White Paper - Key to Future Viability

WHITE PAPER - Part 3 of 6

Identity Preserved Marketing -
Key to Future Agricultural Viability

What’s Involved in Identity Preservation
As the industry considers identity preservation, the same question arises, whether from growers, contractors, merchandisers or processors: What is the cost? We believe that in this situation a better question is: How valuable would it be to get crops specifically produced to processor specifications? It’s our belief that the value of identity is significant enough to justify the cost needed to preserve it.

Business-minded producers and processors must consider the costs as they evaluate the role for identity preservation in their operations. With this in mind, the University of Illinois asked growers in a 1999 study(2) to identify the contract requirements and the related costs they incurred in complying with identity preserved contracts.

The study showed that farmers experienced measurable costs to produce identity preserved grains. Costs items included special seed to added transportation costs. In corn, yellow food grade corn had the highest added costs at $1.61 per bushel. Tofu soybeans had the highest costs at $3.02 per bushel.

Contract Specifications -- Corn & Soybeans Illinois, 1999 Contract Requirements
	Variety	Production Mgmt	Quality Testing	Harvesting Req	Delivery Locations	Delivery Dates	On-Farm Storage	Pricing Method	Pricing Window
High-Oil Corn	19%	37%	56%	19%	89%	74%	63%	15%	19%
White Corn	46%	36%	55%	46%	82%	64%	73%	36%	36%
Yellow Food Grade Corn	88%	13%	50%	50%	88%	25%	50%	38%	25%
Waxy Corn	38%	25%	50%	50%	100%	75%	88%	75%	50%
Tofu Soybeans	93%	47%	27%	27%	93%	60%	33%	47%	40%
STS Soybeans	50%	50%	63%	50%	100%	50%	44%	31%	38%

As the above table shows, several additional requirements are common with contract production. Meeting these requirements takes time and money. IdentityPreserved.com has products, services and systems specifically designed to streamline the fulfillment and reporting of contract requirements, saving both time and money.

The added costs in each case are significant. But tools that help integrate the identity preservation process and help producers and processors better track these costs will allow for better profitability for all participants.

The commodity mindset, with emphasis on increased scale and reduced cost, is not appropriate for the identity preserved production process. Instead of producing a generic commodity, searching for a market and hoping for a profitable price, an identity preserved crop producer identifies a need for a specific type of crop production, negotiates a price and agrees to supply the specific crop according to mutually agreeable terms. Growers are producing crops based on established needs.

<- Part 2: Current Situation

Part 4: Some Suggestions ->