UNITED STATES DEPARTMENT OF AGRICULTURE

WASHINGTON, D.C.

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:

ADVISORY COMMITTEE ON :

BIOTECHNOLOGY AND 21ST CENTURY :

AGRICULTURE (AC21) :

FOURTEENTH PLENARY MEETING :

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A meeting in the above-entitled matter was held on Friday, December 15,
2006, commencing at 8:38 a.m., at the USDA, 1400 Independence Avenue,
S.W., Room 107A, Jaime L. Whitten Building, Washington, D.C. before:

Dr. Michael Schechtman, Designated Federal Official, USDA

Dr. Patricia Layton, Chairperson

APPEARANCES

PATRICIA LAYTON

CINDY SULTON

ABBY DILLEY

KATHY GRANT

JEREMY STUMP

BRUCE KNIGHT

CAROL TUCKER FOREMAN

NANCY BRYSON

DARYL BUSS

LEON CORZINE

CAROLE CRAMER

BRADLEY SHURDUT

SARAH GEISERT

MARCIA HOLDEN

ELIZABETH MILEWSKI

STEVEN PUEPPKE

ADRIAN POLANSKY

MARGARET MELLON

SHARON WIENER

KATHLEEN JONES

RANDAL GIROUX

DUANE GRANT

GREGORY JAFFE

JEROME SLOCUM

NICHOLAS KALAITZANDONAKES

RUSSELL KREMER

MICHAEL DYKES

LISA ZANNONI

ALISON VAN EENENNAAM

DREW KERSHEN

BERNICE SLUTSKY

JIM STITZLEIN

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

MS. DILLEY: This morning we start with a presentation, Michael will
introduce Jim Stitzlein to talk about transportation and infrastructure
issues, which is an area we touched on a little bit yesterday, and I
think generated some questions that I\'m sure people want to pose after
his presentation, if not covered in the presentation. And then move into
a discussion of potential market issues.

Obviously, I think before we get into that piece, we need to revisit the
issue of how we\'re framing our discussion because we still have to
complete it. I think we\'ve got bits and pieces. I think it\'s just
merging them together into a structure that we all feel confident will
get us where we need to go.

I think part of its, the outline that we generated yesterday has been
fleshed out a bit, and taking some of those pieces, reflecting back on
some of the presentations already and just some of our discussion. I
also really like, and in my mind, the framing of what\'s the problem
we\'re trying to solve, it really helped me to think about it in the way
Jerry and Greg had referred to it.

I think that really prompted my thinking in terms of what are the issues
that either stand out for whatever reason or a prioritized set of issues
when you think about coexistence, what\'s working and maybe anticipating
some of the issues that may affect how things are working or not
working. So we obviously need to think through exactly how we want to
frame that and develop our work plan accordingly. And we need to do that
this afternoon so that by the time we adjourn later this afternoon we
have a very clear work plan on how work is going to be continued to move
our progress along between now and the next plenary session and beyond
that.

And also think about the time line that Michael\'s given us in terms of
an early summary report. So we will get to that, but first we wanted to,
I\'ll turn to Michael to introduce the speaker and move on with the
presentation.

MR. SCHECHTMAN: Great. Thank you, Abby. Our final presentation from this
meeting will be from Mr. Jim Stitzlein, and he is the Manager for Market
Development at Consolidated Grain and Barge. He will be speaking to us
today about some of the physical needs for managing coexistence.
Coexistence concerns now and in the future. The title of his
presentation is Transportation and Infrastructure, Addressing
Coexistence Needs. Welcome Jim and thank you for coming.

MR. STITZLEIN: My pleasure. Well I appreciate the chance to share my
opinions with you. Initially I\'m going to go through some slides here
that\'ll talk about how I gained this perspective, I suppose, and
hopefully that will be useful for you.

I have a real hard time coming up with hard concrete rules that
everybody would like to have because this issue doesn\'t lend itself
very easily to those. But, we\'ll begin with, hopefully you\'ll give me
a lot of guidance with your questions and we can discuss what you see
the need to be.

I show this map just to give you some idea of where our facilities are
located. We\'re a river based system along the Ohio, the Illinois and
Mississippi rivers. All of that grain or much of that grain that we
originate feeds to the export market out of the Gulf of Mexico.

We were a locally owned company until 1987 and then we were purchased.
The company was purchased by two Japanese companies, Zen-Noh, which is
the National Federation of Agricultural Cooperatives in Japan. Our
company is actually owned by farmers in Japan. And Itochu, which is one
of the major trading companies in Japan. So we\'ve got two parent
companies. My name is to kind of do what I can to work with them and
their customers in Japan and other places to try to figure out how we
can add value. How we can increase their interest in grain coming from
the United States.

We operate over 60 country elevators and river terminals. About 400
million bushels of grain a year. Of course that fluctuates with each
year's harvest, and the breakdown is normally about two-thirds corn, and
the balance beans and other grains. We trade both in export and domestic
markets. One of the things grain traders do is look at where is the
highest value and try to manage their flow to reach that highest value
market. And so we will respond to marketplace signals.

Roughly two-thirds to three-fourths of our grain is exported. Again,
because of the locations of our facilities, that normal flow. We also
operate a soy bean plant. Since we buy a large portion of the grain we
handle directly from individual growers. Being that first purchaser put
us in a place where we could be involved with identity preserved grains
from an early stage. Due to that close working relationship with the
grower customers in the United States and with our parent companies and
their user, customers in Japan, we\'ve been able to be, I don\'t think
it\'s boasting, but we\'ve been one of the early adopters of identity-
preserved grain handling system for bulk-type shipments.

Our strategy starts with understanding what factors add value of that
user customer. Initially when biotech was in its early stages, my idea
was that that was going to be the tool that would allow us to create or
initiate wider value difference in the grains wed had to drive an IP
system. So, trust me, things, perspectives change over time. But,
that\'s our strategy, start out with understanding what the user
customer wants. Then we come back to our growers and see if these
individual growers are (a) capable, and (b) willing to manage their
farming operation to comply with what that end user wants. It\'s
voluntary. And I don\'t want every grower to be in our IP programs
because, you know, one fails, they all fail. So that\'s a critical part
of trying to do these kinds of systems.

By coordinating with the growers and preparing in advance, that
preparation is such a vital part of all this. Then we\'re able to keep
some of these loads separated so that we can supply what that user
customer has asked us for. We use our standard operating facilities that
are handling bulk commodity grains, but by tweaking the systems, by
controlling processes within those systems, we\'re able to segregate and
simplify this operation so that we can comply with these end user
requests for something that\'s different.

And that\'s what it really is about. It\'s allowing us to differentiate
shipments for those end user customers. Obviously, we don\'t want to add
huge additional costs because that just kills the flow and the demand
from the user. So we try to avoid adding too much incremental costs.
Backing up one step though, it always useful, I think, to look at where
the commodity grain system is. How handlers in general are operating.
How farmers are generally operating.

In commodity grains the trade is very liquid and price discovery is
relatively transparent. That helps us all make decisions. In IP that\'s
not necessarily quite as clear. But, the economy of scale in production,
storage and transportation means that everyone in a commodity-based
system competes at a relatively low cost per ton. The only way we can
increase our margin is by driving out costs in a commodity based system.

The competition sets our prices that we buy, the prices that we can
sell. So our opportunity to increase our margin is to drive up costs.
The commodity based system is also extremely flexible. The grain is
produced, handled and shipped as if every lot of that commodity is the
same. That greatly simplifies production, storage and logistic
functions. It\'s easy to substitute or replace shipments. If a barge is
an accident and does not arrive at the Gulf in time for a commodity
based shipment, it\'s really not that big of a deal because we can
typically find the same commodity from somebody else and do a trade or
an arrangement that way.

The one bad advantage, the one bad thing about commodity based system is
it seldom sends any signals to improve. Average what we produce we\'ll
find a market for it. Average quality should be good enough. That\'s
kind of the attitude. Identity preservation systems or specialty grain
systems, the grain is produced, collected, merchandised and shipped
based on that end user definition. What attribute is he looking for? Or
a combination of attributes. The two way communication that that
involves then sends signals about improving.

If a producer has a higher quality group, I\'m now able to give him an
additional reward for producing that crop because some user is saying
that\'s what they need. Under a commodity based system, I probably
don\'t have that opportunity to reward somebody that does a superior
job. It allows differentiation. Of course there\'s less total supply.
Less opportunity for substitution. So there\'s logistic, storage, all
those functions become increasingly complicated to manage.

We depend on certification and verification. If we\'re supplying
something to an overseas market, we depend on that individual grower to
certify that he has met the requirements. We do certain follow up tests
to verify to the extent that we can. But, it initially starts out as a
process. Verifying or certifying it by the grower.

Now Randy, you don\'t need to pay a lot of attention. But I thought it
was useful to talk about our IP corn volume over the last several years,
and as you can see, we start out relatively small. We\'ve been doing
this since really the early \'90s. But I started from \'96, our fiscal
year ends in May, and you can see we\'ve had pretty good growth of
different commodity types of corn, that\'s what the different colors of
the chart are. But you can see there\'s been significant growth in this
decade. It\'s leveled off now, but it\'s still at a fairly high level.

MS. LAYTON: But that has not just biotech, that was any identity
preserved kind of grain? Or was that all biotech?

MR. STITZLEIN: Well, no it\'s pretty much all biotech. Initially, as I
said at the beginning, we thought we would do this on other
characteristics, but the driver for most of this IP activity, and in
fact, all of our programs today are based first and foremost as being
non-GMO. And then after that we have programs, the different programs or
maybe other attributes. One of those categories was high oil corn. Has a
better energy value for feed, but it\'s non GMO for the Japanese market.

And the driver here has been this concern about the technology. Japan, I
think you all know, they\'re not required. GMO labeling on an ingredient
traceability for several food products starting in the early 2000\'s.
Our IP volume, as you remember the chart, had already started to
increase, but companies were anticipating this change and this
requirement for certain food products. The competition to source IDP
shipments also was increasing as other trading houses asked their grain
origination companies, their supply chain, to source non-GMO shipments.
So there are quite a few players that have a similar history, I suppose,
as what I showed you on our volume.

Nearly 25 percent of Japan\'s corn imports from the United States are
sourced to meet non-GMO demand for differentiated food and feed
products. Food and feed. Interestingly, much of that demand for non-GMO
corn is voluntary. It\'s not required by the labeling law. But it\'s a
response to companies, response by companies to what they perceive as
consumer concern over the technology.

For instance, the beer makers have voluntarily switched to non-GMO corn
source which then it creates the starch makers, the wheat milling
industry in Japan, to source non-GMO corn. Basically, that\'s none of
that is required under their labeling law.

Identity preservation systems, they are much more rigorous than a
commodity based handling system would be. Timing shipments to meet the
users needs are a very big challenge for us. Knowing when it's going to
be needed in Japan, we have to keep backing up what the normal
transportation time is and then make sure that we can originate it from
producers in time to make that schedule.

That also adds a lot of cost or risk, if you will, because we don\'t
always know, well, we hardly ever know, exactly when the ship is going
to arrive or exactly when the barges are going to arrive. So we have
increased costs and interest demurrage and a potential for
deterioration. It takes a lot more communication and coordination, not
only in our own system but with the producers that we deal with.

And finally, I think that the key is responding to these customer needs.
Allowing this differentiation to occur, whether it\'s on a non-GMO basis
or whatever end user base you want to talk about, means that each
participant sacrifices some of their independence and flexibility. So
you have a different attitude than what we typically find, or what we
might typically find a commodity based system where corn is corn and
I\'ll deliver it on the days that I want to, and take what I can get for
it.

We\'re coordinating with producers saying no, you\'ve got a special type
of corn. We don\'t need it this week. We need it three weeks from now
and are you willing to operate your facility under those circumstances?
We work with farmers on a program that we\'ve called premium grains. We
chose the name premium to try to denote higher quality, higher value for
a more valuable product.

Our goal is to respond to those end users needs requests, and again, the
growers that are part of our group are ones that we\'ve identified who
are capable and we\'ve given them training, discussed the requirements
of the programs and they\'ve said their willing to try to operate their
farms in a manner to help us respond to that end user demand.

We have information sessions where we talk about the specific
requirements of any of our programs. At various stages we\'ve had as
many as 30 different programs for corn and beans because of user
requests for something that allows them to be a little different. But
again, the basis always been, almost always been a non-GMO first, so.

We ask the grower to complete an application each year with information
about the hybrids or varieties he\'s planted, his storage and prior
experience. That way we get a chance to evaluate it and make sure that
he\'s going to be able to comply with what program he\'s mentioned.

This is just a picture of the training sessions that we\'ve had. These
could be anything from a large group like this or one on one. I already
mentioned some of this. Capable of meeting the program requirements.
Willing to manage, so it\'s voluntary on their part. It\'s also
voluntary on ours because again, we don\'t want growers who are not
going to be careful enough. We know that\'ll just lead us all to fail.
They do certify their compliance with the program requirements.

For us to verify, yeah, he certifies, some people will sign a piece of
paper without much thought. Others are very careful. So we use these
onsite tests that we can use before dumping the load, before
accumulating it or commingle it with other grain that we\'ve gotten from
other growers. These can range from physical tests. We use NIR, near
infrared instruments to validate oil or protein quality. We use lateral
flow strips for biotech events. We\'re doing this to catch mistakes. The
lateral flow strips don\'t give us the ability to quantify very well the
amount of contamination or GM content in any load, other than to say it
passes or fails at whatever that sensitivity of the strip is.

But we\'ve learned in the earlier years that occasionally a trucker
would pull a load from the wrong bin on the farm, or the farmer might
make a mistake about which field was planted with which hybrid and which
bin that field was harvested into, and so on and so forth. So
occasionally we would have barges go out of spec and usually it led back
to a grower mistake or a trucker mistake. And so by using the lateral
flow strips before we put that load in the bin gives us a chance to
catch those. But it really doesn\'t give us a lever for defining low
level presence.

There are a lot of things we can\'t test for before we dump that truck.
Those types of tests we send to a laboratory and get the results days
later. But we can\'t expect a truck to wait that long. So we tell the
growers that we\'re going to retain a sample of each of those loads or a
composite of the loads they deliver to us within a certain week. We tell
them that we\'re doing this. We do this, and we tell them we\'re doing
it because we want them to be careful. We want them to understand that
we\'re going to do that. We\'re not going to come back and sue somebody
unless we can prove that it was by fraud or default, you know, just
maliciousness. Because we want to keep that guy\'s business coming to
us, whether we just found out that he\'s maybe not qualified as well as
we though he was. It\'s again a part of our network of communication and
compliance.

When we make the barge shipment, we send those samples to outside
laboratories for further validation. This could include the GMO purity,
PCR type testing, chemical residues and depending on the product,
miscellaneous other tests. And we can always go back to those grower
samples if we find a surprise or a problem. And that\'s one of the
things that\'s worked relatively well for us to ensure our success in
future years by correcting some mistakes or finding mistakes after
they\'ve happened.

We adopted an ISO certification program about five years ago. Five or
six years ago. Early on anyway because it was a quality management
system that allowed us to control and coordinate our IP and other
business activities. We chose ISO because it was focused on responding
to customers and that fit very well with our strategy in the first
place.

We\'ve completed ISO 9001 certification at 19 locations. These are our
major river terminals that handle our premium grains. It\'s helped us
improve our communication and control processes. Our employees
understand the customers' objective better now, and it\'s enabled us to
be a better company to comply with new programs in the future.

Now the meat, I guess is what you\'re really interested in. Let\'s start
talking about infrastructure and transportation. Timing I mentioned a
little earlier about the issue about meeting the schedule. Having that
shipment arrive in Japan in time for their needs and how we work it back
to make sure that we ship the barge in time. Basically, we have to start
about two months before that grain is needed in Japan.

There is additional interest demurrage costs on the freight and
potential for that grain to deteriorate as that time gets longer and
longer. So this is one of the risks that we have \-- these are the risks
that we have to concern ourselves with. Demurrage is a penalty for
keeping a barge or a vessel from being loaded or moved on. If a vessel
arrives at port to be loaded, there is a charge if we don\'t get it
completed within a certain number of days. And that charge might be 35
to 50, \$55,000 depending on the vessel. Per day.

You\'re allowed a certain amount of time to load, again if it\'s a
50,000 ton vessel you might have a load guarantee of 10,000 tons a day.
So essentially you get five days within which to load that vessel. Now
if there\'s other vessels already in your berth and you have to complete
those, time still counts if that vessel has passed and been certified as
ready to load. So you\'re, the clock is ticking, okay. If one of our IP
barges, about 15,000 tons, one thousand five hundred tons is late for
that vessel and it\'s a \$30,000 a day vessel, suddenly I\'ve got a \$20
a ton additional cost for that one IP barge. So we try to avoid that
situation.

The other side of it though is we anticipate the vessel will arrive.
Normally we get 10 to 12 days notice that it\'s going to be coming in.
But it usually takes longer than that for the barge to travel to origin
to the Gulf. And it takes longer than that for us to get the grain off
farm or get it loaded into the barge. So we\'re working two to three
weeks at least, ahead of when we anticipate the vessel will be there. So
if the barge gets loaded for a vessel that\'s due January 1st,
potentially, but the vessel doesn\'t arrive until January 15th or 20th,
the barges have sat and waited for an extra two or three weeks of time.

There are charges for those barges sitting. And those charges
interestingly enough have gone up in the last year just like freight
rates have, and so everything has become more expensive. But, it allows
us the flexibility, using barges allows us the flexibility of staging
this special grain so that we can load vessels. That\'s very difficult
to do with rail. Most of the IP shipments out of the United States come
out of the Gulf, the New Orleans market because of the logistics
flexibility the barges give us. Very little, if any, comes across the
PNW, because that\'s supplied by rail, and it\'s just nearly impossible
to do.

MR. PUEPPKE: Could you reconcile, you talk about the shipping
containers, the three times the historic rates ‑‑ often in the media you
read that those rates are coming down, not going up. That it\'s getting
cheaper and cheaper to ship by ocean.

MR. STITZLEIN: It has come down some. Two years ago was probably the
time when we went to three times normal rates, and we\'ve probably
retracted to maybe double, would you say, Randy? You know, it depends on
what measure you want to use. They have gotten a little less expensive
compared to what they were. At the same time, other transportation costs
have gone up. Barge rates now are more expensive than they were before
the hurricane and that was when the big surge of rates went into the
effect a year or 15 months ago.

All of the freight rates though are being driven by just good economic
activity and a lot of movement of a lot of stuff. The containers have
become competitive into certain markets because of the flow of
containers coming to the U.S. with something else in them. And those
empty boxes then being available and, you know, if we can load those in
the interior, in the upper Midwest let\'s say, then we save the barge
freight, port costs at the Gulf, ocean freight, because, you know, it\'s
just an offset. And so to certain destinations containers have taken
over a lot of our shipments. That\'s not necessarily the case to Japan
at all because of the infrastructure that they already have to handle
the bulk.

So a lot of the containers are going to places like Taiwan, where the
factory that\'s using that grain may not be there at the port, but may
be a little further inland. So, you know, as a trader we always try to
respond to the market signals. And the signals on ocean freight and
barge freight and trucking costs are telling us we have a problem moving
grain as far as easily as we did three years ago, let\'s say.

We can come back and talk more about all of these issues. There\'s a
couple of other things that I think specifically concern me on biotech.
The market disruptions. You know, the unintended releases that we\'ve
had. Those just chase buyers to other origins. And I\'m real sensitive
to that because we don\'t originate grain except from the United States.
So when we see Liberty Link corn, for example, causing problems for our
customers in the world, we know that they went to other markets to find
their grain. Those other things are happening with rice and, you know,
it just deteriorates whatever trust you had in your relationship with
your customer.

Asynchronous approvals, asymmetric authorizations, use whatever phrase
you want, but it\'s just the idea that nobody approves these things all
at the same time. We\'re dealing with a situation now in the industry
with Herculex rootworm product, that has not yet been approved in Europe
and so that\'s inhibiting anybody from selling corn gluten feed to that
market. So it doesn\'t just affect grain, but in these cases grain
products as well. And I think one of the factors that I throw out to you
to consider in your dialogue, is what does that cost the other growers?
The ones that aren\'t using that product, or that weren\'t directly
involved. But it does have an impact.

I was shocked when all of our customers said they wanted us to avoid
certain things. I didn\'t expect that was what we were going to be doing
with IP system, but when presented with that question, we felt it was
important to respond even though we felt there was, you know, it was an
emotional value that they were responding to. Not anything that we could
economically define, like higher starch, that\'s worth something, but
non-GMO. You know, where\'s that concern coming from?

But we felt it was important to respond to them, again, because we
don\'t source from anyplace but the United States. There is almost
always a substitute. Either a substitute ingredient or a substitute
supplier. So that\'s a reality in the marketplace we felt we had to deal
with. And we wanted to maintain access while the customers sorted
through these facts and emotions about the technology.

I mentioned this StarLink and you may already know this story, but I
think it illustrates the point that I want to make about the reaction of
countries and customers commercially saying, I don\'t want to buy from
you. This chart is the Japanese imports of corn for wet milling. They
have a certain tax structure over there so that the data is supplied by
the government, and this is the calendar year 2000. Each month the bars
are represented there.

The blue is U.S. origin shipments. And the other colors are from other
countries. And you can see in 2000 that we had the bulk of the market.
We discovered StarLink in September of 2000, but already that grain had
been shipped or commitments had been made to ship that grain. The U.S.
share was 96 percent of this particular segment of the Japanese market.
Over 129 million bushels. Adding the following calendar year after
StarLink was discovered, you can see that these over countries get a
share.

The one month I found especially interesting was April 2001. That was
when the Japanese MHLW, Minister of Health Labor and Welfare, said that
they were going, announced in advance they were going to conduct random
tests on U.S. corn for StarLink, and nobody wanted to be the first one
to have a corn vessel found positive. And so our normal exports had been
running 10 to 12 million a month, that month it was about three.

Calendar year 2001 our exports from the U.S. fell to less than 78
million bushels, and our share fell to 61 percent of this market
segment. The following year we began to get some recovery. Confidence
starts to return. We\'re controlling it reasonably well. We have nearly
99 million bushels and 79 percent market share. But in December 2002
they find StarLink in one of the targets. So again, uncertainty prevails
and we\'re skittish all over.

2003 wasn\'t too bad. Our volume actually increased. Share was about the
same. So you know, we did finally get most of that market back, but you
can see that it had a profound impact. Now, during this period, did it
have an impact on price? Yeah, I think it did. I can\'t see how it
didn\'t have an effect on the price. We were able to bid the producers.
Now prices were already low enough at that time that as tax payers we
probably bore the brunt of that burden.

Do these market disruptions mean that we should do a full review of the
event before taking any risk of escape from field trials or inadvertent
releases like we had with Liberty, Liberty in rice. That\'s one of the
questions that I don\'t necessarily have an answer to, but I think is a
question that should be considered. Requiring U.S. approval. Making it
mandatory. I know everybody pretty much complies with it voluntarily
now. But there\'s still this question of doubt in other regulators\'
mind in other countries.

Are we checking everything before we release it. And just enhancing
foreign confidence in the U.S. regulatory system, I think, is something
that, well, when we keep having these inadvertent release, you\'ve got
to ask, what\'s going on? What do we need to do to fix that in the
future?

I think the U.S. needs to provide leadership. We have three different
agencies involved in many of these events in the regulatory process.
There have been times when the industry has felt that we should have
some sort of executive branch leadership that helps focus that effort
and coordination between these different agencies. Some have called it a
biotech czar or some concept like that. But, you know, these events
happen, things happen and we don\'t have a good response to them, and we
lose that customer confidence in other countries.

The timing issue approvals will likely continue to be an issue because
these regulatory agencies are on the road to sovereign, and we\'re not
going to change that. We\'re trying to deal with adventitious presence
or low level presence situations through Codex. There\'s going to be
some discussions in the next year that we hope are going to be useful,
but that\'s a very slow process.

I apologize for not being able to be here yesterday. I got caught in
some of that fog situation. Who would have thought there\'s fog in D.C.?
The stewardship, the market choices idea, the ASTA program: I applaud
the effort, but we have to be realistic about how successful it\'s going
to be. We have these inadvertent releases of yet to be approved events.
The Herculex situation, I mean.

At the current time, processors are not able to find the corn gluten
feed without presence of this thing that was supposed to be channeled
and we had stewardship for. Now, does that mean every farmer did a bad
job? No. It may mean some did. It may mean that we\'re just victims of
cross pollination. We, you know, we\'ll never be able to control it
here. But I think it\'s imperative to acknowledge the impact on markets
for all other producers. Again, the StarLink situation. What did that do
to the marketplace?

I think there is some weaknesses in the, as to the handler database.
It\'s very difficult for a grain company like ours to put on the
internet that we\'re not going to handle a grower\'s grain. What we\'ve
tried to do is say, we\'re handle your grain. But we need to know if you
have any of this yet-to-be-approved stuff. Does everybody tell us? No.
Many do. I don\'t want you to misunderstand my comments here. But it\'s
just very, very hard to be 100 percent on anything.

MR. GRANT: Jim, can you explain what you mean by the ASTA handler
database?

MR. STITZLEIN: Okay. The American Seed Trade Association, Corn Growers,
the biotech companies that supported this effort, to list all grain
handlers and their status or their preference about handling, unapproved
or yet to be approved events. You know, like the corn that hasn\'t been
approved in EU yet. Processors generally have said, please, we don\'t
want it. But we want your grain, but we don\'t want that stuff.

As a handler, we find ourselves caught in the same predicament. If we
know he\'s got it, and if we\'re going to market where it\'s not going
to be an issue. If we know that a particular shipment is going to go to
Japan where that product has been approved as generic corn, no problem.
We can handle that. It takes a little extra care and we need to make
sure that shipment then in fact does go, and it doesn\'t get swapped out
to somebody that\'s going to, \-- a country where it does matter.

Commodity based system in general didn\'t track that kind of thing. Corn
is corn. I got a barge that\'s applicable. You know, I can swap the
paper with somebody else.

MR. GRANT: So what you\'re saying that it\'s difficult for you as a
buyer to list yourself as unwilling to handle?

MR. STITZLEIN: Yeah. Well, that\'s one of the issues. And then, you
know, does it really get communicated clearly to the grower? You know, I
may be willing to handle several products that are in question, but this
one, on a given day, I have to know. So our approach to our own growers
has been, if you\'ve got it, just tell us before you sell it, before you
deliver it to us, and we\'ll figure out how to, you know, accommodate
you. We may ask you to delay your shipment for a few days. Because if
I\'ve got a train that I\'m loading that\'s going to go to a processor,
I don\'t want it.

Now, you know, not everybody tells us.

MR. CORZINE: Jim, for the group, first thing, all of those, they have
been through the full regulatory process in the U.S. It\'s not like they
are unapproved in the U.S.?

MR. STITZLEIN: Yes.

MR. CORZINE: And, I believe, up until now they\'ve all been approved in
Japan too before commercial release.

MR. STITZLEIN: Yes.

MR. CORZINE: So it\'s primarily focused on your handling. And quite
frankly, I think the weaknesses have been competitiveness in the
countryside in trying to originate grain is part of it, plus there\'s
been some on the other end too.

MR. STITZLEIN: Sure.

MR. CORZINE: It\'s tough if elevator A and elevator B, elevator A says,
I\'ll take anything you have. And elevator B knows that he shouldn\'t,
but then you get into the wink and the nod stuff, and that\'s, \--
there\'s where you break down the system.

MS. LAYTON: A country elevator grain guy would never do that.

MR. STITZLEIN: It depends on how he\'s rewarded me. He\'s rewarded on
volume margins and so forth, you know, handling grains, what they\'re
there for. Here\'s a suggestion that I don\'t know if it stimulates
anything in a positive way, well, I know it does. It\'s just whether you
believe it\'s more positive than what we do currently. Sharing
information about who and where so that the grain handler can manage his
risk, and parenthetically, so that the grower and the seed guy
acknowledge that that risk exists and they\'re responsible. It takes
some responsibility to be a good steward. You know, the wink and the
nod, you know.

MS. LAYTON: Do you have contracts with your growers? Are they legal
contracts?

MR. STITZLEIN: Yeah. Oh, yeah. Typically, \-- well, typically we would
have a purchase contract for any grain that we\'re buying. Now, back up
one step. A grower typically could deliver grain on any day without a
contract and we\'d pay that day\'s price. So it\'s not always a written
signed legal document that goes with this grain.

There\'s also some question, I suppose on, you know, enforceability of
some of the terms if we, \-- again, can I justify taking a farmer to
court? I\'m pretty reluctant to do that personally because of the damage
it does to my reputation as, with everybody. You know, we want to work
with them. We want to help them understand the value of the marketplace,
and you know, legal litigation may not always bee a good alternative in
our situation.

But, I would contend that without this information sharing, stewardship
potential to succeed is rather unlikely. Zero is a very low number.

MS. MELLON: Could you just elaborate a little bit more on what kind of
information you think needs to be available and, you know, some idea
about, I mean, would it be an online database? I mean, what do you see
in your mind?

MR. STITZLEIN: I don\'t think it has to be online. I think it needs to
be available to relevant parties. If I\'m a grain handler in an area, in
a county, and somebody, a seed company sells seed to a grower in that
county that is of the Herculex rootworm type, having that information
gives me some perception of the risk that I\'m taking with how I sell
grain throughout that next year. You know, if I\'m selling to a
processing customer and I know there\'s a lot of this foreign planted in
my geographic area that I draw grain form, then I need to evaluate
whether I can afford to make those sales or how do I deal with the
situation.

I would also offer that, you know, just like our retained samples with
the grower. We tell the grower we\'re retaining that sample as a way to
encourage him to be more careful. As a way to encourage him to be a
better steward, if you will. In this situation, if that farmer knew that
the grain handlers in his community had access to information that he
planted, maybe it was only 10 bags of that particular seed, it gives him
motivation, I hope, to do a good job, and to channel that to where it
needs to go.

Absolute zero, it ain\'t possible. Not with bulk handling systems. Not
with corn that cross pollinates. Maybe not with any other commodity that
is handled through the same systems that handle a GMO product. We know
that if we have soybeans going through a handling system and we follow
that with non-GMO corn, then we\'d better be careful about cleaning the
dust and all the soybean remnants from that, because that is going to
affect the PCR score that we get on the corn that we ship dramatically.

The PCR score does not count percentage by weight. It counts genes. And
relative to an assumed count of standard corn genes. So any presence of
soybeans in there is going to trigger additional measurements of GM
content. Maybe five to seven or eight times the percentage by weight of
the soybeans that\'s in there. And we have the same issues potentially
with wheat shipments that have a potential for a few kernels of corn.
Even dust can be a factor.

To mention other tests, we\'ve had chemical residue test done on corn
shipments and we, the lab gets back and has detected some chemical that
isn\'t even used on corn. But we\'ve handled wheat through that facility
and it\'s allowed to be used on wheat. So, low level presence, but we
think it was just because of the amount of dust that we picked up in the
sample that gave us that detection of a chemical that would not be used
on corn.

Cross pollination is a huge issue for us on corn. It may be on other
crops. Maybe not as critical, but it is. Nice spelling, Jim. Grain
handlers commingle products. Is accumulated from many growers, many
locations, many situations. You know, one field had good moisture. The
next field was sandy and the moisture was deficient so that crop is
different. And it may show up quite different on our test scores. When
you have variability of sample, variability of tests, variability of
expression levels, and we\'re trying to test at zero. What\'s the
standard error?

It\'s bigger than our limit of detection. And so the statistics are
maybe not as valid as the public mind says they expect it to be. One of
my suggestions is that we need to be careful about testing. You know,
our systems all started out as process. But as soon as the tests are
available commercially, you\'re pushed to go to the test. And for
whatever reasons people believe the test regardless of how good your
system is. And so you end up dealing with questions.

I had a sample that we tested, \-- chemical residues has become a touchy
point in Japan because of their new law in the last year. So we had one
customer that wanted to test a shipment for chemical residue, the chose
the number of chemicals, and it was a huge, I mean like 200, and the
report came back and they detected a chemical that isn\'t even used on
grain. It\'s a fungicide for fruits and so forth. But they found a
detection. I said, no, that doesn\'t seem reasonable to me. Is there a
verification, a confirming test you can do?

And the laboratory admitted to me. He said, sure. You know, the test
that we used is a screening type test and we got a reading that says it
might be that chemical, and so that\'s what they reported. They said we
can go back and do a much more sophisticated, but it\'s an expensive
test, so that\'s why we didn\'t use it in the first place. So they went
back and did it, and there\'s no detection. So it was a
misidentification at fault. But, you know, the customer is saying, well,
you know, it\'s there. Well, is it really? And so testing has its own
set of problems. And I think we have to find a way to de-emphasize the
testing, use confirming samples, go to another sample, another test in
many cases. If it\'s already approved by somebody we trust as being safe
food, then low level should mean low risk.

But, you know, the tendency is to say, no, zero, because it\'s not
approved in my country or whatever. So, this is part of the challenge
that we face with the AP, adventitious presence. It\'s tied up with
asynchronous approvals and all the other, but it\'s certainly a factor
that would help us.

MS. GEISERT: Jim, have you seen as, you\'ve been dealing with corn over
the last five years, your low levels, has your low level changed? I
mean, what used to be a low level is now different?

MR. STITZLEIN: It\'s creeping. PCR tests again, are looking at genes.
We\'ve refined our system. I\'m sure Cargill and ADM and all the other
handlers have too, as we\'ve seen these things happening. Our using the
lateral flow strips now catches mistakes that we didn\'t. So when I go
back and evaluate our average GMO content on corn shipments for the last
five years, the percentage of GM content average hasn\'t changed too
much. We\'re still above 99 percent non-GM content. So yeah, I\'m
surprised we\'re able to do as well as we have, quite honestly. But, the
trends that I see, we\'re spending more on lateral flow strips than we
ever thought we would, but, you know, it\'s a tool, a crude tool, but
we\'re having to use it. That\'s to help us maintain that.

The other piece is stacks. As those become more popular, which they
certainly are. The background contamination that we get from cross
pollination, is it\'s half a percent and it\'s a triple stack, the PCR
score is going to say one and a half percent. Even though the percentage
by weight is still the same, it\'s a score. It\'s not an actual
percentage.

MS. LAYTON: Does it have to be actual cross pollination or can pollen
fly? For example, if you were taking soybeans through an area where
pollen from corn was flying and the pollen from the corn had the gene in
it, would you get enough pollen contamination, or could you get enough
pollen contamination?

MR. STITZLEIN: I think it depends on the event and how much protein
expressed is in that pollen. You know, dust, pollen.

MS. LAYTON: Pollen, dust.

MR. STITZLEIN: You know, if you\'re testing at infinitesimally small
levels, then yes, those possibilities exist. But, you know, again, its
probably not a big, big issue.

MS. LAYTON: And you\'re looking for protein, not genes?

MR. STITZLEIN: The strip test, the ELISA test looks for protein. The PCR
is looking for genes. So they don\'t always agree.

MS. LAYTON: And you can\'t even tell where the gene came from? For
example, theoretically, where we live pine pollen is vast. If the gene
was in pine pollen and it landed on corn, I mean, and coated, you
couldn\'t tell if you came from pine or, which it\'s not, but you
couldn\'t tell if it came from pine or corn in your test?

MR. STITZLEIN: No. Not without going to a much more sophisticated type
of testing, if we chose to or needed to. But, understanding these test
methods and the accuracy, I think this is a place where the technology
companies can probably help the industry. I think there\'s quite a bit
of variability in how much protein expresses. I mentioned the dry
conditions. That field may express more or less protein than another
field does. I don\'t, you know. I don\'t know that. But I suspect that
it does have some impact, or something does. I think there\'s a lot of
variability even in the amount of stuff that\'s expressed.

So our protein test may throw the load out because it just expressed at
a high level. The actual content may not be any more on the PCR test
than another load that we accept. But if that protein expression is a
little higher, then it would get picked out. These events, many of them
aren\'t natural sources. The PCR test, one of the triggers that uses the
cauliflower mosaic virus or whatever something, well that thing is out
there naturally. In some case, now, we don\'t go out and measure the
field or the content for just that event, but you know, that may also
give us some triggers that throw us.

StarLink. The exit coalition, I picked up some information from some of
that dialogue in the last couple of weeks. North Carolina State,
Whittaker's Lab went back to some pre-1980 corn samples that were
archived or whatever, tested them for StarLink and guess what they
found? Cry(9)c, the protein that\'s supposed to be in StarLink.

But we didn\'t have StarLink. Is that a natural BT expression of that
protein that\'s just out there? You know, we\'re still struggling. We
still test for StarLink. We still find it on occasion, and it\'s not old
crop corn, but it\'s just another problem with this extremely low level
kind of testing or an attitude that we can define things at those sort
of levels.

MR. PUEPPKE: Yeah, you\'re, relative to the StarLink, you showed those
bars and the response of the discovery of the StarLink. I was a little
surprised that for a few months the corn was coming from someplace else.
I don\'t know where that was but, why did it come back to the U.S.? If
it could, if Japan could have gotten it from other countries, why did
they return to us?

MR. STITZLEIN: Well, for a period of time it was available for other
countries and they were willing to pay, you know, because of the risk
value that they thought they were having with U.S. corn. And then over
time with the agreement between our government and their government, and
with the execution of a lot of careful work by companies like, all of
the grain handlers that were shipping, they got their confidence back
and they said well, maybe we don\'t need to pay, you know, extra for
Chinese corn or South African corn or whatever they were using.

There have become other issues too. You know, the confidence about
chemical residues and stuff like that. So, you now, we always like to
have them come back. We hate losing them in the first place.

MR. PUEPPKE: So sort of our good reputation helped us out?

MR. STITZLEIN: Dependable supplier, economically.

MS. SULTON: Jim, because we\'re starting to get in questions, do you
have any more slides you want to go through the rest of your
presentation and come back to questions?

MR. STITZLEIN: Well, let me, there are some other questions, so let\'s
deal with those, if you\'ve got time.

MS. MELLON: I was just wondering whether over the years the PCR test had
been standardized and whether there is now available, let\'s say a USDA
certified protocol that you and others use?

MR. STITZLEIN: No, no. It\'s, it\'s not USDA. It\'s developed by the
testing companies and to whatever extent they can work with the
technology companies to define the genes they need to look for, the
primer sets and reference material and all that kind of thing.

But again, there\'s variability between laboratories. One of the
challenges people try to test in food products after they\'ve been
processed, baked, whatever\'s been done to them, and you know, that
becomes really problematic because stuff changes. You know, the genes
may not be the same. Yet we have some countries that still expect to
know whether or not its GM or not. Soybean oil, for example, there is no
protein. There are no genes, if the processing is working anyway.
Separation, so how does it impact?

MR. SCHECHTMAN: I wonder, you talked about a whole lot of stuff.
Actually, a lot of the topics are things we talked about in earlier
reports. I\'m wondering if I can get you to talk a little bit more about
physical infrastructure and the needs for, \-- is there enough storage?
Is there, are there deficiencies in the ability to shop a lot more
identity preserved things? Is there enough farm storage? Those sort of
things.

MR. STITZLEIN: Currently there is. And most of us in the business do
tend, \-- that are doing these IP non-GM shipments \-- tend to rely on
on-farm storage. Again, that relationship back to the grower. He\'s got
smaller bins, and if he can keep it in his bins and stage it as needed,
that\'s better than trying to do it in large scale, high volume, high
put through facilities which is what most of the terminals tend to be.

You know, it\'s always cheaper to build a big bin on a per bushel basis
than it is to build six small bins. And so there\'s an economic dynamic
there that says, we don\'t want to build a lot of small bins. But yet,
this market is asking us to allow differentiation. So unless those costs
are offset by some revenue stream with the IP grain, you know, that\'s
the future. I\'m concerned about is that two or three years from now
there\'s going to be potentially a huge problem trying to do at high
purity and with the cost structure we\'re facing.

In the past we\'ve been able to do it because we paid the farmer a
modest premium. He was already growing non-GMO corn or beans. And all we
needed was him to keep it separated, and then help us deliver it as we
needed it to the user. In the future, this yield difference, because of
the last two years we\'ve had enough dry conditions, no insect pressure,
the growers now understand that GM events that we have in the
marketplace today add yield in those circumstances.

If we have great growing conditions, the yield difference may not be at
all. But, whenever we have those conditions, that means we\'re going to
have to pay more to keep that supply available. One of the other things
I have here is talking about the timeline. Seed companies are deciding
today what seed will be planted in 2008. That\'s the crop the farmer
will plant in 2008, harvest in 2008. Basically it will arrive in
countries like Japan in calendar year 2009. So there\'s a communication
link here in anticipating the changes that are happening to us now
that\'s a big issue for our users.

We\'re trying to get them to understand that. Do we need a huge portion
of the crops to satisfy their demand? No. But we do need probably five
to 10 percent of it to be carefully managed so that we can have those
adequate supplies to meet logistic needs and so forth.

MR. SCHECHTMAN: So you\'re saying, in a few years there may be shortages
for the on-farm storage for this sort of stuff?

MR. STITZLEIN: Well, it\'s not so much the on-farm storage as it\'s the
market structure that encourages that producer to deliver to my river
terminal. You know, ethanol, and that whole dynamic is changing the
marketing patterns for a lot of growers and a lot of terminals. And so
the cost of freight, the cost of trucking, all of those things are
backing down the value to the producer to bring his grain to my river
terminal, or to supply the export market.

So it\'s going to be much more focused, I think in the future, and this
idea that the grower gave up his flexibility is, you know, he\'s going
to need some incentives, I think, to do that kind of thing in the
future. So there is some infrastructure problems to deal with, but many
of our IP products we handle with direct transfer. We may put them in a
bin temporarily, but we don\'t expect them to sit in our bind in the
terminal for very long. It\'s just an accumulation while we\'re waiting
for enough to load a barge.

MR. SCHECHTMAN: If I can ask one more question.

MR. STITZLEIN: Sure.

MR. SCHECHTMAN: You have enough folks who can deliver to meet that
demand?

MR. STITZLEIN: Today?

MR. SCHECHTMAN: Yeah, today. Do you have a sense of what proportion of
farmers, so it\'s not a problem now, but do you have a sense of what
proportion of farmers would be willing to meet your needs but don\'t
have their own sufficient on-farm storage to be able to even compete to
get your higher value? It\'s a hard question.

MR. STITZLEIN: Yeah. I haven\'t rally spent a lot of time thinking about
that, I guess. Because of the, you know, the response in the marketplace
is telling the farmer with carrying charges and so forth, they\'ve got
to be building bins anyway. Now the question is whether you should build
5,000 or 10,000 bushel bins or should you build 50\'s.

MR. CORZINE: 30\'S work.

MR. JAFFE: Excellent presentation. Thank you. I have three questions and
I think, one of them was sort of asked by Michael, so I just want to
make sure I understood the answer. Because one of them was on the
storage capacity and whether there really is enough storage and
transportation capacity, and your answer sounded like yes, there is.
It\'s not an issue of is it, that it might be more expensive in the
future because they\'ll be other competing things. But it\'s not like we
need to go out there and support lots more trucks or lots more barges,
or lots more storage bins and farmers. It exists. It\'s just maybe more
costly is what I heard you saying in terms of infrastructure.

MR. STITZLEIN: I think that\'s right.

MR. JAFFE: So, okay, because we were talking yesterday and one of our
things was that, that somehow we needed enhanced, or we needed more
capacity out there for segregation. And it doesn\'t sound like you\'re
saying we need more capacity, but, in actual physical capacity. So is
that a correct \--

MR. STITZLEIN: Today I say that\'s true.

MS. DILLEY: What would change that?

MR. SCHECHTMAN: I mean if we\'re looking five to 10 years ahead.

MR. STITZLEIN: Well, I guess the question that I back up first is, is
that demand still going to be there?

MS. DILLEY: Is your market still going to be there? It\'s that market.

MR. STITZLEIN: Being economically stingy, I guess my tendency is to
think that it will go away. I\'ve always thought it would go away. I
mean it\'s normal to be skeptical of something that\'s new. But after
awhile, typically we get over it and we drive automobiles and we take
those risks. But, you know, this thing for whatever reasons, it just
keeps festering, if I can use that word. And you know, now it creates
opportunities for some of us. And that might be good. But it creates an
obligation, I think for all of us as handlers, producers, seed companies
and whatever, to recognize what\'s doing to the industry as a whole and
try to find ways to avoid the disruptions that have cost us.

MR. JAFFE: I have two other areas I\'ll quickly ask about. One is the
area of sort of thresholds or international standards for AP type
situations. We had a speaker last time, I think it was Lynn Clarkson who
sort of said that, in fact, not having one set standard all around was
helpful to him because he could find farmers and producers in the market
and get the people who were willing to do things, a more segmented
market was actually helpful for him in terms of cost efficiency.

There are some people that would argue that in fact having one whole
standard is more efficient because it gives everybody a standard to
rationally go to, but he was sort of saying that that would end up maybe
be more costly because everybody would be needed the same thing and
finding the right farmers, and you do farmers voluntarily and things
like that.

So, one of my questions is, what\'s your thought on that? Is it helpful
to you not to have the Europeans and the U.S. and EU having the same
threshold and everybody having different things that you can find the
farmers that meet you and that ends up being efficient for you and cost
effective, or do you think it\'s better to have a more international
standard and how that would impact your business? Is the first question.
And the second one is, let me just ask both and then we\'ll let you
answer.

The second one, you talked about testing and you test at the end, before
you say you\'re testing things that are non-GMO throughout the process.
One of the things that come up in several of our reports that we\'ve
done and our discussions over the years has been the fact that somebody
may test at one end, but then you go over and you deliver and they test
differently at the other end and what do you do when you have
conflicting tests and so forth? But your company sounded sort of
interesting because you\'re a Japanese owned company and you have this
relationship with these people.

My question is, do they test on that end or do they accept your test and
what have you done in situations where those tests come out differently?
So those are the two sort of questions, one on thresholds \--

MR. STITZLEIN: Can I say it depends?

MR. JAFFE: What?

MR. STITZLEIN: Can I say it depends? No, we have conflicts all the time.
And, you know, recognize again, the testing has its own set of issues.
If you\'re testing, whatever the threshold you choose, if you\'re
testing and the product is near that threshold then flip a coin. Part of
your test is going to be over, part are going to be under. That\'s just,
I mean, that\'s a statistical bell curve type of thing. It\'s going to
be there.

So you\'re just going to deal with that whenever you fix a threshold or
have an established, if the product you have is near that threshold any
sample because it\'s accumulated from many different growers, each
sample is going to be slightly different from the other, and the
laboratory may be using the same process but it\'s slightly different
from the other test, so there\'s going to be noise or variability. And
that\'s where we hope that we have enough relationship with the customer
that they understand risk. Is that threshold really significant risk or
not, and we do a confirming test, and we come to some sort of terms.

There are going to be cases where the answer is no. And that\'s when you
bring a shipment back from some destination and you burn it. You know,
it just doesn\'t comply. But that\'s, you know, those are just going to
be there whether it\'s GMO content or any other issue. So, you know, you
deal with those risks. You make some judgment about how much risk that
is and you evaluate whether your company wants to play.

As far as having a threshold that\'s uniform, standards are good for
efficiency of bulk and multi- participant supply chains. You know,
commodity grain standards have evolved over time and commercial
agreements have led us to say, okay, that\'s a level that we can all
deal with. But they evolved over time. I think, you know, what\'s
happening in Lynn Clarkson\'s world and mine to that extent too, is
we\'re defining what is a reasonable threshold? What can we achieve? And
that may become a standard for somebody. The problem with a regulatory
point of view saying that they\'re going to fix the standard, it may
have no sense of reality for what is achievable or even how you\'re
measuring. They just pick a number and then find out that the test is
counting things double or triple. Well, you know, sorry, that\'s our
threshold, we\'re not changing it.

So these things have to be worked out over time, I suppose. Would I
rather them be wide and reasonable to begin with? Yeah. And then I can,
and Lenny Clarkson can work within that parameter and say, well yeah,
we\'re better. Okay, and still be different. You know, but from an
efficiency standpoint in a marketplace working, standards are always
good. Liberal standards even better. I mean that\'s an industry
perspective I think would be relatively common.

MS. SULTON: You\'re generating a lot of questions and you haven\'t even
finished your slides.

MR. STITZLEIN: Well, I put the slides together so I\'d have some
guidance. So don\'t, you know, don\'t hesitate to ask questions.

MS. BRYSON: We had a lot of discussion in the last day or so about how
coexistence seems to be working well and the market is figuring out ways
to deal with that. And you made a comment in your presentation, you
said, it\'s imperative to acknowledge the impact on the market for other
producers of these unapproved events which keep \--

MR. STITZLEIN: I tend to think of the society once in a while.

MS. BRYSON: Which keeping popping up. And I wanted to explore that
because I think that\'s actually very important. And you had a couple of
recommendations. You seemed to be saying that we should have a full
review before there\'s any field testing.

MR. STITZLEIN: I think it should be considered as a requirement.

MR. SCHECHTMAN: Now, whose review are you talking about?

MR. STITZLEIN: Well, our own regulatory.

MS. BRYSON: But that\'s part of my question. Are you talking about a
food safety, a mandatory food safety review or something broader than
that?

MR. STITZLEIN: If it\'s a food crop, even if it\'s a pharmaceutical
application, if it\'s a food crop you\'ve got to do a food safety
evaluation to find how much risk that is. In my mind.

MS. BRYSON: Okay. And even though we might be the first country to do
that, you think that there\'s some value in that? You know, when you get
to the asynchronous approval because you would have a good basis. And
you also seem to be saying that the U.S. leadership between the three
different agencies is just not effective the way it\'s been.

MR. STITZLEIN: At times it hasn\'t been as effective as I would have
wanted, no.

MS. BRYSON: Do you want to elaborate on that at all?

MR. STITZLEIN: I mean, you know, when we had these unintended releases
it was my sense in some cases it\'s the dialogue I heard, response to
questions I heard was, well that\'s not our department. Not a good
answer. That\'s somebody else\'s department. And you know having the
three different agencies, there\'s a lot of opportunity, a lot of value
in having that diversity, but at some point somebody\'s got to be
answering those questions and it\'s not effective to have people saying
it\'s not our department.

MR. SHURDUT: Just a quick clarification because it\'s related to
Nancy\'s question. When you talk about full regulatory review before \--

MR. STITZLEIN: No, no. I\'m talking about if it\'s a food crop then we
need to determine how much impact it has on food safety for that whole
crop.

MS. BRYSON: And what you\'re dealing with our food crops right? Grain?

MR. STITZLEIN: Yeah.

MR. SHURDUT: So an early food safety or some type of risk review early
on in the process.

MR. SCHECHTMAN: Just to clarify, you\'re not really talking bout a food
safety review before it ever goes into the field because typically have
to grow some it to get material to do some tests. To be able to do some
of that stuff.

MR. STITZLEIN: All right, and you know, again, the safety evaluation
should be done to determine the risk. And if it\'s just a small quantity
that\'s being produced to grow up to be allowed, allow you to do those
tests, yeah. But, you know, that\'s very closely contained. Very closely
defined. Not going to be cross bred into outbreeding stock by accident
or escape in that way. You know, those are the kinds of controls that
you have to have. But, you know, as early as possible in having that
food safety evaluation.

And back to thresholds. You know, if this is a benign type of protein
that threshold could be pretty high. If it\'s something that has some
risk of creating a problem, then that threshold should be relatively
low. So it\'s a risk assessment based on what that product is going to
do. You know, poisons aren\'t poisons unless you take enough. So dosage
is part of that dynamic. And again, this idea that anything can be zero
is kind of hard.

MR. KREMER: Yes, thank you, very lively presentation. When we talk about
coexistence as far as producers go and creating an environment that
everyone could have opportunity in, I want to get back to this market
disruption just one more time, because it seems like it\'s probably the
most economically, I guess, critical thing. Not just, I guess market
disruption at the time it's also losing the customer or creating other
competition as we\'ve seen when we had a grain embargo, for instance, it
seemed like we triggered the Argentineans to grow more soybeans.

When we had a beef embargo, they went to Australia and established those
businesses. And I know that you said that we have regained basically the
volume, but the fact is that we have created other competition and not
at 96 percent yet. So am I right thinking that it\'s probably maybe the
greatest economic concern as far as creating a fair environment for all
U.S. producers? Again, I\'m talking about missed opportunities in that
respect.

MR. STITZLEIN: Yeah, I think that\'s what I would like to see is some
way to, you know, balance, \-- we wanted to make advances, we want the
new technology, producers do. And there are other things besides just
crop influx that could be very helpful for health and processing
efficiencies and all those things in the future. So, you know, I hate to
throw a wet blanket over the whole biotech industry because I see a lot
of promise from it. But I think the Secretary of Agriculture, the
government society in general needs to make some judgments about how do
we do that.

And I guess I\'m just trying to present some perspective here that says,
there are impacts and frankly there\'s some problems with the way we\'ve
done it in the past and we need to try to find a way to fix.

MR. CORZINE: Jim, a couple things maybe you can clarify. One, with the
Executive branch, that\'s maybe a really good idea. Now the hope was
that the BRS and USDA would kind of help bring that together but we\'re
not really seeing that as far as the relationship with the other three
agencies in your eyes?

MR. STITZLEIN: Well, I think the efforts have been there, but I just
don\'t see the follow through to get the job done. And I\'m not sure, I
don\'t understand enough about Washington to tell you why.

MR. CORZINE: Of course the concern we have another level of bureaucracy
doesn\'t always lend itself to a positive result.

MR. STITZLEIN: But there needs to be a captain I guess is what I\'m
saying.

MR. CORZINE: On the infrastructure issues we talked about yesterday, I
think maybe there\'s still a little misunderstanding to a couple of the
questions Greg asked. Part of what got us back into the markets and part
of whether you\'re able to participate is economic. You talked about
infrastructure for specialty grains and you touched on capacity for \--
I mean that\'s part of it, to participate you\'ve got to have some
on-farm storage and then the river transportation you touched on, I
assume, and tell me if you\'d agree, we were having, starting to have
more problems all the time competing. You touched on the expense of
demurrage, delays, locks and dams, I don\'t know if you have a figure.
If we had these infrastructure improvements what it would o helping you
get into those markets.

MR. STITZLEIN: Well, it certainly would help us respond more adequately.
And if we have, you know, the improvements in lock and dams. You know,
everything else being equal, yeah, that\'s a very valuable asset for us
to be able to latch onto.

MR. CORZINE: Is it fair to say we\'re in some of these markets because
we have an infrastructure advantage over our competitors \--

MR. STITZLEIN: Oh yes.

MR. CORZINE: \-- that is not, is not \--

MR. STITZLEIN: Our dependability as a supplier whether it\'s non-GMO, IP
grains or commodity grains is very much driven by that competitiveness
of that infrastructure that allows us to deliver it on time and compete
in volumes and cost.

MR. CORZINE: And our competitors are investing in infrastructure and
we\'re not right now.

MR. STITZLEIN: You bet they are.

MR. CORZINE: Right? So we\'re losing. So that would be a concern I would
think down the road?

MR. STITZLEIN: Oh yeah. Certainly. I mean that\'s a concern regardless
of the biotech side. You know, but yeah, any influence you can give to
promote that we certainly want to.

MR. CORZINE: Now, on the standards I think too, I think Lynn Clarkson\'s
deal, Greg, was he didn\'t want a standard, not that it would be costly
to have it, except that it\'s opportunity because he can grab some
things. It\'s not really, it\'s an opportunity for, to differentiate
himself if he didn\'t have that standard. It\'s more what, and that I
assume is what would be your case as well?

MR. STITZLEIN: Yeah. I mean even though the Japanese labeling says five
percent is the maximum GM content we\'re allowed, with an IP system, you
know, we get compared to the other guys all the time and so I think
everybody is in that 99, 98 to 99 type purity level today. And to the
extent that my company is a little better than somebody else means that
I get a chance to do more business for that customer if everything else
is equal.

MR. CORZINE: My last question on the testing, with your company I assume
you don\'t have much of a problem with destination versus origination
testing because it\'s going to Japan and we don\'t have that, the same
issues we have trying to deliver to Europe.

MR. STITZLEIN: Not on the asynchronous approvals.

MR. CORZINE: Right?

MR. STITZLEIN: Yeah, because you know, the technology companies have
made the commitment that they\'re not going to commercialize these until
they get the Japanese and major market approvals. The question always
comes, how do you define what\'s a major market and, you know so forth?
But, you know, that\'s a responsible way to approach it. And so if the
event has been approved in the U.S. and commercialized, it\'s probably
been held until Japan has granted its approval for it to be included in
generic grain.

MR. CORZINE: Can we encourage our government to do more government to
government help with these approval processes? Jim, is that where we
need to, is that where the push needs to come?

MR. STITZLEIN: Oh yeah. Well, I think that\'s one of the places that
would be very helpful to have. But there is a different attitude I sense
in the Codex meetings and so forth, you know, our FDA safety approval
looks at the protein and says okay, that\'s enough. These other
countries for whatever reasons have a much broader view of what
regulatory approval means. Brad, you could probably address that much
more than I can, but you know, they start throwing in, you know, a lot
of environmental concerns and other things too to the package. And yeah,
I think the U.S. needs, and that\'s what I hope you get away from this,
needs to have serious leadership in helping these other countries
understand what we\'ve done, why we do it the way we do. You know, these
other countries, the developing countries that may not have the assets
or the resources to do a lot of evaluations on their own, hopefully
through Codex process in this low level project we can get them to start
understanding well, somebody else has already looked at this. At least
one country, maybe more, so how much risk is there and how much of your
resources in your country do you need to spend? So we hope it adds to
this capacity building concept. You know, we don\'t all need to do
everything again. Should be the logical way.

MR. SCHECHTMAN: We\'re running pretty late on this. Can we just have the
last three questions?

MR. GRANT: Jim, great presentation, I enjoyed it very much. I have two
questions, two different lines of thinking, I guess. One of them is on,
you mentioned that you paid the growers a slight premium for delivering
within a particular spec. So I guess my thinking is, how responsive is
the marketplace to demands from the end user for different levels or
standards of performance or purity, if you will, and is that being
communicated effectively all the way back to the field? Is the system
working to get the purity that you need from the field and then move all
the way through?

MR. STITZLEIN: I think so. You know, it\'s not as transparent as the
commodity-based system is. But, you know, growers tell us what
Cargill\'s paying and what ADM is paying, and Lynn Clarkson\'s paying.
You know, they\'ve very good about pointing out when we\'re deficient.
The same the people that we sell to are very good at telling us that
somebody else is willing to do it cheaper and better. So, you know,
it\'s just part of the negotiation that we go through in a less
transparent setting. So yeah, I think it\'s responsive.

The challenge I think is this anticipation impact because, you know, the
grain business generally just responds, you know, more in the near-term
whereas a lot of these decisions that are about what to plant are being
made, you know, years ahead. And we\'re struggling right now to continue
to supply one of programs, high oil corn, because seed companies just
don\'t have the seed anymore. So that\'s beginning to happen in some
places. You had another question?

MR. GRANT: You also export some rice?

MR. STITZLEIN: No we don\'t directly.

MR. GRANT: How about wheat?

MR. STITZLEIN: Some wheat, yeah.

MR. GRANT: Okay, so that\'ll work then for this example. Wheat is
exported with a GIPSA statement. Rice had been prior to LL whatever it
is, 601. In your view, is that statement useful especially in the light
of the now post commercialization deregulation of LL 601?

MR. STITZLEIN: Well, I think rescinding the statement was problematic
because it had not been commercialized. And again, it\'s, maybe it\'s
definitions, but you know, withdrawing the letter I think made it sound
like a bigger issue than it really was. And that\'s one of the areas
where I think maybe this leadership, somebody at the top saying, no, we
don\'t need to withdraw that. Or at least asking for some industry input
before they did it.

MR. GRANT: Does that letter set up kind of a false premise of what is
being offered by the U.S.?

MR. STITZLEIN: Well, I think the letter said commercialized and so it
wasn\'t necessarily false in that context. Now, does it mean we\'re
zero? No, it doesn\'t.

MR. GRANT: Is it a perceived that we \--

MR. STITZLEIN: There are events approved, but they\'ve not been
commercialized, I think is what the letter ‑‑

MR. GRANT: Isn\'t it perceived that way by the end user that it\'s
essentially a zero tolerance policy by the U.S.?

MR. STITZLEIN: Perhaps. And that\'s again problematic with zero being an
expectation and coexistence as an issue by itself. If zero is the
definition, coexistence is pretty hard to defend in my experience.
Because of cross pollination, because of just accidental inadvertent
presence, for whatever reason.

MS. MELLON: I would like to go back to the number that you, you said
five to 10 percent of the corn crop is, \-- we need about five to 10
percent to kind of supply the export demands and maybe the non-GMO
sourcing that\'s done inside the U.S.? I mean, is that for food and
feed?

MR. STITZLEIN: I\'m talking about the export demand that I deal with. I
don\'t deal with domestic market much because our geography doesn\'t
fit. And so, and I extrapolate that number based on current demand we
see, assuming that that\'s not going to change tremendously, and what I
think is an adequate supply, a pool from which to logistics when we
need. So think five percent is probably the minimum level of the acres.

MS. MELLON: I think it would be interesting to know how big the market
is, I mean how much of the market, you know, is now being, \-- you know,
how much of the market in the U.S., \-- how much of our corn acreage is
going to meet both the export and non-GMO and our domestic non-GMO
market?

MR. STITZLEIN: Well the Japanese demand is probably in the neighborhood
of 160 million bushels. Randy, would you agree with that?

MR. GIROUX: Of non-GMO demand?

MR. STITZLEIN: Non-GMO.

MR. GIROUX: So the total export to Japan on a yearly basis is 16 million
metric tons?

MR. STITZLEIN: Right.

MR. GIROUX: Four million of those metric tons goes to food, 12 million
goes to feed.

MR. STITZLEIN: Yeah, that\'s what I mean. So 160 million bushels, right?

MR. GIROUX: I believe so.

MR. STITZLEIN: And then you throw in the Korean, which sometimes comes
out of the U.S., sometimes not, but they\'re using 100,000 tons a month
roughly. So, that\'s about what I can look at in the Asian market that
says they want non-GMO corn supplies today. Now the question I have in
my mind, is do they need it three years from now? More or less? I don\'t
know.

MS. MELLON: Well, the second question might be relevant to that issue.
My second question might go to that. Do our export customers, I mean,
know, understand that it\'s very likely that the grain they\'re getting
is contaminated, there is adventitious presence of a lot of genes for
which we are not testing and won\'t test unless we make some sort of an
additional effort to do that? I mean, whatever field test is very
likely, in corn, is very likely to be, it\'s at low levels in our grain
supply, in our seed supply, in what we\'re selling. Now we don\'t test
for it right now because the companies don\'t make the primers
available, the government doesn\'t ask for the primers. But just in
terms of \--

MR. STITZLEIN: Are you talking about approved or ‑‑

MS. MELLON: I\'m talking about unapproved. All of the field tests, many
for genes that are never intended to be in the food supply. I mean these
industrial genes, pharmaceutical genes or other pesticides that simply
got dropped off, you know, somewhere down the line. We\'ve been testing
for almost 15 years now so, and we have had, you know, I don\'t know
what, the tens of thousands of field tests depending on how you count
them. And that\'s a lot of pollen over a lot of years. So, I mean, do
folks understand that those genes are there, it\'s just that we\'re not
testing?

MR. SHURDUT: Just one thing, let\'s not state that as fact because I
think there\'s a lot of testing. I think it\'s better stated that the
concern about it, but just the fact whether they\'re there.

MS. MELLON: Okay, well let\'s just put it that there are concerns.

MR. STITZLEIN: Well, I think Bt10 and the Liberty rice probably bring
that idea to their mind. I don\'t know, you know, the idea that we can
test for everything or should, as a commercial person I have a hard time
getting my arms around that one.

MS. MELLON: I\'m not even suggesting that we should. I am just, I just
want to know if people understand in terms of educating our folks.

MR. STITZLEIN: Well, I think the same question could be asked, what\'s
going on in other countries today in their research that might be in
stuff that we get from them.

MS. MELLON: I think as the Chinese market comes on we are all going to
be asking the questions, what are they field testing that might be
inadvertently found in what they\'re selling to the U.S., as well as,
what we might be selling overseas. But it just seems, I just want to
know if people, if there\'s any concern about it?

MR. STITZLEIN: I would hope though that we don\'t measure everything
with the same yardstick. I mean, if they\'re something that is not going
to be a dangerous product from a human safety, food safety perspective.
Is that risk as large as it is for something that is going to be a
potential threat?

MS. MELLON: Right. But these are the genes are more likely to be risky
if they were intended to be \--

MR. STITZLEIN: Right. So the risk assessment should take, my
perspective, risk assessment and the evaluation should take that into
account.

MR. KALAITZANDONAKES: If Randy has something related to this question he
can go first.

MR. GIROUX: Yeah, I mean, Mardi I understand the line of thinking that
you\'re taking and I can say from my industry\'s perspective, we think
it\'s much less dire than that and much less prevalent than you\'re
suggesting.

MS. MELLON: Based on tests?

MR. GIROUX: We have an expectation of the technology providers that they
manage their genes and that those genes do not escape into the food and
feed supply chain until they\'re deregulated in the United States or
wherever they\'re being tested. We now that they\'re in the process of
ratcheting up their stewardship protocols, they\'re looking at these as
an industry.

And Brad, you can comment if I\'m incorrect, that they take this as very
serious issue. They realize it\'s important to the grain industry, and
I\'m sure Sarah would agree, the food industry, that we have no
tolerance for unapproved events escaping into the food and feed supply
chain. It is, \-- you know, we take it as seriously as I believe the
technology providers do and so, you know, we\'re not going to chase
phantoms.

And I think it\'s unrealistic for us to be thinking that we should be
testing for every single field trial that ever gets trialed in the
world. It\'s a humongous waste of resources. You know, if there is an
identified food safety issue, why, we have much bigger problems to deal
with limited resources and limited capabilities than to be worrying
about things that may happen or phantoms that may exist.

I think there are some real issues that we can manage first before we
start talking about that particular one, and I think the industry
recognizes it and we\'re trying to do our best to make sure that
doesn\'t happen. I don\'t believe it happens as much as what you\'re
suggesting.

MS. MELLON: Well, I mean, we can talk about expectations. You have
expectations, and I have expectations, but neither of us have data.

MR. SHURDUT: If I could just add just briefly to Randy\'s comments, and
again, we heard a little bit about it yesterday from foundation seed to
the whole program, there is extensive efforts and well before these
other activities and instances occurred, industry has been thinking
about and doing, and you\'re right, we are driven by the rest of the
supply chain and the expectations there, and we understand the whole
zero tolerance piece and the liability and the risk here. So the
suggestion that nothing's done and we don\'t have control of it, we
can\'t let, and then also I want to give, you know, reflect upon the
policy developments that have occurred within the government. There are
requirements that are in place now in terms of early food safety, that
early on before you get into the field or as soon as you get in the
field you are now doing early food safety assessments for these
products.

MS. SULTON: I\'m sorry, we\'re going to have a little chance when we
finish with this speaker to talk about the impacts on the market from
all of these things, so we will get into that in just a second. If we
can have the final question to the speaker that would be good.

MR. KALAITZANDONAKES: So I want to return to a question that Nancy
posed, Jim, because I think it\'s important to clarify or at least get
your perspective on this. When I think of coexistence and I think market
function, but not of system failures where yet unapproved events show up
in the supply chain. This isn\'t about coexistence in my mind as much as
a failure of the system that somehow something that was not supposed to
be there is now.

So what I would like from you is to give me an assessment on how well
the market works, and by market I mean from farmer down to your
customers and everybody in between, and especially considering the
question about infrastructure, how well that system works in the United
States when you take out of consideration any issues around non-approved
events and any market disruptions that we had from those? In other
words, talk a little bit about how well in the last 10 years and maybe
what you see in the future how well that market has responded to
customer demands, new traits coming in.

MR. STITZLEIN: I think it\'s responded quite well within the limitations
of the information that we had. I suppose I would throw the added
information that I\'ve talked about here I think would be helpful in
making it respond even better, and recognizing some of these challenges
that we have faced, and you know, then I think that would facilitate

its \--

MR. KALAITZANDONAKES: So if you had to chose five things, two things,
three items, three priorities on infrastructure information and so on,
that you would, you know, you are a king for a day, what would those
priorities be that would improve the function of the market and the
coexistence? Forget about the unapproved events.

MR. STITZLEIN: I think expression levels having ability to decide
whether that is an accurate measurement or not.

MR. KALAITZANDONAKES: So testing?

MR. STITZLEIN: For the testing because we\'re faced with testing, and
I\'d rather not, but you know, it\'s just a simple fact that we have to
in this market. Being able to share that information with users so that
the thresholds that we deal with are realistic and are reasonable. You
know, from a market, more information if always helpful, flexibility in
being able to respond to those things, then you can deal with.

MR. KALAITZANDONAKES: Sharing information across the industry so that
you can plan better. Is that, did I?

MR. STITZLEIN: Well, to evaluate the validity of any test is what I was
thinking before. I think the information as far as what\'s approved,
that information is fine. If it\'s approved in the destination country
you\'re going to we don\'t have a problem.

MR. KALAITZANDONAKES: What about the infrastructure?

MR. STITZLEIN: Infrastructure, I think the additional incentives needed
to build bins is there, and will continue to be there to the extent that
we can anticipate the demand from the user. But again, my concern there
is that timing issue of do you know it soon enough? And likewise, our
program has always used the same transportation system, the pipeline
that we use for generic grain. And so, if the thresholds are reasonable
we can continue to do that.

MS. LAYTON: Can I follow up on a question on that? You\'re anticipating
the market for 2008-2009 right now.

MR. STITZLEIN: Trying to.

MS. LAYTON: Are you communicating that easily to the seed dealers?

MR. STITZLEIN: No, not yet. We\'re trying to but, you know, that\'s part
of, the other slice I had, is they\'re seeing the trend going up for GM
planting and that\'s what they see. And you know, now we\'re trying to
say, well yeah, but we\'re going to need, it appears that we\'re going
to need to preserve a small segment of this industry to be able to
supply the non-GMO if we\'re going to supply from the United States. So
yeah, we\'re trying to communicate that.

MS. LAYTON: Thank you. I just wanted to make sure I was clarified on
that. I thought it was what you said.

MR. STITZLEIN: I apologize for taking so much time. I enjoyed it. I hope
I\'ve been able to help you understand some of the things that we\'ve
seen and learned. Would welcome the chance to continue any
conversations.

MR. SCHECHTMAN: Thank you very much.

MS. SULTON: I think we\'re going to go ahead and have a break. We\'re
going to take a 10 minute break.

(Whereupon, a short recess was taken.)

MS. DILLEY: What I thought would be helpful is to come back to this
issue of, one of the things that we wanted to do is have a concentrated
discussion and look at are there issues around infrastructure that
really affect or make us think differently about coexistence and to just
make sure that we play that out as much as we think it important and
necessary in terms of looking short term.

It sounded like those aren\'t huge pressures on the coexistence issue or
managing risk or taking advantage of opportunities down the road. They
may be, but that it\'s unclear as to whether that\'s indeed a
coexistence issues or its more just a better infrastructure is always
good for reducing price and managing risk and delivering, being a good
consistent and low cost provider to customers demands.

So the question is, well, are there other things related to
infrastructure that really come into play on coexistence issues, either
now or in the future that we haven\'t talked about or have highlighted?
Leon, you raised a couple, and it seems like we\'ve talked through some
of those, but there may be other issues you can think of, or Randy,
anybody else who kind of has more of a feel for the infrastructure side
of the equation, especially specifically to coexistence that you think
is important for the committee to consider. Some I\'m opening up to that
first before we take a step back and say, okay, let\'s see what we\'re
trying to do and how we\'re trying to do it.

MR. GIROUX: All right, so I don\'t want to lose the whole rich
discussion we\'ve had about adventitious presence and, you know, I want
to be very clear that coexistence does not work at zero tolerance. So as
long as that\'s the key message that, I mean, we can\'t, we cannot have
coexistence if there are not tolerances for adventitious presence, that
there\'s communication. You know, there are some key requirements for
coexistence to work, and maybe it would be useful for us to, you know,
lay those out and talk about so why isn\'t there disruption in certain
markets? Allow coexistence, maybe those requirements exist and that\'s
why it does it.

MS. DILLEY: The question I was hearing tonight before we stepped out \--
what I was hearing yesterday too is that, for the organic we see, the
biggest difficulty about that is there is the expectation of zero, is
that right? An organic, right now you have process requirements \-- no,
I\'m wrong?

MR. SLOCUM: Why would that be an expectation organic, it\'s not
mentioned anywhere. It\'s all about a process.

MS. DILLEY: I thought, okay, I know it\'s processed, but I thought \--

MR. SLOCUM: As long as they don\'t use biotech seeds, they\'re fine.

MS. MELLON: According to the organic, the rules that govern the use of
the organic label, a farmer is fine as long as they didn\'t use the GM
seeds themselves and as long as they took reasonable precautions to see
that seeds do not come their way. Now there\'s a question about what
reasonable precautions are. Is it reasonable to pay your neighbors, you
know, to provide a buffer?

MS. DILLEY: But there\'s no expectation, zero is not possible and
there\'s no expectation?

MS. MELLON: But there is a consumer expectation on the part of some of
the, you know, in some of the markets into which the organic folks sell,
and their consumers basically say, we don\'t care what, you know,
whether you know this technically qualifies as organic or not, we want
zero. So for those folks, in order to meet that demand, they have to be
able to get, you know, as close to zero as possible.

MS. LAYTON: Close to zero.

MS. GEISERT: And I would just, real quick on that, as I think there is,
the organic standards are process standards, and depending on your, how
you participate in the organic market, what the implied expectation is
may differ because not all purchasers of organic foods are identical
individuals. And I think what Mardi says is how we operate, to answer
your question is, we operate, the law allows is processed based, but we
work very hard to try to anticipate what our consumers implied
expectations are. And individual companies, that\'s an internal
discussion to make sure that we feel we are meeting the customers that
we are targeting.

So, it\'s just like any standard, we interpret it based on our
expectations for what we believe our consumers expect for the products
that we purchase and sell for them. And again, I can just highlight, it
is something above zero as levels of detection come down and that\'s
subject to interpretation by individual companies and the spectrum of
organic consumers they are not all equal.

MS. DILLEY: So I didn\'t say it correctly. I think it\'s linking up the
implied expectations and whether you can meet those expectations and
what risk you\'re taking on and either hitting it or missing it, I
guess, is.

MR. KALAITZANDONAKES: How many cases have we had in the marketplace that
we know where we\'re getting production supply has been rejected for GM
or corn?

MS. GEISERT: I hear you talk about organic, and so I think the answer is
there have been some, you know, as we work in our contracts, you know,
and again, it\'s very, very commodity dependent. And we would say the
challenge isn\'t squash, it\'s not papaya, it\'s not soybeans, whatever.
It has been predominantly with corn and whether it\'s sweet corn that
we\'ve kind of monitored, it\'s just starting to come or whether it\'s a
corn that we buy, and so I think we work with our supply chain to make
appropriate decisions, but it\'s not often, but it has occurred. I mean,
you know, it\'s the nature of mathematics. I mean you\'re going to see
contamination levels when the farmer has done everything he\'s wanted to
do. We believe the supply chain is pure, but we have seen a level that
we feel is not meeting the implied expectations of our consumers and we
make appropriate decisions on what to do with that product. But it does
happen. Not a lot.

MS. DILLEY: And is it trending down?

MR. SHURDUT: But it depends on what your contracting level is too.

MS. GEISERT: It all depends on individual companies contracting level,
and again, I would say, so much of this discussion, we were chatting
last night, really centers on corn. And corn has some unique challenges
to it, and you know, it\'s food, it\'s feed and now it\'s fuel. It\'s
sweet corn, and so corn has just some biological characteristics that
present challenges and therefore for people like Lynn Clarkson and
others, it presents opportunities, and so we constantly do trust but
verify, and I would suspect whether you\'re whole foods or elsewhere,
you have your own internal, you\'re in the green zone, you\'re moving to
yellow, oh may, that\'s a red, we\'d better go back, and you reset.

MR. KALAITZANDONAKES: Can I ask one, I mean just that \--

MS. DILLEY: One more question, because we got away from infrastructure
transportation.

MR. KALAITZANDONAKES: Right, just an elaboration on my question. And
this doesn\'t apply just to you Sarah, anybody who deals with organics
would be useful. Mardi I did ask the organic folks and they could not
name a single case where the supply of an organic producer was turned
away. So obviously, you know, with, my question is how much of that? I
mean, you know, is it two percent? Is it 10 percent? Is it 50 percent?
What is the right number that describes how often an organic producer
faces rejection of their supply on the basis of?

MS. GEISERT: That\'s not an easy, just in my perspective, it\'s not an
easy question to answer because what our standards are might be
different than what somebody else\'s organic standards are. Kind of the
Lynn Clarkson point. So I would say in our world it\'s under one
percent. So it\'s not significant and just do they lose the organic?
Again, the farmer has processed it appropriately, he\'s done what he
wants, there are different, and you try to work with them. So I\'m not
convinced that they lose production.

And there\'s another market, you know, that market is segmented more
than what we, you know, I think Lynn Clarkson\'s presentation was
correct, there\'s segmentation that occurs within that. So it\'s been
under one percent.

MR. SLOCUM: So the product is still organic, it just doesn\'t meet
General Mills' specs?

MS. GEISERT: It was produced in the process consistent with organic,
absolutely. And again, that has not ever come back to be a malicious
intent by a farmer or a handler.

MR. SLOCUM: Right. It just didn\'t meet contract.

MS. GEISERT: It didn\'t meet our contract.

MR. SLOCUM: Right. But it\'s not, it is still an organic product that he
can put into an organic marketplace?

MS. GEISERT: Correct.

MR. KALAITZANDONAKES: I just wanted to know what the size of the issue
is more than anything else.

MS. MELLON: And I think that it\'s relatively small. I mean, and I think
from the farm, but I think from the farmers' point of view, they want to
be in a position to compete for all of these markets and don\'t want to
be worrying about whether they\'re not going to be able to go for the,
to get the best price that they can to go to the best buyers that they
can find.

And there have been other cases of, they\'re not, you know, we\'re not
talking huge numbers of cases, but European buyers will also, European
buyers of organic food are also much more fastidious and again, care
much less about whether the product meets the U.S. specs, but they have
turned away Frito, some kind of taco chips or something like that, is
the one that I remember, and left the, you know, the farmer just kind of
holding the bag.

MR. KALAITZANDONAKES: Mardi, I mean, I have no doubt in my mind that
this happens and happens everyday, not just with that kind of specialty
product, right? Any kind. So the question is still in my mind, how big
of an issue are we talking about? Again, I mean, there\'s a difference
in significance when something is one percent versus you know 20
percent. And so that\'s \--

MS. MELLON: And I agree with that.

MS. DILLEY: That\'s right. I mean, I think it\'s all along the lines of
risk management and able to still take advantage of opportunities as
long as you can do those adjustments and you\'re not squashing the
market so that people are going out of business, that\'s what we\'re
talking about in terms of coexistence.

MR. KALAITZANDONAKES: Exactly.

MS. DILLEY: So, Randy I think I completely diverted the conversation and
I\'m sorry to have done that. You were starting to talk about AP and the
difficulty of the two being zero, and I think that\'s relevant because
if that\'s different in different markets in terms of expectations and
if those expectations are so out of whack, I thought that was
interesting on Jim\'s presentation, if at some point that confidence
can\'t rebound or for whatever reason they think the risk is too high or
it starts to become too costly or whatever, then you\'ve got a problem.
Then we\'ve got, then we\'re worried about being able to be the producer
of the highest amount of organic, conventional and non-GM supplies. And
I think that\'s what, how our conversation started to evolve yesterday
is, what is it the Secretary should be concerned about or at least pay
attention to to change that dynamic of being able to meet that, that
hope that we continue to be the biggest supplier of all those three
different kinds of things, much less other kinds of markets that are
different in the future?

So I wanted to go back to after that long exposition, but we need to
come back to some of these.

MS. TUCKER FOREMAN: Well, I just got a question to the issue we were
discussing, if I could ask.

MS. DILLEY: Just now. Okay, why don\'t we do that and Leon you may have
a point on this as well, and then it\'ll come back to Randy.

MS. TUCKER FOREMAN: You know, it seems to me that the flip side of this
is, that if there are few times where an organic farmer doesn\'t, it is,
does suffer a contamination that jeopardizes his market, why are GM
producers so worried? It doesn\'t seem to be an issue for the
conventional farmers. Why, I\'m not, I keep trying to figure out why it
is that there is this huge push to say it\'s okay to have genetically
modified corn showing up in conventional corn, if nobody\'s complaining
about it, why do we, \-- I keep hearing the need for some sort of
regulation that says it\'s okay to have a certain percent there. I\'m
trying to figure out why having that is important to the market if no
complaints are coming in.

MR. SHURDUT: Insofar as AP you can\'t bring it down to a zero threshold,
so that\'s where it\'s practical, and that\'s where the discussion has
been from a policy standpoint is moving beyond zero to make it
operational.

MS. TUCKER FOREMAN: Where are you suffering in the marketplace?

MR. GIROUX: Carol, I\'m not hearing anybody in our industry saying that
we want to put AP into organics, but what I\'m hearing a lot of is the
organic industry saying, we don\'t want AP in our organic and so I\'m
not sure that we\'re trying to push a regulation onto the organic
industry, but the organic industry is pushing for a regulation.

MS. TUCKER FOREMAN: The organic industry has one, Randy. They have one,
it says 95 percent of the product labeled organic has to be organic.

MR. KALAITZANDONAKES: But what I, and I\'m by no means an expert on
organic, but the press releases I see and the testing reports that I see
is that the organic industry is saying they have a problem because they
need zero, and so the rest of the industry is saying, yeah, but you
don\'t need zero, so we don\'t understand where you\'re coming from, and
that\'s really the dynamic that I see going on.

MS. TUCKER FOREMAN: Well, I heard Sarah saying that for her customers,
and certainly for the people that \--

MR. GIROUX: But those people are up and above the organic standard,
right? So there is the standard and then there\'s people who want to
differentiate themselves above the standard.

MS. TUCKER FOREMAN: But if they\'re within the standard they have no
legal action against you for having an amount of product in there
organically produced that\'s less than the standard.

MR. GIROUX: Yeah, markets can work it out.

MS. TUCKER FOREMAN: They might complain, but they don\'t have a legal
\--

MR. GIROUX: Right. The market can work it out so why do we need
regulation?

MS. TUCKER FOREMAN: So why, but then, okay, I\'m trying to figure out
why are we discussing this issue?

MR. GIROUX: I don\'t know.

MS. TUCKER FOREMAN: I keep trying to find out what is the issue that
everybody thinks is such a problem. We\'ve talked about this ever since
this committee has been in existence. It\'s in two reports and now
we\'re going to have a third one.

MR. KALAITZANDONAKES: I mean there\'s value to this discussion because
what we are doing is, we are actually taking things off the list that
might not be as significant just because, you know, people have talked
about them in the past doesn\'t mean that they are necessarily
significant. So let\'s focus on the things that really do matter at the
end of the day.

MS. TUCKER FOREMAN: Yeah, like some subject other than this one that
we\'ve been talking about for two and a half years.

MS. DILLEY: So we\'re trying to get back to infrastructure here. But
Leon, did you want to have any other comment on?

MR. CORZINE: Well, I was going to, I think in the whole coexistence
arena you have to look at the thresholds and what works and what
doesn\'t. And we could talk all day about the organic standards and that
kind of thing that doesn\'t have a standard or a level for GM. I mean
that\'s just a matter of fact and it\'s all contractual. But, to get
back, while we have both Jim here and Sarah and Randy as far as grain
handlers.

And the infrastructure and coexistence issue, I\'d like for them to
maybe speak, because this is a question, and I\'ve got my thoughts on
the infrastructure problems that we have, especially, we\'re supposed to
be offering advice so we should be moving forward. And we\'re spending a
lot of time talking about corn and that\'s fun for me, it\'s okay to
talk about, but we\'re going to be producing 15 billion bushels of corn
in just a few years.

So the infrastructure, I\'m convinced, and you can try to change my mind
and I change my mind once in a while, how we\'re going to handle it
because any infrastructure that we have both on the farm or commercial
is going to be filled up with commodity corn, and some is going to be
for specific uses, so it does speak to the coexistence issue in trying
to hit some of the niche markets or specialty markets with specialty
products and with tolerances.

We can do that growing, but I think it puts additional stresses on, once
it leaves the farm gate or once it leaves the field and goes to my
storage, and getting it to the end user, and what we need is
recommendations moving forward. I mean, already, and Jim spoke to the
cost, which are huge for demurrage, and are not going to go down. And if
you\'re in a specialty market that you\'ve worked a coexistence plan.

At the farm we\'ve been able to do it with something that I\'ve done
with a couple of my neighbors, or some of the things Russell has done
with groups. So you\'ve got small volume demurrage multiples
exponentially if you don\'t have a reliable way to not only separate it,
because we\'ve got a pressure on storage and then also moving it down
the line and being a reliable supply to some end user somewhere. Now
what are your company\'s thoughts or how are you doing that? Or how can
this committee make suggestions to Secretary Johanns about what we need
to do about that?

MR. GIROUX: You want me to go first?

MR. CORZINE: Sure.

MR. GIROUX: I think Jim made it very clear that, you know, when we talk
about specialty products, they are not substitutable. So there is some
volume of corn that needs to get to some location, loaded on some type
of conveyance to go to the end use customer. So predictability of
transportation, access to transportation, being able to time
transportation in an effective way is a critical component. So if we
look at the infrastructure or transportation in the United States, that
is a critical component to not only serving our commodity markets, but
also serving our specialty markets.

We will not likely create a dual transportation infrastructure for
specialty crops. It\'s just not going to happen. So you know, and I say
this all the time, that let\'s all go with the specialty products, the
specialty crops the need to coexist in the same supply chain as the
commodity products. And you know, they\'ll be lots of different ways
that people figure out how to do that, and I have no doubt that Jim\'s
company and my company will figure out the best way to move those
specialty commodities within that large grain handling infrastructure.
But there will be some conditions and they\'ll only be so far that you
can go. So we\'ve talked about it to death, right, AP is one of those
critical things because we will not have a segregated supply chain for
each individual specialty commodity product.

So without some kind of recognition that there\'s going to be
commingling, you know, that will be a limitation to how much those
specialty products can grow at the zero. My impression is we can\'t
manage that, so that\'s not going to happen. So when we look at our
infrastructure in the United States, that is a critical component for
all U.S. agriculture.

So if we don\'t have, if we have a system that isn\'t functioning at
high levels, if there\'s any investment that the U.S. government can
make, it\'s to ensure that we do have that strong transportation system,
and that involves the waterway. We\'ve talked about it several times
today. It\'s a critical piece of moving commodities and specialty
products in the export positions and out of the United States.

It is a huge industry. I think exports are up again this year, Leon? For
U.S. agriculture and so, if there\'s one thing I think that the
Secretary can look at, it\'s to look at transportation and ensure that
our industry has a viable, predictable and efficient way to move
commodities out of this country. That\'s at least one key point that I
think I can make.

MS. DILLEY: So are there some stresses to that that are more difficult
than others? Like volume, volume of ethanol, is that going to have an
impact on the whole transportation infrastructure, or is all commingling
equal? Do you treat different commingling as more challenging than other
commingling or what are some of the stresses on that that are
particularly, because you\'re using one system, because you can\'t do a
dual system, it\'s too expensive, you\'ve got to use the same system,
what are some of the stresses that are more challenging than others?

MR. STITZLEIN: Well, I think it goes to the destination. I think it goes
to the question of what destination you\'re going to go to. So there may
be different challenges based on what that expectation is. But, the
ability to respond is also going to be a factor in what those
expectations can survive to be. Zero is not a reasonable expectation
given the system that we have. And so, you know, I think that\'ll get
sorted out in the marketplace.

Infrastructure, yeah, if we get to 15 billion bushels, that means we
need, you know, an increase somewhere in the system to be able to
accommodate that extra production. I don\'t think the exports are going
to go away. We still will have that demand for a portion of the crops.

MS. DILLEY: You\'re talking about destination in markets as opposed to
physically, like doesn\'t make a difference if it is, you\'re
transporting it across country versus transporting it by barge?

MR. STITZLEIN: Well, you have different requirements at different
destinations. If there\'s more than one pipeline going there.

MS. DILLEY: I didn\'t know if it was more expensive or \--

MR. GIROUX: All right, so we have the export market which is mainly the
river, but you know, a lot of these commodities move within the United
States either by rail or by truck. So when we talk about transportation
infrastructure, I\'m not just talking about the waterway, but also our
rail, investments in rail and highways to make sure that we can move
those things around.

MR. SLOCUM: The real burden that this extra three billion bushels, or
three and a half billion bushels of corn, and that\'s what we\'re
talking about. That\'s what Leon\'s number is, 15 billion. I mean,
that\'s a lot of corn. And however you haul it, it\'s a burden on a
domestic system that\'s already, it\'s operating at capacity. I mean,
you don\'t see railroad cars laying around, you don\'t see any empty
freight engines running up down the tracks. I mean, everything is at
capacity today. That\'s why they price it the way it is, because it\'s
at capacity. And it\'s not getting any cheaper. It\'s not going to get
any cheaper. In our country elevator business, our freight rates, our
rail freight rates are two and a half times what they were two years
ago. And they are not going down.

MS. DILLEY: Is that going to raise your price in terms of meeting \--

MR. SLOCUM: Sure it does. But the consumer ultimately pays that price. I
was afraid that it would be passed back to the producer, but the
producers actually paid a very small portion of those increased freight
costs. The consumers pay for it. The consumers pay for it. And that\'s
who ought to pay for it, I think. So exports are not going to go away,
and that\'s what the river system in this country addresses. There\'s
not another place on the planet that could compete with the U.S. in
growing corn. It\'s just that simple. And that\'s not going to change in
the next 15 or 20 years. It\'s not going to change.

Argentines do an awfully good job of it, but they want to grow soybeans,
and soybeans are on 60 percent of their land mass today, and that\'s
probably not going to go away. Because that\'s what their infrastructure
is geared to handle. So we\'re going to see a tremendous impact on
domestic transportation challenges, in my estimation, in the next three
or four years as we add this three-and-a-half billion bushels of corn.

Because all these ethanol plants spit out other products too, that got
to be transported away from that ethanol plant. None of these ethanol
plants have been built in New York City by the way. So the stuff that
they make has got to be hauled somewhere too. I mean, it\'s just a
tremendous burden on the transportation system, and I don\'t think
we\'re spending a lot of time thinking about. The marketplace in Chicago
began to think about this stuff in the last four, or five months. We
rallied corn a buck and a half at the time we had the biggest U.S. corn
supply in history.

Think about that. So Chicago has already started thinking about, oh my
God, the signals we have to send to farmers to grow this
three-and-a-half billion bushels of corn. But nobody in the
transportation business is saying, ought, ought, we got to haul it. We
need a lot more trucks. Need some more rail cars. Need some more tanker
cars. Need some more open-top cars to haul DDGs and whatnot. And I
don\'t think we are thinking a lot about that. And why would we? Look at
railroad stocks. They\'re making so damn much money by pricing this
stuff at ridiculous prices it feels like, obviously not, because we\'re
paying them.

But I think this is something that, this is a threat, and I\'m not sure
it\'s a coexistence threat, but since all of U.S. agriculture is about
coexistence, it must be. All of it\'s about it. I mean, this is a real
threat. And I don\'t think we\'re spending a lot of time thinking about.
There are two companies building barges today.

MS. DILLEY: Yeah, because if you just said you have to use that system
no matter what, so it is a coexistence issue and everybody\'s got to use
the same system, transportation system or infrastructure.

MR. CORZINE: Well see, that\'s my point. That\'s why I think the
infrastructure is a coexistence issue because it\'s going to push out.
It\'s going to be economics. The end users that want the specialty
products, it doesn\'t matter whether it's high oil corn, or whether
it\'s organic, it\'s going to be a lot more expensive to compete, and if
want the U.S. to continue to participate in those markets, we\'ve gotten
into them in the first place because of economics.

And infrastructure is a big part of that. Not only can we grow it, but
we\'ve been able to use our resources for that. And we\'re losing that
competitive advantage because everybody else is spending billions on
their infrastructure. Whether it\'s South America or whether it is
China, wherever you want to go, and we are not.

MS. DILLEY: So do you have a different vision than Jerry in terms of
we\'ll always out-compete for the next 15 years, or does that price
start getting to a point where it is, or \--

MR. CORZINE: We will always out-compete on production. Just because
we\'re centered \--

MS. DILLEY: What about cost?

MR. CORZINE: And on cost, we\'re there. But part of that cost is
movement of product. And we\'ve been able to do that, and the
infrastructure advantage is part of the ability to compete in the world
market. Now we\'re looking at a lot more domestic use, so what we\'re
really talking about, and Jerry touched on it, is movement of
added-value products. It used to be we counted on the added value was
coming from Cargill or General Mills or ADM, but now it\'s coming from
these hundreds of ethanol plants we\'ve got around, and that product has
got to move, by rail, by water, because it\'s going to be the ethanol
they use domestically, but the distiller\'s grain and other co-products
are competing in the worldwide market.

So that volume of those products which are added value, there\'re going
to be different demands and different things that the end users want
from those as well. But, if we want to continue, you know, it\'s
economics even on the farm if corn did go up a buck and a half. Lynn
Clarkson talked about it\'s a big deal to be able to get four dollars a
bushel for the corn into his organic market. Well guess what, I sold
commodity corn at four dollars. Okay. So why the hell would you grow
organic when you can get twice the yield or whatever percentage,
depending on where you are, that\'s arguably, not the headache, not the
risk, reward issue, the reward isn\'t there for the risk is the point.

So it all gets in, and in this coexistence there\'s infrastructure
really is a big part of that. And I think that\'s why it merits some
sort of space in a recommendation to the Secretary that we see this
coming.

MS. GEISERT: It strikes me that you\'re talking about an access to the
infrastructure as you describe it, and so \--

MS. DILLEY: And predictability like Randy said.

MS. GEISERT: Right. And so, as it moves to fuel, you know, how is that
going to affect feed and how is that going to affect food, and so, you
know, if you look at agriculture, you know, who determines who gets the
infrastructure?

MR. SLOCUM: The guys that own it. That guys that own the infrastructure
is who determines it.

MR. CORZINE: But also with that \--

MS. LAYTON: Okay, so did I hear you say, infrastructure must be in place
to handle increased production and products, types, because there\'s no
products that is going to be out there in different places, to include
any identity preserved kinds of materials. That that infrastructure must
also handle any identity preserved products?

MR. CORZINE: Well, any modernization. You know, the costs are going to
go up, but you can modernize the system. For example, we could send all
our organic products overseas in containers, and we could put those
containers on barges and do it. But there\'s a cost. But, right now our
delivery system is not reliable. It\'s losing its reliability. I mean
something built in the 30\'s with a 50-year life expectancy, it\'s time
that we did something about it.

MR. SCHECHTMAN: Which part of that is losing its reliability? Is this
barges? Is this container?

MR. CORZINE: It\'s primarily the barges. The river system right now, but
as we look at, \-- but it goes further than that because Jerry mentioned
the rail, and that is true, we got rail, we got highways. Look how many
trucks are on the highways all around the country. How much do you want
to increase those? We just had the 50-year anniversary of the interstate
system. So they\'ve been here 50 years and the whole deal is investment
in infrastructure and it goes clear through, and it really speaks to
coexistence in what we may want to grow so we can hit a specific market,
because if we don\'t have that reliability, we can\'t deliver.

MS. MELLON: But why do the people who own the infrastructure, who right
now are, you know, enjoying this tremendous boom, why aren\'t they, I
mean, why in heavens name haven\'t they built better grain elevators or,
I mean, why aren\'t the market signals going right to them. They ought
to be, they ought to have been way on top of this.

MS. DILLEY: Are they going to them? I guess that\'s the question. Do you
see market signals going to them or is that federal dollars and that
hasn\'t been or what?

MR. SLOCUM: You heard Jim talk about the grain handling structure is not
a storage structure as much as a handling structure. And you heard him
say that farm storage is an absolute necessity. That\'s true with this
three-and-a- half billion bushels increasing in commodity corn we\'re
talking about too. A modern ethanol plant is not building any storage
capacity to speak of. Three or four weeks tops. So they\'re depending on
the farmer to store it on the farm or country elevators to store it in
the country or something.

So you\'re seeing, I mean, you\'re seeing bin builders are building more
bins right now in the last couple of years than they\'ve ever built.
They\'re as busy as they can possibly be at the highest cost there\'s
ever been to build a grain tank. Okay. And it\'s outrageous. But people
are putting them up because the ethanol industry is going to demand it,
and because the market until now, Jim, has paid grain companies nice
carries to store it.

The fact is, a farmer can build storage. Generally he's building on land
that\'s less expensive because he\'s building it away from a rail spur,
or away from a river, so probably the most cost effective is what\'s
built on a farm. The government still has a program where they\'ll loan
you some discounted money to build farm storage, and that\'s an
important program. Okay, that\'s an important program that CCC\'s done
for many years and they need to continue to do. But I think the
industry, the handling industry, the processing industry clearly, it is
looking to address this increased demand because the ethanol plants are
going up, biodiesel plants are going on, farm storage is being built.
Some commercial storage is being built, not a lot. There\'s been a good
bit of money spent there in the handling part of it though. Because
that\'s the real issue there is the handling part of it.

So I think the private industry is responding to it. The reality is is
that, you know, the barge lines have not enjoyed the greatest prosperity
until the last couple of years. So they spent a lot of time getting old
stuff out of the fleet and the pace of building barges is about at the
pace retirement of barges right now. We\'re not adding to grain barge
fleet. The guys that own the barges and own the tows are trying to run
it, load it both ways. So they\'re taking grain to the Gulf and they\'re
loading scrap or something or coal or fertilizer and bringing it north.
So turn around time is not as much because there\'s not as many empty
barges anymore. All right. The same thing with rail cars. You know,
nobody is building any new rail cars. Now the industry may begin to
respond to that, but at the current time they\'re not. Is Cargill
building any cars, Randy? Is he gone?

MR. SCHECHTMAN: He headed out.

MR. SLOCUM: Is Consolidated Grain building any cars? No. I don\'t know
anybody in the private grain business building cars anymore.

MS. DILLEY: Because they\'re just still trying to maximize the economic
gain matched by what they already have. But when you get to the point
where you have to go \--

MR. SLOCUM: And if you look at freight structures, if you look at rail
structures, they\'ll pull their own car about as cheap as they\'d pull
your car. So it\'s no real incentive for grain companies to build rail
cars anymore. Because the railroad wants the freedom to chose to pull a
coal car rather than a grain car. Or the freedom to choose to pull a car
full of big-screen TVs instead of a grain car.

MS. DILLEY: It seems like you might have an awfully big lag time for
market signals to send bigger volume because as long as you\'ve got
markets that that well you\'re willing to pay higher costs.

MR. SLOCUM: You\'ve got markets that are willing to pay higher costs
because you\'ve got consumers that are willing to pay higher costs.

MR. KALAITZANDONAKES: I absolutely would protest. So you know, when we
are talking about durable \-- as any industry that uses durable whether
inputs our goods, you do not respond to annual demands with the same
kind of response as if it was buying chewing gum, right? You kind of
have to build your expectations that this is a long-term trend. So if
there is a long-term trend, the transportation business, the train
companies eventually will, you know. Now, there\'s a difference between
the kind of demands that we are talking about.

There\'s one kind of demand on the transportation business like the rail
and the barges and the trucks, and that is privately driven and that
kind of investment eventually will get there. And then there is the
infrastructural kind of demand and that\'s the river system that we were
talking about, and that\'s typically a government type of investment.
And so those two things have to be separated so that, I mean, you might
not like the rail rates right now, but they are sending the right
signals for the future, and obviously the market is going to pay them.

MS. LAYTON: I have a question. The rivers are there. Are they too busy?
I don\'t understand why you \--

MR. SLOCUM: Locks and dams.

MS. LAYTON: Why, they\'re not operating fast enough?

MR. SLOCUM: They\'re built in the 30\'s.

MR. CORZINE: They\'re built in the 30\'s.

MS. LAYTON: So they\'re not as predictable as you\'d like them to be?

MR. STITZLEIN: Right. That\'s the concern.

MS. DILLEY: So you can\'t say I\'m going to put this on a barge and
it\'ll definitely get there by the time I have to \--

MR. STITZLEIN: True. I mean, the locks may fail.

MS. LAYTON: But do you guys have some expectation that you will ever get
licensed new dams and locks? I mean, are people sitting around here
thinking that\'s going to happen?

MS. TUCKER FOREMAN: Or that the taxpayers are going to pay for them they
way they did in the past?

MR. CORZINE: Well, that\'s where half the money is there with the barge,
fuel tax on the barges, but that doesn\'t get recognized enough. But
yeah, there\'s that unfulfilled expectation.

MS. LAYTON: Does the word salmon not mean anything to you all?
Endangered species don\'t enter your thought process?

MR. CORZINE: Yeah and that\'s an issue. And that all clouds the whole
thing of politics because over half the money in the project is for
environmental issues.

MS. LAYTON: Absolutely.

MR. CORZINE: So, but one of the issues is, okay, we\'re talking about
government owned, we\'re talking about the rail owns, it\'s privately
held, but the government can help incentivize because it we\'re going to
talk about coexistence in some of the specialty markets, they can\'t,
because of the big volumes pushing everyone else off, be it coal or be
it corn. There was a time when the Pacific Northwest was where all the
corn was going and it had to go on rail if it\'s going to go to export.

But we need, if I\'m going to hit a specialty market I\'ve got to get
rail access and there\'s not that ability. And some of that is spurs in
strategic locations that are not there today, and we\'re looking at that
even for containers. To get containers in Illinois around Joliet
there\'s a bit yard that\'s got a lot of containers, but we don\'t have
a way to really get some of our specialty products to them. Get them
filled so they can get on the line and get to a destination. So we have
trouble meeting and market demand be it in Japan, Taiwan, or wherever.
So those are the kind of issues that the government can help with as
well that ties right into the infrastructure.

MR. KALAITZANDONAKES: But Leon, let me, I mean, I love your logic, but
let me take the other side of the argument just for argument's sake.
That means that that spot is not good or is not appropriate for IP or a
specialty production. When we talk about coexistence doesn\'t mean that
every farmer has the right, a birthright, to IP and specialty
production. I mean, we\'re all trying to find what are the comparative
advantages of different parts of the market.

So there\'s a difference between we want to make sure that the
environment permits and allows everybody to participate, but comparative
advantage as a concept is not going to change. So some places are just
not going to be right because they are better for another type of
production.

MR. CORZINE: That\'s true, but we\'re talking about coexistence and what
we hear a lot, we\'ve had those opportunities in the past. We hear a lot
about well, because somebody wants to do something or somebody wants
something, they should have that opportunity. And I don\'t believe in
that either. It\'s a matter of economics. But if we been able to
participate in that specialty market in Japan, we want to continue to do
that and we\'re talking about what it takes to continue to be able to
have that ability.

MS. DILLEY: So where do you make those decisions and how do you make
those decisions?

MR. KALAITZANDONAKES: It might be that, now Leon is not an appropriate
farmer to do so, but is somebody else close to the river and close to a
different location. I mean, you know, the idea that everybody has to
have the opportunity to do so, it\'s just not, you know, the market is
dynamic. As long as you\'re not being precluded by market forces, you
know, then just because you\'re comparative advantage changed over time,
well, I mean, that\'s what it is.

MS. TUCKER FOREMAN: I just want to raise the possibility that the future
may look very different. We invested huge amounts of public funds in
creating lock and dam systems. We\'re now making Tulsa, Oklahoma into a
seaport. Today one might wonder, environmental issues aside, whether
that\'s a good use of public resources. But we used to do that.

I think the run up in oil prices, which is clearly something that\'s
going to continue, may make people wonder, are we going to have to
change the way we produce and process and use food so that we don\'t
make an assumption that all of it gets shipped very long distances
because it may not be economically feasible to do it that way over the
next 50 years, as it was over the past 50 years. I have no idea. But
that\'s at least a possibility.

MR. CORZINE: The response to that Carol is that you\'re exactly right.
But, whether we\'re sending the commodity product or the processed
goods, we still, if we\'re going to continue to participate in the world
market, whether it\'s organics or whether it\'s Frito-Lay chips, you
still have to have the transportation, whichever you\'re transporting.

MS. TUCKER FOREMAN: I\'m not sure that we are going to participate. I\'m
not positive we\'re going to participate in the world market on the same
basis that our systems built right now. I do not know what rapidly
increasing energy prices are going to mean for all of that, and there
are at least some studies that suggest that 50 years from now, that this
may be a stopper on international trade or at least a factor that
diminishes it because there\'s only so much energy out there. Plus of
course you want to turn all the feed corn and food corn into ethanol, in
which case we can go places, but we go hungry at the same time. Which
for some of us might not be a bad thing.

MR. CORZINE: I\'m not sure that, if I can just interject, I don\'t
believe that anybody else in this room would really believe that we\'re
not going to participate in export markets in \--

MS. TUCKER FOREMAN: I said not to the extent we are now, and I think
there are some issues, there\'s some questions about whether we are.

MR. KALAITZANDONAKES: Carol, even if tomorrow we stop exporting every
bushel that we have been exporting over the years, our demand for
transportation, especially for most of the market is not going to change
a bit because we still have the processing plants where they are. The
processing plants where they are. We\'re not going to be building new
ones. And all the commodities from all the farms need to go there first,
and then process them, got to the demand side.

MS. TUCKER FOREMAN: I\'m suggesting that may change. In takes 50 years
to build more infrastructure for transportation. It took a lot more than
that to build the lock and dam systems that we have now. To build the
highway system that we have now. It\'s not some, \-- infrastructure
doesn\'t happen overnight. So, it may be that we try to do it by massive
infusions of money to new infrastructure. It may mean that we stop
raising all the corn and soybeans in one part of the country and all the
fruits and vegetables out there in the imperial valley, and that we go
to a more localized food system. It will take 50 years either way.

MR. KALAITZANDONAKES: I mean from a production perspective, from a
germplasm perspective, from a body of soil perspective, from an
agronomic conditions perspective, you nail (sic) infrastructure of
processing perspective, I mean, I can\'t imagine how this would be done
because, you know, forget the infrastructure, forget the exports, forget
all of everything else. We are still producing on most of the same
acreage in the same regions grain that we were producing a hundred years
ago. So, you know, we are moving stuff a lot more effectively because of
the transportation, but production regions aren\'t going to change
tomorrow.

MS. DILLEY: You guys are losing me because you\'re going way out beyond
where I can keep up with you.

MS. TUCKER FOREMAN: The thing is that we made a decision that we wanted
to feed the world. We don\'t, you know, this is all food that is not for
our use, but it\'s to go around the world. I wonder whether that\'s not
going to change very substantially as China becomes a bigger and bigger
producer and other countries do, and energy crisis play a different
role. I\'m not an expert on any of these, but that is at least a
question that people who are, have been raising.

MS. DILLEY: So one of the issues, again, I guess I want to come back to
the accessibility and predictability particularly given the anticipation
of increased volume and diversity in the marketplace and to me it\'s
not, we\'re not talking 50 years because the Secretary probably won\'t
be here in 50 years. So I\'m just trying, if there\'s more discussion
around that in terms of observations or what does that mean, and what
should we be thinking about in terms of coexistence or playing a couple
of different scenarios out, but not quite out 40 years.

MR. GIROUX: No, I think all of the rich conversation pretty much covered
my points. I just want to highlight exactly what Jerry said is, if
we\'re looking at historically high freight rates today, I mean, that is
not going to go away because we are maxing out the system, and what will
be squeezed out will be things like specialty products and those types
of things for the volume products. So if we\'re look, you know, if the
role of this committee is to look \--

MS. DILLEY: Say that again. Specialty products for high volume is
what\'s going to get squeezed out?

MR. GIROUX: No, no. High volume products will squeeze out specialty
products. Or the prices will be incredibly high to participate to get
noticed in the marketplace. So if we want coexistence, then there is an
infrastructure and transportation is one place that is going to need to
grow. And whether that grows by market forces or by improving the lock
and dam system, or the rail system, it\'s probably all of the above. But
that is going to be a pinch point for continuing to have a wide
coexistence of specialty products.

MS. DILLEY: To me that\'s helpful, because as to the issue spotting or
the pinch points, as you just referred to, that seems to be where we can
add some value. I\'m just trying to flush those out a little bit more.

MR. GRANT: Yeah, so I think Randy really kind of summed it up. The point
I wanted to bring to this discussion is not particularly my point, but
it\'s been brought up before, mostly by Michael and probably seconded by
Brad, and that\'s the fact that we\'re talking about coexistence of
biotech crops and conventional crops, and I want to step outside of just
the corn, bean universe right now and really look at all ag products.

The fact is that, you know, better understandings of genetics have led
to a rapid acceleration of yield per acre. In corn it\'s been about a
percent, now Michael made a comment at one of our meetings is, he had
two and they're pushing to three. I can tell you in sugarbeets we\'ve
actually went about five percent in the last 10 years. It\'s absolutely
\--

MR. SCHECHTMAN: Five percent a year?

MR. GRANT: Five percent per year yield increase. It\'s absolutely blown
us away. But just to illustrate, I was looking at some variety
opportunities rankings for next year before I came out, and the
varieties today are yielding around 12,000 pounds of sugar per acre. Ten
years if we hit 7,000 pounds we thought we were doing very well. And
that\'s even before, you know, we\'ve actually moved into true
transgenic varieties. That\'s just by better breeding through an
understanding of genetics.

And so we\'re increasing our production per acre and that\'s the result
of our better understanding of the science. That product has to move
somewhere. And I can absolutely second Randy\'s comment that, you know,
increased production in the Corn Belt will push other products off of
the transportation system. We are seeing that in spades in the PNW. We
can\'t get rail cars. We can\'t ship onions East. We can\'t ship
potatoes East because all of the trackage is used up by the Corn Belt
guys shipping stuff both way. So it is an issue that is related to
biotech, and you know, for our area up in the Northwest, now we hope the
yield to continue to exist, but that depends on transportation.

MS. LAYTON: So when I said infrastructure and its reliability must be in
place to handle increased production and new products, and that would
have to include either identity preserved or specialty products. It
still, it doesn\'t matter, it still, we don\'t have enough
infrastructure, reliable infrastructure in all of it to work.

MR. GRANT: The system has been built up anticipating this one percent
per year yield trend. I mean people talk about trend lines all the time,
and that\'s kind of what the industry is built up around is, you know,
continual improvements. But around the one, one and a half percent rate.
We\'ve accelerated that I don\'t think the transportation guys have
figured that out. The system hasn\'t caught up.

MR. JAFFE: Yeah, I mean, infrastructure and transport is clearly not my
area of expertise. So I defer to others that they say what\'s going to
happen in the future and so forth, but I just wanted to come back to
mixed three statistics of us still being the largest exporter of, I
mean, the largest grower of biotech crops, the largest exporter of
non-biotech crops, and the largest grower of organic crops, and getting
all those to market.

And so, I mean we\'re doing that currently and those markets have all
happened in the last five or ten years that that\'s happened. And having
Jim\'s businesses, or Lynn Clarkson's businesses, I mean, people have
been able to figure this out. So it seems to me, I\'m going to go back
to what I said yesterday, how are we different than others?

I mean, there obviously was a lot of flexibility in the system, and
somehow that, I mean, I don\'t want to sell short the fact that we\'re
going to be short on these things, but there are also, the system has
shown a lot of flexibility and I would expect it will continue to show
flexibility to deal with market forces and deal with some of these
things.

And so, to me, that is also interesting and something that we might want
to point out is that, that we have had that flexibility in the system.
The system has been able to figure out how to deal with specialty crop
in all these different markets, and do it in a cost-effective way and
meet both farmer interests, producers' interest, but also consumer
interests in multiple markets both in the United States and abroad.

So, I mean, the last bit of discussion in my mind has been halted, all
the problems, all the things we could do, all the things that, you know,
we want to do different and better. And I think we\'re missing a point,
and again, I\'m not an expert on this, but from the outside it looks
like our system has a fair amount of flexibility worked into it or has
been able to.

Now maybe we\'re reaching a point where we\'re going to lose some of
that flexibility, but I think it is important to point out that there
has been a lot of flexibility and a lot of ability to do that within the
system, and it would be nice to be able to make some observations as to
why there was that flexibility or how did we achieve that flexibility
because that may also show we\'re not going to get dams and new
infrastructure.

So there may be lessons learned from the flexibility we\'ve had the last
five or ten years that could be used to continue with these growth
things because we may not get infrastructure investment the way that
somebody will think we need it. We may have to learn to do the
flexibility or other kinds of things.

MS. DILLEY: I mean to that point, any additional thoughts you have Jim
or Randy or Leon in terms of, or Jerry, of why that\'s been, and how
that flexibility has been able to allow expansion over the, the decade
that you showed your graph going really up. Obviously it\'s been able to
accommodate that really steep increase, so what are your observations?

MR. STITZLEIN: I think we\'ve faced some challenge as this dynamic
changes to much more demand pull. That\'s why, Jerry\'s not, you know,
why he\'s saying the consumer is paying for this. Well, it\'s a demand
pull that creates that. The market will respond. It\'s just how quickly.
And the dynamics that we see are huge happening to us already. I think
it\'s appropriate to reinforce that message to the Secretary and the
Government to continue to maintain the focus on allowing that growth to
happen and encouraging it to continue to provide the flexibility that
allows us in the industry to respond and figure something out.

MS. DILLEY: So if you could say, let\'s squeeze some more flexibility
out of it, you\'re not sure \--

MR. STITZLEIN: Well I\'d certainly say, make sure that there is some
flexibility there or that\'s important to enable this organic and the
coexistence to be there. Otherwise, the economics will destroy it. The
added costs will be so huge that, you know, then it becomes well, will
the consumer pay that.

MR. SCHECHTMAN: Just a follow up on the flexibility. And this is just
for your company. Your name is Continental Grain and Barge.

MR. STITZLEIN: Consolidated.

MR. SCHECHTMAN: Consolidated. Excuse me.

MR. STITZLEIN: Continental used to exist, but no longer.

MR. SCHECHTMAN: Are you building more barges?

MR. STITZLEIN: Yes. Not fast enough because we can\'t get anybody to
build them as fast as we want to. I mean, the industry, you know, the
construction of them takes time. We took as many old barges out of the
fleet as in industry because steel costs, or steel was high and we
scrapped them for more than they were worth. But we\'d like to have them
back now.

MR. SLOCUM: Part of the flexibility that has been there in the last four
or five years is the fact that the rail, the rail industry built more
cars than they could efficiently utilize. They had cars in storage.
Didn\'t have enough horsepower to pull them. There were barges. The
barge industries had overbuilt. Right before this explosion of exports
was happening, you had several barge lines take Chapter 11. I mean that
industry was in bad, bad, bad trouble. So because you had an overbuilt
transportation industry, it gave us the flexibility that we\'ve enjoyed
the last three or four years.

Well now the system is maxed out again, and he really wishes he would
have welded some patches on some of those old barge they scrapped and
sold to the Chinese. Okay. Because it costs about a half million dollars
or maybe \$600,000 \--

MR. STITZLEIN: Well we don\'t own that many barges because we\'re
foreign-held. But anyway, go ahead.

MR. SLOCUM: But I mean, all of a sudden the flexibility that we\'ve
enjoyed is sort of being maxed out. And you can see it in transportation
rights. That\'s why they can charge what they charge because there\'s
not a lot of excess capacity.

MS. GEISERT: And I think one of the things that comes with flexibility
and we\'ll never do anywhere near what Ron can talk about, but he said
it is substitutability, and so what you\'d say is, you know, we would
perhaps say, you know, look back on oats. We buy a fair amount of oats.
But we end up having to go North to buy oats because acreage has gone
elsewhere. We\'ve seen a place where over time we\'ve seen wheat low.
We\'ve seen wheat go up. We\'ve seen wheat go back down. We see corn. We
see soybeans being planted more. So I do think again there is
substitutability, and it doesn\'t make it equitable depending on where
you are in that market to say, gosh, I can only grow wheat and the
substitutability impacts me differently.

But I think that has been a bit of the market forces that also comes
into play is that substitutability whether it\'s in the U.S. market or
another market that allows to switch from corn so the capacity, or from
wheat, so that there is some added capacity that\'s added in other
dimensions. So I think that\'s another component that has allowed
perhaps this flexibility to occur is the substitutability that has been
available.

MS. DILLEY: And that\'s diminishing as with some portions of it.

MS. GEISERT: It does. You know, and then prices adjust and, you know,
you reset the market and it changes. But, the market has allowed that
substitutability so it reaches where we have choices on how to go and
how to handle it.

MR. CORZINE: I just wanted to jump at the chance. Greg brought out a
really good point. And we have talked about the problems and things we
need looking forward, but we do need to note that really these things
have adjusted. Economics have worked and with the flexibilities that we
have had in the system, it has worked really well and there aren\'t
really, we don\'t want to say currently there are a lot of problems out
there with what we want to do because it has worked.

Now we do have these issues and it\'s not just the Midwest or just a
corn issue like Duane talked about. So moving forward that\'s where we
see the stresses. But Greg\'s exactly right, and I don\'t want anyone to
think that we, everything is completely broken now, because it\'s not.

MS. DILLEY: Right. But I think understanding, like Jerry said, you know,
some of that flexibility was able to come from overbuilding to begin
with and being able to use that and take advantage of that, and having
maxed that out. Those are some of the questions that we\'re trying to
struggle with.

MR. BUSS: Well it seems to me that the, to back up, the issue that we
talked about is that very careful analysis and planning needs to be done
to ensure that the transportation infrastructure is going to be adequate
to support coexistence. It seems to me that we\'re getting way
downstream in terms of predetermining what the outcome of that
discussion is going to be, and I\'m not convinced we have the right,
that takes a lot of, you know, highly specialized expertise that I\'m
not sure \--

MS. DILLEY: I think we\'re just trying to understand the pinpoint so we
can articulate it, not resolve it necessarily.

MR. BUSS: That\'s a concern. It seemed like we were getting out of the
point of trying to resolve it.

MS. DILLEY: No, I think we\'re just trying to understand it a little
better.

MS. BRYSON: I just think we shouldn\'t lose Pat\'s point. I mean, it
seems generally that everyone is agreeing that there\'s going to need to
be a lot of infrastructure updating which requires building. And from
agriculture\'s perspective, it doesn\'t have authorization over a lot of
the environmental issues that need to be considered. But to the extent
it could help streamline those processes or do something to allow us to
actually build and repair and expand some of these things, that would be
a very important role. Sort of a bully pulpit for agriculture to
inhabit.

MS. DILLEY: Other thoughts on the storage infrastructure piece in terms
of beyond articulating it as a pinch point and why there\'s been
flexibility and the system has been able to work until now and then any
other additional thoughts as to why it\'s a pinch point or trying to
flush that out a little bit more? I also had a question. Jim, you had
mentioned we had somebody from ASTA come yesterday and talk about seed
availability, and you made reference to that. And I was just curious,
because again, I think we\'re trying to understand, is that a pinch
point or not a pinch point? You mentioned seed availability is a little
bit more difficult in this period.

MR. STITZLEIN: It\'s not today, but it could be in the future, and I
think that\'s, well, long term thinking. Long term planning ahead is the
point, I suppose. If coexistence means we\'re going to need different
things, are the appropriate people in the industry seeing that need. And
I think it behooves government and the industry to work together to try
to flush that out and communicate it.

But yeah, you know, the trend is pretty clear for the seed companies in
corn at least. That transfer GMO acres is certainly climbing and, you
know, the squeeze is going to happen soon. And you know, they\'re
already talking about a three-year timeline for the seed company\'s
decisions to, when we deliver grain overseas or to the domestic market
for that matter. So I just pointed out that somebody ought to, that\'s a
factor that ought to be looked at.

MR. SCHECHTMAN: So this is a squeeze on \--

MR. STITZLEIN: Availability.

MR. SCHECHTMAN: Availability. Are you talking about availability of
non-GMO\'s?

MR. STITZLEIN: Of non-GMO seed if that\'s what your coexistence question
is.

MS. LAYTON: For high oil was the other one he brought up.

MR. STITZLEIN: Well yeah, high oil we\'re already into that where
because of market conditions lagging behind what was happening on
production of other hybrids, other competing hybrids for the farmer to
choose, seed companies made decisions two, three years ago about how
much high oil corn seed they were going to produce. What\'s happened to
us is, our users are saying, oh, we still need high oil corn, so we
can\'t get farmers to grow it because even though the user is now
willing to pay us more so we can pay the farmer a lot more, there isn\'t
a seed available.

MS. DILLEY: Is that part of going three years out is a little bit more
difficult as opposed to \--

MR. STITZLEIN: Well, we are talking about infrastructure and
uncertainties here and we were over built on barges, now we need them.
You know, all those uncertainties feed into a problem at some stage.

MR. CORZINE: It was economics that drove farmers away from growing high
oil corn because you weren\'t paying enough for it.

MR. STITZLEIN: The user wasn\'t paying.

MR. CORZINE: Right. The user wasn\'t paying enough for it, so the
farmers, the demand isn\'t there, so why would the seed industry produce
the seed if there\'s no market because farmers aren\'t going to buy it.

MR. KALAITZANDONAKES: And so the next question exactly along the same
lines, Jim, is that, if in fact this is a predictable trend on the
end-user side, why did they not put out contracts for 2009 for non-GMO
corn? In which case, ‑‑

MR. STITZLEIN: They haven\'t had to in the past and so there hasn\'t \--

MR. KALAITZANDONAKES: But you see what I\'m saying, that if the market
demand is not articulated by the market demand side, why should anybody
be responding to that? I mean that\'s a hypothetical discussion. So if
in fact they anticipate that, they should be putting out contracts for
2009 with, you know, a premium that would make it attractive. And all of
a sudden, non-GMO seed would be available.

MR. GRANT: So if Jerry\'s to this seed issue.

MR. SLOCUM: Well I am to the seed issue. You go ahead.

MR. GRANT: No, I\'m going to take us a little different direction.

MR. SLOCUM: The demands on the seed industry, let me give you, the
little co-op that we\'re involved in at home to, the supply side of our
business, last year we sold 3,000 bags of a particular Pioneer stacked
corn variety in North Mississippi to our customers. It\'s a great
variety, and people wanted it. This year our allocation from Pioneer for
that, last year we sold 3,000 bags, our allocation for pioneer is 439
bags. That\'s how much increased demand there is for just planting seed
for the 2007 corn crop. We\'re going to plant an extra 7 or 8 million
acres corn in the U.S. next year. And the year after that, Leon, we need
another four to five just to keep the ethanol industry alive.

So where do you think the Dekalb, and Pioneer, and Garst and Monsanto
and Dow are going to spend their energies over the next two or three
years? They\'re going to spend it on commercial corn. They\'re not going
to spend it on high oil. Forget your customer, because he\'s not paying
enough anyway. You know, they\'re going to churn out commodity corn with
enhanced traits, production traits, or traits aimed at the biofuels
industry. Because that\'s where the market demand is for the next three,
four five years.

That\'s the market signals seed companies are seeing. They\'re not
seeing market signals, Mardi, from organic consumers. They\'re not
seeing it.

MS. DILLEY: So does that make a pinch point for those?

MR. SLOCUM: You darn right it makes a pinch point. It makes a huge
pinpoint.

MS. MELLON: That\'s why this is so important that this is a place, I
mean, the organic food market is such a tiny part of the food and feed
market, and now this big commodity corn \--

MR. SLOCUM: And the conventional market is getting to be a much smaller
part. So Russ\'s problem, just trying to find some conventional
varieties to buy is going to be more difficult. Our problem finding
conventional varieties to plant on refugia, is going to become a little
bit more difficult. So there is, and maybe it\'s not crunch time today
on the seed industry, but it\'s getting close.

MS. MELLON: But these to me are important issues to identify. I mean, it
is, we are, and these are places where the government might be able to
step in. I\'m not exactly sure how, but at least to identify that
there\'s a, that there is a market at least for the near time for
non-GMO food in the U.S. That there are people here and abroad that are
going to buy it. That there is a market but it is relatively small. I
mean, it is going to be a relatively small one and it is going to try to
set itself up, you know, in the midst of these big forces that could
just swamp them.

I mean, you know, if everybody just grows corn for ethanol, food corn
could go out the, you know, could go out the window. So it seems to me
that there is a, you know, these are what I would call market \-- I
don\'t know, I hate failures \-- but I mean, these are market
irregularities that we might want to address by identifying the market.
Saying food is important in the United States. That we want to preserve
our ability to produce food. We want to have enough non-GMO seed. I
mean, I can\'t, you know, I can\'t tell you how, I mean, we should not
overlook the idea that conventional breeding which everybody looks at
like as in the past, has just gotten to the point where it is now
producing three percent per year increases in corn and five percent per
year increases in yielding in sugar beets. That ought to be on the front
page. Powerful technology, you know, doing even more than anyone ever
expected. It gets no respect at all. But I mean, that\'s another issue.

So I do think identifying this, you know, understanding what might
happen. Saying it\'s important for us to take some steps, whatever you
know might be appropriate to preserve our ability to produce non-GMO
corn in the U.S. to satisfy our own markets seems, you know, seems like
it\'s a good thing for us to say. It could help us, you know, in doing
that I think we could help some of the specialty markets here. We could
think in broader specialty market terms and we could assist some of
them. But I suspect that bottom is going to be some sort of statement
that the U.S. should not allow energy crops or the combination of energy
feed and export crops to make it impossible for us to continue to grow
food.

MR. KALAITZANDONAKES: If you want to talk on that point, please go
ahead.

MR. SHURDUT: It was just real quick. When you look at seed and the
availability of non-GM seed, I don\'t think you want to look at any
differently than what we talked about with the food chain and the supply
and all that. If it becomes, you look at the market signals, if you\'re
seeing a decreased amount, you know, and people want to pay for it, you
know, you\'ll get the non-GM seed. You\'ll get it as pure as you want
it, but again, it\'ll be driven up just like the non-GM market for
grains. So I think there\'s a market solution there.

MR. KALAITZANDONAKES: My point is exactly on that level. Although
Pioneer might be responding on the stock trades in the way that you
describe, what we have seen, I mean, first of all seed industry is a
bigger industry than most people think, and it\'s bigger than the top
three companies. And there are a lot of specialty smaller companies,
especially at the regional level that will be very happy to receive a
large order from Jim or from Stanley or from Cargill, or from anybody
who wants specialty crops. And non-GMO and high oil corn and so on.

So the idea that the seed industry is not going to respond to those
kinds of demands to me is just, I\'ve been studying the seed industry
for 10 years now. I have never seen a case even with the horizons they
have to deal with, that they there was demand for seed and seed was not
there.

MR. STITZLEIN: If I may, the concern that I have is that the specialty
users have been able to accommodate their demand relatively easily in
the past. And they\'re still thinking that way. And that\'s the
significance is this thing has changed. The energy costs, the ethanol,
all of those things have changed this dynamic to the point now that
it\'s important for them to think two or three years ahead and to offer
those contracts if they determine they actually have that demand.
Otherwise, if they wait, then coexistence might go out because, you
know, of things that have already happened. And that market signals are
the problem.

MR. KALAITZANDONAKES: And in some cases some of the specialty producers,
especially those who have had large enough markets have actually gone
back and developed their own germplasm, and driven the market that way
as well. So, I mean, the idea that the seed industry is obligated to
develop the germplasm for every small specialty market and sell it and
plan for it, is just not the right kind of idea. I mean, again, to the
extent that we are not command economies, you need some type of a signal
that will indicate that there is a demand and a need for other \--

MS. DILLEY: Aren\'t there some instances where those market signals just
aren\'t going rapidly enough to, whether their bottom drops out. You
just don\'t have some of those markets aren\'t anticipating two to three
years down the road.

MR. KALAITZANDONAKES: So my question is, which ones are? I mean, that\'s
the point. The point is, let\'s articulate where the needs are.

MS. MELLON: But I don\'t, I think we can\'t get too, I mean, the market
is just too complicated, too hard to do. I mean, all we can do is kind
of say that, you know, there might be some, what we would want to
announce is some sort of a, I don\'t even know, but a principle that we,
that there is a small market for non-GMO seed. That it comes from the
organic people, from export people, or domestic folks, and that we want
to make sure that American agriculture is, continues to serve that
market and that there, I mean, I don\'t, I really don\'t, I don\'t think
we can do, we can\'t micromanage the whole thing.

MR. KALAITZANDONAKES: Can I make one more point? Mardi, would we be
happy if, let\'s say we had 2000 acres need for not non-GMO, organic
corn seed that would come from Europe.

MS. MELLON: No.

MR. KALAITZANDONAKES: Because I mean, for example, we had European
companies, Limagrain as an example, supplies our seed.

MS. MELLON: I know. I mean to me those are you know little things around
the edges. I don\'t think that we want to have, have a completely, you
know, we want to be completely self sufficient in seed in the U.S., but
I just think it\'s important, I don\'t think a lot of other folks even
know that there is a market for non-GMO seed in the U.S. that we might
want to, you know, simply, I mean maybe the right way to say it is just
be on the look out to listen to the people who are trying to serve the
market and make sure that they, you know, that they\'re able to continue
to do that. And I do agree you can rely on the market to do a lot of
this. But does seem not impossible that at least, you know, there could
be constrictions in the availability of seed, just as we\'ve already,
you know, had described.

MS. DILLEY: So it really does sound analogous to the whole discussion
around transportation. That this is a potential pinch point and we need
to be on the look out for it. How to anticipate or whether you even want
to engage in changing the market.

MS. MELLON: And not have to go out and you know, I don\'t think it\'s
useful to try to document some huge problem that we\'re going to solve.
We want to see a situation that we can kind of anticipate and smooth.

MR. SCHECHTMAN: And is your other part of that, that just sort of the
advice that it may be, it may wind up being the case that there are
going to have to be more of these forward contracts. That forward
contracting may become increasingly important to ensure that those
markets are served?

MR. GIROUX: Why does the Secretary need to be advised on that? I mean,
isn\'t that simply something that business will do as they see the need
for?

MS. MELLON: But that\'s our other choice. Is it we can simply say there
is no coexistence problem?

MS. LAYTON: Isn\'t that what Carol said an hour and a half ago?

MS. TUCKER FOREMAN: Last August.

MR. GRANT: So this is actually a little different tangent, but I wanted
to get it on the table while Jim was here and maybe some of the rest of
the trade group will want to follow up. We\'ve talked about testing
standards before, especially in the context of international trade. This
comment is different. But I enjoyed your presentation, Jim, on how, on
the effect that testing has on the ability to move what you think you
bought through the system to customers who want a particular presence or
absence of a trait, if you will.

And also that you pay some kind of premium to the producers, but that
you really haven\'t figured out a way to hold the producers to that
standard. It sounded awfully wishy-washy to me in terms of a contract
anyway that your contracting \--

MR. STITZLEIN: You understood my point.

MR. GRANT: And so, I mean in trade, you know, knowing what you\'re
selling and knowing what you\'re buying is critical to knowing what the
value is. And it just occurs to me that perhaps this is the place where
USDA could have a role in encouraging coexistence\-- is to standardize,
even if only for the U.S. market, what the testing protocols would be
for the presence or absence of a particular trait. If those traits are
actually going to be pay points in commerce, then someone independent of
the buyer and the seller needs to be involved in establishing whether or
not they\'re actually there.

The government does that on all of the other pay points in trade today,
or the government through their agencies does that, in all of the other
pay points. Is this an appropriate role for some kind of extension of
grading standards as it relates to the presence or absence of GM traits?

MR. STITZLEIN: I think we\'re still talking about a relatively small
segments of the market, and those pay points ‑‑

MR. GRANT: Today, but you know, going forward.

MR. STITZLEIN: And that goes to predicting the view of how much these
markets might grow or expand. I guess more of what I was hoping to get
is maybe not government established standards about how to use the
different tests, but somehow connecting that to the technology developer
because how the test is used or how effective it can be depends on the
event he\'s, you know, that they're bringing to the market. So I think
it has to be an industry-focused effort maybe facilitated or encouraged
by the government is appropriate, but you know, as these new things come
on, the standards will evolve over time if they\'re relevant for the
economic trade. But to have the government fix them in advance, I don\'t
think works. Personal bias.

MS. DILLEY: So you don\'t want government testing protocols?

MR. STITZLEIN: Because the protocols may be different depending on the
event. And the conflicting, you know, signals and so forth that come
with it and that\'s where the science of the technology provider has to
be involved.

MR. SHURDUT: I don\'t know if it\'s, there may be a bit of a nuance
here. I\'m thinking where they may possible be a role for the government
is to inventory or have a standardized test that\'s been developed by
the tech providers or whoever so there\'s a standard test, and then
perhaps to work with trading partners to make sure there\'s some
harmonization in terms of how testing is done. I think detection, not
only the detection method, but the interpretation is so inconsistent,
it\'s such a risk. It\'s hard to work with coexistence if you have
agreeable methodology. So it\'s more or less the inventorying of
reliable methodologies complete with interpretation and then using that
also to harmonize and work with trading partners as appropriate.

MR. GIROUX: So I agree with everything that\'s been said and I believe
that there\'s a role of the government in what Duane\'s talking about,
but I don\'t believe their role is, nor do I believe in the concept of a
international test or event tests. You know, if you look at all other
standards that are developed, generally the way that works is they work
through international standard setting bodies that they set up
validation criteria, that they have standard reference materials that
are recognized from agencies to agencies.

You know, we have a metrology institute, or the U.S. Metrology Institute
member is sitting right here from this, which has memorandums of
understanding between other standards agencies in other countries which
is a government- to-government interaction about cross-recognizing
standards and testing approaches of validation criteria.

We\'ve got work going on at ISO and Codex, there\'s lots of forums in
which this type of thing can be done and I continue to encourage the
U.S. government to get involved in that. Even though biotechnology is
not a food safety issue, and it\'s not a problem here in the United
States, testing internationally for products in modern biotechnology is
an issue. It\'s been referenced in at least two of our reports so far,
and you know, so we should continue to encourage the government to do
that.

If we could get the performance of the testing, and I don\'t care if you
use test X, test Y or test Z, as long as all three of those can jump
over the bar of performance and they\'re all shooting at the same target
which in this case is the reference material, I don\'t think it\'s
required that we have the same test. But there are some critical
building blocks to make that happen, and you know, so this plays a role
in that in terms of setting reference materials in trying to get
additional standards. And there\'s lots of testing organizations working
on tests for GMO. Not to mention the market is full of testing labs that
can do that.

Some do well. Some do poorly. So I hear what you\'re saying Duane and
I\'ll be the first one, and I step out publicly in lots of forums to
say, we are a long way from the finish line in terms of reproducible and
predictable testing around products moded (sic) by technology. But I\'m
not sure we need the government to develop the test. But we do need the
government to be leading towards getting to that point.

MS. LAYTON: Let me clarify again what you want the government to do. I
thought I heard you say you want the government to engage in
international discussions.

MR. GIROUX: Yes, and that is a recommendation I believe in our first and
second report.

MS. LAYTON: Okay, first and second report. So for coexistence you would
just reiterate that recommendation?

MR. GRANT: That doesn\'t get me where I want to go at all. So say I\'m
selling to Jim, all right, I\'m farmer out in wherever and I\'m selling
to Jim, and we do a contract to provide non-GM corn, okay, and then it
comes to delivery time and I believe I\'ve done everything in my power
and I deliver something that tests positive. Also, and I don\'t get my
premium, yet Jim\'s running the test, I have no confidence in his test.
I perform my own test. Mine comes back negative. We have a dispute. So
our effort to establish a value for a trade, whether it\'s GM or non-GM
is subject to arbitrary testing by third parties who may have
allegiances to one party or the other. It\'s a very imperfect system for
really bringing value to the marketplace and letting both sides discover
value.

MR. SCHECHTMAN: Or else you need some more clauses in your contract.

MR. GRANT: So you want one standard test that would be the arbiter that
would have to be used.

MS. CRAMER: Either that or standard validated test materials so you\'ve
got a guaranteed positive and a guaranteed negative that every test has
to have. So even though my system is slightly different than the other,
if we can demonstrate a positive and a negative standard that would be
provided by NIST then you would at least have some sort of level of
coordination and validation.

MS. HOLDEN: I think the problem here is not the identity of the event.
The problem is for the most part going to be in the quantitation. I\'m
sorry, if I wasn\'t loud enough. I said that, the problem is not so in
the identification of the event. The problem is in the quantation of the
event.

MS. DILLEY: We\'re kind of starting down the compliance stewardship kind
of category of things. And what I would suggest is maybe we pick that
back up when we come back from lunch because we\'re over our lunch break
time. So why don\'t we do that.

(Whereupon, a lunch recess was taken.)

MR. SCHECHTMAN: A couple of housekeeping things before we go on. The
first is to get a sense of people\'s schedules for departing this
afternoon. We know people are leaving at various times to catch flights.
It\'s a Friday afternoon, we understand that. Who is leaving before
3:00? Who is leaving before 3:30? Anyone else? So we\'ll aim to adjourn
no later than 3:30. And probably 3:15 is what it\'s going to wind up
being.

One more housekeeping thing for me. There are a number of members\'
terms were expiring either in February or in April. Since I haven\'t
received necessarily everything that could still be in the mail, I want
to make sure that we can find out who, if anyone, might not be
reapplying so that we can be sure and thank them for their work going up
to this point. Now I know of one person. Is there anyone else whose
terms are expiring who is not reapplying to the committee? Lisa and
Carol. Well, I\'ll take a moment now before we go any further to thank
you both for all of your contributions.

MS. LAYTON: Am I correct that everybody\'s deadline was December 11th
even if they were going off in April or February?

MR. SCHECHTMAN: That\'s correct. The only complication in all this
slightly is Russ because he was appointed in the summer, because he was
one added person. I\'ll have to talk to you later about what you plan to
do.

MR. PUEPPKE: Just another quick question. Roughly when will the next
meeting be scheduled?

MR. SCHECHTMAN: We would like, in order to be working towards the kind
of calendar we talked about, would like to hold the next meeting if we
can in March. It\'s always challenging. There are spring breaks and
folks have kids that, for which those schedules may be really important.
So I understand that it may be tough to get everyone here. We\'ll do the
best we can for members, but I think we really have to shoot pretty hard
to have a meeting in March if we can.

I think what we\'ll try to do if this is okay, if you can do this Kathy,
get a calendar turned around for March to people just as quickly as we
possibly can and try to lock in some dates. Are there any major meetings
that will be coming up in March that more than one person from the group
is likely to be off at? I mean, everyone may have one, you know, are
there common events that folks are going to?

MS. TUCKER FOREMAN: I know that I\'m out of town most of the first 10
days of March.

MR. SCHECHTMAN: We\'ll gather everyone\'s schedule and see what we can
do, and we\'ll of course get Pat\'s schedule since you have to be here.

MS. LAYTON: I\'m teaching everyday except during spring break. So I have
to just get out of teaching classes. It could be a joyous occasion.

MR. SCHECHTMAN: And if people can get their schedules to us before the
New Year. If we can be able to get this nailed down as quickly as
possible that would be really helpful. So please turn around the
scheduling form as quickly as you can.

MS. DILLEY: For a March meeting, Carol when do you rotate off? Do you
end it \--

MS. CRAMER: February.

MS. LAYTON: I thought she was the same time as me.

MS. DILLEY: So it\'s a little bit before 1:30 and we have until about
3:15, and what we thought we\'d do is pick up the conversation where we
ended at lunchtime. We were starting to move into the compliance and
stewardship issues. This is kind of, before we launch into that though,
let me give you a sense of where we\'re headed. I think we had a really
productive discussion this morning. We talked a lot about infrastructure
issues. We came back to some of the issues around seed availability and
I think this concept of, you know, looking at the picture as with the
U.S. being the largest biotech and organic crop producer and the largest
non-GM crop exporter in the world, so some things are working.

And there may be areas where we haven\'t really explored or had
presentation on what is not working. I think we\'re still asking
ourselves that question, is it working or is it not working, how are we
defining that? And then we\'re looking at pinch points of where it\'s
working but it may be close to not working, like the transportation
issue. I think we framed that in terms of accessibility, predictability
is really critical and as we see increasing volumes and diversifying
then that may be stretching the limits of the flexibility that\'s there
and that\'s how we\'re kind of defining that pinch point in the
transportation area.

And then we started talking using that same kind of analogy in the seed
availability-accessibility realm as well. And we cycled back to some of
the regulatory standards. I think we came up with some notions of what
we thought were important. I\'m not sure we ever talked about whether
they\'re really critical or it\'s a pinch point for coexistence
specifically, not that I want us to pick that up there, but I think we
need to set that aside for now and just, that\'s kind of where we were
mulling around in that area a bit. And then we started talking just
before the break at lunch about kind of a different piece of the
verification, quantification piece of it in terms of some of the
compliance and stewardship issues. And so we want to pick that
conversation up.

To me, we are following our outline. And we\'re starting to flush out
those pieces with I think a little bit better notion of what we\'re
trying to look for which is highlighting those pinch points, if you
will, and I think we\'re more comfortable with that because market
failures or market imperfections are just have so much connotation,
different connotations to people that it\'s just hard to be comfortable
with that terminology. So pinch points works for me and if it works for
the committee, now we\'re good to go. It\'ll be interesting to see if
actually entitle the report pinch points, but we might.

So we\'ve talked about "blue topics" before because we couldn\'t name
some things. So stranger things have happened. So I think just
continuing to have that conversation and then maybe for another hour,
and then taking a step back and say okay, well where do we still need
some additional information? What haven\'t we talked about? What\'s our
sense in terms of where other pinch points might or might not be, and
where do we need additional information perhaps to have that
conversation like we had this morning on transportation and how do we
get that information? Then we can start developing our work plan.

Because I think one of the things we\'d like to do, just to give you a
heads up, is we\'d like assignments, to have people start capturing that
on paper and describing, articulating those pinch points in a way
that\'s a little flushed out, that mirrors some of the conversation, and
then we can work on those when we\'ve got it in a piece, we can compile
those different pieces and then start working on that as a document to
try and reflect back our thinking about coexistence, how we\'re defining
it, where there might be pinch points, what needs to be thought about.
That would be the overall shape of a report from the committee. Make
sense to people? Okay. So let\'s turn back then to Duane, you had raised
the issue and we hadn\'t had a thorough conversation but we started
getting into it. So I wanted to come back to have you frame it again so
that we can pick that conversation back up.

MR. GRANT: Yeah, so we talked about this over lunch and everybody at our
table agreed, so I think it\'s really solved. So I appreciate the chance
to come back to it, and really, I think it just focuses around the
concept that in order to have trade in segmented trade or to allow
segmented trade to develop if the segmentation is driven by either
desire to have GM traits or not have GM traits, or you know perhaps have
one and not others. That you have to have some kind of a standardized
way to determine whether or not the trait is present.

And I really appreciate Brad\'s comments that, you know, perhaps
something as simple as a common reference point or reference material
which could be used then to determine whether or not the trait was
present would be enough. I think the only thing that isn\'t, that really
doesn\'t work for me is to say that it\'s kind of a mishmashed system
that has seemed to evolve where we recognize that the presence or
absence of traits is a market issue, but for which there is not a clear
testing methodology to determine you know if the trait is even present.
That really doesn\'t work. So that\'s where I\'m coming from.

MR. PUEPPKE: And what was the agreement at the table?

MR. GRANT: That it doesn\'t work and that there\'s got to be a, you
know, there has to be clear reference materials \--

MS. DILLEY: And it\'s relevant to coexistence and, I mean, keep coming
with that.

MR. GRANT: Pardon me?

MS. DILLEY: It\'s relevant to coexistence and there is a pinch point or
there isn\'t?

MR. GRANT: Absolutely it\'s relevant to coexistence. If you can\'t
determine if it\'s present or not, how do you know if you\'re
coexisting. And if the marketplace, you know, responds to the threat of
the presence of something with some kind of overarching prohibition or
discounting, then yeah, you\'re really eliminating coexistence.

MS. DILLEY: Michael, did you have a question?

MR. SCHECHTMAN: Yeah. One of the things that we currently have is
proficiency testing. So you know, there is a voluntary program for USDA
to determine if a test meets, it does what it purports to do. There is
that portion that currently exists. And I think there is also the
portion that as was mentioned earlier, that if you are going to be down
around the level of sensitivity, the best test in the world, or if the
level of presence of something that you have is around the level that\'s
being tested for, having the most uniform, best test in the world is not
going to prevent you from sometimes having a positive result and a
negative result followed later in an inconvenient way by a positive
result.

MR. GRANT: So the point is though that contracts are being written to
specify that yes, you know, these traits are present or no they\'re not.
In Jim\'s case, he was writing contracts and no these traits are not
present. And those contracts have premiums associated with them. Okay,
so commerce is happening around the concept that these traits are either
present or not present.

But there is not a system in place whereby the seller and the buyer can
both have a neutral third party to say yes they\'re here or no they\'re
not. And that system exists in practically every other pay point, if we
can use that term, that functions in the commercial grain trade today.
It\'s around test weights, there\'s an independent third party
verification of what that is. If it\'s protein, falling numbers in the
wheat trade, and you can just go right down the list and there\'s
independent verification of what those values are. We don\'t have that
in this emerging trade around the presence of or absence of traits.

MS. DILLEY: So the key is an independent verification?

MR. GRANT: Yes.

MR. SCHECHTMAN: A third party accepted by both ends?

MR. GRANT: Uh-huh.

MR. SHURDUT: I mean, just to that point, and again, it\'s really grain
guys that are more on point here in terms of living in the whole testing
world, but at least the perception is lack of sort of standardized
technique. And it\'s really not just the technique. It\'s the
interpretation of, we talked about limited detection. Sometime they call
that below it as a positive because of needle deflection. Sometimes they
call it as a negative because it\'s not appropriate to let something
below an LOD or an LOQ.

So the point is, having some standardization or harmonization around a
testing method, methodology and/or sort of a protocol in terms of your
interpretation of the test result. And probably not as big a deal in the
U.S., although we certainly could strengthen that in the U.S., but it\'s
also the risk.

When you move into markets with certain specifications, think about
moving this to Europe with 25 plus Member States and they\'re doing
something different because there\'s no harmonization there. All of a
sudden you create these risks all over the place and there\'s really no
standardized method to go back to and interpretation. So I would just
add that it\'s not just a method and you know, doing a test tube sample,
but it\'s subject to an interpretation of what you get. And that\'s
wildly diverted depending on where you get it interpreted.

MS. LAYTON: Is that not covered on page 28? Global traceability and
Labeling.

MR. SHURDUT: It probably is, but that doesn\'t mean it\'s not
appropriate.

MS. LAYTON: I agree. But it sort of describes a lot of this. I just want
to make sure that we\'re not reiterating.

MS. DILLEY: So that\'s one question, the third party verification is not
there, it\'s a third party dimension of it. So that\'s an extra added.
And then I guess the question, Nick, is it a market failure or is it a
slow response?

MR. KALAITZANDONAKES: Well absolutely, I mean this is, it\'s standard
setting in terms of government response in asymmetric information. This
is what we are talking about which cannot be reached without a third
party. Very legitimate responsibility for a government and that\'s why
governments are in the business of standard setting. But I would very
much join that with what was discussed earlier by Randy as to yes, there
is that aspect of it, but there\'s also the aspect of continuing to push
for a, at the international level, for broader standardization of
testing methods and you know broader use of standards.

So I think both of those are very legitimate responsibilities for
governments that avert market failures. Absolutely.

MS. DILLEY: Specific to coexistence?

MR. KALAITZANDONAKES: Yeah, absolutely.

MS. HOLDEN: Now, when you\'re talking here about third party
verification, I\'d like to ask, do commodity traders like Cargill, do
you do your own in-house testing or do you send that out to independent
testing laboratories that you have contracts with?

MR. GIROUX: There\'s two types of testing. There\'s the elevator testing
that I think Duane\'s talking about where there\'s protocol, we use the
strips that are process-verified which I think is the USDA term. And we
do a specific size, we grind it, it\'s there or it\'s not there. You
know, and Duane, we want your volume, right, because a failure of the
test means we have to send you away and you\'re not happy and we\'re not
happy because now we\'re probably short.

And with GM and non-GM you\'re either in or out. There\'s no discussion
of discounting the grain, right, because adventitious presence means you
can\'t take it. One test sinks the boat. I\'m think I\'m being quoted on
that somewhere in one of these reports. But I\'m not going to argue with
anything you said around that we need to have standards for tests. That
we need to have standard reference materials.

That we need to have options for doing third-party verifications. What
I\'d challenge is whether or not that\'s a role for the U.S. government
to fill or whether it\'s a role for them to just leave the marketplace
as being able to do. Can the buyer and seller not agree to a neutral
third party today to retest the product and both parties agree to live
or die based on that test result? I don\'t know. But if that doesn\'t
exist and it can\'t be filled by the market, then my guess is that it\'s
something that the government should be doing. I\'m not sure that we
need the government to duplicate what may already exist in the
marketplace. So that\'s the only hesitation I have.

Now to your question, you know, testing is the point where the legal
liability changes hands. So when I test Duane\'s grain and it\'s
positive, Duane\'s done. The transaction occurs, the contracts been
filled. Now if I go retest it and it was positive, that\'s, I own it
now. So contractually I own it. So that\'s why testing is so important,
right, and that\'s why we do it for so many different attributes or
traits around or different kinds of specifications because that\'s kind
of the washing of the hands point in terms of who owns it and you\'ve
met your obligation, you get paid and now I own it.

Now we do a lot of third-party testing because a lot of our customers
are not going to accept a Cargill test that it\'s in compliance. So do
and some don\'t. So I would say there\'s a little bit of both that goes
on. Generally we use third-party testing labs because the expertise
required and the documentation and all of the infrastructure required it
doesn\'t make business sense for us to own that infrastructure so we\'ll
just tend to use a third-party lab who\'s internationally recognized or
certified, and then we\'ll agree to live and die based on the test
report.

And that\'s, but that\'s also the, you know, contractually we\'re going
to do one test. We\'re going to take this much. We\'re going to use this
lab. It\'s positive, you own it, or negative you own, if it\'s positive,
we own it. Right. And so, the test settles the contract.

MS. DILLEY: So I\'m hearing you say both the third-party verification
whether the market\'s filling that is still a little bit unclear and
whether there\'s a role for the government is kind of still a question
in your mind?\'

MR. GIROUX: Yeah.

MS. DILLEY: Whether that\'s happening and then the other link that you
had to it Duane, I think was a dispute resolution verification if there
is a dispute then how you resolve that.

MR. GIROUX: And that may be a legitimate issue. I don\'t know that it
is, I\'m not aware of it in our business, but if it is a legitimate
issue then we do have arbitration boards for just about everything.
Right, I mean, NAEGA and GFA (sic) both have arbitration boards for
dealing with this kind of stuff.

MR. GRANT: I think that the best illustration of it really was Jim this
morning when, he said, when you get a positive well, we just what, what
was the word he used? Basically, that supplier and that grower moves off
the preferred supplier list. They just simply don\'t buy from you any
longer. So there\'s not really, \-- and that\'s not the kind of contract
settlement that I\'m used to in the grain trade. If you\'re violating
your contract there\'s a penalty. It\'s not just well, we\'re going to
pretend like you didn\'t violate it, but by the way you can\'t sell to
us anymore. That really doesn\'t facility \--

MR. SCHECHTMAN: I don\'t think that\'s what he said.

MR. GRANT: So did I mishear him?

MR. SCHECHTMAN: My impression was that he said, that you might not be
able to sell to him for the special premium that you were getting for
that material. They still wanted his grain, but it was going to go into
a different channel and maybe not get the same money.

MR. GRANT: So isn\'t that basically what I just said though? If you
deliver, if you sign the contract to deliver a non-GM and we detect GM,
then we take a look at you as a supplier and if you\'re not able to meet
which is indicated by this positive detect, you\'re not able to meet our
criteria as a preferred supplier, we just simply no longer buy from you.

MR. CORZINE: Well Duane, I don\'t think he was quite that direct. My
impression was a little more that if it was something inadvertent, they
would definitely take a look, and if they might determine that, you know
what, I can\'t meet with the preferred contracts want, but not, I don\'t
think it was a cut-and-dried issue like that. It might depend some on
maybe I don\'t have the equipment, maybe I don\'t have the right
facilities or whatever, but not necessarily.

MS. DILLEY: But it could be. I mean, I think to your point though, part
of it\'s interpreting what Jim said, but part of it is your point that
there are others who may treat you differently.

MR. CORZINE: Abby, if I could interject, on the other paper, on that
page 27 and 28, we\'ve got about two or three pages on testing. Does
that, you still don\'t think it quite covers it?

MR. GRANT: So I don\'t think so. Leon, if again, this is built on the
supposition that trade within the U.S., I\'m talking just within the
U.S., not international trade, although you can kind of extrapolate from
this and get to there, but just within the U.S. for trade to develop
based around the presence or absence of traits, there has to be a
verifiable means of saying yes they\'re there, so you lose your premium,
you\'re in violation, or no they\'re not there, and you get your
premium, you\'ve met the terms of your contract. And again, to my
knowledge, that just simply isn\'t functioning in the marketplace today.
In any kind of a manner that\'s equivalent to the way that we determine
other pay points in the trade.

MR. KALAITZANDONAKES: So I just wanted to comment. I guess what is being
discussed is how do we reduce testing uncertainty as much as possible.
Because you\'re not going to eliminate it, but you\'re going to reduce
it. So you asked me a little bit ago is there a role for government, and
I think there is a role for government in the form of reducing
uncertainty along the lines of what Brad was talking about, but not
along the lines of having the government step in and do third party
testing as in performing the testing themselves.

It\'s talking about setting the standards. Talking about setting
standards for interpretation. Helping to take some of the uncertainty
that has sprung up in the marketplace because of multiple testing
technology, multiple ways of that being interpreted and so on, which,
you know, the market is functioning as in, you know, having multiple
shops out there that they\'re doing the testing. So the government can
step in and establish a set of standards that would reduce that type of
uncertainty. Not take it all together.

And that would certainly help what Randy is talking about. All right, so
there is a legitimate function but not necessarily becoming the third
party certifier. So there\'s a difference in the government function. I
just wanted to make sure that I communicated where I was coming from.

MS. GEISERT: And I really was going to echo what Nick was saying. And I
think that\'s happened over the years in many other areas, and it\'s not
just these traits. And I think Leon\'s right. Is that we get, we work
with a lot of suppliers and they\'re not all created equal. And we, you
know, it depends on your history of working with them. We will have
events. Even the best-run companies have an event. That\'s different
than a systemic issue. And I think our responsibility in working with
our suppliers is to understand where they are in that continuum, and
because we have an event doesn\'t mean we\'re just going to drop them
off as black and white. So I do think there is a bit, and you\'re
talking about that uncertainty in the market, is we too would like to
reduce the uncertainty just as Cargill would because that creates us
with supply problems too. And so I do think that as you described it, is
trying to find ways to bridge or to take out some of the uncertainty is
always going to exist. If there\'s a way to facilitate it, that\'s
really \--

MR. GIROUX: Right.

MS. MELLON: What I heard this morning was that some of the uncertainty,
you know, does arise out of kind of the buyers trying to give enough of
an incentive to the farmer to actually take the extra precautions that
are really needed to produce this highly, highly pure product, and that
it isn\'t so much that a single test would take him off the list.

But one or two tests would lead him as a buyer to think that that farmer
isn\'t either in the position to or isn\'t taking the set of, you know,
isn\'t engaging in all the practices, doing all the things you need to
ensure this premium product. So it was less of a testing issue, more of
a relationship issue.

But I still agree with you there. I mean having done some of this
testing myself for our report, and been out there and trying to ask for
people to provide some sort of assurance that one test versus another
one, company versus another was actually offered a reliable test
product. I was just amazed how little certainty there is in the testing,
in that the testing sector and that it hasn\'t appeared to have gotten
any better over five years.

This to me is a technical problem. I don\'t see why you can\'t develop
PCR protocols on a standard product like corn that everybody could
follow and that different people following the same protocol would end
up with the same result. But that is really not the case and I\'m not
sure who, you know, who can push that sector, that testing sector in the
right direction.

MR. GIROUX: Just to come back to the solution and Mardi\'s question, she
won\'t like the answer, but I\'ll come back to it. So it\'s clear that
there\'s two things going on. The first is do you knock them off the
list. Well look, this whole idea of specialty grains and the premiums
that accrue to both the supplier and the farmer or producer, along for
more information capture, this business of identity preservation is an
information business. We collect much more information about our
specialty programs because they are so valuable than any other commodity
program we do.

And we know how our producers perform and, you know, our grower base for
our specialty programs because it\'s not substitutable. These are golden
assets for our businesses. So, you know, if we have one farmer who fails
one test, you know, we want his grain. And we want his expertise. And so
if he fails once or twice, we probably, you know, we wouldn\'t drop him
off the list. He may not be able to deliver that load for sure because
we can\'t accept it as part of that specialty program.

Now if you want to be in the program but you just don\'t have the
capacity that execute on it, we figure that out over some period of time
and so, you know, when we learn that it\'s a failure and it\'s a 10,000
bushel bin, you know, then we just paid a massive amount of money out
too because that whole bin\'s become compromised. So it\'s critical that
we know what our producer is doing, and we think that\'s important.

Now the whole third party concept is, you know, suggests that there
might be some bias on one party or the other to do something. Well, we
do third-party sampling and testing in some of our programs. There are
programs that run biotechnology that have third-party samplers and
testers, that market exists. There\'s a number of third-party surveyors.
We employ those people. It adds a cost to the system. So where we don\'t
need them and we don\'t use them, where they are needed, then we do use
them. If our programs insist on them, for sure we add them. But we do it
reluctantly because of the cost.

The third party part can be solved, but it comes at a cost, and the
whole testing piece, Mardi the answer to your question is that the tests
are not, the test can do it, and the test can be more reproducible, but
they can\'t be at low, low, low levels. Now if we had a tolerance for
adventitious presence of five percent and we were testing for the
presence of GMO at five percent, I\'ll bet you I can take a sample and I
can test very reproducibly at five percent.

In fact, if you look at all the data that exists around validation for
these methods, at high levels, at high GMO percent GMO, those methods
perform equal to performance of other analytical methods like protein or
any of those things. So the struggle is that we\'ve assigned tolerances
that are not related to the safety of the product, that are in fact at a
range where those methods can\'t perform.

So there is a simple solution, and that is to raise the tolerances for
percent GMO and then we\'ll have a method that\'s much more predictable
for the trade. But that\'s a whole political issue that I\'m sure we\'re
not going to solve sitting around this table. But, we\'re driving the
method to its extremes for different reasons than technical reasons. So,
it\'s not that the methods can\'t perform, it\'s that we\'re asking them
to perform in a way that they\'re not ready to do. And we don\'t like
the solution.

MS. TUCKER FOREMAN: Let me tell you what happens in the ground meat
business. Because this is, I think, something of a parallel. After the
1993 *E. coli* outbreak on the West Coast, before that nobody tested for
anything. The assumption was that this is a raw agricultural product,
you have to cook it to make it safe and so the company had no
responsibility.

After that, Jack-in-the-Box foodmaker established purchase
specifications. If you want to sell to them you have to meet their
requirement. And their requirement specifies the type of the test and
the frequency of the sampling, and the result. If a company that
supplies Jack-in-the-Box, there is a level below which Salmonella
doesn\'t count, but if you are above that level one time they\'ll
continue to purchase from you. If you\'re above it a second time, you
don\'t supply them ever again.

There is a zero tolerance for *E. coli* 0157H7, and if it is ever found
in your product you don\'t sell to them any more. You have to provide
them with your test results and then with, on a regular basis the
company, Jack-in-the-Box, in this case, goes through and performs its
own test on the stuff you sent them saying it has met their
requirements.

That\'s the one that I know specifically. I think McDonald\'s is even
tougher. And this is on top of government program that does exactly, you
know, that sets limits nowhere near as effectively. All it says is, you
can\'t sell it to us and you can\'t sell to us again.

MS. CRAMER: Carol, can I ask a \--

MS. TUCKER FOREMAN: Sure.

MS. CRAMER: Is that a PCR-based test or is it a grow-out bacterial \--

MS. TUCKER FOREMAN: It\'s a grow-out. They\'re not very sophisticated.
They grow everything out. The batch test that DuPont\'s using now is the
first one that found it. But it has altered the industry radically. And
by the by, the number of cases of *E. coli* poisoning have dropped
radically over the past 10 years, and the more recent ones have been
produce related. The problem\'s not over, but that\'s a system that
works.

MS. HOLDEN: I just wanted to get to Margaret\'s question also. And as
Randy said, we\'re pushing the technology. The measurement technology.
The limit of detection. And it\'s not a direct measurement. This is not
analytical chemistry. This is a measurement which depends on an
amplification or a copying of the DNA in order to detect it. And that
copying is done by an enzyme. And the enzyme is fraught with
possibilities of inhibition by various components of the reaction.
Particularly contaminants that come along with a template DNA.

So this is very, it is very difficult to get really good reproducibility
with a test such as this when you\'re measuring such low levels of the
materials. The other issue is that some of the problems between the way
measurements are handled come from the fact that you\'re exporting your
grain or your food products. They\'re going to be tested at the other
end by entities that are government-approved and require the use of
reference materials and testing protocols that are specific for that
political thing, such as the European Union or in Japan.

Where there is a Japan method and there\'s a Japan calibrant, and now
they want to do their own reference materials. So there\'s a higher
level political negotiation that has to go on here in order to try to
harmonize. In some ways you\'re asking for is harmonization on many
different levels. But on the highest level, it\'s inter-government. And
it requires political negotiation at a very high level.

MS. LAYTON: That came up before lunch. I had that in my notes already.

MR. SCHECHTMAN: I just wanted to sort of add one thing along on that. I
don\'t know if this is still the trend, but for a while I think it was
the trend that whatever the level of test performance was, any test
would be pushed to its level of delectability, so that regardless of
whether or not the tests were made 10 times better, you know, there
would be someone who would be looking to see at the level that that test
could possibly find anything if they would find anything. So that you
would always have indeed the situation where you\'re going to have
results that are problematical because the tests are being pushed to
their limit.

I don\'t know if that is continuing to be the case, but I can see that
as a problem that in part won\'t go away because of a trend, at least,
to try to do that in some quarters.

MS. CRAMER: I was just going to talk a little bit on the technical point
of view of why this is challenging. The good new about PCR is that it\'s
very sensitive. The bad news about PCR is that it\'s very sensitive. So
it becomes, I mean you realize that if you have an entire ship with two
transgenic soybean kernels down there and everything else is corn on top
of it. If you sample correctly, you could possibly pull up that one
soybean kernel, and it would be detected by a PCR machine.

So the sampling becomes, \-- really the issue is that you can go in and
take the sample and at absolute exquisite sensitivity say there\'s no
transgene in this. And you go to the next place over. So the issue has
to be not just the statistical sampling for which there are now
protocols and tests and it shows that we looked at enough places that if
it was there. But then there really are other issues as far as the
quality of the test. I don\'t worry so much about the starting material
because corn is corn is corn, and if you take 15 different buckets of
corn and grind them with the same procedure, you\'re going to have the
same contaminants.

But the quality of the people testing, the challenge, why we would like
to have uniform negative as well as positive samples is that, you can
have a splash on your pipette, if it\'s not done correctly, you can
amplify that, you can give Duane an answer that he has transgenes in his
so-called nontransgenic, that is nothing but a technical error. So there
has to be, you know, methods where that is then, where all parties are
protected. That it\'s accurately reflecting what the situation is rather
than what the test is, I mean, that the test is accurate.

But who provides the positive and the negative control sample?

MR. GIROUX: Those are available for most of the, some of the events.
They\'re available through the IRMM. They\'re a thousand dollars a gram,
and really, really expensive.

MR. KALAITZANDONAKES: So in my mind, the discussion that took place the
last five minutes articulates two things. That there are a lot of
reasons why we have testing uncertainty, and then the argument between
what Duane said and what Carol said articulated why there is a market
failure that government can settle by participating. Because what Duane
described is, I am a single farmer and I feel powerless when I go and
somebody tells me my stuff doesn\'t meet the specs.

And what Carol described is, I am a very large buyer and I can do and
dictate to my suppliers what they\'re going to give me. And so both
examples are cases of where the market doesn\'t function very well
because Duane feels powerless and somebody has more power than they
deserve based on how much money they spend. And at the end of the day
the government can step in and take some of the uncertainty out of the
market so both of them can participate effectively as much as anybody
else. So this is a very good example of market failure and why
government can actually have a very effective role.

MS. TUCKER FOREMAN: Let me refer you to the Economic Research Service
study done in April 2004, which specifically states that for the first
time the presence of these tests impose market discipline in meat and
poultry where it had never been before. And in fact, it doesn\'t mean
that the guy whose food is rejected by Jack-in-the-Box can\'t take it
down the road and sell it to somebody else. He\'s just been told
Jack-in-the-Box. That\'s the market to me.

And of course there is a federal standard for these things.
Jack-in-the-Box is saying, you can\'t be just at the floor and sell to
me. You\'ve got to be up here. It seems to me that\'s the perfect
market. That saying, I\'m setting the standard and you have to meet it.

MR. KALAITZANDONAKES: Let me rephrase. Your example alone is not a
market failure. I said what the two of you described is two extremes of
the same market function. And to the extent that McDonald\'s today went
to any meat supplier and said, I want my cows to be white, they would be
working towards white cows. And not because the cow it should be white,
but because McDonald\'s said so. And that is market power. I don\'t care
whether ERS says one way or the other.

MS. TUCKER FOREMAN: It\'s not market failure.

MR. KALAITZANDONAKES: Now wait a minute. One of the definitions of the
potential for market failure is market power. To the extent that
somebody with monopolistic, in fact, that was Russ\' point when he said,
hey, because of concentration in the seed industry, I might not get
access to what I would like to have. That is the possibility of
concentration and market power is exactly a source of market failure.
That\'s exactly what we said.

MS. TUCKER FOREMAN: But that kind is in fact a violation of the law.

MR. KALAITZANDONAKES: But yet it\'s exactly the same thing, Carol.

MS. TUCKER FOREMAN: The fact that you can\'t sell to me if you don\'t
meet my standard is the same when I apply when I go to the supermarket
and say, I\'m not going to buy from you anymore because you don\'t have
any organic food.

MR. KALAITZANDONAKES: Absolutely.

MS. DILLEY: Okay, so play out your scenario.

MR. KALAITZANDONAKES: My point is very simple. That when, because of
market structure and because of the way that different parties come to
the market, and to the extent that the government can take in and take
some of the uncertainty out of the market and improve by setting
standards or in case of market power if there was some, taking that,
that\'s why governments regulate monopolies, right?

MS. DILLEY: And that\'s the same situation for, that\'s the same
scenario for Russ\'? How would you do the same kind of thing?

MR. KALAITZANDONAKES: No. What I\'m saying is, what I\'m saying is in
the case, if in principle there was, an example of market power, then
there is another argument for government intervention. That\'s not what
I\'m saying here. What I\'m saying is, what the two of them described is
a situation where government can step in and take some of the
uncertainty out by setting standards. And that is an example of
legitimate government intervention.

MS. DILLEY: I\'m just trying to understand the distinction between
describing that as a pinch point versus what we talked about with the
seed availability.

MR. KALAITZANDONAKES: No, no. Maybe I shouldn\'t have brought it in.
Maybe I shouldn\'t have brought the rice into this.

MS. TUCKER FOREMAN: I want to argue the point. You know, the thing is
there is a government standard for me. The government sets that minimum
that everybody has to meet. McDonald\'s and Jack-in-the-Box, in order to
protect their business and their customer, have imposed a higher
standard. It seems to me a perfect working of the market and to ERS it
seemed the same thing, because they\'re responding not to the Cattlemen
and not to Randy\'s company, but to protecting the retail customer the
final person in their chain. The person who usually has the least power.
But in this case, the desire to avoid publicity surrounding illness from
*E. coli* has been given pretty serious market power.

MS. DILLEY: So maybe you\'re describing different things. You just said
the government has set a floor, and they\'re defining a higher standard.

MS. TUCKER FOREMAN: That\'s right.

MS. DILLEY: And as long as they still meet a floor somewhere they can
sell it someplace else.

MS. TUCKER FOREMAN: They can take it down the road and sell it.

MS. DILLEY: And that\'s what you\'re saying, is maybe the government
needs to set a floor because there\'s no floor right now in this area.
Is that like?

MS. TUCKER FOREMAN: But I\'m saying that the government can set a floor
and it does not obviate the need and the desirability of the market
setting something. But Nick\'s suggesting that if the government steps
in that Duane doesn\'t have to, doesn\'t have any more problems. He\'s
saying, if the government regulates you can\'t have a market standard.

MS. DILLEY: No, I thought it was kind of like a minimum expectation.
Then, if you want to sell the premium grains you have to meet their
premium expectation. If you don\'t then \--

MS. TUCKER FOREMAN: Is that what you said?

MR. KALAITZANDONAKES: I said, if you can take some of the uncertainty
out of the market, that\'s right. So that you don\'t allow large
entities, small entities, small entities to say I feel powerless. Large
entities imposing rules. Take some of the uncertainty out.

MS. DILLEY: So you\'re negotiating from this range instead of a common
floor.

MS. TUCKER FOREMAN: What if this is a little bitty company that says
I\'m going to protect my customers so I\'m not going to buy from you
unless you meet my specs?

MR. KALAITZANDONAKES: My point is still \--

MS. TUCKER FOREMAN: Why isn\'t that okay for a big company to make a
higher standard?

MS. BRYSON: Can I try?

MS. DILLEY: Yeah, Nancy go ahead.

MS. BRYSON: I think that you\'re talking about different things. Because
if I heard Duane correctly, his issue about unfair market power is that
because there isn\'t a standard agreed-upon test, the person to whom
he\'s selling has an unfair amount of market power. And if the
government could come in and define what an accurate test is in some
way, then that would help him.

I think the issue that you two are arguing is, should there be a floor
for AP or something like that. You know, is there a minimum threshold of
safety above which you can specify different things? And that\'s a very
legitimate discussion. It\'s just different from the market failure that
Duane was identifying, I think. There\'s a role for the government in
both, but it\'s really more of a fairness one as opposed to a safety
one. I think.

MS. TUCKER FOREMAN: I will agree with you as long as your government
standard doesn\'t prohibit a higher standard, which the government has
done in endless numbers of cases over the years. And as long as the
government\'s not setting a ceiling, sure.

MS. BRYSON: I think it\'s just a measurement standard. It\'s not
quality, safety.

MR. GRANT: I think the discussion has been very good. If I could just
kind of recap what I, I think I would just, so I\'m not an economist,
but just by observation, it seems that markets that work the best that
have room for value to be discovered are those that have a certain
degree of transparency and predictability to them.

Somebody made the comment, I don\'t remember who was it, that what Jim
was talking about was relationship-based purchasing. Okay, so I have no
problem with relationship-based purchasing. It works very well. But it
has to be based upon some known factor. And if we\'re looking forward
for the next five to 10 years about how conventional and organic and
transgenic crops are going to coexist, the differentiation between those
three has to be based upon some kind of predictable factor so that all
of the players in the market at least have a basis by which they can
expect their actions will be judged.

So yeah, it really is setting the floor. And then you can raise the bar
off the floor, but you have to at least know where the floor is at. And
right now we really don\'t have that. And again, listening to Jim this
morning the floor was kind of a wavy area where the relationship
determined exactly whether it was down here or whether it was up here.
And from a producer standpoint that doesn\'t work for me.

The only way it would work is if the premium was so extreme that I could
then kind of do a mental calculation that this guy is going to screw me
every third year, but the other two years probably going to be all
right, so we\'ll be okay. There\'s probably a different word that would
work better.

MS. MELLON: I think Duane\'s right. But I wanted to go back to, and ask
Carol and Randy once again about the limits of the test. I mean it seems
to me that, you know, there are a lot of ways in which setting
thresholds would make sense. But one of the reasons I think people, I
mean, one of the, there are a lot of questions around thresholds, but
one is this notion that thresholds can only be set at 10 percent or 7
percent or 5 percent.

I mean how, you know, and I do understand, you know, the differences
between analytical chemistry and PCR. But still, in a world where limits
of detection go way beyond one or a 10th of a percent or 100th of a
percent. For us to say that the best we can do in the way of testing is
to, you know, is to adopt tests that can ensure no more than that things
aren\'t in the, that contaminants are not in the system at up to five
percent? That just doesn\'t compute. What will it take for us to move
that technology so that it can reliably detect a lot less, which in
turn, makes thresholds make a lot more sense.

MR. JAFFE: Thresholds aren\'t necessarily science based. Thresholds, I
mean, organic has a threshold of 95 percent. Five percent of other
stuff. I mean those are policy or other determinations, market or
otherwise. I think you\'re mixing up the scientific things and threshold
things. Now in some cases somebody may want to make those identical. But
if no one wants to set minimum standards for things, I mean people can
set all kinds of things, the definitions and all kinds of things.

MS. TUCKER FOREMAN: And so can the contractors.

MS. MELLON: But mine is more of a scientific question. Randy said these
tests work for me. You know, that they\'re find, they\'re reliable if
you set a threshold that is up at five percent. So then the tests are
reliable, they\'ll definitely tell you whether you have five percent or
more of a particular thing in the \-- I want to ask whether as a
technical matter it isn\'t possible to come up with tests that can
reliable assure that contaminants are not in the grain supply at a tenth
percent. Is that asking too much?

MR. JAFFE: Well, I mean, I can\'t answer that question, but that\'s
different than a threshold. You were saying threshold, that\'s why
we\'re having a threshold at five percent.

MS. MELLON: Right, but whether the politics of a threshold makes sense
to me. One factor of that inquiry is whether the test can actually
support a threshold that would be lower than the ones now being talked
about. SO I do, but I think there is a technical question there to ask.

MR. GIROUX: So the variability of a GMO test is based upon sampling, the
product you sample, how much you grind it, how much you test it, how
clean it is and all of those components and add them all together,
right? And that\'s the variability.

MS. MELLON: Right.

MR. GIROUX: So one of the largest components of the variability is the
sample. And unless you want to turn it into, turn that corn kernel into,
you know, nanoparticles, and I don\'t even want to use that term nano,
very small particles, there is going to be a limit to what you can
measure down to reliably because it\'s either going to be there or not
be there, or not be there at a representative number. Very technical,
very technical. There is nothing that says, \-- I will not say that we
cannot get to very, very very low limits. But the process to get all the
sampling and preparation and testing done to those very, very, very low
limits \--

MS. MELLON: A lower percent? Is that a very, very, very low limit?

MR. GIROUX: It depends on what you are willing to do and what\'s
commercially viable, and what the testing labs want to do. You can, you
know, you can get to any level. And I\'m not saying that we can\'t below
five percent. What I\'m saying is, if you look at the performance data
today based on the performance studies and the ring trials that get done
on PCR testing methods, the methods once you get much below one percent
they are not reliable. They have huge relative standard deviations. They
are not predicable that if I test here and I test there that we\'ll get
the same number.

MS. MELLON: That I get. But I\'m trying to figure out is there any kind
of action we could take or suggest that would actually create a test or
a sampling protocol that would change that situation?

MR. GIROUX: Yes.

MS. MELLON: Is it inherent in sampling very large whatever they\'re
called, you know, vessels full of grain or is it some, is it a limit in
PCR, the PCR technology? Where is the limit that makes it impossible for
you to be comfortable about less than five percent?

MR. GIROUX: I don\'t know the technical answer to that question is, but
as we put it in two of our reports from the USDA right now, and that\'s
for the technologist to figure out. But as we said, they should be
validated and fit for purpose for whatever matrix they\'re testing. So I
don\'t know, so I can\'t answer your question, but I know that the
methods that are on the market today, if you\'re going to test certain
types of products they have not been validated and demonstrated to be
fit for purpose.

MS. MELLON: No, and I\'m all for validation and everything. I\'m just
trying to figure out this, how do you get to have some of these
discussions? And as long as people say to people who are concerned about
having low, extremely low levels of GM in product, that there is, you
know, essentially what I\'m hearing from you is, no matter what happens,
no matter what can be done there\'s no way that I could ever assure a
set of customers that I\'ve got any less than five percent.

MR. GIROUX: I did not say that.

MS. MELLON: Well, that\'s kind of what I\'m hearing.

MR. SHURDUT: He\'s saying general won\'t work.

MS. MELLON: Well, maybe it\'s just a matter of cost. It\'s too, you
know, we probably don\'t want to go into too much, but I think it is
important to, you know, to understand why it is we can\'t assure
customers more easily that these low levels can be met.

MS. DILLEY: Everybody\'s waving their cards over here. I\'ve got three
people waving cards. So we got Carol Tucker Foreman. We\'ve got Leon,
and then we\'ve got Carole Cramer.

MS. CRAMER: Can I just sort of address from the numbers point? Which is,
if you have, if you\'re looking at one percent, that means you take 100
seeds and one of those seeds may have GM component. So for one percent,
you take a sample size of 100, you have a bell curve around that. But if
you want to go to .01 percent, that means that in order to find that one
seed that\'s in there, you have to take, do the math, 10,000 seeds. So
and you need to do that more than once at multiple times so that you\'re
then, basically in order to find that you\'re sacrificing significant
amounts of your product for the testing component for something for
which it\'s not clear that theirs is a benefit.

MS. MELLON: Okay so, but, so you\'re arguing it\'s an inherent limit in
sampling?

MS. CRAMER: Yes. PCR is incredibly sensitive. Why I asked Carol whether
or not they look for *E. coli* based on PCR because if they did, it
wouldn\'t, they would have the same issues which is a combination of
having an extremely sensitive test. That has to be balanced over real
risk or unreal risk.

MS. TUCKER FOREMAN: Well, in the meat industry, and boy, you know,
listening to this, I\'ve heard it from all, I used to hear it from
Randy\'s guy all the time, only now his company does it. And they brag
about. In meat, they establish a sampling protocol. I\'ve been in one
company where one guy stands there all day long. He\'s got a little
thing about that big, he dips it in, drops it over here, dips it in,
drops it over here, and that\'s their composite sample that they then
test for *E. coli*.

It is possible that somebody down the line from him could do the same
thing and turn up a positive. But by setting the protocol the company
that is doing the purchasing is saying, you did it by our protocol, we
accept your findings that you\'ve done what we need to have done. And it
does not require destroying product. It does require taking small
amounts of meat and composing them into a sample that\'s big enough to
reflect what the overall product might be.

I think it\'s extremely sophisticated and accurate. On the other hand, I
don\'t know anybody who says to you, if it\'s been through this process
you can eat the meat raw.

MR. KALAITZANDONAKES: Carol, should every company \-- can I ask a simple
question? Should every company have their own standards?

MS. TUCKER FOREMAN: The purchasers can.

MR. KALAITZANDONAKES: Yeah, but should each and every company have their
own standards?

MS. TUCKER FOREMAN: If they want to have them that\'s fine by me.
That\'s fine by me. You know, only in agriculture is there this notion
that everybody owes you doing it by the way you want it done. It
doesn\'t happen in automobiles. It doesn\'t happen anywhere else.
There\'s a negotiation between buyer and seller and the market works. I
don\'t feel there\'s a moral obligation to do it in a way that keeps a
particular farmer in business. I just don\'t.

I was in business 20 years. Nobody said, it\'s my responsibility to keep
Carol in business.

MR. CORZINE: I\'ve been in business 30 some years and nobody\'s told me
that either. I tend to agree with you. And maybe to get through this, if
we, we look at, I still, Duane, wonder if some of the language we\'ve
got, because what we\'re talking about is some sort of standard if we
can of a test. Now, even if you say it\'s going to be an origination
test or whatever, there\'s nothing to stop if you have a particular
market you\'re trying to hit. That that end-user puts some contractual
obligation that we\'re going to do a destination test at this percent
and this is the methodology we\'re going to use. Either meet it or
don\'t participate in the market.

I mean that\'s really what you\'re talking about.

MS. TUCKER FOREMAN: That\'s exactly right. Thank God, Leon, we agree.

MR. CORZINE: But anyway, I think that, I don\'t see how this committee
can go any further than that. Duane, you\'re not going to solve, I
don\'t believe, what you\'re asking.

MR. GRANT: So if not, it\'s unfortunate. I guess that\'s all I would
say. It\'s really unfortunate because it leaves a tremendous amount of
ambiguity in the marketplace which will in the end be to the detriment
of the conventional and the organic producers because that will be the
groups that will be having the false positives at the expense of the
producers of those commodities.

MR. CORZINE: But the economist in me says, that if there\'s a legitimate
market that wants that product, they will make adjustments for that to
work or they won\'t get the product.

MR. GRANT: To a point. So we can stop on this.

MR. KALAITZANDONAKES: Okay, so the argument is to the extent that
governments can step in and take some of the incremental cost, the
inefficiencies, the multiple standards, the transaction cost in going to
the court, you know, all of this by setting a standard, the government
should do it. That\'s the argument? That\'s the improvement on the
efficiency said. That\'s exactly right.

MS. DILLEY: That\'s Duane\'s argument.

MS. TUCKER FOREMAN: No.

MR. KALAITZANDONAKES: That\'s exactly what the point is.

MS. DILLEY: Leon and Carol were saying \--

MR. KALAITZANDONAKES: It isn\'t that it cannot be done. It isn\'t that
somebody might not get shoved. It\'s exactly what you just described
could very easily happen.

MS. LAYTON: Except there\'s an OMB directive that says you should \--

MR. KALAITZANDONAKES: No, no. Governments do set standards for exactly
this reason for all kinds of things, and that\'s exactly the
justification. Taking some of the uncertainty out. Taking some of the
inefficiency out. Then improve the market function. That\'s the
definition of market failure.

MR. SCHECHTMAN: But you\'re not talking about a mandatory \--

MR. KALAITZANDONAKES: No, no. What Bradley was talking about, what Brad
was talking about before, where a government can step in and say here
are some standards on how you interpret these things. Here are some
standards on \--

MR. SHURDUT: For guidance.

MR. KALAITZANDONAKES: Right, guidance on taking some of the variability
out of the market.

MR. GRANT: So can I give an example of maybe, Leon? So I want to give
you an example of what I\'m talking about, all right. So I was over in
Russia about a year ago, a fascinating place. It\'s the Wild West of the
grain trade right now. Because there are no standards, there was not a
standard setting agency. They gutted the budget for the standard setting
agency, so how do you decide what you\'re actually selling?

And they had very much restricted the ability of the producers to move
their commodity market because they didn\'t know what they were going to
get paid because nobody was setting the standard. Can you imagine what
trade would be like in the U.S. if nobody was out there determining what
U.S. Number two yellow corn is? Somebody decides. There are standards to
say this is what you have to meet to be U.S. Number two.

We\'re moving into an era in which trade in transgenic and
non-transgenic crops takes on similar connotations as the grading
standards that exist in the marketplace today. Yet there is not a body
out there that is setting the standard for what it means to trade a
transgenic or non-transgenic crop.

I don\'t think that is conducive to coexistence of multiple marketing
streams. It will result in the predominant marketing stream, I believe,
taking precedence in the marketplace, and there will be, absolutely
there will be other private contracts that will find ways to exist at a
cost, but that\'s, in my mind that\'s not a very efficient marketplace.

MR. CORZINE: I was agreeing right through the point that if, and it may
be the government\'s job to set that standard or floor and not the
ceiling as Carol mentioned, because my point is, wherever you set that
on your testing methodology or whatever your protocols are, it\'s a good
thing to have that standard, but there\'s going to be nothing to stop
Randy from saying well, you know, I want a little more. And it\'s up to
you to agree am I going to try to hit that or not, right?

MR. GRANT: That\'s correct.

MR. SCHECHTMAN: And you\'ll be subject to the same problems. If Randy
decides that he has a different standard for it, you\'ll be up the same
creek.

MR. GRANT: But at least I\'ll know from where. Okay, from right now
we\'ve had this long discussion about what is a detect. You know, what
is zero and what is .0001. All right, we\'ve had that long discussion.
So at least I\'d have some place to have a floor from which to negotiate
with my buyer from.

MS. TUCKER FOREMAN: Now a little history here. The grading standards
were set up at a time when it was impossible for buyers and sellers to
go the distances that were required to actually be on site and see the
product, and they\'re becoming less and less important as people have
had the capacity \--

MR. GRANT: It\'s become less important today?

MS. TUCKER FOREMAN: Yes.

MR. GRANT: I totally disagree.

MS. TUCKER FOREMAN: Lots of the supermarket chains don\'t bother with
the USDA grading. They send their people off to look at the suppliers,
so they\'re there and they look at it because grading standards of
agriculture products, marbled meat, peaches, they\'re very subjective.
And what the store really wants is to have its standard, and that may be
exactly what the U.S. one is, and it may be different. And I do remember
the year that every peach in Georgia was at least Grade B which meant
that nobody would buy them, because the peaches grew too fast and pits
exploded. And they were in here in my office saying, we\'d like you to
set aside the grading standards this year please.

You know, don\'t just rush off there because in fact as time goes by
those grading standards are I think less and less and less important.
You may be adopting something that has passed its prime.

MS. SHURDUT: Just quickly in terms of what I said earlier. I know this
has moved into short of discussion where the private contracts moving,
there, I think there\'s also a big compliance issue here. If you don\'t
have a standardized protocol and interpretation, it\'s more a compliance
thing, and to me it\'s more of an international piece meaning if you\'re
delivering against a zero tolerance and someone\'s using a test in the
U.S., and you go and you go to 25 member states and they\'re using
different tests and/or they\'re interpreting it many different ways,
again, we talked about limited detection and all that. People call
something positive all over the place, above the LOQ, below the LOQ, you
know below the LOD etcetera. So I guess my point around standardization
and protocol and all that is, possibly gets into that area of compliance
which is very integral to a coexistence system. So it\'s less private
but in Europe it\'s the government that\'s doing the spot checking with
variable methodologies. Not a private party. So that\'s I guess where I
see it being even, you know, being very important.

MS. TUCKER FOREMAN: Would Codex set up such a standard?

MR. GIROUX: Codex is setting a standard for validation criteria and
performance characteristics, but that\'s their role, right? What\'s the
bar of performance that the test has to jump over? It doesn\'t tell you
you\'ve got to use that machine and that enzyme.

MR. SCHECHTMAN: Or how you interpret your data.

MR. GIROUX: Well it does to some degree do that. Reporting. Data
reporting.

MS. LAYTON: Okay, I go back to page \--

MS. TUCKER FOREMAN: Excuse me. I have to leave. But I just want
everybody here to get these \-- next time I need to get a bill passed to
get some assistance to poor people or consumers, I want to come and not
hear anything about big government being evil here?

MS. LAYTON: Coming from a statistics background, because quantitative
genetics is statistics. Here\'s what we said, "There are significant
sampling and testing issues from one that\'s supplying grain or grain
products that are required to meet specific tolerances or thresholds.
This difficulty reflects sampling and analytical challenges associated
with the testing of grain for genetically engineered content.
Variability between tests relates to the absence of reference standards
and internationally validated and harmonized test methods. Without
harmonization and standardization it will remain difficult to
practically and reproducibly determine whether products are in
compliance with a specific tolerance.

The problem of variability among tests is exacerbated by tolerance
levels, as tolerance levels decrease. Which test results take precedence
in the movement of grain and grain products needs to be clarified.
Mutual recognition of testing and sampling methods may enable downstream
parties to accept testing at the origin of a grain or grain product
without the need for additional testing.

Development and recognition of testing certificates would reduce the
commercial risk along the supply chain. Industry is grappling with how
to address issues related to acceptable zero versus an absolute zero for
both approved and unapproved events." And then we went, "uncertainties
as to liability..." \-- maybe that\'s not it, \-- "about liability
transfer and exclusions for biotechnology related claims..." That\'s
about insurance industry\-- never mind.

Any way, this was the final one, "There is a role for international
organizations as well as bilateral and multilateral efforts to address
some of these impacts and implications. But it is not always clear which
approach is best suited for the resolution of each. The U.S. government
should continue to creatively explore different venues and approaches."
What didn\'t we cover?

MS. MELLON: Gosh we\'re good. I must say that read well.

MS. LAYTON: That was, The U.S. must continue to discuss. Third party
standards and all those things. Dispute resolution. I mean, I think, I
don\'t know. I just keep hearing the same old stuff just different ways
of looking at it. I\'m open for more, but \--

MR. JAFFE: So what is not in that segment to me, and maybe I\'m just too
focused on the issues in the field, but what is not in that segment to
me, it talks a lot about international harmonization. It talks about
multilateral and bilateral talk, you know discussions, etcetera,
etcetera, etcetera. We\'re talking, all that is part of this overarching
debate, okay? But, in my mind we\'re looking for ways to facilitate
coexistence within the U.S.

MS. LAYTON: Right.

MR. JAFFE: And if we can\'t come up with a system within our own grain
trade, food trade, if you will, it seems just extremely unlikely to me
that we\'ll prevail in attempting to harmonize standards between
ourselves and other countries.

MS. LAYTON: And what I thought I heard was, which test results takes
precedence in the movement of grain or grain products needs to be
clarified. Mutual recognition of testing and sampling methods, and that
may be mutual recognition within a stream from you to Consolidated
Grain. To me that\'s mutual recognition.

May enable downstream parties to accept testing of the origin of a grain
or grain product without the need for additional testing, which will say
that Consolidated Grain, if we have a mutual recognition system, and you
test, Consolidated Grain will take your test. Now I may be wrong and I
may be misinterpreting what that said, but that was just what I thought
it meant.

MR. JAFFE: I\'m just going to go back to what I said yesterday and
relate it to \-- what are we doing here with coexistence and where does
it overlap with our report? I don\'t disagree with you, Pat, but all of
those things you brought up earlier, they are covered by more of the
supply chain point of view. That report did not cover the producers'
point of view and Duane as the farmer is talking about it from the
producers' point of view.

I think, you know, as I said yesterday, if we\'re going to write the
thing about coexistence in some of these areas, I think the areas that
that report didn\'t cover was the point of view from the producer on the
farm level, where I think there are some good things happening and maybe
some things that aren\'t working so well, and similarly from the
consumer point of view at the far end, stuff that Mardi\'s talked about,
or things like that of consumer expectations. And those kind of things
weren\'t talked about.

I think that report, which I was very involved with, and I thought
covers a lot of these topics but it does cover it from the supply chain
point of view, the middle people, less from either of those ends. It
wasn\'t written with those ends in mind. So I think if we\'re talking
about where we don\'t want to duplicate, or what we want to report in
this report, I still come back to, they said that we\'re going to, \-- I
mean in addition to what I said yesterday about some of the things
about, you know, that we are coexisting and where are things going right
and where might things change in the future?

We might want to add something about things from either the farmer point
of view and some of the things that are, some of those issues that I
don\'t think have been covered, and it may be a lot of the same
language, but it may have a slightly different slant to it, as well as
some of these things from the consumer point of view. The consumer\'s
expectations and some of those kinds of things and how that feeds into
all of this.

MS. MELLON: I agree. I think it\'s very important to, I mean, use that
as a background. But to frame some of the issues from the producer point
of view and from a coexistence point of view. I mean, if we agree that
we want to enable a market that in the U.S. that will produce non-GMO
foods, one thing that you need to do is help farmers to participate in
that market. And one of the things, what we\'ve just heard is that there
is a grower who feels that a barrier to participation is, are some of
these testing issues.

But framing them like that as a kind of barrier to coexistence in the
U.S. I think is very, is important and it\'s suggests different
recommendations. It suggests not that you go and put pressure on Codex,
but that you actually think, you know, more about things that could be
done within the U.S. to make our domestic market work.

MS. LAYTON: And I\'m comfortable with that, but one of the things we
said was we had to have data not just somebody\'s opinion. So, the
question is, do we have data that says that farmers, 20 percent of the
farmers feel like this is a barrier? So I guess, you know, we have one,
two, three, four, because you farm, Jerry, right? Four, is this a
barrier, is it one out of our four? Is it four out of our four? And I
don\'t know the answer to that.

MS. DILLEY: You guys are data.

MS. LAYTON: I don\'t think we heard this in our last time\'s talks. So I
want to just ask \--

MS. DILLEY: I don\'t think that your point is to answer that now in
terms of that\'s either hard data or it\'s not hard data. I think
Greg\'s point is a good one, in that if you\'re looking at \-- yeah,
pinpoints and what are the areas that aren\'t covered perhaps by the
reports, and the three possibilities are something you need to
coexistence, which I don\'t think we\'ve said so far.

And then, those reports for particularly how industry or the supply
chain is responding to those requirements around the world. So that was
that particular approach to it. And so if there are particular grower
issues, which Duane has expressed several times, and consumer issues,
then those are the things that we need to take a look at.

MS. LAYTON: Take a look at. And I\'m fine with taking a look at.

MR. JAFFE: I mean this committee has never been driven by data before.
We\'re not a data gathering organization. And it will take us many more
than two meetings to gather data to support any of our things we would
write in a report. We\'re an anecdotal committee who has thought about
these issues.

MR. SCHECHTMAN: You\'re a group of experts.

MR. JAFFE: We come from different perspectives and we bring that to the
table, and we represent constituencies. But we think we\'re not, who
have similar views or have had similar experiences. And I think that\'s
all we could ask for. It\'s great when we have data that helps point out
things or that we can use to explain some of the issues. But if we\'re,
\-- I don\'t think we should set a standard that we have to have a data
point for each thing that we\'re going to discuss.

MS. LAYTON: I\'m fine with that. But we talked about that yesterday, so
I thought there was sort of consensus about it.

MR. SLOCUM: I think producers in general are very accustomed to the
standards. They\'ve traded cattle by them, they\'ve traded hogs by them,
they\'ve traded grain by them for as long as they\'ve farmed. So I think
it would be difficult to find producers that weren\'t opposed to minimum
standards. I also think producers understand in the last decade or so
that capture these higher value markets, you have to perform at above
those minimal standards.

I don\'t think these are new issues. But what growers like though, is
they like to be able to come into my elevator or Cargill's elevator, or
anybody\'s elevator and bring their John Deere moisture tester, okay,
that\'s been behind the backseat of their four-door pickup. It\'s been
bounced around, and it\'s got a battery in it that\'s about three years
old, and they want it to be the same as my Dickie John, that\'s tested
by the State three or four times a year, for each and every crop we do.
So they like a standard of measurement and they\'ll bring samples, and
we\'ll run samples on our Dickie Johns, that are tested by the State
four or five times a year, and they\'re calibrated daily. And they\'ll
take their moisture machine that\'s been behind the backseat of their
truck since the last harvest, and they will agree to a, okay, if yours
is 13 and mine says 14, they\'re the same.

But that\'s the way they sort of do it. So Duane\'s right. They want a
reference point to start from. Even if it\'s a reference point that they
have to do a calibration in their mind, okay, with their particular, the
guy they\'re going to try to sell the group to. So, yeah, I think,
there\'s some value here to some standardization of these things so that
the grower at least has a place to start from.

And not all of us, and I\'m one of them, we\'re not going to compete for
these higher-valued markets because of soil types or because of erratic
climatic conditions, or because hell, we may just not be interested in
it. We may be a lot more interested in trying to buy the neighbor's farm
or rent it out from under him so we can farm large on a commodity scale,
that\'s what makes it so much fun, you know.

There\'s so many different ways to approach profitability in
agriculture. So, I don\'t \--

MS. LAYTON: Including the Farm Belt, right?

MR. SLOCUM: Well, part of it is the Farm Belt. You\'re absolutely right.
I would say some things but we\'re on the record. I mean, I think
intuitively, and there\'s no data you understand, but intuitively, I
think farmers are accustomed to standards and they understand what
standards are, and if they can raise a product that\'s better than the
standard, they want more money for it. And there are buyers out there in
the world today that are willing to pay that premium for things that are
above the standard.

So I think, and I thought this since 1996, there ought to be some
standards for these new products, these products of biotechnology. And
there ought to be repeatable, measurable, testable standards there. And
I think most growers would agree.

MS. LAYTON: So does he want a Dickie John in his truck? I mean does he
want a dipstick that you can say, okay, I think I\'m meeting it and when
I go down to the grain elevator I\'m safe?

MR. SLOCUM: Absolutely.

MR. GIROUX; So Duane can buy for the same distributor that I buy my
lateral flow strip from. The exact same test and do exactly the same
thing that I do in my elevator, there\'s nothing that prevents him from
pre-testing the sample. Those kits are verified by the USDA that says if
I follow this insert, that it performs up to USDA standards.

MR. SLOCUM: But Duane might not be dealing with just you, or just me. He
may be in a place where there are one or two or three. And so he wants a
standard.

MR. GIROUX: For what?

MR. SLOCUM: For what it is he\'s trying to grow.

MR. SCHECHTMAN: I think I need to jump in now. I don\'t think we\'re
going to resolve this right now. And I think we have to do a little bit
of business in terms of moving forward to what we\'re going to do next
before everyone hits the road.

MS. LAYTON: I know that. But I will say that this is helpful, because
now I understand what we\'re talking about.

MR. SCHECHTMAN: I mean I think we\'re going to have to do more work on
this, but I think we have to talk about what, \-- with this piece as not
yet being completely resolved, we have to talk about getting some other
pieces that we\'ve talked about during the course of the meeting today.
How we\'re going to get them ready for next meeting, and what else we
still need to do.

MR. CORZINE: I just have to interject, and that\'s fine, Michael, but,
and Jerry did a good job with that except, there are different levels of
sophistication as you move northward through the \--

MS. DILLEY: We have about a half an hour to kind of take an inventory of
where we are with our discussion so far and what needs to be done
between now and the March meeting. I still think we\'re working along
the premise of U.S. is the largest biotech producer, etcetera, etcetera.
Some things are working, what is not working? I think there was still
some, are we, have we had all the information necessary to do a good
analysis of that? And I think Carol had some suggestions for what she
wanted. I think in terms of other perspectives.

I\'m not sure if there are other people who are looking for additional
information to what we\'ve already had presented. Then we should put
those on the table so we can kind of sort through all that. Kind of the
big picture. And then we\'re looking at pinch points on the
transportation. I think kind of the logic flow of the discussion we had
was we have had flexibility and the market\'s been able to accommodate
that.

The accessibility and predictability is critical, and it\'s potentially
reaching a pinch point. And we need people to kind of grab that and
articulate it. And I guess I wanted to see if there were volunteers,
otherwise, I\'ve already started thinking about assignments, so.

MR. SCHECHTMAN: We\'re prepared to volunteer people.

MS. DILLEY: Yeah, we are prepared to volunteer people. So I wondered if
there are folks who had a particular interest in the transportation
issue? So we got the transportation as one option. Somebody started
talking about market access and availability. Most of that discussion
revolved around seed availability and accessibility. I\'m not sure if
there are other pieces on market access. I think other points had come
up on that topic, like access to capital markets and we had competition,
it\'s kind of a shorthand, and I\'m trying to remember exactly what that
was. But the capital market I think has come up yesterday and last
session. So I don\'t know if there is more information that we need or
we need to set up that discussion, but I think we need to capture what
we have on seed availability, that discussion.

MS. GEISERT: Market access, I think we needed to talk competition, this
global competition a bit. May not work in the U.S. but you can go
elsewhere and then what?

MS. DILLEY: I think you\'re right. And again, we haven\'t probably
kicked that around enough right now to know that\'s a pinch point or not
a pinch point, or how we want to capture that, but that\'s under that
kind of category.

MS. LAYTON: Is that rural development funds?

MS. DILLEY: Under door number three \--

MS. LAYTON: Was rural development funds under that?

MS. DILLEY: Capital, yeah, capital markets was under that as well. I
mean, if you look at your outline on the paper that was also under
there. Part of us need to decide, first we need to kind of capture what
we\'ve already discussed and then there\'s setting up a conversation to
talk about other pieces. So let\'s go through the first of what we have
talked about. And then there\'s this discussion that we just finished,
so we\'re not going to have again right now. To me, we also talked about
the fact that we may want to merge these categories, and we do hop back
and forth between the two of them.

They\'re obviously interlinked. And the way we started kind of homing in
on that was there some material we\'ve already written. We need to
reference those reports. Those were from one particular dimension of it
and what\'s missing and the issue around, there\'s some grower and
consumer perspectives that need to be flushed out a little bit more and
whether or not coexistence raises some specific issues. So that\'s what
we\'ve discussed so far.

We also talked, yesterday was more about the externalities, the
liability piece of it, and I, there was some interest in bringing up
some additional, maybe some additional presentations or discussion
around that. We haven\'t even started talking about information. I mean
I think that\'s kind of a common scheme, in terms of facilitating good
information, decision making, and how that transparency or moves. We
haven\'t even started. We haven\'t had a concentrated discussion about
that at least over the last couple of days this meeting.

One question is assignments for kind of capturing what we\'ve already
discussed and then opportunities to lay out any additional issues and
then how we might want to use any other, or what other information we
might need framing.

MS. LAYTON: The other thing we talked about yesterday that I wanted to
make sure that we captured here was, Mardi\'s issue on public ballot
initiatives on coexistence. Moratoria. I wrote that down. Was that in
wherever your notes was because I thought that that was sort of
something, it came sort of at the end of the day or right before break
or something. And was that something that needed to be added or? Because
I think Alison would say yes.

MR. KALAITZANDONAKES: So am I going to explain or articulate what, a
little bit more of something?

MS. MELLON: Well, I mean, we could, it\'s just a phenomena. It\'s
probably too late in the day to address it, but there\'s, you know,
regardless of, this is an issue that plays out at multiple levels.
We\'re kind of here at the federal level. And it reflects kind of the
power dynamic, I would say at the federal level.

The power dynamic is different at the local level, and at the state
level, and I think we just ought to take account of the fact that in
states and counties around the country people are coming up with
moratoria on the growing of GM products as a way of dealing with some of
the issues that we\'re talking about here. And so I think we ought to
acknowledge that that\'s happening. We\'ve all in the past have had
different views about whether, you know, this is good or bad or
indifferent, but it is a part, it\'s a dimension of the issue that we
really haven\'t discussed.

And again, it is an issue where the power dynamic is different. Where
the number of farmers who are interested in keeping GM out, for example,
can be much greater relative to the number of folks who want it in
because they have different markets and whatever. Different
relationships with their consumers. But I just think that we, that we
ought to acknowledge it and I guess it\'s, like I said, it\'s hard to
bring up at this hour, at the end of the day because we can\'t really
discuss it.

MS. LAYTON: It\'s item 16.

MS. MELLON: It has been discussed before. But we might want to talk
about it, you know, in the coexistence or just, you know \--

MS. DILLEY: The framing piece of that.

MR. KALAITZANDONAKES: Can I make a comment? I mean just for my
understanding. So we know we\'ve had three counties that have
successfully imposed moratoria. We know that there are 19 States that
have either voted or in the process of voting preemptive regulation for
disallowing those kind of moratoria. So what else, what else would we, I
mean, what kind of discussion do we want to have beyond that this is
happening?

MR. SHURDUT: I think you mentioned that just the framing piece. That
recognition that [Coates and Habbon]{.mark} (phonetic sp.) brought up as
a reason for a couple of states, certain counties.

MS. DILLEY: I mean to me it fits in the same kind of framing category as
your comment about, well, growers don\'t have an inalienable right to
grow whatever they want. Nor do, I mean, there are boundaries around
this discussion. So that\'s one dimension of it. The grower \--

MS. MELLON: But I would suggest is a metaphorical framing piece to the
extent that the federal government fails to acknowledge the interests
and the desires of the people who are driving these initiatives, the
more likely you are going to have them. I mean these folks look up and
basically they say, the federal government is blowing us and our
concerns, you know, away. They don\'t, they\'re not strengthening the
safety systems. They\'re basically saying there\'s nothing that you can
do about this, it\'s coming. I mean people even have more cynical views
of say the coexistence issues. People are trying to basically
contaminate the seed supply so that no one would ever be able to offer a
completely GM-free product.

MS. DILLEY: Let\'s not go down this path right now.

MS. MELLON: But those people are out there. You know, as I said we can
just acknowledge them, and you know, depending on where you stand,
either say more power to them or you know, try to restrain them, or we
might spend some time trying to talk about how providing some sort of
access outlet, legitimacy, acknowledgment of the legitimacy of the
efforts at the federal level might actually diffuse them.

MS. DILLEY: One, I don\'t want to have that conversation.

MS. MELLON: I know, I don\'t want to either. It\'s too late.

MS. DILLEY: Because it\'s late and that\'s a really, and you mentioned a
whole bunch of stuff including the whole category of externalities which
we\'ve touched on and we haven\'t really, I don\'t know if there\'s more
there that we need to pick up with in that realm. But to me I think we
started with it\'s kind of a framing dimension of kind of painting the
picture of what we\'re trying to wrestle with in the whole coexistence
piece of it.

So let\'s park it there right now and there may be other dimensions of
other things that we\'ve talked about. Not just that topic, but other
things that we haven\'t quite figured out how to address or further
discuss in any kind of final form, or either have a discussion on paper.
So we have, let\'s go back to some potential assignments that you have
to choose from.

One is some of this framing stuff, starting to capture this in terms of
how, I think we started to evolve our thinking about how we\'re looking
at coexistence. It\'s been working and why is that, and some of these
things in terms of a pinpoint, and some of the dimensions of that. Some
boundaries around that. Some framing pieces.

Then there\'s the transportation issue. Infrastructure. Transportation
and storage piece. There\'s market structure and access. Mostly right
now we\'ve talked about that around the seed availability and
accessibility parts. Then there\'s the combination of regulatory
standards, compliance and stewardship piece.

And then what we haven\'t talked about as much is whether we\'ve got
additional work to do on the externalities piece and the information.
Again, I\'m going by my, the outline that we had generated at the last
meeting. So, I think the more solid pieces right now in my mind are the
framing, the transportation, market structure and access, and the, what
would look less clear to me and I could, certainly couldn\'t write, but
it sounds like other people have a better handle on it, the regulatory
standards, compliance and stewardship pieces of it. The last part of the
discussion after lunch. So, Mardi are you volunteering?

MS. MELLON: Yeah, I will write stuff. But, I think one issue that we
need to park somewhere, maybe it goes in compliance, but I think Russ
made it early on is the notion of some sort of zoning, some sort of
establishment of zones within which you know you, there\'s an agreement,
a political agreement, you know, not to grow GM crops and that of course
is a compliance, perhaps it could be considered as a compliance issue.
But it would, it would facilitate farmers meeting this demand for
non-GMO crops. And we might just want to talk about the, you know, that
there are some precedents and that obviously they\'re also some
problems.

MS. DILLEY: Yeah, that came up yesterday after Drew Kirchen\'s
presentation too.

MR. CORZINE: I just think back to the point we\'re a little late in the
day to get into that discussion so we shouldn\'t even bring it up, if
we\'re not going to have, you know, all public record and all that kind
of thing because there\'s a lot, there\'s difference of opinion there
and I think and some time \--

MS. DILLEY: Absolutely. We\'re not even close to any recommendation. I
think Mardi\'s just saying we need to, does that park somewhere and
let\'s just make sure we either come back to it and figure out whether
that does belong anywhere. So let\'s park it for now and come back to
the assignments that I\'ve kind of laid out that are more specific, and
then we need to kind of take an inventory of what else do we need to
discuss and talk through.

MR. JAFFE: One of them is your park, because, I mean, it\'s a powerful
thing to say from a consumer perspective, and a consumer expectations
and other kinds of things in the marketplace for products and some
discussion about that. And I don\'t know where that goes, I guess,
we\'re talking about parking issues.

MS. DILLEY: Yeah, and it may just be a separate presentation that
touches on different dimensions of this. So we\'ve already talked to
Carol about a couple of ideas for speakers, but we haven\'t pinned
anything down. So, I see people just racing to volunteer for writing
assignments.

MS. MELLON: Well, I will write part of the framing.

MS. DILLEY: For framing.

MS. MELLON: I shouldn\'t be out left by myself to frame though. I would
suggest that some of my esteemed compatriots who have different points
of view need to join with me. Otherwise I won't be responsible.

MR. SCHECHTMAN: I think just the one thing to add to the framing is, I
think, the whole idea which Greg had talked about earlier, Greg and
Jerry, of this idea that, you know, we need to talk about the facts that
there have been some things that have been successful through
flexibility and you know overall we have gotten, you know, we\'ve
managed to certainly satisfy most of the needs for a lot of folks. We
may not be satisfying, \-- the question is whether in the future we will
be and whether all of the needs seem like they\'re being satisfied at
one, at the end points as we talked about before.

MS. DILLEY: So for transportation. How about seed availability? Okay, so
we have Russ, Nick and Brad.

MS. MELLON: On the other, I think I\'m volunteering Russ to write a
little thing about access to capital as also being an issue, as another.

MS. DILLEY: And then Randy\'s, who\'s going to join you on the
regulatory standards, compliance and stewardship? Sounds like Duane you
need to be doing some of that. Nancy.

MS. LAYTON: If I had to choose where I\'d like to help it would be
transportation.

MS. DILLEY: So the couple of people who don\'t currently have
assignments. I mean the alternative is that when you pick up some of
these other topic that haven\'t, but it\'s hard to do that without
having some of the discussion. So the question then is, what other
pieces do we need to pick up?

MR. KREMER: So are these work groups?

MS. DILLEY: I don\'t think they\'re necessarily work groups. I think
they\'re doing \--

MR. SCHECHTMAN: I mean think what will need to happen is you all will
need to talk among yourselves to produce pieces that we will then
assemble and send back out to folks.

MS. LAYTON: So sometime by February 15th?

MR. SCHECHTMAN: Oh no. It\'s going to have to be before that. People are
going to need to be able to look. We\'ll have to assemble them and
people are going to need to be able to have them back out to look at
them and provide comments back before the next meeting.

MS. LAYTON: So we need them by January 30th?

MR. SCHECHTMAN: January 30th.

MS. DILLEY: So we need kind of a time frame in kind of figuring out
logistics of how to get this accomplished.

MR. KREMER: I was just going to, the people working on the compliance
and regulatory thing, just, I\'d ask that you not forgot, some of the
stuff that Jim had in his presentation. I asked him for that
presentation to about \-- yeah we didn\'t talk about it much, about how
he thought that the number one economic issue was when we prematurely
release an event that basically, did someone use the word screw, screws
the whole deal for all the properties within a country. In other words,
where it creates a situation where they ban all feedstuffs from a
country. I don\'t think we hit on that very much this afternoon. I
request that you all at least look into that.

MS. DILLEY: I think Nancy raised that point again too. Yeah, and
remember, this is a committee document. So everybody gets a chance to
have their particular thing. We\'ll has through them at the next
meeting. So are there pieces that, and we still need a time frame on
that, I guess, Michael. Let\'s finish out that discussion by when do you
need that.

MR. SCHECHTMAN: I think we need to have a draft by January 30th. I
don\'t know what day of the week that is. By the end of January we need
to have each of those pieces submitted so we can assemble them back
around. And I will send out a reminder to everybody mid-January that you
need to be getting together. Our next steps memo will remind folks of
that. It will remind folks who they need to be contacting. We\'ll try to
keep you suitably anxious about the need to have these pieces done.
We'll assemble it. We will try to turn that document around within about
a week or so, so that you can all look at the whole thing recognizing
that this is not all the pieces that are going to be there.

I think we can still strive to keep each of these pieces pretty short.

MS. DILLEY: So to just facilitate some things, can we ask people, and
Kathy had a good suggestion, she mentioned to me is maybe have one
person take the lead in getting them organized. So could we do that for
each group? So Mardi, Nick, Sarah, Greg, would one of you be willing to
organize? Sarah, thanks.

For transportation there\'s Pat, Jerry and Leon. Okay, so market access
\-- Brad, will one of you take the lead of organizing? Brad.

Okay so any other input in terms of additional information needed to
flush out some of these other topics that we haven\'t really touched on?
Information I feel like we haven\'t really grappled with that at all.
Not that I\'m pushing that we should, but if we\'re missing something.
It would really be a good idea to have any other presentations we need
be done by next meeting because, otherwise we\'re getting pretty late
into the game here of having new information interjected into the
conversation. So we know we need some kind of consumer kind of
perspective piece.

MS. MELLON: We also might consider having somebody else from the organic
community other than just, you know, someone that\'s kind of already
dealing with the marketplace and doing pretty well. But maybe someone
from OFR, from the organic farming research foundation, Mark Lipson or
Bob Scowcroft. Or someone that could give us some idea of, I mean from,
you know, from the, if we\'re going to agree that we want to help our
farmers serve this non-GMO market and organic is part of that, they
certainly feel that they\'ve not been given the same resources in terms
of access to markets, for example, as the transgenic folks.

And they could, I think it would be helpful for folks to kind of hear
from that community. You know, what kind of, their perspective. And it
would be, I think, somewhat different from Lynn\'s. But might provide
some opportunities for, you know, for recommendations for coexistence.

MS. BRYSON: Does USDA have any statistics on this that would be helpful
to us?

MR. SCHECHTMAN: You missed our last meeting and we talked about this and
there was one set of statistics that is now quite old that was gathered.
And we talked about that little bit that\'s in the transcript from the
last meeting. But there has not been the money, you know, an allocation
to do any additional information gathering along those lines. And that
was in fact one of the things that Caren Wilcox from the Organic Trade
Association said with a lock.

MS. DILLEY: Anything else? Okay. So as Michael said, we\'ll put a next
steps memo out trying to capture all of this along with a schedule to
try and pin down the March meeting. And is there anything else, Michael,
that we need to do before we adjourn?

MR. SCHECHTMAN: I just want to go over one thing on this thought of how
we\'re going forward. It sounds to me like we have two pieces of an
approach here and one of them is sort of talking about a system having
worked pretty well for lots of the customers. Maybe there are some
issues around the edges currently, and looking forward we see potential
pinch points. I just want to get that sort of mixture, everyone\'s sort
of on the same page as a general approximate framing.

MR. CORZINE: I just may suggest that, I don\'t know how many more
presenters that we need because we pretty much covered the gambit and
take it away from the time that we might have to actually have our
discussion, do our work. You know, even the organic piece, I mean,
we\'ve had two organic producers. We had Organic Trade Association. We
had an organic marketer. How much more do we need there. I mean, we
don\'t want to discount the segment, but you know.

MS. DILLEY: No, I think the issue, Leon, from what I\'m hearing anyway
is that we, so far in terms of presentations and discussion, I think the
way Michael framed it in terms of there, lots is working. I guess we\'re
kind of doing due diligence, if you will, to make sure that that\'s the
case. And so if there are other presentations that we have, and you may
be right, maybe we have asked and answered. But it seems to me that I
think from some perspectives, Carol\'s and Mardi\'s and a couple of
others, that maybe there are, what they\'re hearing is the market\'s not
working and we do have a problem. So if that\'s the case and they can
bring valuable different information, it\'s worth checking it out and
maybe hearing that perspective. If it doesn\'t offer other additional
information, it doesn\'t offer additional information we won\'t do it.
But I think, my sense is that we\'re trying to do due diligence to ask
that question and have it answered.

MR. CORZINE: Well, I\'m all for due diligence, but to a point. I mean,
we can seek out any segment of anything and find something that isn\'t
quite working right, somebody\'s got a complaint.

MS. DILLEY: That\'s true.  And case in point is AP. We like to talk
about it an awful lot and a lot of our presenters have talked about AP
an awful lot, and it\'s obviously an issue. So it\'s kind of, you know,
when do you call it quits and move on? I think that\'s what we\'re
asking ourselves is, you know, is there anything else out there that we
haven\'t really put before us that would change our thinking to some
degree?

MR. JAFFE: One thing I would think about, again except this is also
going to deal with international issues is, somebody from the EU or
somebody who\'s actually, again, tackling this issue from a very
different perspective and hearing some of why they think this is a big
issue, and why other parts, and the ways that they\'re tackling it may
give us insight into again, additional things that we\'re doing right or
also may be able to make distinctions of things that may come to be five
years from now in the U.S. that we\'re not thinking about. So that might
be something to think about.

MR. SCHECHTMAN: On that question. Would that be something, I\'m thinking
about that as something that might be, even though it\'s late in the
process, two meetings from now when we have a report \-- when we have
some material and we want to see if we\'ve covered, \-- if we\'re
talking about three presenters at this point for the next meeting, I\'m
wondering if that\'s going to be \--

MS. DILLEY: I don\'t know if we\'ve made that decision yet.

MR. SCHECHTMAN: Well, I mean, what I heard is that the candidate topics
that I\'ve heard about are someone talking on the consumer perspective
from Carol. We\'ve heard one comment regarding having someone on the
organic side talk about their perception of how coexistence is working
systematically or not working. And now just this potential EU one, and
you know, I\'m not saying \--

MR. CORZINE: Another system that\'s not working.

MR. SCHECHTMAN: And I think there are folks who can talk about the
debate in the EU that can talk about also how it\'s not working. Talking
about that from the inside. I think that\'s also a possibility. But I
don\'t think we can get three presentations in at the next meeting. I
think there\'s a lot to do.

MS. DILLEY: You know one alternative is, actually at the Pew Initiative
meeting there were a couple of people who talked about, there was a
woman from Ireland and they put together a coexistence guidance
document, I think, and then Wolf Meier from the EU, Bob remind me what
he, where he\'s from.

MR. KALAITZANDONAKES: He is from the EU. He\'s the new EU delegate on
biotech.

MS. DILLEY: So I want to maybe looking at that. Because it\'s up on
their website. Maybe looking at that and seeing if that\'s enough to
have access to some information. Greg, it obviously doesn\'t take the
place of having somebody actually come in and talk and be able to ask
them questions et cetera, but at least we can look at that and see,
maybe that offers some additional, that reinforces that we really want
to talk to somebody from the EU, or we say, okay well, actually it
sounds like the same argument, maybe we don\'t want to do that right
now.

MR. SCHECHTMAN: We can certainly at the very least link people to some
information on the EU and what they\'ve done to provide information that
might be useful for discussions.

MR. KALAITZANDONAKES: I would very much encourage us to have somebody
from the EU come talk to the rationale of what they\'ve done, and how
well it\'s working and in a very directed way. There is no shortage of
material on coexistence policy in EU out there. But having somebody to
actually articulate the reason for the policy and how it came about and
the rationale, I think it would be very interesting and I think it would
make what we do very much more effective.

Because there is a basic philosophical difference as to how we
approaching coexistence versus how they approaching coexistence, and I
think the faster we articulate this issue among us first of all, then
for the rest of the world they\'re better off the report is going to be.
So if we have anyone single presenter, that would be definitely my first
choice.

MR. JAFFE: I agree with Nick.

MS. DILLEY: So we\'ve collected up the suggestions and now we need to
figure out how to sort through all that and put the next meeting
together. All right, anything else? I think we\'re pretty close to the
time that we wanted to adjourn.

MS. LAYTON: Thank you, Abby. I\'d like to wish all of you here a very
happy holidays. I hope that all of you take a break between now and
January when we start on working on these reports. So go home and think
about. A safe journey to each of you. Thank you so much for all your
hard work today and yesterday. I think this has \-- I\'ve really enjoyed
the discussions today, and yesterday. It\'s been informative and I come
away always from these meetings thinking, wow, I didn\'t know this stuff
was going on. And I hope each of you learn from each other while we\'re
over here.

MR. SCHECHTMAN: And it\'s been as usual relatively good natured.

MS. LAYTON: Please leave your badges.

(Whereupon, at 3:23 p.m., the meeting was adjourned.)

[]{.underline} Digitally signed by Keena Lukacinsky

[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:

ADVISORY COMMITTEE ON BIOTECHNOLOGY AND 21ST CENTURY

AGRICULTURE

FOURTEENTH PLENARY SESSION

Keena Lukacinsky, Transcriber

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