Traceability as a Component in Bio-Security Systems

Mechel S. PaggiDirector, Center for Agricultural Business

California State University, Fresno

Cal-Med Sonoma WorkshopMarket Organization, Resources and Finance in Mediterranean Crops

October 24 – 26, 2007

What do I Mean ByBiosecurity Systems

Networks and Concepts

Policy Environment : Public/Private StandardsTraceability Component

How does compliance with industry standards and government regulations affect industry operations,

costs & returns?

Where Do We Need More Work?

Networks and Concepts

Biosecurity Systems are Designed to AddressConcerns About

Food Safety Food Security

Protection AgainstUnintentional Events Protection Against Intentional

EventsInspection, Monitoring, Control

TraceabilitySystems

Field to the Fork

Processing, Package, Cook

Storage and Aggregation

Transport, Delivery

Grow Crops, AnimalsMonitor Quality, Safety

Oversee Markets Handle Waste, Environment

Manage, Train Labor

Adopt TechnologyTransit and Analyze Data and Information

Science, Research& Development

Finance & Credit

Food Distribution Network

* Adapted from Jean KinseyUniversity of Minnesota

ConsumptionConsumption

Networks Give Rise to Safety and Security Concerns

What happens to the merchandise during transportation by truck, container, rail, or boat?

During transportation a number of events can create both security and health hazards:

1. Sabotage / Terrorism2. Change in temperature

How is the product produced? What chemicals are used in the process? How is the water? Etc.

At Any Given Time60% of the World’s Population

Is Awake

And Some of Them Are Up to No Good

Mantra of Homeland Security

Foodborne Illness Raises Consumer Awareness& Creates Business Concerns

Some Cases that Got Our Attention

• 1996: Escherichia coli O157:H7 California lettuce

•1996: Cyclospora parasite in Guatemalan raspberries(originally reported as originating in California strawberries by

the Texas Department of Health) The California Strawberry Commission estimated that this false alarm led to $16 million in lost revenue to

growers in the central coast of California

• 1997: Hepatitis A in Mexican Strawberries

• 2000, 2001, 2002: Salmonella, Mexican cantaloupes

•2003: Hepatitis A in Mexican Green Onions

• More Recently Leafy Green Ecoli from California Spinach

Additional Examples with International Dimension

Market and Policy Environment

Public/Private Standards

New Products, In New PackagesIn New Places: More Dependence on Food Safety

And Security Provided by Others

***

* Ken McCorkle

3843 46 51

0102030405060

% o

f Foo

d P

urch

ases

1976 1986 1996 2006

Expenditures on Food Away From Home

%% % %?

Source: USDA/ERS

Sales Net Grocery Net Grocery Sales Company ($ billion) Sales ($ billion) Rank

Concentration in GLOBAL FOOD RETAILERS

Wal-Mart U.S. 244.52 83.14 1

Carrefour/Promodès France 64.77 45.34 3Ahold Holland 59.27 49.78 2

Kroger U.S. 51.76 43.48 4Metro Germany/Switz. 48.56 24.28 11

Target U.S. 43.92 7.47 27Tesco U.K. 39.52 28.46 8

Costco U.S. 37.99 23.18 12Source: R.Cook, 2002

According to the Centers for Disease Control and Prevention, an estimated 76 million cases of food-borne disease occur each year in the US, resulting in 325,000 hospitalizations and 5,000 deaths annually.

WHAT IS CIES - THE FOOD BUSINESS FORUM?

CIES - The Food Business Forum is the only independent global food business network.

It serves the CEOs and senior management of nearly 400 members, in over 150 countries, with retailers being the largest single group. Providing a platform for knowledge-exchange, thought-leadership and networking, CIES has been growing with the food business for over 50 years. Its strength lies in the active commitment of its member companies and its privileged access to key industry players which allows the organization to facilitate the development of common positions and tools on key strategic and practical issues affecting the food business.

1953 – CIES was founded on 24th June 1953 at a congress held by international retail association AIDA in Belgium. The objective was to create a body to represent food retail chains, which at that time had no association of their own, unlike cooperatives and voluntary groups. The new association was named Comité International d’Entreprises à Succursales (CIES – International Committee of Food Retail Chains) and was headed by Henry Toulouse, founder of AIDA and Chairman of the regional food store chain Docks de France.

CIES retailer members alone generate over $2,000 billion, employ 4.5 million people and operate close to 600,000 stores representing a total sales area of 160 million square meters.

On the 20th June 2007 – Roger Corbett, Chairman of CIES - The Food Business Forum announced to over 1100 senior executives at the CIES Annual World Food Business Summit in Shanghai, PR. China, that retailers have reached a landmark agreement on food safety schemes.

Under the umbrella of the Global Food Safety Initiative (GFSI), 7 major retailers have come to a common acceptance of the four GFSI benchmarked food safety schemes:

• BRC - British Retail Consortium Global Food Standard • IFS – International Food Standard • SQF 2000 – Safe Quality Food Scheme • Dutch HACCP Scheme (Option B)

Each scheme has now aligned itself with common criteria defined by food safety experts from the food business, with the objective of making food manufacture as safe as possible. As a result, this will also drive cost efficiency in the supply chain and reduce the duplication of audits.

The GFSI vision of ‘once certified, accepted everywhere’ has now become a reality. Carrefour, Tesco, Metro, Migros, Ahold, Wal-Mart and Delhaize have agreed to reduce duplication in the supply chain through the common acceptance of any of the four GFSI benchmarked schemes.

September, 07 : Eurepgap goes globalIn 10 years the voluntary organization establishing

Good Agricultural Practices mutually agreed upon by multipleRetailers in Europe and their suppliers spread to identical critera adoptionIn South and Central America, Africa, Australia, Japan and Thialand in the

Formation of schemes such as ChileGAP, ChinaGAP, KenyaGAP, MexicoGAPJGAP (Japan) and most recently ThaiGAP.

Currently Global GAP covers 80,000 producers in 80 countries

Dr. Richard Baines

Field systems to provide data for trace back capabilities

Modern satellite systems allow transport companies to see where trucks, containers and boats are, what is their

speed, the inside temperature and changes in temperature etc.

Based on set parameters instant alerts can be given on a variety of events, such as (but not limited to):

• truck unscheduled stops / starts • tethering / un - tethering trailer

• unacceptable change in temperature• trailer / container opened

• foreign gasses in trailer / container

Modern Trace/Track Systems

Operation for 50,000 boxes of melons per day.

At each control point in the farm,the pack house, the trucks, the containers, the repackaging centre,the Retailer DC, lot numbers andbar codes are created linking all Traceability information to the very beginning

SUPPLIERCentral

TraceabilityDatabase

Pack House 1

Pack House 2

RETAILREPACKING

RETAIL DISTRIBUTION

CENTER

Tenerife Port

CadizPort

Store 1

Store 950

Store 267

Tracing Fruit & Vegetablesfrom farms to supermarkets

RETAILERCentral

TraceabilityDatabase

Farm 1

Farm 376

Farm 2763

Farm 4499

TraceAbility PartnersSupply Chain Integrators

Goods Flow

Information FlowManual label

XML

XML

XML

XML

XML

XML

XML

XML

Tracing Processed FoodPasta Example

Salt receiving

Pepper receiving

Flour receiving

Eggs receiving

Salt plantCuracao

PepperIndia

Flour MillBelgium

Egg FarmBelgium

Importer/Retailer DC

Store 78Store 1

Store 190 Store n

Physical flow

Traceability flow

***

*

*

** * *

Transfer to

Process Hall

*

*

*

*

*

*

*

*

*

* External control pointvia XML

* Internal control pointplant

TraceAbility PartnersSupply Chain Integrators

Each * is a control point and generates a traceabilitylot number tracing back to the beginning

PlantTraceability

Database

PlantAdmin

Database

Vegetable Information Traceability Components

Source: John Deere Food Origins

Salinas Valley Lettuce Harvest

Salinas Valley Lettuce Harvest

Salinas Valley Lettuce HarvestTraceability in Practice

Chinese Carrot Harvest

But Not All Systems are GlobalGAP

The Quality Line : Real Quality and Value Image

Taste:Propose good tasting productsabove market standard

Food safety:Contribute to the human

health and food safetyfor the consumer by applying the precautionand prevention principle.No GMOControl the food chain:

from the field to theplate (guide line, control plan and traceability)

Quality/Price:Guarantee the best andstable quality products withan accessible priceRetribute producers accordingto their work

Authenticity:Preserve and promote theagricultural heritageLook for the best originEncourage andSupportRegions and Countries where Carrefour ispresented

Permanence:Preserve thesocial, economical andecologicalenvironment

QL project in Carrefour China

FujiVegBJ

VegSH

Pork DL Beef SH

Litchi99.06

Pomelo02.09

Mandarin02.12

Salmon03.03

Pork03.06（SH）

Pork04.11（BJ）

Pork05.05

(South )Signed Product

7 product

Orange Pork DL Beef SHProduct in trial

( launching in store )

6 product

Project in development

8 product

VegGZ

VegShZ

Shrimp PorkCD

PorkKM

PorkShYang

BeefBJ

KIWI

How does compliance with industry standards and government regulations affect industry operations,

costs & returns?

While certification to GlobalGAP will result in additional costs to growers, there will be numerous benefits. Long-term benefits include more motivated farm workers due to improved facilities, training and better working conditions with a subsequent increase in living standards. This would obviously also result in better productivity and outputs to the ultimate benefit for the grower.

• For Texas citrus operation Documentation and auditing preparation for Primus Lab/GAP (Good Agricultural Practices) and EUROGAP, aswell as fruit residue and irrigation water testing, cost the grower $2.11 per acre, out of $963 cultural costs. (5400 acres of citrus)

• For California lettuce operation: $1.50 per acre, 3200 acres, $1090 cultural costs.

•

Cost of Compliance

Table 9.3 Activities/Costs Attributed to Regulatory Compliance - Arizona Lettuce

Food SafetyHours Rate Fee or Additional CostsTotal CostCost / Acre

Primus Lab Cossts - Ranch Inspection $3,000 3,000 $0.94 - Harvest Crew Inspections $125/crew $625 $0.19Time in documentation/audit preperati35 hrs./year 34/hr. $1,190 $0.37

$1.50

Cost of Compliance

* Food security has become a greater concern over the past five years, and the grower has implemented an employee identification program to help ensure that no one is in the fields or packing houses who isn’t supposed to be there. The employees wear photo IDs, and the farmsupervisors have copies of the picture IDs of the employees. The grower spent $4,000 on the initial system, which comes to $2.56 per acre.

• Arizona Lettuce operation, 1,563 acres, $1748 per acre cultural costs

Table 9.3 Activities/Costs Attributed to Regulatory Compliance - Arizona Lettuce

Food SafetyHours Rate Fee or Additional Costs Total Cos Cost / Acre

Documentation/preperation for aud10 hrs. week $50.00 h $50 per year $14.,050 $8.90Employee Food Safety Training 10 hrs. month $50.00 h $200 per year $3,700 $2.36Maintaining Food Safety Program 30 hrs. month $50.00 hr. $10,050 $6.72

$17.98

** Hamilton CISSC Study, 2006.

In Morocco, the EUREPGAP standard is being widely implemented at the farm level on medium -sized and large-sized farms. the estimated costs to comply with

EUREPGAP for a medium-sized tomato farm managing 10 ha with a workforce of 60 people were altogether US$71,000; that is about 8% of the production costs per

ha and equivalently 3% of the FOB value of the farm’s exports.

Affirmed by a number of interviewed farmers and packing house managers, compliance with multiple standards, namely EUREPGAP and BRC, is the most

serious problem, particularly for smaller-scale farmers, leading to higher compliance costs because they cannot economize on scale .

Frohberg, Grote and Winter Paper at the 2006 IAAE

2005

Anecdotal Evidence

• Monterrey Producer: about 20 cents a carton, 5%

• Environmental costs: removal of buffer strips from creek area to make less inviting for wildlife habitat, previously established as wildlife habitat enhancement

Costs

Benefits

• Watermelon producer Arkansas, Texas & Mexico

Not providing certification of compliance with GlobalGAPlimited access to super/hyper markets. Providing certificationpayment of accounts receivable in 10 days rather than 30 - 60on $1 million + sales.

Where Do We Need More Work?

What Is Wrong With This Picture?

More Information on Fruits and Vegetables ?

Research Agenda

• Case Studies of Existing Systems• Cost vs. Attribute Values• Mandatory vs. Voluntary• Government vs. Private• Global Harmonization vs. Barriers to Trade