1. CGCI1 Marketing to the “GMO Sensitive” Lynn Clarkson Clarkson Grain Co., Inc. August 2006 lynn@clarksongrain.com www.clarksongrain.com Supply Chain Isolation & Verification

2. CGCI2 Perspective – happy clients Why IP?  Product distinction  Process distinction  Market access - GMO  Traceability To get what you want when you want it and avoid what you do not want! Speaker perspective IP system, not commodity system Key factors Contract production Protected production Segregated storage 3 rd party verification by tests and process audits

3. CGCI3 Dear client, what do you want? I want X plus I want to avoid all GMO events Some GMO events I want A particular GMO event A set of GMO events I want to be informed - tolerances 0.0000% Mr. Han 5.0000% Mr. Tamai

4. CGCI4 GMO challenges in pleasing client Contract standard – tolerance Prove compliance Seed Production Storage Handling and Shipping Transfer of ownership The most disciplined systems involve layered, overlapping, certified segregation audits and testing protocols. Every step involves costs and risks. Who pays? The Consumer

5. CGCI5 GMO tolerance - examples Goal - max 0.1% GMO Official Europe Market Europe Challenge of multiple standards encourages default to toughest standard Increases costs for all Provides alternative market Korea Official - Zero Market - Games Process path – More games Unapproved (RiceLink) Perfection 0.0…00%? Impossibility System wide risk

6. CGCI6 Prove GMO Compliance Testing techniques – client choice PCR (lab) ELISA (lab & field tests) Bio-Assay (lab) Sampling/Testing protocols Single/multiple event focus Critical points Statistical validity Compliance: when, where? 3 rd party systems for verification/certification Testing services Verification services Certification services Goal: Keep the client. Develop trust in certified, traceable system, dampen reliance on “THE TEST”!

7. CGCI7 Seed tolerance for 0.1% client Very difficult to acquire appropriate seed. Breeding pools no longer pure. Who will guarantee? Cost? Extreme isolation Geographic regions Geographic separations Testing By lot By farm Seed must be under 0.1%. The level of GMO presence becomes more concentrated as move from seed to production to delivery. Our seed goal is 0.025% max. That is becoming VERY difficult.

8. CGCI8 Production challenges Cross pollination by wind or insect Human carryover on machinery or tools Planters Combines Field segregation barriers ½, 4, X miles Harvest/test/discard outer rows to GMO compliant markets

9. CGCI9 Storage Scattered production with challenge to consolidate without contaminating Farm storage: US, Other Commercial gathering centers Dedicated 100% Segregated by Test Affidavit Statement

10. CGCI10 Handle, Process & Ship Handling Bins Conveyors Conditioning system Testing equipment Processing Process aids Admixtures Preservatives Transportation (cleaned/segregated) Containers (20 MT) Trucks (22 metric tons) Rail cars (100 MT) Barges (300-1400 MT) Ships (50,000 MT) Receiving facilities Dust control Human error

11. CGCI11 Japanese Program - Pure Green © Seed: Sample/lab test Field: Visit and stake Harvest: Sample/lab test Storage: Sample/lab test Consolidation: Sample/field and lab test Vessel: Sample/field and lab test Container simplest Barge reasonably simple Ship increased complexity

12. CGCI12 Risk – rejection (cost unknown at start) Within IP system Seed – costs depend on rejection rate, contract premiums Production cost depends on Yield drag – balance with $$ Pest control –balance with $$ Management detail – $$ Storage costs depend Single-user storage Multi-user storage Process/handle/deliver Yeasts, stabilizers, … CG Experience Cost of verification Depends on the level of rejection. That level is not known until program complete. Major cost: rejection at buyers receiving plant. Negotiated effort toward 3 rd party certify Transfer responsibility as early in process as possible Test and accept before shipping Agree on which test controls National collaboration would help

13. CGCI13 Solution & Conundrum Genetic Purity PuraMaize™ Breeding breakthrough by Hoegemeyer Seeds Legally required genetic markers?? Organic Puzzle Process definition Avoid or embrace tolerances and testing?? GMO Labeling

14. CGCI14 Trend Boosters Genetic engineering will offer more market choices distinguished by ingredient quality, process aids and production advantages Buyers will want/accept No GMO events Some but not others All GMO events Means increased market complexity, segmentation, testing and verification!