Claudio Soregaroli, Stefano Boccaletti, Alessandro Varacca 14 November 2012

Claudio Soregaroli, Stefano Boccaletti, Alessandro Varacca14 November 2012

WP5: Coexistence implications within the EU and international supply chain

Stakeholder dialogue workshop

Claudio Soregaroli November 2012

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WP5: Who is involved

UNICATT – UNIVERSITA’ CATTOLICA DEL SACRO CUORE

IPS - INSTITUTO POLITECNICO DE SANTAREM

TUM - TECHNISCHE UNIVERSITAET MUENCHEN EVD - EIDGENOESSISCHES

VOLKSWIRTSCHAFTSDEPARTEMENT

JRC -JOINT RESEARCH CENTRE


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WP5: Motivation Coexistence has implications

downstream within the national and international supply chain that are pivotal in determining scenarios for the EU agricultural, food and feed industry

Consumer’s preferences (demand) are the driving force. Firms need to comply with market requirements (positive or negative labelling – public or private mandatory/voluntary standards)


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WP5: Economic problem International supply chain and EU supply

chain They are interdependent and face the

economic risk of adventitious presence (AP) of GMOs

The economic risk is influenced by: Endogenous factors

Actions taken by firms to control risk of AP Exogenous factors

Asynchronous approval, threshold levels, enforced liability, imports from non-EU countries…


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WP5: Purpose To evaluate implications of coexistence

and segregation along the supply chain under an industrial organization and institutional perspective.

Taking into account the structure of the chains and exogenous factors (approvals, thresholds, liability…)


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WP5: StructureStructure of the supply chain for maize and soybean

Governance

Economic risk of AP- Asynchronous approval- Liability- Traceability - Thresholds- Imports

Scenarios

Case studies- Maize (Portugal)- Milk(Switzerland andGermany) WP2

Implications for the EU industry

WP4


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WP5: Description of work (1) Description of the international (soybean and

maize) and EU supply chains Objective is to identify:

1. the structure of the chain, with a clear picture of the economic agents involved and their linkages;

2. Identify the relevant governance aspects with particular focus on segregation and “GM-free” labelled foods

3. contractual arrangements, standards, quality management procedures, market failures, transaction costs…

involvement of stakeholders, data availability from secondary sources!


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WP5: Description of work (2) Factors influencing the economic risk of

adventitious presence (differentiated by crop, trait, and supply chain)

Subtasks: 1. Legal issues, their costs and possibilities for

reducing them (TUM)1. Three levels: farm, supply chain and WTO

2. Up-date of the JRC-IPTS report on GM crops in the pipeline (JRC-IPTS)

3. Overview of the technical traceability requirements and their relevance to firms (JRC-IHCP)


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WP5: Description of work (3) Case studies

1. Description and analysis of the maize bread supply chain in the context of maize coexistence in Portugal (IPS)

2. Description of the market for conventional and “GM-free” labelled milk in Switzerland and Germany (EVD)

Detailed description of the structure and focus on costs


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WP5: Description of work (4)

The final goal is to

evaluate implications of coexistence and segregation along the supply chain

provide scenarios and implications for the EU feed and food industry


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WP5: First year of work Countries covered

EU: Germany, Italy, Portugal, Switzerland Non-EU: Brazil, Argentina (USA, Ukraine...)

Objective: description of supply chains Method:

Use of secondary data sources (statistics) Literature review (supply chains: maize and

soybean, GM and non-GM) Qualitative unstructured survey on key agents at

different levels of the supply chain


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Survey on key agents of supply chain

Step 1: Literature review

Step 2: Questionnaires setting up Building on available literature One common framework for all countries

Step 3: Questionnaires drafts tested with industry experts

Step 4: Interview with representative stakeholders


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Questionnaires Type: open questions Structure:

One general structure adapted to the type of respondent

Questions cover the supply chain structure, the market of commodities and processed products, supply chain deals and pricing mechanisms, GM and non-GM products and their segregation, certifiers and certifications, liability long the supply chain

Selection of respondents: Relevant players, associations, snowball

selection


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Questionnaires for Italy (1) EU supply chain: main actors interviewed

Multinational trading companies Domestic oilseeds crushers Compound feed producers Livestock breeders Retailers Certification bodies


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Questionnaires for Italy (2) Other actors interviewed:

One Brazilian oilseeds crusher focused on non-GM soybean processing

One port shipping agent One market broker One crereal food processor One representative of a national association

of processors


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Italy: Soybean meal (average situation)

Source: Own elaborations based on: ISTAT (2012), Assalzoo (2010), and expert interviews

000 tons% over available

soybean meal

Production from domestic seeds 350 9.3

Production from imported seeds 950 25.3Imported as GM 2280 60.8Imported as non-GM 170 4.5Available soybean meal 3750Exported 190 5.1Apparent consumption 3560


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Italy: Maize (average situation)


000 tons

% over available

maizeGrains production 9900 81.5Grains import 2250 18.5Available maize 12150Grains export 770 6.3Apparent consumption 11380


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Italy: Maize flour (average situation)


000 tons

% over available

flourDomestic flour production 9392 82.8Flour import from EU 1583 14.0Flour import non-EU 368 3.2Available flour 11343Flour export 80 0.7Apparent consumption 11263- feed 8740- other uses 2522


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Italy: Structure of the supply chainSoybean / soybean meal Maize

Domestic Domestic

Retailers/consumers


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Italy: Traders and crushers International traders

5 Multinational trading companies: Bunge, Cargill, Dreyfus, Nidera, Noble.

Only Nidera supplies non-GM soybean meal Non EU non-GM soybean meal comes from Brazil Two main ports: Mestre (Venice) and Ravenna

Domestic crushers 5 domestic crushers

2 only process domestic soybean - non-GM 1 has a dedicated plant to domestic soybean 1 (Bunge) only crushes GM soybean 1 crushes non-GM and GM soybean


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Italy: Compound feed industry Almost 260 industries, but 3 are the main players

in terms of volumes, 2 integrated downstream (Veronesi and Amadori) 1 multinational integrated upstream (Cargill)

Inputs: they source soybean meal from domestic crushers and

international traders they source maize from domestic farmers or elevators

(often cooperatives) Outputs:

local markets matter market niches can be exploited


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Italy: Supply chain deals Personal relationships are very important Middle-men operate as an “outsourcing” of

the purchasing department (especially for SMEs and large stock breeders)

Trust on supplier and its flexibility are seen as the most important attributes... after price!

There is no evidence of long-term contracts, orders are processed for each supply and based on market price

Price shocks are largely transmitted downstream


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Italy: market for non-GM soybean World supply for non-GM soybean product

decreasing: non-GM price premiums on the rise (higher costs of IP and

less economies of scale)

Source: International trading companies, Industry representatives, interview by UNICATT staff, 2012

HP non-GM premium for soybean meal over the price of the regular pellet 46 protein in the market of Paranagua


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Italy: market for non-GM products It is a small market, its size is becoming smaller in latest years

(niche), and it is concentrating on fewer dealers Only one international trader involved and domestic crushers

rely on domestic production paying soybeans with no premium Two kind of structures emerge for compound feed processors:

large firms with dedicated plants and small specialized firms other SMEs outsource production of non-GM feed

Dedicated plants of compound feed processors usually work at full capacity, however they don't sell all of the product as non-GM

Most of the market is driven by Coop, the largest Italian retailer. No mark-up at the consumer level.


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Retailer case study: COOP Italia (1) Non-GM Private labels:

Animal products: poulty meat, beef, pork, milk, eggs, farm fish, some cold cuts and cheeses.

Processed meat/eggs so far excluded 0.9% treshold (fed without GM feedstuff) Negative labeling Certified

Grocery products 0.1% treshold No negative labeling: corporate policy Certified


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Retailer case study: COOP Italia (2) Non-GM Animal PL Products:

Technical specifications imply vertical coordination Suppliers qualification guidelines: suppliers shall

deal with other qualified subcontractors only Certification:

BVQI, CSQA Audits on:

RetailerSlaughterhousesFeed Producers

Retailer price: in line with that of regular animal products (no premium charged at the consumer level)... This implies....


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Final remarks Only soybean supply matters (coexistence in

producing countries and segregation practices)

No price premium at the consumer level for non-GM products implies lower margins

Upstream the supply chain there is little incentive to produce for non-GM feed

What would happen if coexistence is allowed in the country? (maize, soybean...)

Except for organic production, will any liability issue be relevant?


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Thanks for your attention!

Documents

Claudio Soregaroli, Stefano Boccaletti, Alessandro Varacca 14 November 2012