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IP Crops & Target Country Markets

This section contains an overview of the market for selected identity preserved (IP) crops grown in Minnesota. The issues addressed include the following:

• Minnesota IP crops selected for promotion.
• Production of and market for Minnesota IP crops.
• Country markets to be targeted for the promotion of Minnesota IP crops.

A. Minnesota Identity Preserved Crops

The first task undertaken in the development of this study was to select the Minnesota IP crops that would be promoted.

Base Crops

The Department identified the following three Minnesota base crops for promotion in selected target country markets:

• Soybeans
• Corn
• Wheat

Once these three base crops were identified, the next step was to identify specific IP crops that might be suited to Minnesota’s growing environment, and for which there might be a significant market.

IP Crops

An extensive list of IP soybean, corn, and wheat crops was developed as a result of a review of the literature and interviews with a wide range of resource persons including staff from the University of Minnesota, seed companies, elevators, handlers, Minnesota Trade Office, commodity organizations, and others.

The initial list of potential IP soybean, corn, and wheat crops contained 84 specific IP crops.

After review by the Department and follow-up interviews with selected resource persons, the Department selected the following IP soybean, corn, and wheat crops for promotion in the target country markets:

• Soybeans
  Clear Hilum, Food Grade
  Clear Hilum, Food Grade, Natto
  High-Amino Acids (Methionine, Cystine)
  High-Isoflavone
  High-Oil
  High-Protein
  Low-Linolenic
  Non-GMO
  Non-GMO, European Standards
  Organic, Food Grade
  Trait-Consistent
  Trait-Specific
  Variety-Specific
   
• Corn
  Blue
  Food-Grade Yellow
  High-Oil
  Non-GMO
  Nutritionally Dense
  Organic
  Trait-Specific
  Waxy, Yellow
   
• Wheat
  Hard Red Spring
  Hard Red Spring / Dark Northern Spring
  Hard Red Winter
  Organic
  Trait-Specific
  Variety-Specific
  Spelt

The Department also decided to include red potatoes, edible beans, and organic edible beans as options on the survey form for potential feedback regarding customer demand.

It should be noted that the Department determined that certain IP crops from the above list would not be promoted in all target country markets.

For a detailed list of the specific IP crops to be promoted and accompanying notes, see Table 1: Minnesota IP Crops to be Promoted – Final List. See Table 2 for an initial list of IP crops that were considered for promotion.

B. Production of and Market for Minnesota IP Crops

This section provides a summary of the production of IP crops in Minnesota and the market for these crops.

Trends in the Market for & Production of Minnesota IP Crops

Historically, farmers in Minnesota have been growing, segregating, and marketing certain types of IP crops for decades. In the future, the range of Minnesota IP crops will expand dramatically.

Traditional IP Crops

Minnesota farmers have grown, segregated, and marketed small quantities of IP crops for decades. Examples of traditional IP crops grown in Minnesota include the following.

Waxy corn has long been grown and segregated from yellow dent corn because of specific characteristics that make it desirable for feed and valued by producers of starches.

Clear hilum soybeans have been grown, segregated, and marketed by farmers for their unique traits in producing soymilk and tofu.

Wheat is a major example of a traditional crop that has been grown, segregate, and market for its unique characteristics. Various types of wheat are marketed as separate and distinct crops (e.g., durum, hard red spring) based on the characteristics of each type of wheat and their value to processors and manufacturers for various types of end products.

Current IP Crops

In recent years there has been a rapid expansion of various types of IP crops that are grown, segregated, and marketed by Minnesota farmers. This expansion has been caused in part by the introduction of efficient methods for introducing particular desired genes or groups of genes into plants. These genes are designed to improve the performance of the plant in the field (e.g., resist insects) or to add value to the end user (e.g., increase oil content).

Some examples of current Minnesota IP crops include the following.

• Organic crops are small-volume, but significant, IP crops that have developed in recent years. Organics have gained popularity with food processors and livestock producers, and Minnesota farmers are growing these crops to organic standards.

• High-oil corn, on the other hand, is a high-volume IP crop that is currently grown in the southern areas of Minnesota. While production dropped in Minnesota this past year due to various factors, the production of high-oil corn reached approximately 5 percent of the total production of corn in the year 2000. High-oil corn is valued by domestic and foreign livestock and poultry producers because of its high-energy value when compared to yellow dent corn.

• Non-GMO (non-genetically modified organism) soybeans and corn have developed into large-scale IP crops for Minnesota farmers. While the ultimate demand level for non-GMO crops is in a period of flux, it is expected there will continue to be a large demand into the future. This demand is a result of the introduction of seeds with genetically modified material that make the crops resistant to various chemicals and pests. These GMO crops have resulted in negative reactions from many consumers and governments that object to the use of GMO corn and soybeans in human food products and as food for animals that will be slaughtered for human consumption.

• Specific varieties or traits are demanded by some buyers. For example, some wheat buyers want a specific protein content. Some corn buyers want a specific moisture content. Some soybean buyers want a specific seed variety.

In the 2001 update to the Minnesota Port Access Study it was estimated that the percentage of non-GMO corn and soybeans grown by Minnesota farmers was 64 percent for corn and 37 percent for soybeans. While only a portion of this non-GMO product was actually segregated at the local level and marketed as non-GMO by farmers and local suppliers, the amount is still significant.

The 2001 update to the port study also found that the total crops segregated and marketed as IP crops was estimated at 9.6 percent of Minnesota’s total crop production – soybeans at 4.6 percent, corn at 1.4 percent, wheat at 97 percent, sunflower seeds at 69.5 percent, dry edible beans at 95 percent, and barley at 50 percent.

Future IP Crops

The market demand for IP crops is expected to grow significantly over the next decade. A conservative estimate is that 25 percent of total crop production in Minnesota will be grown, segregated, and marketed as IP crops.

Traditional and current Minnesota IP type crops such as specific types of wheat, waxy corn, clear hilum soybeans, organic and non-GMO crops, and high-oil corn will continue to be in demand and produced by Minnesota farmers in the future. However, many new and unique IP crops are beginning to come on line and many more are planned for the near future.

Consumer and governmental demand for non-GMO products and for the labeling of food and feed products containing GMO product will be a major driver of the total demand for IP soybeans and corn. However, the future demand for non-GMO soybeans and corn has many uncertainties.  For example, the supplies of non-GMO product in the U.S., Brazil and other countries will decline relative to the supply of GMO product, hence, driving up the price of non-GMO product.  But, will the price increase to the point where consumers, governments, food processors, and livestock producers will lower their demand for products produced from non-GMO soybeans and corn?  Or, will they be willing to pay for the higher cost of growing and handling IP crops? Or, will these groups adjust the tolerances for non-GMO product to reflect a low-level mix of GMO and non-GMO product sufficient to allow the major grain merchandisers to blend commodity product in the commodity flow in order to meet requirements?

The demand for healthy foods will also be a major future driver of the demand for IP crops. This driver will stimulate continued demand for organic, chemical-free, and other types of crops produced for food and feed that is directed at the health-conscious consumer. IP “farmaceutical” crops – traditional crops that have been altered to deliver benefits (e.g., a potato with additional vitamins and medical traits) – are being developed for future use.

Nutraceutical crops are beginning to come online.

GMO crops with highly stacked traits (e.g., nutritionally dense corn) will become more available from the seed companies, more demanded by livestock producers, and more widely grown and marketed in the coming years. Because of the high value of these products, Minnesota farmers will grow, segregate, and market these crops as identity preserved.

Highly unique GMO product is also being developed by seed companies for specific pharmaceutical, nutritional, and other specialized uses. Many of these high-value products will be tightly controlled by the seed companies that develop them. These IP crops will only be grown by selected Minnesota growers.

While the highly unique GMO crops are coming on line, it will become more common for Minnesota growers and local suppliers to segregate and market existing commodity crops by specific traits. Instead of always blending product with various traits to obtain a standard grade product, marketers will begin to develop a demand among processors and other customers for commodity-like product that has specific traits that have added value to their customers. Thus, products that were previously handled and marketed as commodity product will become IP crops. A prime example of this type of crop is the Norsoy™ soybean that is beginning to be marketed to poultry producers.

The future trends and opportunities for Minnesota IP crops will be fueled primarily by feeders, processors, and manufacturers as a result of either consumer demand, governmental regulation, or the increased efficiencies in operations that can be achieved through the use of IP crops sourced from Minnesota.

In order to take full advantage of the growing opportunity to supply IP crops, Minnesota growers and local suppliers will need to continue to develop the infrastructure required to successfully and cost-effectively market, handle, ship, and certify the IP crops required by increasing numbers of buyers.

Barriers in Marketing of Minnesota IP Crops

There are numerous barriers that Minnesota farmers and local suppliers must address in order to successfully grow, segregate, and market Minnesota-grown IP crops to domestic and foreign customers.

However, these barriers can be overcome provided that they are identified and addressed by a combination of resources supplied by Minnesota farmers, local suppliers, commodity organizations, governmental agencies, and private entities as proposed in the IP crop infrastructure model outlined in the Minnesota Port Access Study.

Some of the barriers to be addressed in order for Minnesota farmers and local suppliers to successfully market IP crops include the following:

• Restrictive or demanding governmental labeling, tolerance, or other regulations.
• High tariffs, quotas, or other non-tariff barriers.
• Customer or governmental traceability requirements.
• Customer or governmental certification requirements.
• Competition from local IP crop suppliers and large grain companies.
• Competition from suppliers highly subsidized by their governments.
• Deep distribution channels with end customers inexperienced in buying direct.
• Customers unaware of a product’s added value and increased efficiencies.
• Selling prices insufficient to cover the cost of production, handling, and marketing.
• Supplies insufficient to meet the customer’s quantity requirements.
• Finding facilities available to cost-effectively handle the product.
• Obtaining shipping services that are available, appropriate, cost-effective, and timely.
• Locating effective and cost-effective direct marketing resources.
• Providing educational and technical assistance services sufficient to shorten the learning curve and assist in managing risk.

C. Country Markets to be Targeted

The next tasks undertaken in the development of this study was to select four primary target country markets for use in this study and to identify a set of secondary target country markets that might be used in follow-up studies.

Market Selection Process

The process for selecting the target country markets included:

• Developing market indicators that would be representative of the potential in individual country markets for Minnesota IP crops.
• Collecting data on the market indicators from a large array of country markets.
• Applying weights to each of the market indicators and, based on the total weight of each country market, identifying a short list of prioritized potential target country markets based on the applied weights.
• Evaluating each of the countries on the prioritized short list of potential target country markets using the market indicator information and applying informal judgments and other relevant knowledge relating to the potential for Minnesota IP markets.
• Selecting the primary target country markets into which Minnesota IP products will be promoted, and select a set of secondary target country markets.

The market indicators were used in two market screens.

The first country market screen used imports of soybeans, corn, and wheat from the United States to identify the top-20 importers of the base crops of this study.

The second country market screen utilized the following country market indicators:

• Imports of U.S. soybeans.
• Imports of U.S. corn: #1, #2, #3, and other grades.
• Imports of U.S. wheat: all wheat and durum wheat.
• Animal production: poultry, pork.
• Egg production.
• Per capita GDP.

The Primary Target Country Markets

The top-20 country markets in the second screen, excluding the United States, are listed in Table 3, “Market Screen – Target Country Markets for Minnesota IP Crops”.

After reviewing the weighted ranking of the potential target country markets and applying the informal judgments and other relevant knowledge about the individual country markets, the Department selected the following primary target country markets:

• China
• Japan
• Mexico
• United States

The rationale for selection of the primary target country markets was based on the following major factors: U.S. imports of soybeans, corn, and wheat; production of poultry, pork, and eggs in the country markets; per capita income in the country markets; the overall expected future significance of the market for commodity and IP crop consumption and U.S. exports; and potential future changes in the country markets. Other factors and comments about the primary target country markets included the following:

• While China may be least ready to purchase IP crops, it has the potential to be a significant IP crop market in the future. Establishing relationships now and beginning to develop a preference for Minnesota product is essential.

• Japan is currently Minnesota’s largest IP crop export market, and has been willing to pay the added cost of growing and handing IP crops. The majority of containerized export shipments of Minnesota IP crops are shipped to Japan.

• Mexico is upgrading and integrating its agriculture sector. Recent experience indicates a high interest in some of Minnesota’s IP crops and in purchasing more directly from Minnesota farmers and local suppliers.

• The U.S. offers a large domestic market for Minnesota IP crops that needs to be further developed.

The Secondary Target Country Markets

The secondary target country markets selected by the Department were:

• Taiwan
• South Korea

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