitimate
companies that we deal with.

We started growing organic tomatoes years ago. That\'s pretty much
what\'s involved in the organic, just tomatoes, and then we expanded
that to grains and then we eliminated grains because there was no money
it them in growing some of them, but, we\'ve gone to the higher dollar
crops and the ones that fit the organic program a little bit.

I feel we can probably grow anything organic, but, we may not get the
yield and it may cause a fortune to do it where it\'s not practical,
but, we grew organic sugar beets one year. We\'ve done organic garlic,
organic onions, organic peppers. We\'ve tried a lot of different things
over the years, but, you\'ve got to find a way to keep the weeds. Our
biggest problem is the weeds and the labor to get rid of them, the
economics because it starts becoming a thousand dollars per acre on crop
there\'s no profit involved with the workers.

I mean, we keep the employment rate down in the county but that\'s about
it.

MR. SLOCUM: Thank you.

MS. SULTON: Sarah.

MS. GEISERT: Don, thank you. I\'m wondering if you looked back over the
last 13 years you had to deal with the difference between conventional
and organic and then biotech entered in, what have your insights and
learnings been on sort of some of the key issues that you\'ve
encountered and how you kind of tackled those? Some of them, it sounds
like, it\'s contracts, some of it\'s market driven.

MR. CAMERON: The contracting and marketing, marketing and I\'m trying to
\-- I mean, once you designate \-- it takes three years to change a
piece of ground from conventional to organic and once you\'re there you
have to have something to grow on it and we went through certain years
we looked long and hard for something to put in there that either had a
market for it or was profitable.

And I think that\'s been the hardest part. I think farming, we\'ve
transferred some of the systems that were organic onto the conventional
and vice versa, from the conventional to the organic.

MS. GEISERT: Have you seen a debate change in the last few years; have
there been new obstacles or hurdles you\'ve had to overcome or are these
just what you\'ve been kind of honing your skills? You know, if you hear
the debates more public?

MR. CAMERON: Yes, it\'s definitely more public than it used to be, you
know, especially with the identity of biotech crops. Maybe before, it
was pesticide driven and everybody seems to have forgotten about that
and, to be honest with you, pesticide drift is a much bigger problem
than the biotech crop being planted next to it.

We\'ve got neighbors and aircraft companies that come in and fly over a
neighbor\'s field with really no regard to whether they\'re organic,
biotech, or conventional. It happens on a fairly regular basis and
sometimes we have to call, this is mainly on conventional crops, but, we
have to call and find out what was sprayed to make sure that it\'s
labeled on the crop that we\'re growing so that there\'s no problem with
it.

I think that, you know, we\'re getting into a debate over biotech versus
organic and it\'s something we need to consider, but, I mean, we deal
with these issues and been dealing with issues of pollination for years.
It\'s not a new challenge for us. So, I think that the pesticide issue
is \-- I mean, we switched to much safer, softer pesticides, you know,
over the last ten years that eliminated really a lot of the problems,
but, that\'s an issue on a day-to-day basis; that and getting along with
your neighbor, whether he wants to let you drive down the road and
remove your crop.

I mean, it\'s, you know, some of the daily issues we face. It\'s not so
much the biotech versus the organic.

MS. GEISERT: Thank you.

MS. SULTON: Duane.

MR. GRANT: Don, great presentation, I enjoyed it very much. You\'ve got
a lot inner fortitude to take on all of those issues so my hat\'s off to
you. I have two questions. One\'s technical and one\'s kind of
philosophical. First one is, why is organic seed hard to find? You made
that statement, Allen also made it. I\'m just \-- I don\'t understand
why organic seed would be so difficult to find.

MR. CAMERON: Well, like, let\'s say for the cotton that we grow,
California grows the majority of, probably 90 percent of the pima cotton
and that only amounts to 278,000 acres this year. I grow \-- I planted
80 acres of organic pima, ended up with 60 acres of seedling disease
issues. It\'s a small market. It just doesn\'t justify the time and the
separation that\'s required from the field to run it through the
delinting because it has to be kept separate. It has to be delivered
separately. You have to clean the facilities and separately identify
them and who are they going to sell it to, they\'ll sell it back to me.

Or, we have one other fellow that\'s growing I think 40 acres this year.
So, it\'s a real small market. I mean, not that we don\'t do \-- I
guarantee you, we do several many seed productions on small, small
scale, but, it\'s usually going into packet seeds. The sage seed we grew
up organically, I saw what was left when we got done, and the seed
company said they were happy with it so I imagine they\'re probably
putting 10 seeds in a little packet and charging three or four dollars
for it.

Economically, I mean, I couldn\'t afford to do it.

MR. GRANT: Interesting. So, the industry just isn\'t there to supply the
organic seed yet. I mean, it sounds like you guys are doing organic seed
and you\'re probably then a big part of \--

MR. CAMERON: I think we supply a lot of the organic lettuce market in
the U.S.

MR. GRANT: All right.

MR. CAMERON: We\'re doing other \-- you know \-- 40-50 acres of lettuce
seed is a lot of lettuce, organic lettuce seed.

MR. GRANT: Okay. So, philosophical question then. You talked a lot about
pollen drift and things that you\'re doing to manage that on your
operation as well as maintain the integrity of purity of the crops you
produce for your different markets. There\'s been discussion about
potential role for the Risk Management Agency, just as an example, to
offer some kind of insurance product that would relieve the producer of
some of the burden of ensuring \-- the financial burden of ensuring the
purity of his product.

What are your thoughts on that, having been in the industry and dealt
with it?

MR. CAMERON: I think I feel confident that we grow and not have
contamination to begin with. I probably wouldn\'t buy it if it was
available. I don\'t foresee it as being in our area and every area is
different. But, in our area I don\'t think \-- I can\'t see purchasing
it. I feel we do a good job of separation and separation of planting
dates that precludes any need for it.

MR. GRANT: Could I push a little harder on that?

MR. CAMERON: Sure.

MR. GRANT: Do you think it\'s an appropriate role for RMA to offer
product like that to the organic industry?

MR. CAMERON: Well, I think that if you \-- I\'d rather see the money
spent on insuring maybe just insuring the crop itself from the loss. I
think we have a lot bigger risk in growing organic crops rather than we
spend it, again, the preservation is a lot of money for the crop.

I imagine if there was a need I would think a private company would be
involved, but, we\'ve never \-- we\'re one of the larger organic growers
in the area and we haven\'t heard of anything. We\'ve never asked for
it. But, I do know that, you know, a private insurer for organic cotton,
for quality, I mean, nobody\'s interested. We hope to change that thanks
to USDA which has been working on a thermal defoliation unit for cotton
which we hope to have by October 15th.

We\'ve been working with them for several years and we had a thermal
defoliation unit for cotton. It essentially forces hot air down on the
leaves causing them to wilt so we can pick within two to three days. It
burns a lot of propane. It\'s an alternative to having to wait until you
get a freeze. For us in California that\'s a big issue. In Texas where
there\'s a lot of organic cotton grown in Texas they get freezes much
more regularly than we do.

But, we tend to get rain. If you get the rain you get the quality. You
get that coloration in your cotton and you tend to get paid less because
of that. We\'ve had a sympathetic buyer here recently who tended to
overlook that because his demand\'s been good. It\'s an issue. You know,
you write the contracts and then you talk at the end of the year.

MS. SULTON: Mardi, Michael, and then Alison.

DR. MELLON: That was a very nice presentation. I guess I have three
questions. One is, how much help do you get from the USDA with dealing
with the problems that \-- the agronomic problems that you\'re facing on
the organic side of your operation? Do you feel that USDA can help, has
enough research going on on organic operations to, you know, have
something to offer?

MR. CAMERON: Well, when you put in \-- you know \-- I like to talk about
the cotton because we do the organic cotton and it\'s something that is
nationwide, more so than the sweet corn that we grow or the alfalfa.
When you look at the number of acres there\'s 13-14 million acres of
cotton in the U.S. and of that, 10,000 is organic. You know, USDA we\'ve
been working with in thermal defoliation unit. I think that\'ll be a big
boon to us. We work with our local university extension staff probably
more so than USDA.

We get guidelines from USDA on certain issues that \-- probably on a
day-to-day more with the University of California. I don\'t how you got
the university to go out in the field with a hoe. So, you know, I guess
proportionately, you probably have more help there to be honest from the
USDA than we do in our conventional cotton crop because it is specific
to organic and it\'s something that we really have a need for.

But, on a day-to-day basis it\'s usually any of the work is done through
the University of California researchers who advise us and really their
entomologists. It\'s more on a local level than a national level and I
would really expect that because I think the university, your local
university is going to be more in tune with what the problems were in
your individual regions.

DR. MELLON: The second question is how much do you know about your seed?
I mean, do you really \-- does anybody tell you what levels of different
biotech events are found in the seed that you purchase?

MR. CAMERON: Well, the seeds that we actually grow to reproduce for seed
are supplied by the seed company.

DR. MELLON: But, do they know? My question is \--

MR. CAMERON: The majority of them is our \-- the majority of those are
the \-- they\'re a transgenic event in, you know, tomatoes, lettuce, the
majority of what we grow. But, no, we don\'t ask for a percentage of any
biotech event. Let\'s say in our cottonseed, we\'re not required to know
if there is one percent, two percent, three percent. Our buyer is really
\-- he\'s in on the process in which it\'s grown. He really \-- it\'s
not number one important to him that we have \-- even if we do have \--
let\'s say we have pollen here into the cotton, the lint itself isn\'t
going to be carrying the trait. The seed will and the seed gets \-- to
be honest with you, the seed gets sent to the dairy cattle for its feed.
But, the lint itself would not have any presence of the Roundup Ready
gene if that\'s what was the event.

So, it\'s a non-issue for me.

DR. MELLON: Certify it.

MR. CAMERON: You know, the one thing we did run into was we were IFOAM
to certify it, internationally certify it because we were originally \--
some of the lettuce seeds were going to Northern Europe. We have a nice
letter from our certifier saying that we will no longer certify IFOAM
because we were a mixed operation. Europe does not allow us to
re-certify under IFOAM if we have biotech and organic. So, we no longer
certify IFOAM, but, that really hadn\'t mattered for international
cotton market.

DR. MELLON: Did you have a single buyer?

MR. CAMERON: There were other buyers, but, I mean, we had no problem
selling the cotton. It\'s just we\'re trying to make it profitable and
try to get our buyers to increase the price. That\'s been the biggest
problem. Organic is turning into more of a commodity product, more so.
We\'re seeing that with more \-- relatively more \-- even WalMart\'s
getting involved.

You know, WalMart now says they\'re the largest cotton buyer, organic
cotton buyer in the world and I\'m sure they are. They\'re buying from
Turkey. That puts pressure on the other buyers if they want to continue
to buy organic cotton to pay and out-compete WalMart that\'s a lot of
money. So, you know, in a way it\'s kind of different.

And I also think that you\'re going to see the organic industry in
labor-intensive crops move offshore because we don\'t \-- number one, we
don\'t have the labor. Number two, we have much higher worker standards.
We pay them more, we provide a lot more for the workers here and we will
not be able to compete on some of the specialty crops in the U.S.

I firmly believe that over a period of years if the demand continues
it\'ll be offshore in the countries that pay their workers maybe one to
five dollars per day.

DR. MELLON: And that will be across the board, I mean, not just organic.
That\'s going to be \--

MR. CAMERON: Biotech, with biotech crops, no, we\'re more competitive
than anybody in the world because we can do it. We can \-- our yields
are better, our production systems are better, our infrastructure\'s
better. I do see organic specialty crops going offshore where cheap
labor\'s available and working conditions are poorer. But, that\'s a
whole other issue.

DR. MELLON: Right. And it is a whole other issue and it\'s a much bigger
issue. And then my last question is just whether since you\'ve had an
organic operation for as long as you have, do you see any difference in
the soil that you\'ve farmed organically over a ten or fifteen year
period compared to conventional farming efforts?

MR. CAMERON: Yes. We talked about manure applications. We use chicken
litter primarily for our organic operation and also on our conventional
operation if it\'s available we use it in certain cases. But, we tend to
compost the majority of our chicken litter and then apply it. It\'s
better but we\'re in the neighborhood of anywhere from 10 to as 20 tons
per acre per year and over the years our costs have doubled and our
testing levels have increased.

In California, because of the heat and the mineral soils that we have we
really don\'t build organic matter. No matter what we do it just
doesn\'t \-- it has a very tough time trying to build organic matter. It
just is not conducive to it but we have seen nutrient levels increase
due to the levels of the fertilizer we\'ve been using.

We\'re fortunate we have a readily available source, you know, within
one to two miles so we \-- it\'s beneficial for us. It\'s been good for
the poultry company and it\'s been good for us. We have seen
improvements in our soils.

MS. SULTON: We have two more questions and then I have to ask you if you
can make them rather brief so we can go onto the next speaker. Michael.

DR. DYKES: Don, I\'ll ask you the same question I asked Allen, I think
you touched on earlier. But, as you sit here and listen to the
conversation we had earlier, we\'re just starting this topic as a
committee about coexistence and unfortunately you won\'t be able to be
with us for the rest of the meetings after this, but, if you were
talking to the Secretary of Agriculture advising the Secretary on
coexistence, looking to the next five years or so, what issues would you
bring forward that need to be considered?

MR. CAMERON: I think that biotech crops are there. They\'re successful
for a reason. And I think you\'re going to see additional project traits
become available and I think they\'re going to be accepted by the
American public. I think the growers that are farming now are highly
educated. They\'re aware of the circumstances with commingling, pollen
drift. They\'ve dealt with it for years.

I think that he needs to be aware that this really is not a big \--
it\'s not a problem out in the field. It is \-- I know that we\'ve been
doing these things for years. It\'s just adding another piece of the
puzzle and I think it tends to get over-emphasized sometimes. It\'s
interesting to talk about the definition of coexistence.

I mean, it\'s a common practice that we use and now it\'s been defined a
little better. We need some guidelines. Definitely, there\'s a need for
guidelines in the marketplace and I think the marketplace will dictate
that to us. Our buyers will tend to dictate that more than anything
else. I guarantee you, if a buyer comes to me and says, you know, you
can\'t have this or you will have that, we\'ll do it. We\'ll jump
through the hoops and we\'ll get it done. I don\'t know if that really
answers your question.

DR. DYKES: Thank you, Don.

MS. SULTON: Allison.

DR. VANEENENNAAM: That actually leads into my question and that is, with
your contracts you said that you were comparing the organic contract
with a conventional contract. What actually does your contract specify?
It sounded like they were specifying separation distances. Is there any
specifications there about adventitious presence?

MR. CAMERON: The one contract, the last time we grew white corn the
distance requirements were greater than for organic human consumption
corn and I think the one at that point that said no adventitious
presence period, zero, and that was probably three years ago.

Today, we\'ve become better educated. I would tell the guy to take a
hike. I wouldn\'t sign a contract that specified that because many times
the buyers, if they have a glut of a crop they\'ll look for an excuse to
cancel a contract, so, I wouldn\'t go down that road and I hope other
growers are learning from me, you know, as well as I have over the years
but I wouldn\'t sign a contract like that.

I think especially now in organic we\'re able to dictate a little more
than we anticipated. I think before we were at the mercy of our buyer
and I think now we\'ve got a little more competition. I guarantee you
I\'ve got people calling me that want us to grow different crops
organically and we have a given choice and I know we, in California, we
can grow a lot of different things, but, I think you can see more of
that and it gives the grower maybe a little bit more control of what
he\'s doing and the price he receives.

Thank you very much.

(Applause)

DR. SCHECHTMAN: Our next presentation will be given by Caren Wilcox, CEO
of the Organic Trade Association and a former Deputy Assistant Secretary
here at USDA. She will provide some perspectives on this topic from the
viewpoint of the Organic Trade Association. Thanks again, Caren, and
welcome.

MS. WILCOX: Thank you. I see that we\'re already after noon so I can\'t
say good morning any more. But, I\'m glad to be here and I appreciate
being invited to discuss the Organic Trade Association and organic trade
in general.

Last week I had the privilege of attending the first international
meeting to discuss worldwide practices of organic animal husbandry in
Minnesota and that was a very inspiring and informative tour of organic
farms. We were out in the fields of lush pasture growing organically,
building soil, and environs almost entirely devoid of flies or other
insect pests, something that if you\'ve been to a lot of conventional
farms you know isn\'t always true. These were free not because any
pesticides had been used but because of practices of organic farming,
especially around animals mandate cleanliness and reduction of any
breeding ground for harmful biting insects.

So, it was a very informative area and I hope sometime the committee can
come out and see a few organic farms. There are some within driving
distance of Washington and here we\'d be glad to help arrange that.

The Organic Trade Association has been calling for more coordination at
USDA around organic practices and when I was invited by Dr. Schechtman
to attend this meeting I urged upon him more of an emphasis within USDA
so that all types of practitioners in U.S. agriculture could speak
together regularly.

Obviously, we\'re not here presenting our case to the biotechnology
industry today. And we hope the committee has an open line as to the
future of U.S. agriculture. Fortunately, I\'m accompanied here today by
a member of OTA\'s board, Lynn Clarkson, who will speak this afternoon
and we\'re here to give each other a little cover.

USDA recently indicated in a public statement that it acknowledges that
organic is the fastest growing segment of U.S. agriculture and I suppose
given the resources we get here at USDA it means that we have to be
working a lot harder for our fair share and OTA intends to do that. So,
you\'ll have a better understanding of the Organic Trade Association let
me tell you a bit about us, give you an overview of the organic
regulations and I\'ll finish with OTA\'s perspective on market
conditions for the organic business community and a little information
on what the association will be seeking for organic in the future.

First, what is the Organic Trade Association? OTA\'s a membership-based
business association founded in 1985 as the Organic Foods Production
Association of North America. We have always been \-- had members from
both Canada and the United States and we have an office in Ottawa as
well as in Greenfield, Massachusetts and here in Washington.

The Organic Trade Association\'s mission is to promote and protect the
growth of organic trade to benefit the environment, farmers, the public,
and the economy. And we are an umbrella association welcoming membership
from any business that produces or sells organic products or that
provides services for producers and sellers of organic agricultural
product.

OTA was formed to serve the organic system of agriculture and food fiber
distribution and it has continued to grow with the industry as it has
developed. When pioneers in organics started out they quickly realized
that they would have to have distributors and stores and shipping that
would be sensitive to organic practices and they would then be able to
maintain the chain of organic quality all the way with the consumer.
Otherwise, all organic agricultural products, even today, might be sold
directly on farm to consumers. OTA grew to represent that chain and we
still do.

I don\'t want to over-represent all the groups with which we coordinate.
There are excellent regional groups of organic farmers, cooperatives,
and certifiers. Certain states that were strong pioneers in organic
development are still leaders in the effort of organic production and
promotion and they include California, Vermont, and New Hampshire, Iowa,
Texas, Wisconsin, Minnesota, Colorado, Pennsylvania and New Jersey.

And hearing Mr. Cameron talk, for instance, in California we have
Earthbound which has about 26,000 acres under organic production right
now and they\'re very happily successful. Having visited some of the
home offices of companies I realized that founders often decided to
bloom where they were planted and many of our companies are located in
some of the most beautiful areas of the United States.

Most of these strong regional groups are members of OTA and we work with
them in a comprehensive way to ensure that the chain of organic
integrity is not broken. Membership in the association which spans the
United States and Canada is highly diverse and includes all parts of the
supply chain. We cover farm to fork and farm to fashion as we like to
say and beyond membership is certainly not limited to food producers and
we also have personal care products manufacturers who are members.

We\'re diverse in size and scope as well. And we have a scale that
ranges from members that have less than \$100,000 in organic sales to
the publicly traded companies like Haines Celestial, United National
Foods, Whole Foods, Wild Oats, and many companies that have since been
acquired by some of the traditional food companies like General Mills,
Mars, and many others.

Here we\'ll see the Organic Trade Association\'s latest distribution of
our membership revenues and you\'ll see that over 60 percent of our
members declare less than \$100,000 in organic sales and a very, very
tiny amount of our members, one percent, have over 50 million dollars in
sales. Many people think because of the Wal-Mart debate that suddenly
organic has become gigantic and it hasn\'t.

1990 OTA was present and working to help coordinate passage of the
Organic Foods Production Act and before this law was passed organic
communities governed themselves through various voluntary standards as
well as a few state laws and regulations. One of the great insights that
the pioneers of the industry had was to realize that they had come
together and resolved technical differences they might have in order to
achieve the national standard codified in U.S. law.

Not only would they achieve a capacity to market nationally with a valid
and accepted organic label, but, they would have USDA accreditation to
help them with that label and to help them in the growing international
organic marketplace as well.

Those of us who have been involved throughout our careers in food
regulation can only stand back and admire such foresight and
achievement. But, following that tremendous achievement passing the law
to create the standards and labeling there were years of hurdles to
pass. It took until 2000 for a final rule to be completely vetted,
accepted, and made final. As a result, the initial standards were
implemented and a USDA organic label was first introduced and applied in
October of 2002 so we have not had the label very long.

The Organic Trade Association was at the table developing key
regulations to govern how the word organic is used to describe
agricultural products and those regulations are very important to
consumers and producers alike. Under the current regulations a product
can be called organic if certain criteria are met. Products labeled as
organic must first come from a farm that has had at least three years
from the last use of any prohibited substance.

Animals receive organic feed and must have access to the outdoors and
living conditions appropriate to the species. They also cannot receive
growth hormones or antibiotics. Farms that sell more than \$5,000 of
organic product must be certified and processors are certified as well.

Three areas are considered excluded methods and are completely
prohibited from working in production \-- use of genetically modified
organisms, sewage sludge, and irradiation. This is a direct result of
overwhelming number of consumer comments opposed to the use of those
methods in organic products and those who were at USDA at the time will
remember that there were over 300,000 comments that came in to USDA,
almost all of them on those topics.

The way the word organic is used on packaging is regulated and indicates
the percent of organic ingredients. One hundred percent organic can be
labeled as such as used with the USDA organic seal. Ninety five percent
organic ingredients can opt to use the USDA organic seal. And products
must have at least 70 percent organic ingredients in order to be labeled
made with organics. The remaining non-organic ingredients cannot be
produced using excluded methods.

You\'ll note that these requirements, especially those around excluded
methods, can create an issue for organic farmers when faced with
neighbors who may be employing these methods in their own agricultural
practices. We\'ve spoken about that this morning. Although some would
argue that because the preamble to the U.S. National Organic Standards
says, \"The presence of a detectable residue of a product of excluded
methods alone does not necessarily constitute a violation of this
regulation\", such contamination does sometimes jeopardize the status of
organic crops.

According to USDA\'s own website, if the certifying agent has reason to
suspect that an organic product has come into contact with prohibited
substances or has been produced using excluded methods the certifying
agent can call for testing which under certain conditions could result
in that product no longer being considered organic.

This places quite a burden on organic producers who, through no fault of
their own, may have to pay for testing and if non-adventitious
contamination is found will not be able to sell their products in the
organic marketplace. I\'ll speak a little more about this critical issue
later.

It\'s important to understand that U.S. law also requires that any
agricultural product sold as organic in the U.S. must meet or exceed the
U.S. standards no matter where it\'s been grown. And USDA, therefore,
approves certification organizations around the world as well as in the
United States.

Now, organic has always grown and promoted itself. We haven\'t had a lot
of the support. In fact, in the beginning we didn\'t have huge companies
to do it either. They had to just grow up on their own and they\'ve done
pretty effectively. I believe the reason the segment has prospered and
grown is that the producers and processors were living and working at
the true grassroots of America. They were in touch with consumer desire
for environmentally sound production methods and exclusion of practices
they considered unhealthful.

Consumers' desire for more helpful and more natural lives has grown in
the U.S. and indeed in the world and so too has the demand for organic
product. The business climate for organic products has been growing
steadily for over a decade and has been spurred by consumer demand.
Consumers want a choice. As shoppers face healthy bits in their lives
(sic) and as they learn about how foods and beverages are produced they
are drawn to organic products. Shoppers see organic products as fitting
in with a healthy life and also appreciate the environmental benefits of
organic agriculture.

Studies specifically show that consumers value many of the attributes of
organic products. Foods grown without pesticides, toxic and persistent
pesticides, foods that are natural and that are produced without
artificial preservatives, flavors, and colors, foods grown without
GMO\'s, and foods grown on farms that practice sustainable agricultural
practices.

Of course, the shoppers also appreciate flavor and quality of organic
product and, let me say, a lot of good work has gone into meeting
customer expectations in this area. For those few of you who may still
think organic business only sells granola, I would invite you to visit
almost any supermarket today. There are fabulous products.

Because of these features and more, organic products resonate with
shoppers and 73 percent of shoppers in the United States have purchased
organic products. Twenty-three percent purchase them at least once a
week. Organic products are sought after in more venues also. We know
that many food service operations on campuses and in schools, in
ballparks, and museums, and other areas are now marketing organic. Some
colleges even use it as a draw for students.

We also have community-supported farms and farmers markets and stores of
all kinds, including natural food stores and, of course, cooperatives.
The dollar value of organic products sold in the natural product channel
is about the same as the amount of organic products sold in mainstream
grocery stores and the overall organic pie is growing as well, now about
2.5 percent of food and beverage sold in the United States up from 0.81
percent in 1997.

Growth rates overall have been in double digits since 1990 and are
currently about 16 percent. That\'s compared to about 2.2 to 4 percent
growth in the non-organic food and beverage product area.

Now, I\'d like to run through a couple of charts that I brought today.
These, the first is the sales channels which we\'ve seen. You can see
down here that the natural large grocery stores which would include
groups like Wild Oats and Whole Foods combine with the smaller natural
food stores to be almost half the segment still in 2005 and we\'re now
beginning to see a lot of distribution in the mass market chains and
other outlets.

And as I said, we\'ve good growth and we\'re going to continue to have
double digit growth until about 2011 by our numbers. This will show a
little bit about the sales penetration from 1997 to 2005. We, in the
beginning, of course, didn\'t have the greatest numbers in the world,
but, in fact, we\'ve had to develop our own organizations that measure
the market because the conventional marketing groups didn\'t want to do
it so very good people decided to enter the field.

And we\'ve gone very significantly up in terms of our penetration being
almost at 2.5. I expect by the end of this year we\'ll be at least at
that. And now, here you can see the important categories for organic
food sales. The leading category still is fresh fruits and vegetables.
We now have over 5.3 billion in sales there and led by companies like
Earthbound but certainly many others.

And then dairy, as you know, is coming on very strong, not only with
some of the big companies, but, many regional companies like Albert
Strauss and Humboldt\'s and others. And then the bread and grains are
growing nicely; beverages, non-dairy growing nicely. Of course, our
fastest growing segment are on a very small basis meat, fish, and
poultry and really that would be meat and fish.

We don\'t have a standard \-- I mean meat and poultry, not fish. We
don\'t have a standard yet for agriculture but USDA is working on one.
So, these are very exciting categories and consumers are waiting in many
cases to be able to get even more.

And then this just shows you in a different way some of the ways the
category\'s broken out. These are some forecasts about growth for the
organic food sales over the next four years and you can see that we\'re
expecting very high growth in a number of the segments. I\'ve talked
primarily today, by the way, about mostly about food. We don\'t have as
good numbers about fiber but organic fiber is a fast growing area as Mr.
Cameron mentioned and not only is it in cotton but also in wool and flax
and we have people who are designing now and wanting to design in
organic fiber materials and I expect to be a fast growing area.

Now, the consumer driven growth has caught the attention of the media
and established food purveyors alike. Seventy-three percent of shoppers
report their primary designation offers organic. Many loved legacy
brands are adding an organic line extension to their product mixes. I
understand there\'s organic Rice Krispies coming although after last
week I\'m not sure that that was true.

These numbers, by the way, also come from, as I said before, some
marketing and analytical groups. The dynamic field is expanding in large
measure due to consumer demand. Furthermore, organic agriculture in the
United States has developed to achieve societal goals and because of
that we have a very nice kind of meshing of the societal goals and a
challenge to meet will be to expand our supply. That\'s a nice problem
to have, however.

Now, I want to spend a little time discussing those factors about
research and development, funding, and so on because, clearly, organic
agriculture has been at some disadvantage related to our government\'s
own policy. As part of the passage of OFA we did, of course, receive
some Appropriations help and we are very, very grateful that we have an
excellent staff at the national organic program at AMS and we will
receive some funding for organic agriculture and economic research.

One study which may be of interest to the committee would be a study
that was done by ERS concerning the EU and U.S. support for organic and
it\'s a very instructive and interesting document. So, we are having
some good research emerge here. During the 2007 appropriations cycle
we\'ve been seeking to support the 3.13 million that the President
advocated and which is contained in the House Bill to more fully fund
the national organic program offer.

This would be an increase up from that current 2.026 million. Now, if
numbers like that sound like peanuts to you, they are, and we\'re very,
very fortunate that we have dedicated professionals in NOP because they
obviously are not receiving all the support. Like any sector, we need to
be sure the standards are upheld appropriately and that certifiers are
accredited and that new rules can be researched, drafted, and issued for
comment in a timely manner and they need money to do that.

Right now, doing that with less than three million is nothing short of
phenomenal and especially when I have to say I contrast that with four
million that used to go to Foreign Ag Service to promote biotechnology
in foreign markets. That doesn\'t have anything to do with just
oversight of biotechnology in the United States.

In addition, we\'ve sought monies for pricing information for organic
products, analyzed our production analysis, and we\'ve been seeking to
find out the number of acres of organic producers currently operating in
the United States. When Dr. Schechtman asked me about a map, well, it\'s
pretty hard to have a current map if you don\'t have the data put in it
and we don\'t have the data put in it.

Fortunately, an appropriation of five million dollars was successfully
put into the House Appropriations Bill for research on organic and we
are attempting to hold that. Support for farmers is a transition to
organic farming is also critical need in the organic community.
Unfortunately, organic certification cost share dollars have not kept up
with this need and OTA recommended 1.5 million in new dollars in 2007
for that.

Finding specific information about organic expenditures within the
Department can be difficult at best. From what we can tell, funds were
allocated from appropriate appropriated monies for some other organic
research. ECIP funds were used for organic proposals in some states and
NRCS programs have been used. USDA\'s URS has tried to be responsive and
has been developing a market outlook report for organic producers and
handlers.

We know that funds were allocated from USDA\'s Market Access Program
because OTA received them and we did promote organic exports in Asia,
Europe, and Canada. As a whole, we will be lucky to get a direct
appropriation this year of about 8.5 million for organic regulation,
research, and cost share transition. And we will then need to work with
specific parts of the department to try to persuade them of the merit of
working with organic producers as part of their normal product programs.

I don\'t need to tell you what a minute amount of USDA\'s budget that
entails. Recently, I asked someone on OTA\'s staff to do a quick scan of
USDA\'s budget to try and identify just the funds expended by USDA, not
EPA, not FDA, or, HHS, or any other agency on the development, research,
and oversight of products of biotechnology. They came up with a figure
in the neighborhood of 170 million dollars in direct expenditures.

I\'m sure that you can understand that organic producers and processors
are at a distinct disadvantage because we lack economic data studies and
production data. For instance, without such data organic farmers cannot
hope to have crop insurance that will compensate them for their actual
costs of production versus those conventional in the case of a loss. And
without such data farmers lack vital tools for deciding which crops to
plant to meet market demand.

Dr. Schechtman asked me, as I said, about a map and it\'s pretty
difficult for states, regions, or, for extensions for that matter to
know where they ought to be operating if they don\'t even have a valid
map. In the next Farm Bill, OTA will be seeking parity for organic and
comparison to other aspects of agriculture. And I have said to
leadership in the Department and to leadership on the Hill that I would
consider it a tragedy if the United States fell behind in production and
research on organic while the rest of the world\'s moving toward both
organic production and at the same time is honoring the environmental
benefits that come from that production.

What a shame if we were to miss the boat. Now, before I close, I would
be gravely remiss if I did not discuss an elephant that is sitting in
the room. I simply must convey to this committee the problem presented
to the organic community when events such as those over the last few
weeks concerning rice presented to producers, processors, and
distributors. Recent incident in the U.S. rice supply is only the latest
report to cause potential problems for organic producers and processors
due to these under-supervised practices.

Last night I spoke to a major rice producer and distributor on the West
Coast who is beside himself with worry. He told me shipping has
virtually stopped. Testing is underway and he has been told he may not
ship to his foreign customers. He asked me, how can we let these things
happen in the marketplace? Will we face losing everything we have built
because another company is not cautious? Another company is not careful
and another company\'s not regulated.

These are all very excellent questions and I don\'t have the answers. We
also discussed how in the future he\'s going to get GM-free seed. Will
it exist? We don\'t know that either. And there is no crop insurance for
these products. If organic rice is found to be contaminated, and I want
to emphasize if, because I have no reports thus far that the occurrence
that my members are facing potential loss from this, they have not found
these yet and I hope they don\'t.

But, they may be facing serious economic loss from rice containing
unapproved GM models. The efforts that they have undertaken to produce
these products without toxins and in an environmental friendly manner
may go completely uncompensated. OTA warned for years about its concerns
about protecting other crops from biotechnology and advocated that new
introduction should be stopped or that closer supervision should be
exercised when developing products of biotechnology that can contaminate
neighbors.

Unfortunately, everything that OTA has feared is coming to fruition in
the rice incident. OTA understands that you\'re going to be considering
some new discussion of coexistence. And I have found the conversation
this morning very interesting. I am very unclear on what that could
mean. Generally, this word is a political term and is in my dictionary
and is defined as the concurrent but separate existence of two or more
nations of assertively great ideological disparity.

Terms like this are usually applied to places like Southern Lebanon and
Israel or the former East and West Germany, not neighbors over the farm
fence. Since I hold a degree in international relations, I\'m not
unfamiliar with what it takes to reach such a condition and there are
very few places in the world where coexistence has been successful.

But, the first steps that usually have to take place are the
intervention of strictly disinterested and neutral parties that enforce
the separation and if those neutral parties favor any point of view it
is the weak and under-financed over the strong and wealthy. And
sometimes there is an attempt to encourage the sides to examine their
societal responsibilities, assume humility, and engage in an enhanced
ecological and human environmental practices in a way that will benefit
all beings living in the nations of great ideological disparities.

I believe that organic is doing its best to be a good neighbor and this
morning we heard about that from some farmers who are good neighbors.
Frankly, we are not a nation in great ideological disparity. Rather,
we\'ve been a community struggling to use responsible methods to grow
excellent food and fiber while at the same time improving soils, water,
air, and our general environment; not the marks of a community in great
dispute with anyone; and we have been doing this without much
governmental support.

Because we relate in a positive manner in our environment the organic
sector is gaining more and more acceptance in the court of public
opinion. Perhaps it is fair to characterize other elements of
agriculture as nations of great ideological disparity. I don\'t know.
Certainly we do have a long way to go on a global and regional and
federal basis to see if other elements of agriculture and other segments
who produce agriculture products such as chemical companies can develop
the attitudes that will lead to coexistence.

But, we have to see if those practices or beliefs will be adopted into
other corporate cultures. True coexistence, as was stated this morning,
entails a desire to live in harmony with neighbors big and small. We
shall see if that\'s achievable. You can tell that I am decidedly
skeptical and there is no plausible evidence so far that this is the
objective of the purveyors of biotechnology.

In any case, personally, for many reasons, it would take too long to
describe today, I believe that organic is actually the future of 21st
century agriculture. We have a very bright future in the United States
and a bright future worldwide. We are responding to what consumers want.
I hope your committee will take seriously the benefits that organic
farming brings to U.S. agriculture and will help us gain parody in the
treatment of our products.

It\'s been a pleasure to introduce you to OTA and I hope you\'ll feel
free to access our website, www.ota.com for further information. Thank
you.

(Applause)

MS. SULTON: Carol, would you like to start the questions?

MS. TUCKER FOREMAN: Caren, thanks very much. I have a question and I\'m
not even sure I know how to formulate it so let me try. Inherent in the
notion of organic and the law and the rules is that it was sustainable.
I think it was Nick who raised the point this morning about a market
that may be becoming increasingly dependent on organic products shipped
from China, New Zealand, other great distances.

Do you think that we face the possibility that there will become
different kinds of organic agriculture and that we may have a need for
coexistence between those that can be defined as sustainable and those
that may not be able to be defined as sustainable if oil is \$80 a
barrel and you\'re bringing food from China?

MS. WILCOX: Well, first of all, I guess I would look at what sustainable
means on a local basis and I like to say that any acre that converts to
organic is contributing to our environment, whether it\'s in China or
it\'s in Arkansas or Pennsylvania or anywhere else because the practices
that go into that are the practices that are basic to sustainable
agriculture.

So, from that perspective, what I hope is that we don\'t let it all come
in from other countries. We need to have the practices here and we need
to expand our supply here. We\'re doing everything we can to work on
transition here and to enhance the ability of the American farmers to
grow organic.

There is no question right now about half of our food supply
conventionally comes in from overseas, if I remember my numbers from
when I was at USDA, and, so, I\'m sure that organic will continue to
come in from overseas. If it comes in here it needs to be certified to
the same standards as would be applied here and many of the same
certifiers who are working here have gone international and are being
accredited in other countries and are working on being accredited by
USDA as well and to look at what\'s being done there and to certify it
to U.S. standards.

So, right now, you know, I could never say that there will never be some
refinements that happen in terms of the rule or labeling, but, I don\'t
foresee it right now. I have been telling my members that they need to
remember this is the 100th year of the Food and Drug Cosmetic Act and
there has been a lot of change in 100 years so that\'s something that is
always going to happen.

MS. SULTON: Jerry.

MR. SLOCUM: Caren, you had some comments about size and scope and they
were all related to sales dollars. Do you have any idea of what the
average size of organic production would be; what would be the average
size of an organic farm?

MS. WILCOX: Unfortunately, since we don\'t have farm data from USDA
it\'s very hard to do anything other than anecdotally. We know that the
dairies are anywhere from 60 to 350 cows with a couple of very, very
large diaries that are emerging that are well over that. We know that,
you know, we have like Earthbound\'s got 26 acres under cultivation so,
you know, then we know we have farmers. I have an organic farmer that
works for me and he works part-time for me to make some cash and he
farms about 10 acres so it\'s pretty hard to know.

MR. SLOCUM: Would you \-- I mean, do you, anecdotally, would know more
than I would. Would you think, are these organic producers, are they \--
do they also practice some conventional and even some biotech
agriculture or are they primarily exclusively organic?

MS. WILCOX: Well, that varies. Obviously, we have people here who are
doing both conventional and organic and then I don\'t think that Allen
is biotech, but, obviously there are people that are doing both and as
transition goes on you have to do both because you\'re not certified the
first three years so you\'re not going to be organic the first three
years to trying to get certified. You\'re in a transitional state and
you are considered \"conventional\" not organic.

We\'re in a big transition period. I wish I knew how many acres were
under transition. We know a lot more about supply and what\'s coming,
but, we don\'t have it.

MR. SLOCUM: I mean, this question of coexistence, however we want to
describe it, if it\'s Carol\'s dictionary that defines it or your
dictionary defines it, is an issue that we\'re going to wrestle with,
even for the guy who wants to be 100 percent organic.

MS. TUCKER FOREMAN: I want to point out our definitions are not
inconsistent because Caren\'s is they\'re not fighting with each other.
They may be ideologically different but they\'re living in peace and
harmony.

MS. SULTON: Leon, did you have a question?

MR. CORZINE: Yes, thank you, Caren. Couple of questions. One, you
mentioned, I may have missed it, how many members?

MS. WILCOX: We have 1,700 members right now.

MR. CORZINE: Okay. That whole thing on size is just about \-- I mean,
USDA, we, and my organization, how do you come up with the size because
you have part-time farmers, you have full time farmers, you have, you
know, family farms that are very large farms and some that may derive a
small percentage of their income from the farm so that\'s an issue that
I think no matter what sector of agriculture you talked about as you
know we will grapple with the definition of a farmer if you want to as
well as the definition of sustainable which I think for this challenge
this group has before and we can probably spend the rest of our time
trying to define that so I won\'t go there.

But, question on your organic label that I had. You said that \-- do you
need to be certified to sell to someone then that uses the organic
label?

MS. WILCOX: Yes.

MR. CORZINE: So, you have to be \--

MS. WILCOX: The chain goes down.

MR. CORZINE: Okay. So, okay. Because you have another classification if
you weren\'t \-- you could be organic, some organic?

MS. WILCOX: It\'s 70 percent organic and be labeled as made with
organics. But, even that class of product must be \-- the other 30
percent cannot be made with excluded methods.

MR. CORZINE: Is there a way in the process to determine that because you
can\'t really test for it?

MS. WILCOX: Our guys do tracing.

MR. CORZINE: It\'s a tracing process?

MS. WILCOX: Sure.

MR. CORZINE: Okay. You also mentioned that in the requirements that over
\$5,000 in sales. If I keep sales under \$5,000 \--

MS. WILCOX: It\'s an exemption for the very, very smallest organic
farmers who can go to a farmer\'s market and market as organic. They
would still be subject to oversight and if they were to go there and
their neighbor knows they\'re really not they could be reported and they
would be acting against the law but they don\'t have to certify. They
don\'t have to go through all of the paperwork to certify for \$5,000.

MR. CORZINE: So that is to help him so they don\'t have to go through
the transition period?

MS. WILCOX: No, no, they still would have to go through the transition.
They just couldn\'t make \-- they can make the claim without making and
they have to follow all the steps but they don\'t have to do all the
paperwork that Allen was talking about which is very, very extensive and
they don\'t have to have a certifier come in to oversee everything.

MR. CORZINE: Thanks.

MS. SULTON: Michael.

DR. DYKES: I had two questions for you, Caren. I enjoyed your
presentation. You talked about excluded methods in biotech and the
problems, the burden that places on organic producers. But, as I recall,
there\'s never been an organic producer who\'s lost certification
because of excluded method biotech. Is that correct?

MS. WILCOX: Well, we\'ve only been under the world for three years so we
may see that with rice. We don\'t know. But, you\'re right.

DR. DYKES: But, as of today that\'s correct?

MS. WILCOX: I do not know of anybody, no.

DR. DYKES: Yeah, that was my understanding. I guess another question to
think ahead as we think about for this committee. When we listened to
Don Cameron\'s presentation about sweet corn and spring and every three
days or every five days and you talked about the Meat Act changing over
100 years. Would you foresee a time when BT biotech would be an accepted
organic practice as opposed to BT sprays for organic?

MS. WILCOX: Probably not in my dreams. I think that\'s a long way off if
it would ever happen. It would not happen in my lifetime I don\'t think.

DR. DYKES: And \--

MS. WILCOX: Our growers are very, very adamant about their desire to
farm without genetically modified products and I don\'t see them
clamoring for any change like that.

DR. DYKES: Thank you.

MS. SULTON: Mardi.

DR. MELLON: I\'d like to focus somewhat on the future too acknowledging,
you know, the infancy of organic and I think it\'s really important to
realize how recently it is that the label has been available to folks,
particularly to the meat folks. But, just I\'d like you to just imagine
where organic could be if it had something like ten percent of the money
that goes into the promotion of biotech. I mean, if it had the
seventeen, you know, million dollars a year rather that scraping around
for a million here and a million there for research, for marketing, for
agronomic practices; I mean, for the whole smear that is really
necessary to make a sector of agriculture move forward.

MS. WILCOX: Well, I think it would be very exciting. I mean, hearing Don
talk about the machine that he hopes to have emerge from USDA research
is just one little thing that could happen and I have no idea how long
that will take given the shortfall of money here, but, there is
tremendous \-- the meeting in Minnesota around some of the issues that
we would like to have researched on animal organic, I mean, that\'s an
organic research agenda that could go on forever.

We don\'t have fully trained extension agents in many, many states. And,
in fact, unfortunately, some of our farmers who are mentoring people who
would like to enter organic don\'t want to send people to extension
because they don\'t feel that extension understands organic or advocates
for organic or supports organic.

We know that there are certain states where they do and where they\'re
very well informed. We have some extension agents up in New York State,
for instance, who are really, really good. But, you know, that\'s just
one little example of something that could happen. I think in the whole
area of what NRCS is trying to do in conservation that if we actually
were able to go out and look at the conservation practices that are
going on in organic and then the requirements that NRCS is looking at I
think we would see a lot of different resources applied to that whole
effort.

But, again, you know, we\'re struggling to set up some conference calls
so that they can understand what we\'re doing.

MS. SULTON: Nick.

MR. KALAITZANDONAKES: So, I have two questions, I guess, a question and
a comment and my hope is that in my comment I\'ll get in a couple of the
members of the committee. So, the question is, you mentioned the 170
million dollars in biotech expenditures. Are those regulatory oversight
costs or are they commercial?

MS. WILCOX: No, they were primarily research.

MR. KALAITZANDONAKES: And this is ARS?

MS. WILCOX: Well, they were within NRE, yeah.

MR. KALAITZANDONAKES: So, my comment then and my hope is that Carol and
others might jump in the discussion is this. Although we don\'t have a
lot of production data on organic agriculture, we do have, especially
within the context of food companies, a very large volume of scatter
data that tell us a lot about consumer behavior when it comes to organic
products and, so, what we actually find, and I\'m sure that some of the
members here can talk about this, is that consumers actually jump around
on their consumption preference.

So, today a consumer can go and buy an organic tomato and then the next
week they can buy conventional. And then two weeks later they can go
back and buy organic or out of a basket of \$100 they can spend two on
organic products and ninety eight on conventional.

So, and that\'s the vast majority of \--

MS. WILCOX: And that\'s about what they\'re spending, two dollars.

MR. KALAITZANDONAKES: Right. So, I actually used the number intently.
So, the question is, is that an organic consumer because that\'s the
vast majority of the consumers and if that consumer is making a healthy
choice and two percent is she making an unhealthy choice on 98 percent?

MS. WILCOX: Well, there are various levels of consumers. It\'s rather
interesting and, in fact, I would posit to you that most of the big
companies have no idea about the market for organic. There are only
about three groups that actually do very thorough market analysis of
organic. They had to go off by themselves because they didn\'t get
support from big companies.

But, those groups break down in people who are absolutely devoted
consumers of organic. They are the ones that are going to Wild Oats or
to Whole Foods or to their farmer\'s market or they may have a CSA that
delivers organic to their house. One of my sisters-in-law is that way
and for her three kids she does not buy anything but organic.

Then you have a group that does move around in the middle and then you
have a group for whom organic is just something to try. It may be
trendy. It may be fun. Actually there are guys in that group who buy
organic milk and keep it in the refrigerator who impress their
girlfriends. And we know where they are.

But, the point I think that we would want to make about that is that
because it\'s a very desirable product and when you get it and when you
eat it and when you see it, taste it, people want to come back and they
do come back and they\'re coming back in double digit numbers. So, the
segment is growing exponentially. Is it going to take over for all
conventional in the near future? No. But, it\'s going to get a lot
bigger than 2.5 percent.

DR. SCHECHTMAN: Let me interrupt this. We\'ve gone about 25 minutes over
time on the discussion and I want to make sure that we\'ll have time to
get our other two speakers in before our mandatory break for public
comment. So, with your indulgence, \--

MS. TUCKER FOREMAN: I just want to respond because he raised an issue
and I agree with him. Can I just respond directly to that? Because it\'s
an issue I wanted to raise. I think it would be very helpful to have, in
fact, somebody would come in and talk to us about how consumer
preferences break down in these areas and how their purchasing patterns
develop. The A.C. Neilsen Company and Bill Limpert, the Neilsen folks,
I\'m sure all the industry people here at the table have probably bought
some of Neilsen\'s data at one time or another, they have collected a
very, very impressive amount of data that is specifically directed at
helping people sell to you.

And I think it would be terrific if we could get Bill or someone from
A.C. Neilsen. He has a relationship with them and they do a lot of work
for the Food Marketing Institute to come in and give us a presentation.
That\'s all I had to offer on that. Thank you.

DR. SCHECHTMAN: Okay. With that, I would like to break and ask folks to
come back within one hour. There are two cafeterias in this building and
I was told by the guards outside when I brought you in that I was
supposed to escort you over to the cafeterias. I will take and move
folks over to the main cafeteria in the other building. If someone else
who is going to be here is going to eat, from USDA, is going to eat in
the cafeteria downstairs, which is smaller but closer, I would be happy
to take them over as well.

One other thing to mention. As the second half of the meeting starts
I\'m going to pass around a master version of the contact list that was
put out for all the members for your personal contact information and
I\'d like everyone to just take a peek at it and make sure we\'ve got
the correct information and circle that around. Michael?

DR. DYKES: Are we going to have copies of these presentations?

DR. SCHECHTMAN: Yes. We will \-- I\'m not sure that you\'ll have them by
the end of tomorrow but you\'ll certainly get the meeting notes.

I\'ll just take one other comment. Pat is not here. She usually takes
care of trying to make some arrangements for folks who are here and want
to go out to dinner. We\'ll talk about that before the end of the day.
We\'ll try to do that someplace that folks who are staying in town might
be able to go to.

DR. DYKES: What time do we need to be back here, Mike?

DR. SCHECHTMAN: I would like to be back here sharp at two o\'clock or
else we\'re not going to be able to get our two speakers in before. Even
that\'s going to be pushing it. We\'ll probably have to sacrifice before
public comment unless of course there\'s no public comment.

(Whereupon, a luncheon recess was taken at 1:00 p.m.)

[A F T E R N O O N S E S S I O N]{.underline} 2:03 p.m.

DR. SCHECHTMAN: Let\'s get started, please. As I indicated earlier, I\'m
going to circulate the master list for contact information for our
regular committee members. Please check out your information and correct
it if it needs to be corrected.

Thank you coming back. We have a packed afternoon. I note that we do
have at least one person who wishes to make public comment today so we
will need to be sure that we can at 3:30 be able to turn to that. We
have two presentations that we will get through. We may have time after
comments if we need to go back to any issues that may be raised there.

But, our next presentation will be from Lynn Clarkson who is the CEO at
Clarkson Grains, a supplier of non-biotech and organic products and, as
was mentioned earlier, a member of the National Organic Standards Board.
The title of this presentation, I hope, is Meeting the Challenges of
Biotech-Averse Markets. Welcome, and thank you for coming.

MR. CLARKSON: Thank you. I am not pro-GMO, I\'m not anti-GMO, I am
pro-happy client. Whatever it takes to get the happy client I wish to
provide it. That is becoming increasingly complex and that\'s why,
Michael, I think asked me here to permit you and entertain you.

IP. Yesterday we knew more about the bolts in your car than the food
that went into your system. If something happened we could trace that
bolt back. Something happened to your food, forget it. Not a chance with
a few very isolated exceptions. So, in my world, every client that I
have wants identity preservation, he wants to know what he\'s getting
from the time I put it in the ground until I deliver it to his
processing plant, his animal feed lot, his nutriceutical plant, or, his
cosmetic plant.

Product distinctions in my world. We select varieties and hybrids based
on taste profiling. You see Japanese leaping out of cars in the Midwest
running over to soybean fields, grabbing a soybean, spitting it out and
saying, yes, pitui, it will never work. But, the farmers who we're
dealing with had no idea that soybeans had a taste. We go for flavors.
We go for process characteristics. If you\'re a tortilla maker I can
double the throughput of your plant by switching from one variety of
corn to another. I\'m looking for faster water absorption rates.

Certainly not obvious when you\'re picking your seed. The only way I
will get that corn is to give a farmer a market signal before he plants
to plant it for me. Market access didn\'t used to be an issue over GMO,
but, in the past ten years has become one. My company serves clients in
Asia, in South America, over North America, and Western Europe and the
standard first question I get from a new client is, can you deliver me
zero GMO and the answer is always no, I can\'t.

I can deliver it to you within certain tolerances, but, zero is a
conceptual standard that is impossible. Traceability. I think most of
you are familiar with the European efforts or the United Nations efforts
on rewriting the Codex Alimentarius. I think it\'s probably an
exaggeration every other word is traceable, but, that document is going
to be full of the concept of traceability. People want it. I would like
to provide it.

So, if somebody comes and wants a commodity my company hands out cards
for Archer Daniels, Cargill, and anybody else who wishes to have a card
handed out we'll hand it out. If somebody wants a distinction we try to
keep that and work with it. To do those things we\'re engaged with
contract production. And one of our challenges is to find enough people
to raise organic crops for us around the United States. To meet economic
thresholds for some of our clients we\'re active in 20 states.

I\'m also one of the people who buys in China, Brazil, and Argentina to
meet demand domestically. We\'re looking for protective production where
we can avoid contamination if at all possible and contamination,
there\'s no absolute standard; it depends on the perspective of the
buyer so I don\'t mean to ruffle anyone\'s feelings.

We need segregated storage and I thought the United States was 20 years
ahead of everybody else on segregated storage. We\'re not because new
storage technology is out front with the use of silage bags all over
South America. Ten years ago in Argentina there was maybe one silage
bag. Last year, 300 million bushels went in silage bags. What\'s it
cost? The same thing that costs a minimum storage fee at a grain company
in the Midwest, 12 cents a bushel.

We need third party tests and verification. If I say I\'m delivering
something to you that\'s different and you can\'t tell by visual
inspection, how do you know? So, I need infrastructure that can provide
that. Here\'s a breakdown of my clients as it relates to your committee.
They say I want to avoid all GMO events, or, I want to avoid some GMO
events, or, I want a particular GMO event, but, not the second GMO
event.

As new GMO events are added to the gene pool these questions are going
to become more and more complex in my mind. We then have to settle on
tolerances. Zero is a mighty, mighty small number and Mr. Han, who is a
client of mine in Korea is backed up by a current national standard that
says zero tolerance and I\'ve suffered through having containers sitting
in Tucson. Fortunately, I\'ve been paid but I don\'t lose my interest in
finding out whether the client really gets the product or not.

Mr. Tomai is a Japanese client and his official tolerance is 5 percent.
But, official tolerance isn\'t what we deal on. We deal on commercial
tolerance. I don\'t know any company that wants to be just as good as
official, they all want to be better so they cut the load. Mr. Tomai\'s
real standard with me is 1 percent, very close to European standards.

So, the tightest standard in the world that\'s going to be coming out of
a British grocery store chain. It will be 0.1 percent. If I get into
other places in Europe I can get by with a national standard that varies
between .5 and .9. If I\'m in Japan it will almost always be one
percent. If I\'m in Taiwan they\'re still trying to make up their mind
whether to follow the Japanese or the Koreans and over in Korea is
ridiculous. I would really like Michael to take care of that and
negotiate that.

We have to prove compliance. This is another area in which at the end I
can give you a summary of what I want to see you do, Michael, but, I
need help with compliance. We would like an agreement perhaps negotiated
with the United Nations of a third party, well respected, well received
testing agency and protocol where tests will be done before we ship and
the shipper would accept it.

You don\'t want to invest in international transportation and then
you\'re rejected. This gets ridiculous for that system costs are just
ridiculous. Seed is a challenge. It\'s an increasing challenge for us.
There is no national standard that I\'m aware of for seed purity. It is
industry standard and some of the best seed coming have the tightest
standards, but, those standards vary from year to year depending on the
difficulties imposed by Mother Nature.

So, it is difficult for us to get seed that matches our client\'s purity
standards. Production is one of the easier things to arrange here. It\'s
finding the right quantities. Storage is an issue for us. It\'s a
perfect place for commingling. We really do like independently stored
situations on farms. It splits the risk significantly. Handling and
shipping, always a problem and we would really like to transfer the
ownership and get rid of the risk as soon as we can in the whole
situation.

The most disciplined of these systems that I\'m aware of we worked with
our Japanese clients to develop in 1992 before GMO was a real issue but
it was perceived as going to be a big issue by the Japanese. So, we sat
down with the Illinois Crop Improvement Association and wrote protocol
and Illinois Crop Improvement took them to the AOSCA group which is the
official seed certifying group and made protocol all over the country. I
like it because we can get the same protocols apply in roughly 40 states
working for the AOSCA agencies already.

So, we use those and we overlap steps. If we just had one step we\'d be
wrong and in trouble because we frequently overlap five of them. And
I\'ll give you a brief description of what we do later. Okay. I\'ve
pointed out to you what the standards are and in your Korean standards
they are very difficult and what happens if you run into a difficult
standard? I suspect corruption may be involved. I don\'t know where the
money comes from and I don\'t help people change their minds, but, I\'ve
seen their minds change from day one to day three when day one said we
were seriously contaminated and here\'s the results and day three says
you don\'t have a problem anymore. So, I\'m making an assumption here
that there\'s something funny in the game.

And I really don\'t like to get involved with business when that\'s
going on. I can\'t predict what\'s going to happen. It\'s trouble. The
rice issue comes up. Where was the person who was supposed to have the
hand on the switch here? This, for us, related to us by our Japanese
clients is "RiceLink 1" or StarLink 2, take your pick. They basically
said, jeez, why should we buy from you anymore, you guys can\'t keep
track of anything. You\'ve lost it in the system. We\'re shutting you
out.

We worked for 40 years to get into the Japanese rice market. USDA worked
mightily to get in. We found them caught with a bad crop and we forced
our way in. And we\'ve been there for rice farmers for years and we just
had a door shut in our faces with the Europeans shooting torpedoes
across our bow about a week ago.

So, Caren referred to rice growers in California and I personally know
them. Their entire business is at stake. They may have lost their entire
client not because of anything they did, but because of a perception of
an issue by the Japanese that\'s absolutely significant to the
marketplace.

We don\'t have a cookie cutter approach to our clients. We have
different protocols for different clients. Some of them want tolerance
testing done by PCR, some ELISA, some have a chemically indexed
germination test they want to do. We don\'t care what their test is. We
were willing to provide it as long as it seems to make sense. Sampling
protocols, sampling is something I talked to a couple of you folks
about. It is normally ignored but it is extremely difficult for us to
secure a representative sample of anything.

And it\'s just assumed in general that we can do that. We can\'t. And if
you\'re dealing with unapproved GMO event one kernel out of 60 billion
in a Panamax vessel sitting in Yokohama Harbor can get you rejected. How
do you sample for something like that? I just \-- it\'s just not
possible. And then you have the compliance issue when and where. Tests
say one thing in New Orleans. They say something else in Yokohama. Who
is right? Come on, Michael, negotiate.

Okay. Third party systems, they\'re growing. We got great
infrastructure. We\'ve got test labs that are owned by Europeans that
used to be owned by U.S. folks at the mouth of the Mississippi River who
do an excellent job. We\'ve got companies scattered across the Midwest.
We\'ve got a number of universities who have gotten involved. Third
party testing has come a long way. Third party sampling, okay, we\'ve
still got the inherent problems in sampling, but, the testing has come a
long way.

We\'ve got verification services to look over our shoulders and we\'ve
got certification services who are checking our documentation to see
what\'s going on. They\'re all helpful. But, our goal here is to keep
the client, develop his trust in a certified traceable system however he
wishes that defined and dampen reliance on the test.

So, we try to set up multiple operations. In dealing with Sainsbury\'s,
which is a British grocery store chain, you\'re going right to the edge
of possible. We can put together soybean programs that will meet their
standards. And we pretty much know we\'re going to do it. We can\'t do
it on corn. But, we can put together corn programs that will come
reasonably close and then we can cherry pick a reasonable approach
program.

But, we have no real idea what percentage of the ground we\'ve initiated
in the project is really going to meet the standard. So, we can\'t
really figure our costs until we\'re done and how do you price that? We
can go for extreme isolation and we are now working, to my surprise,
with some Native American tribes on severely isolating growing
conditions with absolutely full irrigation going on.

Some of those tribes I\'ve noticed have negotiated their own deal with
Mr. Castro recently. You\'re not their committee. Testing. We can easily
do testing by lot, by farm. If we have a very sensitive client, if Allen
Williams were growing for us, we will test the seed lots coming from one
of Monsanto\'s companies, one of Pioneer company, we\'ll test the seed
lots to get ones that match and then he has to show that he\'s got an
invoice out of that seed lot.

If it\'s late in the year and it often is when we\'re scrambling with a
last minute order then we may get a sample seed delivery from his farm
and then we\'ll test it because nothing is going to get better after we
put the seed in the ground. It\'s just going to get worse.

So, we\'re trying to shoot for 0.025 percent in seed if we\'re shooting
for a .1 in delivery to the client. Can\'t do it every day. Lots of
rejections go on.

Okay. Production challenges. Cross pollination, wind, and insects.
Soybeans, cotton, insects. They don\'t steer a straight line. They
wiggle and they carry pollen and really like to get involved in the act
and we\'ve got contamination. Human carrier on machinery or tools. Allen
Williams shows you how he cleans that combine. The organic farmers of
the world follow the same bell shaped curve that any other group have.
So, you\'ve got good ones and you\'ve got bad ones.

And the difference between Allen and some of those farmers is best. We
would like to be able to deal with the top 25 percent, but, we\'re so
starved for getting production all you have to do is lay your
dissertation on my desk and we will deal with you even if you are a
total failure as a farmer because we\'re really desperate for the market
that wants the output.

Field segregation barriers. We hear back because we\'re one of the blue
corn purveyors of the world and so pollen will travel not ten yards, ten
rows, it\'ll go four, five, six miles and get a really good thunderstorm
going you can clear the county, no problem at all. And since blue gene,
the indigo gene, is dominant we hear from a lot of farmers. So, it\'s
not just the GMO issues, it\'s lots of issues.

Okay. Storage is always an issue. The barrels are there because Michael
and I were at a GMO conference a couple of months ago dealing with wine
and GMO\'s. They have a different degree of coordination in their
storage than we do. It\'s a little more variable. But, we like dedicated
100 percent storage. Storage is where accidents happen. You may have a
farm very well run but they\'ve got somebody working for them who is in
a rush to go see a girlfriend and is getting paid \$6.00 an hour and
pulls something out of the wrong bin. It is a problem.

We\'ve got handling, processing, shipping issues, most of which you are
familiar with. We got containers to deal with at 20 tons, trucks at 22
metric tons, rail cars at 100, barges at 300-1,400, ships at 50,000, and
Panamax\'s largest ship squeezes through the Panama Canal and we have
receiving facilities where there\'s dust lying around. It all it takes
is dust flying around for us to lose verification certification
someplace.

Okay. This is the program that we put together for a Japanese company
who I will not mention, but, they\'re one of Japan\'s significant food
companies. We have it trademarked in the United States as Pure Green.
They have it trademarked in Japan, Pure Green. First is the seed sample
before Allen Williams can plant it. If it passes \-- it\'s sampled by
one of the crop improvement agencies around the United States. If it
passes, we approve it, comes back okay, go ahead and plant it.

At 80 percent leaf drop, which is a good time in soybeans where you
dealt with it as varietal seclusion going on in planting, there\'s a
third party visit to the field and the third party stakes the field to
say he\'s observed it and he\'s satisfied that there was varietal
seclusion.

At harvest, the farmer takes a sample and he sends the sample to a third
party verification agency. If that sample passes, we will pass the bin.
He stores the grain in his bin and a third party goes to the bin, takes
a probe, takes a sample back. He seals the bin. Takes a sample back and
if it passes the bin gets cleared.

Then stuff has to be consolidated at a receiving center. And since
we\'re never sure whether there\'s confusion on which people pulled out
of, we have to hold trucks between a half an hour to forty five minutes
upon delivery so we have time to give them essentially a stick test, a
litmus test.

And then to be sure we\'re doing things right we have random inspections
at least once every two weeks at a time of the choosing of the
verification agency, comes in and checks their incoming, checks their
outgoing, and checks their inventory, including bagged inventory.
Anything that doesn\'t pass muster, the whole lot goes into the
conventional world where people don\'t care as much what they do.

So, we can be wrong a couple of times in the system and we would still
pass. So, this gives some of these food companies that are extremely
sensitive to their reputation and not wanting to see an article in the
Nippon News about having made a mistake about something. So that is the
toughest GMO or ID program that I\'m aware of.

We have risk rejection issues going on throughout the system, but, I
should tell you, if you do this job right, you\'re probably not going to
have to reject more than about 5 percent of the loads you see and if
you\'re working with people you know very well, very closely, you
probably kept that down to the two percent or three percent level.

I might have mentioned that on corn issues, I don\'t think I mentioned
this to you, on corn issues if you have a buyer that\'s extremely
sensitive about the corn issue and you tell him quit buying yellow corn,
buy white corn. The reason is there are no commercially available GMO
white corn husks. And white is a recessive gene so if you get cross
pollination you\'ll have yellow kernels. And you run this corn through
optical scanners and you can get as close to zero as humanly possible. I
would never zero, but, you can get close to zero.

Okay. Solutions to conundrums here. There\'s some new technology, some
new knowledge that\'s come to the field that could be used and what
everyone decides about biotech in the future I would like to see enough
regulation that we don\'t have another RiceLink or StarLink issue.
There\'s a seed company in Western Iowa. I think it\'s Western Iowa. It
could be Eastern Nebraska. It\'s Hagermeyer Seeds.

And when Tom Hagermeyer was getting his Ph.D. as plant breeder he was
terribly frustrated because he was dealing with a corn phantom he was
trying to crossbreed. The dark family wouldn\'t crossbreed with
anything. Then the GMO issue comes up. He says, gee, I wonder if I could
take that trait that\'s not crossbreeding with anything, it\'s a natural
trait, and breed it into corn. He said it\'s the toughest breeding
challenge he\'s had in his life but he\'s done it.

And he is willing to make that trait available to any other corn company
that wants to put it in. He\'s not trying to sell his own seeds. He\'s
trying to sell trait and it\'s a naturally occurring trait, so, it
satisfies the organic people. It satisfies everybody at the table. It is
not 100 percent perfect. It\'s 99.X percent perfect which is a lot
better than we are now.

I would like to see, I have no idea what the cost of this is, but, I
don\'t think it would be very much, if there\'s a new genetic event
that\'s going to come into our agriculture put a marker on it. Make it
easy for me to find it. Because my difficulty, my opposition isn\'t that
anybody grows, my difficulty is seeing the client gets what he wants or
avoids what he doesn\'t want.

So if that can be done I would love it. I do have one special thing I
would like. Some of you I think know Dave Shipman, troublemaker here
within the Department. I asked David for something. He turned me down.
We raise blue corn. We do the seeds behind blue corn. Al Williams has
been raising blue corn for us. Mr. Cameron, I tried to convince, but, he
makes more money on tomatoes so he didn\'t want to do the blue corn.
But, what I found was blue corn is not corn according to the USDA.
Across the world it\'s corn, but, not to the USDA.

I found that out because a farmer went in before planting it for us and
said I want to know if I can sell this blue corn. What, blue corn?
There\'s no definition of blue corn. No, sorry, it might be a vegetable
but it\'s not corn. So, I start with the Farm Service Administration and
said, surely you guys are going to call this corn. Oh, no, we rely on a
GIPSA definition of what corn is.

And, so, I go to David. I said, David, surely you\'ll find enough time
in the year to give me a definition that says blue is corn. But, David,
after fiddling with it for six months sent me a note, sorry, Lynn, no
definition of blue corn, there just isn\'t enough demand for it.

Well, how many people have to demand it before we can recognize that
blue corn is blue? I mean, that means the organic farmer raising blue
corn for us cannot seal it, he can\'t get a deficiency payment, he\'s at
a loss unless he runs into happy, lower level members of the USDA that
says, that\'s stupid, we\'ll just call it corn which is going on.

It would be nicer if we\'d just recognize it. Okay. Enough of my own
lobbying here. Okay. The type of stuff I\'m talking about is not going
to get consumed. It\'s not going to go away, it\'s going to get more
intense and it\'s going to get more intense because of more GMO events
coming up.

The genetic events aren\'t going to be poured into our system just from
us, just from people who like and we trust and you know that they think
they\'re doing great things. It\'s going to be poured into our system by
Chinese breeders, by Indian breeders from all around the world and
there\'s need to, I think, do a little more regulation here to see what
comes into your system.

What\'s going to become really difficult, if not impossible, to deliver
segregated stuff. Again, I\'m going to have to be dealing with buyers in
my foreseeable future that want none or want some or there might be one
genetic event they really want and they want to improve their sex life
and all that is what they want and I\'m supposed to distinguish and
there\'s no visible characteristic that\'s distinguishable.

So, I\'m going to be locked into testing, locked into markers, and I
would like to leave them happy, but, this is an increasingly complex
marketplace and the organic world occupies a growing segment. The
organic world is supposed to have zero but allow adventitious presence
so what happens when I deal with a major national food company whose
name I will not use with you, what\'s your GMO approach here, do you
want us to have a traditional organic program or you want us to have an
organic program with a GMO tolerance added. Well, what are the
differences?

Well, the standard program is it is a process definition and nobody\'s
going to run a test on it. We\'re not going to test it for GMO. And that
way you\'ll get the most material off the fewest acres.

Okay. We like that plan. I said, wait a minute, don\'t do that because
if you do that everybody in the world will know we\'re not testing and
then we\'ll become a dumping ground for any problem that everybody else
has. Well, what do you suggest? I suggest you allow me to randomly check
incoming trucks because the truck driver is a virus. There is no secret
in agriculture because the truck driver carries the information
everywhere you want to go.

You just know it\'s not going to be a secret so if you\'re going to run
a tight system it has to be done in such a way that the truck driver is
aware of what you\'re doing and typically these companies said, sounds
like a good plan, run it however you like it. And, so, we then set up a
tolerance level for them because they\'re still arguing what tolerance
level to use. And we typically insert the ones the Europeans use to give
the most flexibility to our buyers.

Almost every food company wants to be able to sell whatever you make in
as many markets as possible. That\'s why we try to do it. So, I would
like a regulation that doesn\'t inhibit development of genetically
engineered traits. I would like help in negotiating an internationally
accepted test protocol or protocol. I would like help in negotiating
somebody to do the testing and sampling where everybody in the chain
accepts the result and we don\'t have five tests going on arguing about
who is right and who is wrong.

And then, again, I would like you all to take David Shipman to lunch and
talk to him about blue corn.

(Applause)

MS. SULTON: Do we have any questions? Mardi.

DR. MELLON: When you test for your clients that demand no GMO\'s do you
test only for approved events or do you test for unapproved field test
events?

MR. CLARKSON: Testing for unapproved events strikes me as an infinitely
difficult process. I wouldn\'t know what\'s there to test for. So, the
only thing we\'re testing for is for proven events relying on government
to see that we don\'t have unapproved event. But, we don\'t test for
them.

MS. SULTON: Duane?

MR. GRANT: I liked the presentation and thanks. I\'m not really sure how
to ask this, but, I guess, is there a tipping point which buyers will
back up from your Pure Green premium product to maybe a national
standard level of assurances, the Japanese at 5 percent, and because
I\'m not looking for a specific number, but, just kind of a general
sense of how willing are consumer companies to pay for the premium
versus just simply the national standard?

MR. CLARKSON: It runs the bell shaped curve. You have the very sensitive
companies whose reputation is a matter of keen concern to them who are
willing to put the money together for a program like that. The program
probably costs less than 50 cents a bushel if you have a significant
size program. If you have a very tiny one it would cost quite a bit
more.

But, 50 cents is more than the tipping point for many people so you\'ve
got the full range of folks that\'s far too expensive for some people
and always a struggle but adequate for some folks. But, the futures
market for non-GMO soybeans in Tokyo is typically paying about 50 over
the futures or commodities in the United States. Of that, the American
farmer is currently at 50 cents and the rest of the supply chain is
getting an extra dollars and those things may change over time with the
radically improved demand for corn over the ethanol issue. I don\'t
believe that people will be able to buy non-GMO corn with the 20 cent
premium they\'ve been paying in the past.

I think it would have to be someplace between fifty and a buck and
soybeans is going to have to grow between fifty and a dollar, dollar
fifty to keep generating that. We\'ll find out which ones really care.

MR. GRANT: So, to follow up, so the premium Pure Green is fifty cents on
a big project. What is a minimal program cost just as percentages or on
a bushel? Some kind of IP but nothing that would approach Pure Green.

MR. CLARKSON: We have a barge on Newmont River that handles almost
exclusively hard starch non-GMO corn slated for Japan in both dry
milling and wet milling. The farmer has to produce an affidavit showing
he planted the preferred hybrid. He comes in and we issue a \-- we\'ll
hold the truck for about half an hour and then we do the stick test on
it and they would have been done on that. That\'s it.

And my guess is, and this is a little bit of a guess, we\'re rejecting
maybe two percent of the loads going to that.

MR. GRANT: Okay. And the upcharge to the buyer?

MR. CLARKSON: The upcharge to the buyer is really sure. It\'s probably
15 cents a bushel, 10-15 cents a bushel. And then he\'s probably paying
20 cents a bushel to the farmer to get the corn and then an extra 15
cents covers our expense of our new test for him. We don\'t try to make
more money on it. We\'re just trying to hold onto the same business.

MS. SULTON: Josephine?

DR. HUNT: You mentioned at least 95 percent of the cases you\'re able to
deliver the product successfully. I was wondering in those cases which
don\'t pass where you have a reject at which place in the process tends
to be the critical point for failing?

MR. CLARKSON: It\'s somewhat of a tossup. With farmers not cleaning up
bins and delivery equipment and failing because they may have a bad
blend on their farm. With \-- the other issue is trying to bring in the
entire field, corn field, when you have a non-GMO corn field but right
against a GMO corn field and that\'s okay, but, you really have to
harvest 16-24 rows and off your IP field and move that into conventional
commerce and not try to bring it to us.

If we\'re doing our job well we\'ll detect that, but, by the time it\'s
spread through your bin you may have contaminated your entire bin. And
so we may lose an entire field because the farmer failed to pay
attention to a wind drift pollen issue. That would be typical.

Another typical thing is not having the bin cleaned out. So, those are
probably the cases where we lose the most.

MS. SULTON: Michael.

DR. DYKES: The typical program you described, what crop was that for
because I think the point you\'re making, which I totally agree with,
it\'s highly dependent upon the crop, so, what crop was that you were
talking about?

MR. CLARKSON: We started out on soybeans. It\'s been extended to corn.
The same protocols we were willing to provide were applied to any crop
but the only two we\'ve been asked to do it on are soybeans and corn.

DR. DYKES: And \--

MR. CLARKSON: Soybeans primarily.

DR. DYKES: That\'s what I was going to say. Does it work for corn?

MR. CLARKSON: It works for corn.

DR. DYKES: You made \-- the question. You made a comment that you\'ve
tried to start to meet .1 percent at the end. You try to start with seed
that\'s less than or no more than .025, is that correct?

MR. CLARKSON: Right. That\'s fantasies when we try to start \--

DR. DYKES: Okay. And that\'s the bulk up in the seed side of it?

MR. CLARKSON: Uh-hmm.

DR. DYKES: Okay. Okay.

MR. CLARKSON: That\'s for the .1 percent. That\'s where the sensitivity
of the British grocery store chain which is \-- except for the Koreans
they\'re the tightest regulatory group, commercially regulatory group.

DR. DYKES: You mentioned one other thing about we need additional
regulations to control what may come in from Chinese breeders, from
Indian breeders. But, I didn\'t hear you say at the end, what are some
of those things that we might be able to put in place to control for
genes that we don\'t know, proteins we don\'t know from breeders we
don\'t know?

MR. CLARKSON: I think that\'s a wonderful reason for you as a committee
to tell me how to do that because tomorrow we could have a new corn with
an unapproved genetic event that comes in from Japan.

DR. DYKES: Absolutely.

MR. CLARKSON: We don\'t know what to do to screen it.

DR. DYKES: Absolutely.

MR. CLARKSON: So that\'s why I\'d like to see markers in everything.
I\'d like to get the Chinese, sit down with them, have an agreement with
the Malaysians and the Indians.

DR. DYKES: It sounds good in theory. You made a point on the markers and
that\'s the last comment I had. You know, interesting on the marker
concept because it senses to me that we may be going full circle because
we\'ve outlawed markers. The Europeans have outlawed markers in crops
and what you\'re highlighting is that markers had a very useful purpose.

MR. CLARKSON: With the European standards the markers would be very
helpful to me with the European standard.

DR. DYKES: Yeah, absolutely. But, we, as a company, are going to great
lengths if we have markers to get them to start with, to cut them out
once we get them.

MR. CLARKSON: Put them back.

MS. SULTON: Leon.

MR. CORZINE: It\'s always good to see a neighbor even if we\'re not in
the neighborhood, right? Your Pure Green, it seems to me, is it pretty
similar to what we do in soybean seed production?

MR. CLARKSON: Uh-hmm.

MR. CORZINE: So, it\'s pretty similar to that as far as testing of the
lots before you plant and clean out and all those issues so am I
assuming that correctly that it\'s pretty close?

MR. CLARKSON: Yes. We\'re working with Delmar Crop Improvement (sp.)
over in Urbana and their history has been in doing exactly what you just
talked about so they brought many of those programs to the table and we
worked as an intermediary with the Japanese buyer and we agreed on many
of them and they\'re very good IP protocol.

MR. CORZINE: And these are all going into Japan products you\'re
talking. That\'s for food production rather than feed production, right?

MR. CLARKSON: Every time we\'ve been asked for it it\'s been going into
a human consumption.

MR. CORZINE: On your sampling of seeds getting back to tolerance, I
would assume that in your sampling, just like you mentioned very well I
think the whole thing about how you draw that sample, you have the same
issue with your seed sampling?

MR. CLARKSON: Absolutely. I would never look you in the eye and tell you
we have done it perfectly because I don\'t know what that is. We just
use the great system of muddling through.

MR. CORZINE: The last question was when you\'re talking about the blue
corn, and I\'m familiar with that, but we don\'t have pollen drift
issues mainly because of the temporal difference that we talk about,
right?

MR. CLARKSON: Uh-hmm.

MR. CORZINE: I mean, my corn flowers and yours is not vice-versa. Now,
so I would think that that\'s fairly common among the organic producers,
especially through the Midwest. So it seems some of those issues might
be more around the different organic varieties, one organic variety to
another, and so are the issues the same as far as needing buffer strips
in that from organic corn to the next organic corn?

MR. CLARKSON: The answer is yes and more and more but the organic
hybrids that we\'re offering in blue corn by the way range in maturity
groups from 112 day, from 112 day to 118 day corn. So, depending on
where we\'re growing those, farmers either react by delaying their
planting or rush to make that organic corn.

By the way, we pay about \$8.00 a bushel for organic corn, okay. And a
good organic farmer will have over 100 bushels an acre yield. The bad
organic farmer, we\'re sorry we even asked him to raise it, but, there
it is.

So, because it\'s one of the most profitable things that you can grow in
the land between the mountains we have farmers striving, organic farmers
striving to make sure that they get full maturity on that so they\'ll be
planting it sometimes at the same time as their neighboring conventional
farmer. And that\'s where we have people stopping by our office and
saying, my God, what did you put in my corn. I\'ll say, did you get a
damage discount? No. Then, okay, fine, let\'s have a cup of coffee.

At least we hope they don\'t get a discount. But, Alan was quite right
when he says a kernel of blue corn shows up in Archer Daniels or Cargill
it\'s regarded as damaged. It\'s got higher protein. The blue
pigmentation gives it four times the anti-oxidant level of blueberries.
It\'s a wonderful corn. And it\'s regarded as damaged. That\'s the way
the system works.

MR. CORZINE: Is that any different of the co-mingling of white corn and
yellow corn. I worked in an elevator for a while that had a large market
in the poultry industry and they wanted yellow pigment so we were,
because of a market situation, unable to get rid of the white so we were
blending the white thinking it wasn\'t a problem but we about lost the
market because they wanted no white, they wanted yellow, so it\'s
similar.

MR. CLARKSON: They hadn\'t written that in the contract though, had
they?

MR. CORZINE: It was in the contract. It was a few years ago.

MS. SULTON: We\'re a little short on time.

DR. SCHECHTMAN: Yeah. I was going to say, we can probably squeeze in one
more quick question and if we need to we can have any questions that go
to Nick after the public comment period.

MS. SULTON: Mardi.

DR. MELLON: I just wondered if you had any idea of how the "RiceLink"
was discovered. It apparently was discovered by a customer of a U.S.
companies so that customer must have been testing for unapproved variety
\-- unapproved events.

MR. CLARKSON: I don\'t know. Do you know?

DR. DYKES: That\'s not ours, but, I think we got to get clear, Mardi, on
testing for unapproved events and proteins and I want to reiterate, not
our rice, but, the protein in that rice is the same as the protein in
the others so if you\'re doing some quick scans on particular classes of
protein you could have found one in the approved one the same as you did
the 601.

So you\'re not necessarily \-- I think his point was how do you test for
purely unapproved stuff because you don\'t even know what you\'re
looking for.

DR. MELLON: Well, you would if you had required that everybody who had
tested in the U.S. had, for example, provided primers to USDA.

DR. DYKES: But, I guess that\'s the point, Mardi. They did have and they
tested they found the proteins but you don\'t necessarily because it\'s
the same protein in all three so then you got to come back and do some
more testing to find out if it\'s 601 versus 602. But, I think they
found it for their testing for the protein.

MR. CLARKSON: If I knew nothing, you asked me that question, if I knew
nothing about the issue at all, I would make the assumption it was a
Japanese buyer who is testing it. Now, earlier we heard that people
weren\'t really paying attention to pesticide drift, pesticides. I have
a list of 250 pesticides I\'m being asked to check for but you have
these buyers. The cost of doing a test on a single lot is around
\$10,000 and some of the pesticides or chemicals really aren\'t used in
agriculture at all.

They might be using a guy and a back pack so then we get back to
negotiating, to try to negotiate down, let\'s not really test for this,
but, we are seeing increased sensitivity on the part especially of the
Japanese testing for everything which you might imagine. And those are
my clients. If it\'s an important issue to them it becomes important to
me. My guess would be Japanese but I don\'t know.

MR. SULTON: Thank you very much.

(Applause)

DR. SCHECHTMAN: And now our final presentation for the day will
obviously come from a member of this committee, Dr. Nicholas
Kalaitzandonakes who will speak on the economics of alternative purity
requirements under conditions of coexistence. Once again, we are calling
on a fairly new member of the committee to jump right in.

MR. KALAITZANDONAKES: Thank you very much, Michael. I am going to go as
quickly as I can so that we give time both for questions and then the
comments and our procedural issues we can address.

So, these are the questions that Michael posed to me and I\'m going to
try to address today the first three, what is the cost of supplying
commodities under different tolerance levels. I prefer to use the word
adventitious presence levels because of all these reasons I can\'t say
tolerance today.

So, the second question is how do these costs vary by size over the
market to be supplied. How are these costs distributed across the supply
chain and then there are several portions that I think are very, very
insightful, very, very important but I don\'t think that we are going to
be able to address them today \-- how risk is factored into such costs;
how costs are affected by the diversity of products as new products come
to the market; and then how the cost structure varies for products in
the case of when we are trying to assess presence versus absence, so,
depending on how much time we have and my comment on those.

All right. So, let me kind of go very quickly over some numbers and if
any of the numbers are not clear just put your hand up and I\'ll
explain. So, the first question is, what evidence do we have on how much
does it costs to really do identify preservation and deal with
adventitious presence? And, so, as I told you, you first look at markets
that are going to tell you something and then I\'ll try to use some of
the information to address a question that pops up a lot at almost every
presentation I give I get this question.

So, let me show you the first slide. One of the interesting statistics
which I think a lot of people do not know is that United States is the
largest exporter of non-GMO products in the world. We export despite the
fact that we are the largest GMO producer we are also the largest
non-GMO exporter. And we export anywhere between 3-4, a little bit over
4 million metric tons of non-GMO corn in any given year and up to 1.5
million, a million metric tons of soybeans.

And I have a list of typical, and these are about, by the way, to Japan,
the \-- I have a typical set of premiums. Now, some people have gotten
more, some people have gotten less, but, this is standard on average and
I want to put them out so that you can see how they have evolved over
time which is not very much.

Now, in general, these numbers are not very large numbers. And, so, a
lot of people look at these numbers and they ask the question, well, if
it doesn\'t cost all that much identity preservation might not cost all
that much to do anyway. Maybe adventitious presence is not a big deal
and identity preserve systems can be not very costly. And when you look
at these numbers, next slide, please, those are very consistent with
numbers that we get, for example, from the non-GMO premiums from the
Tokyo Grain Exchange and let me see the next slide.

And we very similar kinds of reactions from people and that\'s where the
question that I was telling you that I get a lot is in the seed market.
For example, we have in Europe two markets that are especially tough
when it comes to tolerance levels, especially Austria and Italy. Both of
them are imposing practical zero which means .1 and they\'re testing for
it and they are getting what they\'re asking for and in addition to
that, there is no premium.

In other words, they don\'t pay more for the cost of the seed. So, I
always get this question which is pretty much lumped into the previous
slide that I showed you which is, well, you know, non-GMO premiums in
Japan are not very large. You know, we look at the seed market in Europe
or very low threshold markets and there are no premiums and, in fact,
supply goes there.

So, it should be a problem. It\'s got to be a problem. And the reason
this is happening is because of the size of the market so back to the
question that Mike posed, Michael posed, what is the impact of the size
of the market? This is going back to the size of the market. So, this is
how it works. I\'m going to slip away just for a second from the
microphone.

So, let\'s assume that this is a hypothetical distribution of seed
purity of the whole industry, and it is hypothetical by the way, where
basically you have when you took all the beans from the seed industry
and you spread them around you would have something that looks like
this.

Lynn used the word cherry picking in his presentation. That\'s exactly
what\'s happened. So, in the United States we produce about 28 million
bags of seed corn in any given year. Also, in Italy are very, very small
markets. Austria is about 275 thousand units, bags. Italy is about 1.2.
They also have their own production. That means that they produce
domestically under non-GMO conditions over half of that.

So, what is being supplied by other markets is a very, very, very small
fraction of this demand. So, if you go to all the beans and you cherry
pick the lowest distribution or your lowest dollars levels then you can
supply this market. Well, so, this actually works pretty well. So, back
to the \-- you saw Lynn present the Cadillac of IP systems that we have
in the United States and also appealing to a very probably high-end
market in terms of his customers.

But, we also have a very large number of suppliers in the United States
in grain that are supplying a less demanding market, very similarly in
this way that I was describing by cherry picking or by low level, low
cost IP systems. So, next slide. So, the focus of course is that this
system works under one circumstance. And that\'s only when your supply
is a lot larger than your demand.

So, if your market starts growing then you can shape it. Then all of a
sudden you actually have to go through and do IP for a large part of
your production and that\'s where systems begin to get really expensive
and as that volume goes up that\'s how the cost begins to go up. But,
now, let\'s see now how that works.

I\'m going to use and show you some numbers from both the U.S. and
Europe from seed core production, okay. If you want the details on how
we produced these numbers I can give you the details but the bottom line
is we use some modeling but all the data that the models are based on is
real data from seed companies across the board. In other words, in the
United States, companies like Monsanto, Pioneer, Syngenta, and several
regional companies have cooperated for this. They have given us
confidential production and distribution data and then in Europe and the
U.S. and others have worked with us with real data.

So, this is not hypothetical situations I\'m going to show you. These
are real data. Now, what I\'m going to show you is asking the question,
what happens if I start producing IP under more and more strict IP
systems under different threshold levels? So, like I said, what is a
seed company to do? Well, they can do a whole bunch of things in order
to manage their purity level of seed and anything from includes
isolation businesses to border rows used to the number of male rows that
they are using so that they have more pollen.

To increase the pollen isolation people spoke about planting at
different times; a block plant (sic). In other words, put together, for
example, fields with the same male pollinator; harvest fields
separately; on and on and on. So, all of those different activities can
help improve the purity but also implies some kind of costs because
you\'re re-engineering the supply chain. So, the question then is, you
know, which one at what cost? And what I\'m going to show you is \-- and
that\'s where the modeling comes in because most of the seed companies
have not done this exercise. In other words, they have not done
everything. So, what we have done is we have taken the actual data. We
have done all the different implementations of different re-engineering
of the supply chain and then chosen the optimal one, the minimum cost
and over cost, baseline cost, or, the case of producing conventional
seed. Okay. So, per bag or per unit cost. This is percentage increase.
Baseline being two percent purity. Okay. So, if you are receiving two
percent today why would it cost you to go down to .5 purity or .3 purity
and so on? And so you can see that the range of incremental costs for
the different plants that we have modeled, and by plants I mean the
whole production system: the fields that are producing for a particular
plant, the processing and conditioning in the plant and so on, all the
way down to being seed in a bag.

So, you can see the range is between 27.2 percent and an 42 percent for
.3 percent purity. So achieving that purity level would imply that
incremental cost. Now, one of the most interesting questions to ask is,
okay, if we know what these numbers are can we find out where they come
from? Because if you know how they come about, what contributes to
these, then you might actually be able to manage them.

So, let me show you really quickly and you can see that the models that
we are using are very transparent. That means you can actually model and
estimate changes and associated costs down to the individual bin in a
particular plant. The bottom line result is that everything contributes
a little bit or, in other words, a little bit of cost is contributed by
a variety of factors.

So, for example, all your plant assets like dryers, storage bins, etc.,
are basically under-utilized. You extend their use so you are spending
more in fuels. You are also running less volume through them\-- and
therefore you\'re using less of their capacity. Then this is a really
important one. The number of bags you are producing is greatly reduced,
due to discards. Next slide, please.

And the reason that you\'re losing product is because basically some of
the product has to be rejected and if you don\'t have a residual market
then that means that, you know, that goes to the grain elevator and so
the residual revenue is not very much. So, what happens is, as you see,
those types of costs, and I have broken them down here by committal
costs because of these guards and then processing costs and other costs,
the discards become bigger and bigger or more costly as you try to push
lower and lower these purity thresholds.

So, as you try to go more towards the lower IP thresholds your discard
costs go up. Now, let me show you comparable results from the EU. We did
the same type of analysis and there we tried to make costs for .1
percent as well because of the interest of the regulators and you can
see that the incremental cost or the range is actually even higher.

In fact, in some cases the .1 percent most of the clients fell out of
the analysis because they couldn\'t meet it. There was no way that they
could actually do anything to meet that. Now, keep in mind, we are
assuming coexistence. In other words, this is under in the case of the
U.S. under an environment of adoption of GM corn in the region and in
the case of Europe under the assumption of 25 and 50 percent adoption in
the region. So, those are in the case of Europe the adoption of GMO, the
assumptions of GMO adoption.

Now, let me show you really quickly the issue of how risks sometimes
factors in because quite often averages mean one thing but then there
are years when things can go really poorly or better and so the costs
are actually on average might be 54 percent in one year but 63 percent
in another year and what\'s interesting here is that as you go lower and
lower those risks tend to increase.

And, so, as we go to the lower thresholds your costs can actually double
in a particular year based on the distribution that we have. Again,
I\'ve broken them down. One of the interesting points to point out here
is that I did testing costs. This was at the time actually pretty small,
relatively speaking, as a portion of the total and, so, quite often a
lot of people spend a lot of attention or pay a lot of attention to
testing costs and really those do not end up being a large percent of
any IP cost in any IP system but quite a bit of the risk and I think
Lynn talked quite a bit about this in terms of how you sample and how
you test and so on.

So, there\'s a lot of uncertainty around testing but the cost component
of that is probably not the largest one. Some of the reasons why you
might have some of this cost differentials and I\'ve selected to just
point to a few things is because of the production system. So, for
example, on the left hand side on my picture you see a typical U.S. corn
seed field. On the right hand side it\'s not a typical one, but, it\'s
pretty darn close and this is

\-- these are fields, production fields of KWS in Germany. I don\'t know
how well you can see it, but, this says 1.15 hectares so this is
actually a field that they produce seed on.

And, so, you know, in a field that is not much bigger than this room
obviously you can have a lot of pollen fly in. The borders are not going
to work very well and so on. So, among other things, the large number of
fields, the smaller size, and so on are sources of differences for the
costs.

So, one of the questions that I get very much is, okay, so, obviously
this starts to play a very significant role in the costs, how dependable
are these estimates, and when we compare our estimates, our projected
discards, against actual discards that would have happened if I took the
U.S. inventory and looked at all that inventory in terms of purity so
large seed companies can share some of the tests that they have across
the board and, so, comparing our projections to those numbers basically
says that we are over \-- I\'m sorry \-- under-estimating, not
over-estimating those discards.

Now, SEPROMA, which is the French seed, French seed association has
projected those discards to be in the order of 25-30 percent for the
.513 percent totals. Okay. Now, one of the questions that Michael posed,
I think is a very insightful question and something that one has to
think about a whole lot is how are all these costs, and I just showed
you incremental costs for IP in the case of seed, how are all these IP
costs distributed across the supply chain?

And one issue of distribution, of course, isn\'t just going from one
part of the chain to the other, but, even inside the same industry what
happens, for example, to the small versus large size companies. And in
general, we have found that large seed plants cope much better in
principle than smaller ones so smaller seed companies would likely be
helped by a situation like this.

But, when you start thinking of going from one sector to the other, one
part of the chain to the other, things such as simple as the underlying
production process and the underlying issues that you might make up
front can make a huge difference on the cost.

So, for example, in the case of seed production, we deal with a
production that has two different plant lives, a male pollinator which
is this thing, and the female plants which produces seed. These are all
of this. And, of course, that creates a much more significant problem in
terms of keeping floating pollen outside of the field. Then you would
have a normal grain production.

So, in the case of normal bin production you basically have a much
denser cloud of pollen. You have a much lesser chance of getting
basically pollen flow into the field. So, what does that mean? Well, let
me show you really quickly. This is from another study that we\'ve done
where we basically looked at the IP costs for supply chain in the case
of wet milling.

This is, again, in the U.S., two different plants, two different
locations. Location A is in \-- both of those locations are in the
Midwest. Location A is in a place where there is about 65 adoption of
GMO corn and location B is in a place where there is about 20 percent
GMO corn adoption. And what you see is the rejection rate after the
whole production has taken place.

In other words, the wet miller works in the seed companies much like
what Lynn was describing to get less than 4.5 percent GM content in the
seed, the seed corn, and then from that point on they work with the
farmers all under contract. They deal with \-- they use border rows to
do most of the isolation.

After it\'s scored, after it\'s transported to the wet mill or two
different wet mills those are the rejection rates that you get and this
is averages over several years and I have organized them by field size
so you can see that obviously the field size is the less the rejection
is because you have less of a rejection issue, but, in general, those
numbers are very consistent with the numbers that Lynn was talking
about, 2 to 5 percent rejection after all the production has taken
place.

Now, in terms of economics I want to show you really quickly costs of IP
again for this system. And this is actually a certified IP system. I
have highlighted only three numbers here. Two things to notice. First of
all, we\'ve broken up the IP costs into a variety of categories and
there are numbers in every one of them so that means, again, that each
and every one of those reinstitution processes add to the cost.

But, things such as trucks, transportation costs, I\'ve never thought of
transportation costs as being a real driver for IP or incremental
transportation costs. What happens is instead of a farmer in those
particular regions taking their corn and taking it to the next elevator
basically they have to deliver it to the plant. They incur a lot higher
transportation cost and all of a sudden transportation costs becomes a
full percent component of an IP system.

So, sometimes you have surprises of that kind. Another one is the
rejection costs again for the high and the low adoption levels and then
one last point to point out is this. The cost of IP for the farmer and
the premium they receive are almost identical, almost to the point. So,
quite often it is agreements are discussed as net value added but rather
as bonuses to the farmer.

And it isn\'t like that. It is a value added activity. You get more
service, you get more payment. And, so, that\'s exactly what\'s
happening in this particular case, the farmers incur some costs and
quite often managerial costs and they get more payment.

Last line. This is from a study that we did back in 2003 with a
consulting company in Europe, Arcadia, and basically what we did was we
measured IP and traceability costs across the supply chain in the case
of meat production and the incremental costs for non-GM soy at 1 percent
threshold. And this is a lot less accurate than all the numbers that I
showed you before, mostly because it\'s all based on survey, different
actors in the supply chain so there is no modeling, there is no extra
effort to go beyond the different companies and actors in the supply
chain.

But, I have broken down the different costs by this, even the
opportunity costs to us for utilization control; in other words,
management, operations, changing operations in the fields just so that
you see that as you go from one part to the supply chain to the other
that share of those different costs actually changes quite a bit.

Okay. So, let me then try to complete really quickly and I think I\'m
ahead in terms of time. So, the very first thing I hope that you got out
of all these numbers that I flashed through very quickly at you is that
IP costs vary drastically with the market size, with thresholds, with
the crop that we are talking about, soybeans, corn, and so on, the
production location. I can go from one location to the other and because
of adoption, because of the modality of the place, because of the
weather patterns and so on, I can have drastically different systems.

The physical characteristics that are being used, large, small, many
beans, few beans, and so on, and from one part of the supply chain to
the other. And that variation basically means that the question how much
does it cost to do IP cannot be answered with a single number, whether
that\'s cents or whether that\'s percentages. It doesn\'t work that way.

So, depending on where you do IP you get different costs, and markets
have been very good at finding where the low cost, and that\'s where I
started my presentation, right, markets have been very good at finding
where the low costs production possibilities are and making them
available when the demand was there.

But, the question, of course, is what happens when you try to implement
these type of systems across the board. Say, in Europe where you
basically regulate and you say, .9 percent across the board through
regulation and that becomes a much different proposition.

Of course, when you start talking about process versus product based
systems the cost issues are very, very, very significant. And the risk
differentials are also very significant and I won\'t go into that since
we have not talked a lot about testing and sampling and so on.

So, my perspective so far in studying IP markets for the last eight,
nine years, and my perspective is that IP markets are working
exceptionally well. They are both at the global level and at the local
level. In other words, production goes where it\'s supposed to go.
Pricing, the value is very close to the cost which you would expect in a
competitive market and you have tremendous diversity and ultimately we
have few examples of rejected loads of failures of the market to deliver
what the customer wanted in large part because of people like Lynn.

But, markets have worked exceptionally well in IP systems and those are
very specialized markets and they\'ve done very well. So, the question
then becomes what happens when you try to take that experience and
assume that it will work exactly the same way when you translate that
into regulatory in a global regulatory framework. In other words, by
saying, oh, this is how it will work in the case of similar standards
applied across the market and that is absolutely the most fundamental
mental error that one can make and it\'s been made each and every time
in documents, for example, published by the European Commission where
they put examples of IP systems and they use those to project costs for
labeling systems and traceability systems that they\'re putting in.

And, of course, that doesn\'t work that way and I hope that if I
communicated nothing else at least I communicated that part. So, let me
just stop right there and take any questions you have.

(Applause)

MS. SULTON: Questions? It was so enlightening, no questions?

MR. SLOCUM: I have one.

MS. SULTON: Jerry.

MR. SLOCUM: So, Nick, if IP premiums roughly cover the costs incurred by
the producer, why do it? Why would the producer \-- why is he chasing
this thing if all he\'s going to get out of it is a premium that covers
his additional cost?

MR. KALAITZANDONAKES: So, first of all, this happens at where at the
point where his market stabilized. In other words, in the beginning you
basically have high opinions in order to motivate supply. And those who
come in, much like any adoption process, right, area doctors rate area
benefits, right. At the point where supply equals demand everybody gets
paid for their effort. So, that\'s what we\'ll do.

I mean, I\'m surprised you are surprised. We all supply at our equal
marginal cost point, you know, at the competitive level. Now, I\'m sure
that Lynn, for example, works with a lot of farmers that hold the
margin, you know, this 10, 20 percent top producers are better
producers, they will get the better contract when it becomes available
and potentially are more efficient than my averages, okay.

So, these guys will make a premium over cost, but, in general, at the
point where supply equals demand that\'s how it works.

MS. SULTON: Thank you very much. One more question. Sorry. Mardi.

DR. MELLON: Do we have time?

MS. SULTON: Yes.

DR. SCHECHTMAN: Yeah, we can do one more question. What we might do is
go to the public comments and we\'ll take a break after that and so I
think we can do that if you want to finish this segment.

DR. DYKES: Do we have public comments?

MS. SULTON: Yes.

DR. SCHECHTMAN: I believe we\'ll have at least one.

MR. GRANT: I think if we can put Nick and Lynn back on the hot seat for
just a little bit just because we\'ve kind of condensed the questions.

MS. SULTON: Mardi.

DR. MELLON: If I understand this correctly there are very high adoption
rates biotech, let\'s just say in a country, maybe globally, than the
cost of supplying a non-biotech product become higher and higher and
higher, right, unless \-- but those costs depend on the tolerance level.
And the tolerance levels we\'re talking about here are relatively low,
right. They\'re less than one percent.

At what \-- I mean, if you can even hazard a guess like this, at what
level do the costs not become high? I mean, what level \-- another way
to put it is what level does the world have to tolerate in biotech
products in order \-- I guess another way of putting \-- well, just
answer the question.

MR. KALAITZANDONAKES: Let me understand your question. So, the answer to
your question is multi-faceted. First, how large is the market that
you\'re supplying. If the market that you\'re supplying is pretty low,
it\'s pretty small, then you don\'t have to incur a lot of costs because
you can cherry pick your production areas. You can cherry pick your
bins. You can cherry pick your producers and so on, okay.

So, it depends on the size of the market that you\'re supplying. As the
size of the market grows then you are basically coming against the
farmer making a choice on what to grow. You are coming closer to farmers
being, you know, closer to each other so more pollen flow, more border
rows, so you now start having to re-engineer your production technology.

In that case, it depends on where production is taking place. It depends
on what crop you are talking about. So, it\'s very different when
you\'re talking about canola versus corn versus soybeans. So, that\'s
what I mean there is no such thing as a single answer. In the case of
corn, my guess is that probably seed companies and seed companies are
represented here and they might venture an answer themselves, but, I\'m
guessing that, you know, in the two to five percent area they could
probably supply purity at very limited incremental costs.

Because, you know, or at least the largest ones, they already are
implementing very, very tight control systems in which case they can
meet purity standards, not just about GMO, but, just about anything,
varietal purities and so on at these levels. But, again, I\'m sure that
they can answer that better than I can.

DR. MELLON: And the numbers independent of the number of events that
occur?

MR. KALAITZANDONAKES: Well, again, not exactly again. You know, depends
on how you measure GMO content, right, you know, but, if GMO content is
accurate, say, then whether you have this GMO adoption versus that GMO
adoption in a field really doesn\'t matter. So, I\'m substituting them
freely with each other.

So, but, you know, you have issues with testing, for example, when it
comes to stacked events and so on and how you measure GMO contents. And
I\'m sure you know.

DR. SCHECHTMAN: If I can just ask one question to clarify for me. You
were saying that the \-- if I understood this right, just tell me if
I\'ve got this right \-- that the costs and the difficulty in supplying
material at a particular percentage level is going to depend not only on
the percent adoption of biotechnology but also on the percentage
adoption, if you will, of non-biotech products?

MR. KALAITZANDONAKES: That\'s correct. That\'s right. In other words,
the size of the market that you are supplying vis à vis your non-GMO
acres, but for lack of a better word, so, if that\'s relatively small,
that ratio\'s relatively small, then your costs are in most cases
pre-admitted because you can cherry pick, because you can find all the
right places and markets are outstanding at doing that by the way.

DR. VANEENENNAAM: I guess Don Cameron raised the point where he actually
can\'t source seed because he\'s such a small market for the organic
cotton so I guess you can get so small on the other end that it\'s not
worth anyone\'s effort to supply you with that seed.

MR. KALAITZANDONAKES: As far as seed is concerned, and I actually used
the seed corn example on the incremental costs because there was a lot
of discussion about seed, both in terms of the need for purity standards
and in terms of anything else you do is additive. So, in the case of
very, very specialized markets, and I\'m not really sure a market
becomes too specialized, but, in the case of a small specialized market
obviously it becomes very difficult to supply those because if you think
that you have to have a breeding program behind, not just a commercial
production program, but a breeding program that you actually take care
of genetics of sorts then you\'re talking about, you know, substantial
costs up front and so the size of the market that justifies that kind of
investment for anybody is that would include in my book a government
doing the research it cannot be 80 acres.

DR. SCHECHTMAN: Again, I think we can get one last question in and then
we\'ll turn to public comments and then we\'ll take a break.

MR. GRANT: Okay. So, I\'m wrestling with this on Nick, but, in listening
to your comments it sounds to me like if I could try to summarize what I
heard it would be that the market has so far ficklely sought out sources
for in terms of seed, and I suppose you could extrapolate from that and
say to commercial products for human consumption as well, has sought out
sources for those folks that are willing to pay for them and so thinking
forward to what we might attempt as a group to recommend to USDA, the
Secretary, we probably don\'t want to damage the ability of the market
to make those allocations, if you will.

And if we attempt to impose some kind of more, what we might think would
be rational or broad-based standards that that would actually less
efficient than what the marketplace has done to date. Is that a fair
assumption of what your study \-- is there a summary, I guess, of what
your study showed?

MR. KALAITZANDONAKES: I will try to answer your question in two ways.
First of all, I showed you multiple studies and some of them that I have
not shown you which suggest that markets in general are very good about
segmenting both production and consumption, moving product from the
production side to the demand side. And so in general my assessment over
the last eight, nine years is that markets have been very effective, not
just in the non-GMO market, but, other specialty markets out there have
been very effective in doing their job.

So, that\'s point number one. And I think that was reflected in the
comments that the other folks made today. They said, hey, you know,
we\'ve been doing this. We know how to do it. You know, when we need to
communicate with our neighbors we do it. When we need to produce X what
do we do, we contract. So, what you heard is probably different kinds of
assessment from different kinds of participants in the marketplace
saying information is flowing and demand and supply come to meet each
other, both at the local level and at the global level.

So, I would agree with that. In fact, my very first question this
morning I think it would be very appropriate for this committee\'s
discussion to raise the issue what are the market failures because
that\'s where really you need to pay attention when you have, you know,
some type of an accommodation for policy.

So, if markets are working generally well in certain areas probably is
superfluous for somebody to step in and try to mess with them. On the
other hand, we did hear places where market participants said, hey,
maybe this part of the market isn\'t working exactly perfectly and those
would be in my book places where somebody can actually pay some
attention and ask, is there a policy intervention that would do better
than the market and maybe there is, maybe there isn\'t.

But, at least it lets you focus on some of the issues that might need
more attention.

DR. SCHECHTMAN: Thank you very much, Nick. We will turn right now, and I
take it that Nick and Lynn will be willing to entertain some more
questions after our public comment period. We will turn to that now.
What we will do is entertain the public speaker, the request for public
comment that are here now and since the time for public comment is
between 3:30 and 4:45 we will check again a little bit later to make
sure that there are no other public commenters.

I believe that we have just one public commenter at this time. If you
could come up and use the microphone. Actually, you could come up here.
That would be fine as well. If you would please state and spell your
name for the record and indicate your affiliation. It\'s our practice
that we allow five minutes for each public comment. The committee\'s
happy to hear the comment that will go on the record. It is not a
question and answer session. Thank you very much.

MS. POLK: Good afternoon. My name is Theresa \-- T-H-E-R-E-S-A \-- Polk
\-- P-O-L-K and I represent Columban, the U.S. Missionaries Society of
St. Columban, Office for Justice, Peace, and Integrity of Creation. I
feel a bit odd man out here. I\'m not a scientist. I\'m not a farmer
unless you count the disaster in my backyard. Hopefully I can bring a
different perspective to the discussions here today.

Columban Missionaries share the struggles and joys of people in 15
countries around the world, including Chile, Peru, Philippines, Korea,
Japan, China, as well as here in the U.S., all countries in various
stages in the debates on biotechnology.

We ask you to remember that the discussions and recommendations of your
committee here affect not only the farmers and consumers here in the
United States but have profound repercussions around the world,
affecting some of the world\'s poorest and more vulnerable people. We
are deeply concerned on a moral and spiritual level about the potential
ramifications of genetic engineering and biotech crops, not only for
human health and the environment, but, also for the communities that we
live and work.

As the debates rage across our country on issues as disparate as
immigration, global warming, national security and trade policies, we
kid ourselves if we do not see the interconnectedness of it all. It\'s a
world beyond our borders. In such a globalized world, decisions we make
affect our remotest corners of the planet and boomerang right back to
us.

As subsistence farmers in developing countries find their livelihoods
undermined and themselves pushed into ever more desperate situations,
national security is also destabilized and migration flows inevitably
grow. While at first glance, the future of biotechnology may seem to be
an isolated and technical discussion. I assure you that it is not.

Having just a few brief moments to address you, I can only barely touch
on my concerns. However, there are a few specific points we would like
to reference in your document, Opportunities and Challenges of
Agricultural Biotechnology, the Decade Ahead. We believe that as we are
called to be stewards of the earth, we are ultimately responsible to
respect and protect the integrity of life and not tamper with nature and
destroy it with unsafe and destructive technologies.

With the recent reports of genetically engineered bentgrass escaping
into the wilds of Oregon the contamination of commercial long-grain rice
with an unapproved gene strand we are concerned that the technology
cannot be adequately contained or controlled. We are dependent on a
biologically diverse and healthy planet. Within nature\'s bounties there
exist all the variants and adaptability necessary for our survival.

There are too many species that face extinction each year. We should do
nothing to accelerate this process and break the cycle of existing
varieties. Accountability and transparency must be the hallmark of the
day not only within our borders to our fellow citizens but also with our
trading partners and aid recipients.

Labeling should be a bare minimum requirement, a compromise for granting
marketing approval or access. Testing for health and environmental
safety should be expensive, carried out by independent certified
agencies and all information made easily accessible to the public.

Humanitarian concerns should not be used as a cover to test or
distribute GM food and medicines that we do not wish to risk in
ourselves or that cannot be approved in our own market for sale. If we
would not put on our plates or serve it to our children, how can we
ethically serve it to someone else? Are their lives less valuable than
our own? We are particularly troubled to hear of an experimental serum
made from a genetically engineered rice given to sick children in Peru
who are starving or ill. All the people have the right to safe and
healthy food and medicine.

Furthermore, we fear for the world\'s small-scale indigenous and
subsistence farmers. While your document references the need to
recuperate investments made in research and development of genetically
engineered products, we worry about the subsistence farmers who, barely
eking out a living, are paying those costs and the high prices of
patented seeds which too often fail to deliver in terms of decreased
pesticide needs or overall productivity or in improvements to the
general well being.

Rather, since the GMOs exacerbate already desperate situations, as
farmers fall into increasing debt, risk control of their livelihoods and
even their lands. We truly wish to resolve issues of hunger and poverty.
We must look at addressing the root causes of access and distribution,
instead of offering their seeds.

While there remains so much uncertainty about the long-term consequences
of genetic engineering, we ask is it not wise to proceed slowly, with
greatest concern, greatest caution for the damage we might inflict on
other and our earth. We ask that, first and foremost, that the
repercussions for the most vulnerable always be at the forefront of the
deliberations. The fragile diversity of our planet and the farmers
struggling to survive off of it.

Thank you for your attention and inspiration.

DR. SCHECHTMAN: Thank you, Ms. Polk. Did we have any other public
comments at this point? All right. Then what I\'d like to say is that we
will take a break until ten minutes to four. We will come back and see
where we are at that point. Thank you.

(Whereupon, a brief recess was taken)

DR. SCHECHTMAN: Okay. So, it\'s now five minutes of four. I think what
we will have time to do yet today is to just see, first off is to see if
there are any questions that any of the members of the committee would
like to visit or revisit with any of our speakers today and I think
actually we probably have enough seats available at the table right now
if our speakers today want to come up.

We can sit here for a couple of minutes and then we have three of the
four non-committee members who gave presentations today are here. If
that\'s okay with all of you we can spend a couple of minutes and see if
there are any further questions. It didn\'t seem like we were rushing
through all of that but I wasn\'t sure that we had finished all of that.

There\'s a seat up here. There\'s a couple of seats around. And then we
can continue our discussions. I don\'t think we \-- we may need fresh
\-- the freshness of a new day to figure out how we\'re going to really
move forward but I think we can certainly continue the discussions that
are arising out of the variations this afternoon.

MR. SLOCUM: I guess the question I\'d like to pose to the two because
they both spent an enormous amount of time studying IP markets and
particularly consumer preferences and how you deliver those folks. In
the last year we created such a greatened or heightened demand for
biofuels, ethanol, corn, and biodiesel from soybeans or other oil
products, oil crops.

And we\'re looking at these enormous acreage increases that we need in
the United States to meet those two huge marketplaces. What do you see
or what do you think, what does that mean to the IP businesses that you
analyze and that you practice? Are we going to see a lessened demand for
IP activities from the producers\' standpoint, the guy that wants to add
the incremental income, the early adopter; are we going to see us guys
less attractive to those kind of crops or are you going to see us
tracking about the same? What do you think?

What do you think? Because I don\'t know that this issue is merely as
big a thing as it was a couple of years ago when we were worried about
huge oversupplies and right now we\'re wondering where do we get it?

MR. CLARKSON: It\'s an economic question, it\'s a market question. What
I started telling our buyers they can expect a fifty cent to a buck a
bushel increase in the price of their specialty corn. But, if the
ethanol industry\'s competing the ethanol\'s competing at maybe three
billion so you want to compete with the big guys, one billion to you is
three billion dollars, one dollar a bushel, three billion dollars. One
dollar bushel to us is maybe a hundred million.

So, I don\'t think you ethanol guys are going to \-- I don\'t mean you,
I don\'t think the ethanol market is going to crowd out the food market
at all. I think the food market is going to compete on money to get just
what you want. Now, you may run into wet millers where you can\'t detect
the protein over in Japan saying, it\'s time we dropped out and we took
all the corn we can get, but, the dry millers, I think, will absolutely
stay with whatever it takes to get themselves non-GMO corn in the
marketplace.

And they\'ll raise the premium and make it more attractive for you.

MR. KALAITZANDONAKES: That\'s what I think as well, but you have to also
factor into the situation what other suppliers might do around the
world. So, for example, China has aspirations of supplying non-GMO corn
to Asian markets and, you know, we\'ll see whether they\'ll be
successful in doing that. So, yeah, but, it\'s almost always about
competing buyers and sellers and if that means more options, you know,
that\'s what it means.

MR. SLOCUM: So, your answer is in the end if the consumer wants what
he\'s getting today he\'s just simply going to pay more for it.

MR. CLARKSON: Competition between fuel and food is there. Raise the bar
for the price on food.

And I think that in that equation you\'ve also got to consider the third
component in corn which is steam which is huge in the fuel issue. By the
way, the major DDG\'s don\'t really substitute for corn. They substitute
for soybean. My crystal ball isn\'t good enough to know how it\'s going
to be.

MS. DILLEY: Michael, did you have something you wanted to add? Go ahead.
Adrian, Sarah.

DR. DYKES: Because to me this issue and the point you\'re raising here
is exactly the point we had a debate and discussion about at length on
the last chapter we wrote. And, Jerry, if I recall, you\'re one of the
leading leaders of the debate about how technology in one crop has
implication for what\'s planted in other crops and this raised the
introduction around the soybeans and what\'s that done is if we\'re
going to launch five acres of wheat what happens with ethanol for corn
and what that does to DDG substitute for soybean oil.

I mean, you can\'t look at these things simplistically as one crop and
only one crop. It\'s the co-interactions of the commodity market says
you\'re looking for first in food or feed or fiber. And it isn\'t just
corn acres. To me, the biggest issue is ethanol. One of the biggest
drivers is ethanol and what we\'ve been doing in corn yields. It\'s
bushel per acre.

And if we look at what\'s just happened in basic germplasm, forget
traits. I think the other part of this whole debate that\'s never talked
about, it\'s just assumed that I guess it happens or it remains status
quo, but, and Nick got on it when he talked a little about seeds. But,
the tremendous infrastructure and breeding programs around just
improving basic germplasm, farmers, none of these farmers that are on
this committee who present it to us want to buy ten-year-old varieties
when it comes to corn and soybeans.

They do on wheat because there hasn\'t been any new investment in wheat
products. They\'re buying 30-year-old wheat varieties. But, they won\'t
buy ten-year-old corn and soybean products because they want the latest
that\'s been developed for plant breeding because of the different
ingredients that come with it.

Then you got to get the traits in the latest variety so we as a
committee never talk about what\'s happening in just basic germplasm and
conventional seeds and all the money that\'s been spent there and how
that relates to the other thing such as the ethanol thing. I think the
big driver is yield on corn and corn acres until we get drought
tolerance or something, until we take corn, when we take corn to replace
other acres.

MR. CLARKSON: There\'s a subtlety on that. We\'re seeing traditional
genetics essentially keeping up the yield except where there are insect
pressures and disease pressures. Now that might force the IP market out
of the Midwest. That could force the IP market upland which means the
Pacific Coast of the United States or just inland of the Andes Mountains
in South America or someplace like that.

The real bump in yields is, I don\'t have to worry about the insects.

MR. SLOCUM: Which is the comment that Allen made. He didn\'t know if he
could survive in a sea of GM corn.

MR. CLARKSON: I would worry. Yeah.

MS. DILLEY: Adrian.

DR. POLANSKY: I\'d just follow up. Now, clearly to comment a little bit
on that and I have a question. I think the dynamics with whether it\'s
ethanol fuel/feed can be market-driven to a large degree. In my view, if
producers can see the equivalent of three dollars a bushel for corn
that\'s sort of the relationship of cost production in terms of what we
as farmers have seen over the last ten years we\'re going to grow a lot
of corn and then from the genetic companies, my understanding is very
soon we\'ll probably just improve year-end increases, probably double it
per year the yield increase through biotechnology from one traditional
thing even up to this point very soon.

UNIDENTIFIED SPEAKER: Through biotech?

DR. POLANSKY: Through biotech. Through biotech. Just the advances.

DR. MELLON: I mean, not a specific trait? I don\'t understand.

DR. POLANSKY: I\'m talking about we\'ve been able through genetics, as I
understand it, increase yields of corn about a percent and a half a
year. In my opinion, what the researchers tell me that will soon be
three percent a year. Not saying anything about insects and other
traits. So, through this biotechnology in terms of genetic yield
potential improvement.

DR. MELLON: Conventional. I mean you don\'t need any \-- I mean, I need
to know the difference between increasing yield by adding an
insect-resistance trait and increasing the yield by, for example,
producing corn that you can produce more corn stalks per acre or per
plot and my understanding is that through conventional breeding without
additional traits corn breeders have over the last 25 years done that
percent to two percent a year independent of the traits.

Now, GM has added \-- has allowed us to add traits now and maybe in the
future would contribute to an increase in this kind of baseline
improvement that\'s trait-independent.

DR. POLANSKY: What I\'m saying is with that one of the two percent is
going to go to three plus. That\'s no use getting into that detail in
the discussion. And I just make one other comment in terms of the
food/fuel and so forth, Lynn. From a farmer\'s perspective when the
packaging in a lot of products costs about as much as the amount of
money that goes into that container or package that\'s paid for the raw
wheat or corn that goes in it, I\'m not real concerned personally that
it\'s going to be that drag to have a little more competition so that we
actually see at least potential from additional profitability on the
production side.

But, anyway, back to my real question. There was made mention of the
terminology. I wasn\'t quite sure what it meant and that related to
silage bags. That specific grain in terms of that\'s something similar
to the ton and seed bags or that type of or if it\'s something else and
then a follow up question in terms of IP, one of the things that seemed
to me potentially, and may be already, could make a real difference in
terms of delivering to the Asian market of the preserved products is all
those containers that end up here that need a ride home and one
wouldn\'t think it costs all that much more to get them back full versus
empty.

That is assuming the railroads will accommodate us and off load, you
know, the ability to put those full containers back into unit trains. A
couple of questions.

MR. CLARKSON: With respect to the bags I\'m talking about, they\'re very
similar to the ones that are used in Wisconsin in dairy areas for
storing silage on the ground and the Argentines started experimenting
with them about six years ago in very small scale at first. Typical bag
will hold something in the vicinity of 8,000 bushels and it\'ll be
filled at moisture levels at harvest time.

If it all works right, any spoilage will consume the oxygen inside the
bag and slow down the oxidation rate and many Argentine farmers have
concluded they store grain better in those bags than they do in their
steel silos.

I\'m not sure the gophers would agree, but, they tend to eat their way
into the bag since they\'re lying on the ground and that\'s a major
challenge, but, that has grown with not this year\'s harvest but the
prior year\'s harvest is 300 million bushels of bag storage which is
very nice for identity preservation. And you can adjust your storage to
what you have.

The Argentines have come up with systems of slicing the bag, emptying
it, rolling up the used plastic, recycling it back to the plant who\'s
made the 10 percent or 15 percent discount on next year\'s bag. So, if
you travel the cornbelt in Argentina you just see tons of these things
laying out on their prairie.

With respect to containers, you are absolutely right. That has occurred
to Cargill, Archer Daniels, Clarkson Grain, and all sorts of people. Two
years ago we could move twenty tons of material from Chicago, Illinois
to downtown Tokyo for \$675. Now, the bridge between Central Illinois,
Decatur, and Chicago is \$500. But, if you were close to a container
center like Chicago which has a surplus of containers to send home
you\'d get an amazing deal. It would cost \$1,200 to send you, but, I
can send twenty tons for \$680.

Now, there is a strong consideration that much of the DDG is produced by
ethanol plants will be headed by container to Japan. We had one company
show up one day and say our plant has to move 10 million tons of DDG by
the year 2010, at which point I want to know if they had been drinking
or smoking. That\'s a fantastic amount. That\'s the largest container
ship that exists in the world every week moving from New Orleans or the
West Coast.

If so, we could find there\'s no room left in the container supply. But,
at the moment, you\'re quite right. Does that answer your question?

DR. POLANSKY: Yes. Thank you.

MS. DILLEY: Sarah and then Michael.

MS. GEISERT: Yeah. This question is directed towards you. You talk about
being active in 20 states, Brazil, Asia, elsewhere. As you look at those
different market dynamics with some of the tools you were talking about,
the bags, are there some learnings that have occurred in other markets
that would be helpful for us to think about in this discussion that
helps the market mature or helps the market advance?

How would you compare Brazil or Asia market to the U.S.?

MR. CLARKSON: Well, the biggest thing to start with is for somebody
who\'s interested in organic production is it by culture. They\'re far
more flexible than we are. The culture in the confines of Argentina was
not to buy inputs. It was to rest half of your land for up to six years.
So, a fourth of the land might mean corn, a fourth of the land in
soybeans and a fourth is in grass for \"x\" amount of years and when one
fourth gets the grass for six years it moves back into your rotation.

So, if that were still the culture pattern, that is still a significant
pattern on the pampas. If people weren\'t using Roundup on their
pastures we could down there and convert 25 percent of the pampas, it
would be tens of millions of acres tomorrow for organic production. I\'m
not too terribly far off, by the way. You could do that by putting price
incentives in front.

If you looked at Hong Jong (sp.) Province and some of the northern
Chinese provinces along the Manchurian border those people were too poor
to afford synthetics. And, so, they\'re really selling the same today
they were selling five years ago but they found you mean people pay more
for this. So, those farmers are selling at 120 percent; 20 percent
premium to what they\'re selling conventionally.

South American farmers are selling at 35 percent premium and U.S.
farmers are selling at a 100 percent premium in general. So, you\'ve got
some flexibility based on cultural issues in the country. You\'ve got
the flexibility of storage that the Argentines have really pioneered
more than we have here in this country.

Looking at this other issue makes some of us wonder \-- I mean, I could
conjure the argument here, who needs the Midwest for ethanol because the
market \-- most of our tribe, our North American tribe lives within 200
miles of the coast and I think I want to thank the rest of you for
subsidizing those of us who live between the mountains who gave us free
land, railroads, and stuff like that.

We\'ve got to get our product to you because you live where we do so
what does it cost for us to move a ton from Illinois to the East Coast.
I compare that to what it costs to move a ton from Buenos Aires to the
same place on the East Coast using water and if we\'re not moving by
unit trains the trip from Buenos Aries up to Norfolk or to Philadelphia
costs less than it does for me to send stuff from Illinois to the East
Coast.

So, I\'m starting out with a cheaper platform, cheaper everything, and
cheaper freight. And freight is going to become a major, major player,
more so than it\'s ever been in the past in these issues. So, does that
help in answering your question?

MS. GEISERT: It\'s helpful. Thank you.

MS. DILLEY: So, are you going all offshore because it\'s just cheaper?

MR. CLARKSON: No, no, we really don\'t want to. We\'re actually \-- we
talked to our clients and the differential right now, today, between a
Midwestern being delivered to California and feed coming in from China
can run \$4.00 to \$4.50 and there\'s not enough patriotism in the room
to span that gap. It\'s just a huge gap.

But, the last two years is the first time that the domestic farmer, it
happened with organic first because that\'s the high value farm, the
first time that a domestic farmer has been in combat for his domestic
markets. He always thought he owned those domestic markets. He didn\'t
own the international markets but he owned the domestic.

So, this is coming as a shock. Now, the organic farmer can afford to
lower his price from the \$15 to \$16 a bushel he was used to getting to
a nine to ten dollar a bushel rate, still make excellent money, and I
think win the competition. So, we\'re encouraging that. But, when I say
it as a buyer, you\'re lying, you\'re trying to get our prices down.
Yes, I am. I\'m not lying.

There\'s a reason for you to do this. So, we have talked to a number of
our clients who run a risk in the marketplace of being recognized as
buying out Syngenta and our advice to them is allow us to pay a dollar a
bushel more for domestic soybeans than we would for foreign soybeans,
allow us to pay fifty cents more a bushel for domestic corn than we
would for foreign corn. Then I think they\'ll take much the sting away.

We\'re going an extra mile to try and get domestic production. But,
right now, Nick was talking about the demand and supply and everything.
When you get enough supply it sort of evens out. The demand in much of
our sectors is running at 40 percent, 20 to 40 percent. The increase in
supply domestically is probably running about 6 percent and it appears
it\'s getting farther and farther apart every year.

There\'s only one place to go to make up the difference and that\'s
called overseas.

MS. DILLEY: So at what point does that trajectory not work for you and
when does it become a market failure?

MR. KALAITZANDONAKES: Yeah. I\'m honestly not sure that there is a
market failure in all of this. I mean, there might be a place for a
government that wants to participate in some policy of sorts in terms of
supporting farmers, but, I don\'t see a market failure. I mean, that\'s
how markets work.

Infrastructurally, you know, we\'ve had a very, very long discussion
here in the country about, you know, how to pump up the transportation
infrastructure and make sure that we keep that part competitive and, so,
all of this goes right back to what Lynn was saying.

MS. DILLEY: Going back to your earlier question, Nick, you asked this
morning in terms of are you talking about what the parameters by which
you\'re defining a market failure. Do you expect that organic market to
stay domestic or do you go international and depending on how you look
at that, that\'s going to determine whether you view it as a market
failure or not?

MR. KALAITZANDONAKES: Not in most economists' book, this would not
qualify as a market failure. It \-- I mean, as consumers we might have
an angst about it but it is not going to \-- does not qualify as a
market failure.

MS. DILLEY: Michael, you had your card up and then Jerry.

DR. DYKES: You\'d have to look \-- the definition of market failure as
we just said is in the eyes of the beholder. We have to look at where
we\'ve been on trade in the ag community in the last few years and I\'d
have to believe that a significant number of members of Congress would
assume that organic production ex-U.S. that overtakes the domestic
market would be a market failure because we are \-- whether we like it
or not we\'re less supportive as a nation of free trade than we have
been. The market\'s been declining.

Look at the votes in Congress for that, so, market failures are like a
lot of other things. They\'re kind in the eyes of the beholder so I\'m
not sure a lot of people would see that as a \-- I think a lot of people
may see that as a market failure.

I guess one of the questions I had, Lynn, is do you think about all the
different complexities and interactions you run into and what would be
your advice as how we \-- to facilitate trade how do we deal with
adventitious presence on a national, on a global level because when you
really get down to it that\'s what a lot of these issues boil down to is
adventitious presence or tolerances in standards, how we \-- whatever
term you want to use for them, but, definitions around what amount is
acceptable as a people?

How do \-- do you have suggestions because you\'re probably on the front
lines and have more day-to-day interactions that from an international
trade perspective than most.

MR. CLARKSON: Well, my company\'s wrestled with that for about \-- what
year did the first Roundup Ready soybean \-- we\'ve been wrestling with
that since \'94, two years ahead of time. And we\'ve given up coming up
with an answer. Our answers vary by our client. So, we\'re really not
hitting one target. We\'re hitting maybe five different targets. I mean,
there\'s a limit to our ability to even comprehend a number of targets.

But, five is pretty much where we are right now. And if it doesn\'t get
worse we can cope with that but we would really like to retrieve it. We
can\'t force that. So, they come back to us. And mostly they seem to be
reasonable and there\'s a tendency in the world to join the European
standard. And that is what we are recommending to our domestic clients
who want a standard so that they have the flexibility of European
markets as well as the U.S. market.

Do we know that\'s right? The answer is, no. But, that\'s our best
effort.

DR. DYKES: It\'s a number that gets you the most access to the most
number of concerns.

MR. CLARKSON: Right.

DR. DYKES: But, it sounds like \--

MR. KALAITZANDONAKES: From a practical perspective, I think Lynn should
want at least ten different thresholds in the marketplace because he can
make more money from it.

DR. DYKES: That\'s what I was just going to say, Nick.

MR. KALAITZANDONAKES: That\'s his job. His job is to capitalize on the
market\'s limitation that is taking place and I hope that Lynn every day
goes to bed and says I certainly hope that, you know, there is no
standardization of adventitious presence thresholds around the world.

MR. CLARKSON: Nick, I want you to know, I\'m probably the only person in
the country that sent roses to Monsanto, free market distinction.

MR. KALAITZANDONAKES: Like most of you did. Absolutely. But, we serve
those markets and does serve very well so why would you want that.

DR. DYKES: I agree because to set a global standard we\'d probably
commoditize on the thing and if you look at that now the way Lynn is a
perfect example of how the market is working to clear.

MS. DILLEY: So, even though that\'s an erratic, Lynn, it\'s a headache,
that\'s what you do.

MR. CLARKSON: Yes, it is. That\'s what all traders do. The point Nick\'s
making is we would recognize or welcome more distinction. The answer is
yes. But, if we get too many distinctions in our ability to do our job
excellently it gets muddled and we\'re in serious trouble. So, I don\'t
know how many distinctions we can handle.

MS. DILLEY: So, how do you know when to say we need a policy?

MR. CLARKSON: I don\'t know. We\'re still muddling through it.

MS. DILLEY: Jerry, you had a question and then Russ.

MR. SLOCUM: Yeah. I want to say something Lynn said a little bit
earlier. You said that for \-- and I think we\'re talking about organic
soybeans in particular \-- you said that demand was growing by some 40
percent but the supply within the United States was only growing at some
6 percent. Why do you think that is? I mean, I understand why the demand
has grown, but, why has the supply, the U.S. grower, when you say you
can still sell it for \$10 or \$11 back to him? Why are you willing to
do that?

MR. CLARKSON: Well, it\'s a complex answer, but, truthful, let me tell
you what the incentives are. In soybeans, if it\'s feed soybeans today
we\'re probably paying a low of \$10.50, a high of \$12.50 a bushel. On
food grain soybeans we\'re paying between a low of \$14 and probably a
high of \$20 a bushel. On feed corn, we\'re probably paying a low of
\$4.75 and a high of \$5.25 and food corn, a low of \$5.00 and a high of
around \$9.00 a bushel.

Now, according to Dr. Kathleen Dillet (sp.) at Iowa State University,
who focuses on yields, a good organic farmer should have 92 percent of
the yield of his conventional neighbor on corn and 95 to 97 percent on
soybeans. So, what I\'m talking about should be a no-brainer because the
costs are very similar when you add them up.

So, the question is, why don\'t we have more? My guess is we have about
10 percent coming in and we have about 4 percent leaving every year. It
hasn\'t work for whatever reason. So, I think our net gain is around 6
percent. Now, I don\'t really have any data to back me up. This is my
hunch based on working with a lot of people.

So, it\'s a question I ask. I asked Allen Williams that. I asked all
sorts of farmers that. First of all, if you\'re a conventional farmer
today you can hand off to third parties a lot of the responsibility for
your farming operation. One phone call typically in October-November
where you agree to buy your chemicals and fertilizer from a single
provider, and don\'t you let a weed be on my farm or I\'ll never write
you that check again, and then off we go.

Currently, there is no one to serve that function for the organic
farmer. He has to do it himself. He has to take almost 100 percent
responsibility for his farm. Now, ten years from now that third party
purveyor will have organic solutions too and he may be in the same
situation, but, right now, it doesn\'t exist.

So, the organic farmer has to put together his own new network of people
to help him. And he\'s got to address issues that he hasn\'t addressed
in 20 years. He\'s got to write a learning curve. And not too many
people are real fond of writing learning curves with their sole means of
support. So, that\'s a problem.

He can\'t sell his stuff locally so he can\'t just truck it into a
neighboring grain elevator. Your receiving points might be 100 miles,
200 miles apart. And you can\'t sell on just any day. We\'re a niche
market. We\'re certainly a growing niche market. When we put in the
niche I don\'t know. But, you can\'t just convert any day to cash. So
you have to plan ahead. That\'s an issue.

And the fourth one is a sociological issue. Almost every small town in
America where there are farmers have the table of knowledge and that\'s
when farmers get together for breakfast and lunch and if you go organic
you just moved to the other side of the table and you\'re going to be
the butt of humor and \--

MR. SLOCUM: You\'re by yourself.

MR. CLARKSON: Yes, for the next \"x\" amount of time. And that has some
significant influence over people\'s behavior, but, I don\'t know how to
put a number to it. And \--

MR. SLOCUM: But, it\'s worth more than Nick\'s economic models would
suggest.

MR. CLARKSON: I would think so. I think it\'s very important to people.
So, there\'s a congruity of influences there that make it difficult.
Now, many farmers assume that we would \-- the organic market would just
go away. It was a flash in the pan, it\'ll go away. So, as we keep going
now we\'re getting the phone calls from the 10,000 acre farmers and I
may be missing something here. I may be missing a wave. What would you
recommend? Well, we recommend you try it.

Put 80 acres in, 160, don\'t throw that whole 10,000 acres at once,
you\'ll have a tremendous headache. So, we\'re starting to see more and
more people come in. As far as the size of farms we deal with, the range
is at the low end five acres and the high is probably around 10,000
acres and we\'re seeing more interest in folks like you would regard as
mainline farmers than we\'ve ever seen in the past.

So, we may see changes in this, but, I haven\'t seen them yet. We\'re
still very much involved with the market, as Caren said, around two to
2.5 percent of the food system is where we are right now. If your radar
scope only looks at things moving fast we\'re the only thing \-- we and
the farmers are going to get money for ethanol plant too. The only
thing\'s moving fast can be seen on the radar scope.

MS. DILLEY: Caren and Allen, you want to add to Lynn\'s comments?

MS. WILCOX: Well, I would just say that we think that there is a
deterrent for the farmers going toward transition also because they
can\'t get \-- let\'s say, no Lynn. There\'s very little way for them to
get a lot of information about the price differential. And, you know,
without information it\'s pretty tough to decide that you\'re going to
go over. I mean, if you are approached \-- now, in New England, we have
supermarkets telling farmers that within the next five years they must
be organic for whatever reasons they\'re doing that.

But, I don\'t think that\'s happening in lots of other areas. I think
it\'s happening there where they want to have local organic produce
available as much of the year as they can, but, you know, there are some
really basic things I tried to talk about this morning that we aren\'t
getting that everybody else in ag is getting.

MS. DILLEY: Allen, you want to add to anything?

MR. WILLIAMS: Yeah. I would agree with Lynn. I think the most that Lynn
said could be summarized in one word and that\'s risk. If a local
farmer, especially in the corn belt in the rural crop region is making a
reasonable rate of return providing for his family why in the world
would I take a risk to look at something else if I\'m comfortable and if
I had one chance and one year to make the right decision and if he makes
a wrong decision he is screwed for most of the year.

And that could be substantial for some operators. And the other thing is
studies. Some folks put a high dollar on the studies and there\'s no
right or wrong to that. That\'s just the value to that.

MS. DILLEY: Russ.

MR. KREMER: I was going to ask the same exact question but I want to, I
guess, follow up because I had the same concerns as a farm organization,
a farmer organizer, I guess, seeing that this is more than just a little
niche. It\'s a very significant niche and, Caren, I appreciate it.
We\'ve talked about this, about, you know, as a marketer of natural
foods and organic foods for our farmers you\'ve been out to the West
Coast and to New York and we\'ve actually had retail chains, you know,
in the top ten of production in the United States that would like to
take our natural and organic foods and completely replace the stuff, not
just in the corner of the store but completely replace it.

At the same time, back in September, for instance, pricing organic corn
at \$6.50, Lynn, in Missouri at the same the price of conventional corn
was \$1.30 and in real life we\'re exporting corn and wheat sometimes at
the cost of production in the United States, especially when subsidized.
It just doesn\'t make sense.

And I want to know, you know, what are some possible policies? Because I
think this is an issue that this committee needs to address, not just
the contamination issue or as far as coexistence, but, what\'s
preventing our farmers here in the States from filling that significant
niche. I\'m saying that niche that will support that price at probably
at 10 percent, you know, rather than the two percent.

I mean, is there policies that we need to be considering to change to
encourage farmers to get into the system? That\'s for anybody.

MS. WILCOX: Well, we are actually about to come out with a long list of
things we think need to be changed but I would say that we\'re really
looking at the basics that are here in the department as well as new
programs because we think that what we need to build on especially right
now with the way the federal budget is and other things that we need to
be really working within the mission area, department, to get more
attention for organic footing in RCS and ERS and REE and to focus on the
kinds of \-- we had over 80 projects proposed for research in CSRES.

I think there were eight that were approved. And I mean we have a huge
backlog of things that could be done here in the department but, you
know, it\'s just not happening right now and we\'re also beginning to
work with the states. I mean, NASS is very progressive on the issue of
organic because the state secretaries of agriculture know darn well
where, you know, they can start to save farmers and also build up
farming and we\'re looking to work with them.

I just came back from a meeting that they had in Canada with ag
ministers in Canada and we need to watch some of our competitors too.
There\'s some holistic thinking that\'s going on in other countries
around what to do about organic and how to grow it in a way that perhaps
avoids some of the conflicts that we\'ve talked about today and they are
also measuring environmental aspects and environmental gains that they
get from organic and counting those into the grains that they get.

We don\'t even measure those here so it\'s pretty hard to do that. But,
in terms of the specific departmental things I think there\'s a long
list coming.

MS. DILLEY: Michael and then Nick.

DR. SCHECHTMAN: Two things. The first, I want to just interrupt as I
said I was going to and check that there is no more open comments
requested from anyone who is sitting in the audience. Okay. That having
been done, I wanted to pose a question to Nick.

I\'m asking for a little bit of clarification. Again, this is on the
topic of market failures because you indicated that you didn\'t envision
market failures and I guess it would be useful for us to understand more
specifically what you would mean by a market failure because certainly
there are any number of things that could happen that would cause
political repercussions if the markets were acting perfectly fine or
that either the biotech community or the organic community would think
of as very bad events but the market might be working fine.

So, I wondered if you could just elaborate a little bit.

MR. KALAITZANDONAKES: Yes. So, economists think of externalities in a
very, very specific way. Actually, lawyers think of them in the same way
and there are very few places that lawyers and economics actually
overlap in their thinking but this is one of them.

And, so, examples of externalities where when economists talk about
externalities examples would be, for example, significant asymmetries of
information where government can step in and provide the appropriate
information so that the markets actually are informed and act on it.

So, I\'m going to use as an example the point that was made, well, if a
particular demand in the marketplace exists, even in a nation-kind of
fashion but is not fulfilled because producers are not responding
because they don\'t have the information either for production or
pricing and so on, then that is a form of market failure, in which case
government can actually step in and provide the kind of support that the
market needs.

Now, you know, somebody has to ask the question, why has the market not
stepped in and take care of itself. In other words, if there is an
opportunity for the market to be informed why a purveyor of some sort is
not there providing the information. So, you know, so, economists play
this kind of \-- and legal scholars for that matter play that kind of
devil\'s advocate about what\'s a market failure.

And then the next question always with that is, can the government do
any better than the failure itself. Another example is externalities and
pollen flow is a form of externality.

So, if you are polluting and you\'re polluting somebody else\'s backyard
but you\'re not incurring the cost that\'s an externality on the books
of economists. So, pollen flow would fall into that category if I am
imposing harm on somebody else and I\'m damaging their production, their
market, and so on, but, I\'m not incurring the cost from my externality
that\'s a market failure.

Now, is that a policy issue or is it a legal framework issue in which
case the legal body can resolve it. So, again, the question after you
say, hey, this might be an externality the next question is always, can
governments really do any better or should they still stay? But, all I
was trying to say is those are examples of places where, you know, the
natural thinking about regulatory intervention might be an appropriate
place to start.

MS. DILLEY: You mentioned market access too and I guess we would ask the
same question I guess in terms of why is that not happening.

MR. KALAITZANDONAKES: Absolutely. But, all that point, I want to say to
Russell, that, you know, for one thing absolutely more power to Russell
for bringing all these businesses to Missouri agriculture and certainly
we want more of that, but, what you want is not to spoil, much like what
you were talking about with Lynn, you do not want a policy that would
create too much of a good thing because then Russell is not going to
have any markets.

Because what Russell is talking about is entrepreneurships coming in and
creating a place where producers are fulfilling a market which is a
separate commodity, right, and they are doing it for what they\'re doing
they\'re getting paid. But, if I bring the government to institute that
then all of a sudden too many guys are doing it and then all of a sudden
Russell\'s nice markets are gone and his premiums are gone.

So, I\'m not sure that Russell, much like Lynn, wants to advocate, you
know, an across-the-board policy that is going to destroy their nice
nest egg. So, you know, sometimes things work out counter-intuitively.

MS. DILLEY: Adrian.

DR. POLANSKY: I think I would present that what\'s just been the
conversation here is something to reflect on that I think has some real
value. But, I just want to touch on it as a farmer and a few other
reasons why there\'s sometimes a slowness in turning the ship around.

I mean, in our particular operation starting ten years ago we just
turned our ship to no-till. We don\'t have the big tillage equipment any
longer at the farm. We don\'t have \-- I mean, when I grew up we threw
out the corn. We threw it in. We laid it by and so forth. I don\'t have
any of that equipment any more. We no till, you know, with the idea of
saving the soil and keeping the water quality enhanced, keep the soil on
the land.

Now, to make that change and go back and reinvest that\'s a big step.
That\'s a big investment step. One thing we do have is we do have the
storage which is unlike most of my neighbors. I mean, we can store
everything we grow in a year in our own bins or leased bins. So, but,
that\'s another impediment on the grain side at least that\'s there
because and a large part of the country without that storage and without
that it\'s critical as was mentioned earlier there.

And there are other thoughts that I wanted to share but I think kind of
reflects on this coexistence issue was the comments that most of the
issues with mixing come in terms of those storage facilities and
transportation facilities. And as a person that\'s been involved in
wheat seed sales and so forth and custom cleaning, I can guarantee you
that\'s another area where the typical farmer doesn\'t necessarily
always clean the truck or clean the planter to the degree that it takes
to meet these tolerances in the marketplace.

It\'s a whole different ball game which is and then you add to that if,
you know, just management oversight. It\'s a whole lot easier to plant
all Roundup Ready beans because that eliminates either custom sprayer or
the person that works for you or you not keeping the records adequately
and spraying 100 acres of soybeans that no longer exist the next day.

There\'s \-- so, just as an example of risk. So, there\'s a lot of
things here that\'s involved. I can make a lot of excuses for why I\'m
not growing organic, but, there are \-- I just wanted to be clear
there\'s a lot of issues here that have to be dealt with to make that
change.

MS. DILLEY: Mardi and then Leon.

DR. MELLON: I just wanted to ask Nick about concentration in the seed
market because of problems. I do understand that you can have this
evolution of folks willing to meet niche markets but it seems to me that
the ability of individuals to do that depends on their being able to
get, for example, seed that isn\'t already contaminated.

And that not already contaminated seed, but, also just being able to get
this high quality seed that Michael has described without the GE traits
in it, but, that is the very latest in terms of incorporating this one
or two percent per acre yield that, you know, can be produced.

To what extent is that a problem that if somebody wants to kind of step
into this market, they\'re not going to be able to find that in the
marketplace because all the seed companies, sorry, are owned by one or
two companies?

MR. KALAITZANDONAKES: So, that\'s a very valid question and it\'s a
possible place where market failure can happen because of concentration.
So, industry structure is a place where market failure can happen and,
so, for example, if you had a monopolistic situation, you know, not
necessarily seed, that\'s why monopolies are being regulated by
governments, right, because they can cause markets to fail.

So, that\'s an area where somebody should be looking very carefully to
evaluate whether in fact this \-- the industry structure, not just in
the seed, but, across the board because I mean you can make and some
people have made the argument on the buying capacity or the buying power
of retailers or manufacturers and, so, concentration cuts across the
whole supply chain.

So, the question is, is the supply chain as it\'s structured today plus
in a global environment because this isn\'t just domestic, is it
competitive enough and, so, you know, the answers on that issue will
vary depending on who you ask.

Now, in the case of an individual company like Monsanto, for example,
they are in the business of making money and they will make their
independent decisions on how, you know, what kind of breeding programs
they want to have or what kind of germplasm they want to sell, what kind
of traits they want to breed.

So, the next question is, is there a reason given that industry
structure is there a reason for the government to intervene? And, so,
that\'s a legitimate question and, so, for instance, in the case of
wheat we have a lot of public breeding programs still out there because
there are not a lot of individual private companies that are interested
in supplying the market.

And, so, the government has determined that there is a reason to
participate in the form of public breeding programs. In the case of
soybeans and corn, governments are getting out of that business for some
time now. Can the question be revisited? I\'m sure that the governments
can. And so that\'s actually a case where you have to look into it and
potentially evaluate that situation.

But, that\'s not a problem for Monsanto. It\'s a problem for governments
to evaluate whether there\'s a role for them to participate.

DR. DYKES: I just want to make a comment on Mardi\'s comment. Farmers
have access to conventional seeds if they want them today so I think,
not to take away the meaning, but, I think there\'s a perception I
believe that maybe they can\'t buy conventional seeds. To Nick\'s point,
we will satisfy what the market will buy. We have conventional seeds and
we have to estimate what those seeds are going to be for different
geographies, different growth links, different varieties a year in
advance to bump them up to have them ready.

And do try to estimate that, but, the demand for conventional seeds just
isn\'t out there and we have them, we have them available, and we try to
make them available. If you look at the numbers of penetration of the
traits in seeds you\'ll go bankrupt if you produce mass quantities of
conventional seeds for the marketplace because they won\'t clear the
market. There\'s no interest in them.

I won\'t say no interest. There\'s little interest.

DR. MELLON: But, that is something, you know, that I\'ve heard
conflicted views of that and, so, it would be \-- I\'m quite interested
in that if that\'s the case.

MR. KALAITZANDONAKES: I can provide a little bit of information in this
area. So, in the case of corn, corn is probably one of the most
difficult ones because the mobility of corn is not perfect from one
region to the other. So, hybrids are very specialized. So, taking seed
corn from a place and moving it to another location isn\'t
straightforward.

But, on the other hand, you have seen very little inflow of conventional
seed. For example, from Europe and elsewhere or from European companies
that could very easily bring, for example, very successful French
hybrids to you to the United States that would be transportable. And the
reason is \--

DR. MELLON: Would they work here?

MR. KALAITZANDONAKES: Some of them would and have in the past and the
other way around. So, it\'s not as if the U.S. market or any other
market depends exclusively on the purveyor, you know, the supplier in
that particular region. Plus, you still have some over 300 companies in
the U.S. who are supplying so some of the regional seed companies are
extremely successful at supplying very small, you know, sometimes about
five counties, sometimes a state market and, in fact, in many cases
large companies like Monsanto, Syngenta, and otherwise would very much
like to be successful and as competitive in that narrow region as those
regional ones.

So, quite often we concentrate on the large market share and we forget
that 30 percent of the market is regionals who are doing very well. In
fact, they keep increasing their market share against the nationals.

So, the market is not that uncontested. That\'s what I was trying to
say.

MS. DILLEY: I don\'t think we\'re anticipating to resolve the question
of, Is it a market failure? It\'s just kind of an example of where we
might explore further and I\'m just trying to understand the dynamic in
the situation.

MR. KALAITZANDONAKES: Industry structure in general, yeah.

MS. DILLEY: Leon, you had a question. Then Adrian.

MR. CORZINE: Actually, to tag on as far as just on the opportunities and
options for farmers in the Midwest, really what we have seen in the past
several years we have more choices than we used to have as far as
companies that we can buy from because the biotech providers are through
business arrangements are selling their traits, if you will, to the
regional companies which has really helped the help of those regional
companies.

I know some of those people directly that would not be in business today
if they didn\'t have the ability to get the traits from either Syngenta
or from Pioneer or from Monsanto. So, it\'s a real misconception as far
as monopolization which we\'re seeing more diversity as far as choices
that I have on what products are grown.

In fact, it gets to be a bit of a problem because you want to \-- it
gets to be a little bit of an inventory control because we do control
what kind of track our seed from what\'s planted in this field to now
with global positioning like a lot like Allen mentioned. He does in a
week track things and then there are some things for harvesting those
corn or the right corn or whatever corn. It helps us keep track.

And there\'s more of that going on and it becomes problematic because we
have to be careful that we end up, gosh, this guy\'s selling this and
this and this and so you end up with too many small lots of corn and we
can\'t even fill the corn planter one time because we only ended up with
ten bags of everything.

So, I think that\'s a misconception that is out there. It is all an
issue of management on the individual farms. You know, I think we\'re
focusing on organic today, but, we are looking at the growth and
percentage growth is really high in organic, but, if you look at the
total acre growth, if you back up a moment, the growth in biotech acres
and not just in the U.S. but around the world \-- actually I\'ve got a
chart in here if you\'d like to see it \-- the third world, the
developing world countries, it\'s a higher curve on the adoption of
biotech crops.

And there\'s a reason for that. There\'s a reason why they have been
adopted. The growth in acres of corn and soy from no biotech to where we
are today in a matter of less than ten years is pretty phenomenal and it
doesn\'t happen just because whatever you present to me, Michael, I\'m
going to grab it and buy it and pay a whole bunch of money. That\'s not
the way it works because farmers are businessmen and they plant what
works.

In between growth, you start off slow and then it works and then you
have a different insect becomes a problem or a different pest and if it
works, he continues. If not, it doesn\'t. It\'s a matter of economics.
And you do the same thing on markets.

Now, Lynn\'s been very successful in those specialty markets going back
even before biotech helped him out. And I guess because we do business
with you, Lynn, and I go over to your places.

MR. CLARKSON: I want to thank you too.

MR. CORZINE: You know, you have to weigh the factors and I guess, Lynn,
I don\'t know of the study that you\'ve said by the person at Iowa
State, but, and maybe it\'s just a south of Decatur issue, but, we are
not getting 92 percent of the yields and the organic producers that I
know, it is closer to 50 percent of the yield.

And, so, if you\'d like to respond that that\'s fine, but, because we
weigh that when we look at what we\'re selling and we do have a change
in dynamic in agriculture in what global fields are doing and others
and, so, part of that is the job of is if we get back to the issue of
the day which is coexistence is, you know, producers are business people
and they\'re given choices and we make that choice and so there\'s my
organic neighbor, so does Allen, so does Don, and, you know, it\'s not a
willy-nilly thing because we\'re talking about our livelihoods and
we\'re all talking about making soils better.

And you cannot say that an organic system is safer or has a higher
quality product or is better for the soils than a no-till system or
something in between that I do because we\'re all striving for that and
I think that\'s where we get into trouble when one tries \-- if the
niche markets are specific markets then you don\'t want to call them
niche markets \-- it is not an issue of safety. It\'s an issue of what
works in different regions like in Kansas is a little different than
Illinois is a little different than Missouri is a little different than
the East Coast because we\'re talking about more than just corn too.

So, I think a caution here is that all of a sudden we\'re saying, gosh,
everybody should do organic and the world would be wonderful. That\'s
not \--

MS. DILLEY: I\'m not sure we were saying that, Leon. Adrian and then
come back to Lynn.

DR. POLANSKY: Well, when Nick was talking, I just wanted to make sure
that people were aware, if you\'re looking for non-GMO soybeans I know
where there\'s some that\'s growing for seeds. I can almost guarantee
it\'s pure.

I just wanted to talk a little bit in terms of what my family does,
regional, because it might be an over-statement. What we do, contracts
with farmers to grow seed and the non-headache (sic) had soybean seed
that\'s growing on my son\'s and my farm because we have a very
difficult time getting other farmers to grow that seed for us. So, we
want to make sure that we have it in the seed line and that it\'s
available. So, we grow it, which I think, again, there\'s a message
they\'re someplace. Well, there\'s a couple of them.

But, the ones I wanted to point out here is that, you know, there is
that seed available and there are some pretty good producing varieties
if you don\'t have it. If you don\'t have some of those issues where you
just can\'t be without some of the competition issues. So, at least in
my area there are some available.

MR. CLARKSON: I would suggest that every farm would be perfect for
organic farming, but, I would call your attention to, I think, Adrian,
you\'re from Kansas? You\'re from Kansas?

DR. POLANSKY: Yes.

MR. CLARKSON: The happiest group of farmers I know in the entire country
are about 26 Mennonite farmers in the western edge of your state that
have a high water table and are nestled among a number of feed lots and
they\'re probably putting on 240 lbs. of N and they\'re getting 220
bushels an acre of organic corn and they sold last year\'s crop, every
one of them at \$5.50 a bushel.

I don\'t think farmers come at a happier level than that.

DR. POLANSKY: We have some great organic growers. We are fortunate that
we have a lot of cattle that deposit and we fully utilize that
opportunity.

MS. DILLEY: That\'s good.

MR. SLOCUM: Coexistence.

MR. GRANT: Actually, I really appreciate Lynn\'s comment, but, there\'s
\-- the farmer in me can\'t let this slip by, all right, because
there\'s another side to that issue too. I\'m sure their P levels are
going through the roof and that is not a sustainable system, long run.

MR. CLARKSON: I really don\'t know what is happening to the P levels.

UNIDENTIFIED SPEAKER: Their what levels?

MR. GRANT: Phosphate.

MR. CLARKSON: But, a number of farmers are organic farmers. But, I\'m
not aware that they\'re using the same fertilization protocol every
year. And many of the organic farmers are mixing manure from different
species along with green manure rotation, but, I do know these guys have
just been abundantly successful financially over the last five or six
years.

MS. DILLEY: We are getting off on P levels this is the time \-- it\'s
time to call it a day. So, I wish I could succinctly summarize all this.
I think what we all need is a night to think about all the information
that we\'ve gathered today and then start working through back to the
issue of what\'s our scope and how\'s the committee going to proceed
from this big chunk of information from all the speakers which, first of
all, a round of applause for all of those who gave such good
presentations today.

And that will happen when we come back tomorrow. We\'re first presenting
the report to the Deputy Secretary first thing. We start at 8:15. Just
want to remind people. It\'s fifteen minutes earlier than today so make
sure if you need two cups of coffee you get here with adequate time to
ingest so we can start right at 8:15.

Greg, question?

MR. JAFFE: It says we\'re not doing the report till 9:00 or 9:10 has it
changed now again?

MS. DILLEY: Nope, that\'s my error. We\'re doing a little discussion
because the Deputy Secretary\'s not coming until 9:00, right?

DR. SCHECHTMAN: Yes.

MS. DILLEY: We\'re still starting at 8:15.

MR. JAFFE: Okay.

MS. DILLEY: So, thank you for correcting me. I apologize. That was my
error. That\'s why I really need to take a break. You wanted to have
some time to talk about dinner?

DR. SCHECHTMAN: Yes. Let me \-- before we leave I\'d like to see is
there another comment, Michael, that you wanted to \--

DR. DYKES: I\'d just like one general comment to all the presenters and
I\'ve been on the committee for a long time, but, I think this is the
\-- and we\'ve been through a lot of presentations. But, I would have to
say to the presenters today, I don\'t think we\'ve had a better set of
presentations that were as objective, not a philosophical vent on
things, but, just a pure objective presentation of what they\'re
experiencing in the real world and looking at it on an objective basis
across all different types of production systems, different types of
crops, and different types of markets.

And I just \-- kudos to all of you who presented and to Michael for
organizing it because I think it genuinely is the best set of
presentations we\'ve had and the most applicable to the topic we\'re
trying to discuss that I\'ve seen on this whole committee.

DR. SCHECHTMAN: Thank you.

MS. DILLEY: Carole?

DR. CRAMER: Thank you. Just to follow up on that. I think I\'m walking
away the most optimistic I ever have from one of these meetings.

DR. SCHECHTMAN: And it\'s the first day.

DR. CRAMER: I know. That the market dynamics are really creating
opportunities on both sides and I think that the talks today have really
sort of changed me fundamentally as to where USDA should be putting its
effort and it\'s not in a lot of sort of the regulation. It may be more
peripheral stuff which is basically saying that part seems to be working
quite well.

Are there things that we can do in standardizing testing and enhancing
transportation and creating communication so that the market that needs
Russell can find him and, you know, it really has changed my thinking.
So, I actually feel \-- until tomorrow I feel really good.

DR. SCHECHTMAN: Okay. So, with that, what I\'d like to do is adjourn the
meeting. We will have Pat chairing tomorrow and then the rest of this
will be off the record.

(Whereupon, at 5:03 p.m., the meeting was adjourned to reconvene on
August 30, 2006 at 8:15 a.m.)

[]{.underline} Digitally signed by Beverly Jason

[ELECTRONIC CERTIFICATE]{.underline}

DEPOSITION SERVICES, INC., hereby certifies that the attached pages
represent an accurate transcript of the electronic sound recording of
the proceedings before the

United States Department of Agriculture in the matter of:

ADVISORY COMMITTEE ONBIOTECHNOLOGY AND 21ST CENTURY

AGRICULTURE (AC21) THIRTEENTH PLENARY MEETING

By:

![](media/image1.wmf){width="3.0458333333333334in"
height="0.8923611111111112in"}

Beverly Jason, Transcriber