Significant Takeaways

MARCH 23, 2012: Following the last meeting of the day with Hungarian officials and ag/biofuels leaders, the mission team took some time to debrief. Some significant takeaways noted by the team:

 - The entire week was a serious reality check in terms of the situation in the EU. The EU represents at 500 million person market. You don't write them off. But under the current circumstances, they are likely not a market of significant growth for U.S. corn and corn products.

In Hamburg, team listens to a presentation on
ISCC certification for
the biofuels industry in the EU.

- We cannot be arrogant about this market. It's easy to dismiss the EU as irrational, but that's dangerous. We must learn to adapt and change in some ways.

- The perception among EU consumers related to GMOs and biotechnology is visceral and emotional. Science and logic have little influence on swaying their opinion. Moreover, politicians are using these issues to gain votes and, to some degree, divert attention from other issues. Even though we have science on our side, our story in the EU (and in the U.S.) also needs to carry with it an emotional appeal.

 - We need to keep a close eye on the regulatory developments in the EU related to animal care, sustainability, etc. since the regulatory environment in the EU tends to work its way across the pond to the U.S. "Green" is an overriding concern in the EU and we need to take heed.

- There are niche markets available to American producers. For example, they are reacquiring their taste for marbled, corn-fed U.S. beef (albeit hormone-free, GMO free, etc.) And as the EU loses its livestock production (due to regulatory and economic issues), new opportunities for protein may emerge.

- U.S. producers (grain and livestock) need to be more cognizant of consumer opinion and perception. We have lost our consumer focus.

A wind farm in rural Hungary.

 - Traceability, especially in the meat industry, is an expectation—and must be implemented if the U.S. is to continue building market share in the EU.

- We talked to a lot of people who seemed resigned to the regulatory environment, and not many who seemed to think it would work or was particularly enforceable. That would likely not be the case in the U.S. If regulations of this nature are in place in America, they will be enforced.

 - We're not the only people selling corn. Global competition for corn is growing. We heard about the Ukraine all week. They will have an impact on corn markets in this region.

 - Something of significance will have to occur in the EU in order for the current trajectory to change—a food shortage for example. If that happens, their priorities—and their regulations—may change.

- The EU political system is convoluted and cumbersome, what with 27 member nations. It takes a very long time for decisions to be made—and once they are, they are very unlikely to be undone.

Representatives of Hungary's agriculture and
biofuels markets (along the far side of the table)
listen as Kelly Brunkhorst of Nebraska
talks about the U.S. corn and ethanol industries.

- Many groups have worked to collaborate with the NGOs in the EU in the development of regulations in order to be part of the conversation. But once you make a coalition with these groups, when do they stop? How far do they go? How does this increase their credibility and impact? Do initiatives such as ISCC give these organizations a single point of focus at which they can concentrate resources and effort?

- Transparency is critical. Cary Sifferath with the U.S. Grains Council noted that the recent "Corn Quality Report" published by USGC marks the first time we've had hard facts to communicate and substantiate the U.S. corn supply. We still have a "hangover" from the 09/10 crop—but the report is helping convince global customers about the reliability and quality of U.S. corn.

- The work of the U.S. Grains Council and the U.S. Meat Export Federation is helping keep U.S. agriculture in touch with market development, market opportunities and potential threats.

The mission team returned to the U.S. on March 26.

A Roundtable with Sharp Corners

Kelly Brunkhorst of the Nebraska Corn Board
makes a point during a presentation to
Hungarian ag and biofuels officials.

FRIDAY, MARCH 23, 2012: Our long day ends with a roundtable discussion with representatives of Hungary's agriculture and biofuels industry. Kelly Brunkhorst, staff member with the Nebraska Corn Board, began the meeting with a presentation on the corn and ethanol industries in the United States with an emphasis on Iowa, Illinois and Nebraska. His presentation was augmented with information from Shannon Textor of Iowa and Phil Thornton of Illinois.

The discussion was surprisingly frank and open—and at times heated—as participants on both sides discussed regulations, biofuels, livestock production, animal nutrition and the new CAP program in the EU (their version of the farm bill). Some highlights:

 - The EU has set a deadline of 2020 for its member states to achieve a 10 percent minimum of renewable fuels in their transportation fuel supply. However, it was felt among the group that many, if not all, states would not be able to comply by this time frame.

Vanda Zhola-Pollak, corporate affairs director
for Hungrana Ltd, an ethanol production company,
takes notes during the meeting.

- E85 is generally available in Hungary, with 400 stations offering the fuel—most of them are mom and pops, not the majors. But similarly to the U.S., the oil industry is protesting the increased availability of higher blends.

- Hungary offers both E5 and E85. About 75% of the stations carry an E5 blend. (During our travels, we saw several stations offering E85.)

 - There are two ethanol plants in Hungary. One produces 135K metric tons/year. The other produces 160K. Biodiesel is also a player in the Hungarian fuel supply.

- The livestock industry in Hungary is at a crossroads. Poultry is seeing some growth, especially duck, turkey, waterfowl and broilers. However, swine production is on the decline and may virtually disappear. Dairy is small and is not meeting its quota of production. Overall, the outlook for livestock production in Hungary is not positive.

 - There was some considerable discussion between our team and a DuPont animal nutritionist regarding DDGS. He said mycotoxins were a considerable concern for livestock producers—though his contention that DDGS resulted in five times (or more) the level of mycotoxins in feed was disputed by our group. He also mentioned that the inconsistency of color in DDGS was a concern to producers, but our group noted that DDGS were being mixed with different feed products in Hungary than in the U.S. Essentially, he said he would not recommend the use of distillers grains in livestock diets to his clients—especially in pork diets since is results in "belly softness."

A team photo from the Ferenc Miko farm. The photo includes
Ference Miko (center, front row),
his wife (2nd from right, front row) and the
Dekalb seed representative (first left, front row)

- The new CAP (farm bill) program in the EU is focusing on the "greening" of agricultural production. They are moving toward a simplified support system—and support is being reapportioned to reward "green" initiatives. Additionally, a social aspect of agriculture is being proposed as a factor in support in terms of the employment created by ag enterprises. A cap on CAP is being discussed at a maximum of 250,000 euros per enterprise.

- The seed representative from Hungary was surprised to learn that efficiency increase in ethanol production in the U.S. were not based on ethanol-specific corn hybrids, but on technology and improvements in the ethanol production process itself.

A Bit of a Head Scratcher...

Sunflower seed is loaded on a barge, while another
barge sails up river on the Danube.

FRIDAY, MARCH 23, 2012: We start the day traveling to a port down the Danube River—the "Mississippi River of Europe." This large storage facility has 84 buildings with a capacity of 256,000 bushels each. There are also drying and cleaning facilities on site. Even though the port is right on the Danube, only about 20% of the grain is shipped by barge. The remainder moves by truck or rail.

This facility was originally built to handle "interventional" grain—stocks of corn, sunflowers and rapeseed that would be parceled our (or stored) in response to market conditions as a way to control prices—similar to the warehouse reserve program in the U.S. The Hungarian program no longer exists, so the facility is now privately managed.

An employee watches as sunflower seed
is dumped at the barge facility.

The members of our group were struck by the inefficiency of moving grain by truck from the warehouses to the barge loading facility. The manager providing the tour said they intended to eventually build a conveying system that would move the grain from storage to loading. While we were on site, they were loading a barge with sunflower seed.

We hopped on the bus and headed to the farm owned and managed by Ferenc Miko, the farmer we learned of yesterday at the Dekalb/Monsanto facility. Ferenc won his nation's corn yield contest last year with 302 bushels per acre on non-irrigated land (and with no GMO hybrids). He made it a point to let us all know that only seven winners in the NCGA corn yield contest beat his 302-bushel achievement.

Ferenc Miko discusses his
impressive farm operation.

A former top-class chef, Ferenc got into farming in 1996 with 60 hectares and has built an impressive operation in a very short time—about 8,000 hectares. He grows corn, wheat, barley and sunflowers. Ferenc started building grain storage in 2000 and has added capacity annually. He has an on-farm quality grading facility. Ferenc claims to have a 259 bushel/acre average yield on corn in 2010—and 270 bu/acre in 2011—with a planting population of 30,000 per acre.

He made sure that every farmer in our group shared his average yields—clearly with the intent to further underscore the fact that his record yield was better than that of some America's best farmers.

He has quite a gig going here. He uses subcontractors to farm the land—and he essentially serves as a kind of "cooperative" for other farmers in the area. He buys inputs in bulk and resells them at a competitive price to his neighbors. He sells and markets grain—and even gets Cargill to pay him to store grain! (Corn prices are based on both CBOT and Budapest.)

Members of the team tour Ferenc
Miko's on-farm grain storage facility.

The facility was a bit overwhelming. Six combines. A fleet of huge grain carts. Tractors. Grain storage of enormous capacity. You name it. Ferenc had it. And he also had everyone in our group trying to figure out how someone could do this much in just 15 years. Apparently some government subsidies were involved, but mostly it appears that Ferenc has been able to capitalize on a seismic shift in Hungarian agriculture.

Deb Keller of Iowa inspects
sunflower seed in Ferenc Miko's
grain storage facility.

It's a long story, but essentially the old cooperative farms were returned to their original owners (or their heirs) in the 1990s as part of a "restitution" program. When that happened, many people who had no idea how to farm ended up being owners of farmland. Production fell—and a drought made the problem even worse. As a result, new "cooperatives" were formed that consolidated parcels of land under central management—and now Hungarian agriculture is on the rise again.

Our group pressed Ferenc on his cost of production, his fertility program and other issues, but he was reluctant to share details (as are most winners of national yield contests!) He believes that Hungarian farmers will become a force to reckon with—especially as non-GMO drought resistant hybrids and other management practices become available to him.

Ferenc and his wife were gracious hosts, providing us with a delicious lunch of pheasant soup and wild boar—made of game he hunted and shot himself. We left the farm scratching our heads a bit as to how the apparent achievements were possible—but also with the feeling that Ferenc was a smart operator and a bit of a visionary and "thought leader" in his part of the world.

Dekalb in Hungary

THURSDAY, MARCH 22, 2012: Midnight arrival at our hotel in Budapest, to discover they only had smoking rooms available for us. Hack! Hack! (Thankfully, we were able to change rooms for our remaining two nights here..)

Céline Calais, seed supply lead for
Monsanto Hungary,
interprets the information on the back of a
Dekalb seed bag for Julius Schaaf
and Bob Bowman, both of Iowa.

Left around 8:15 a.m. to head west on a 70-minute drive to tour the Monsanto seed plant in Nagyimand. Here they produce and distribute Dekalb corn and oilseed rape—and their market share has grown to the point where they expect to share the market lead with Pioneer in the 2012 season. They use a system of distributors and dealers to market their products, which include about 30 corn hybrids (all non-GMO, of course), mostly within the 90-100 day maturity.  Each bag of seed must be government certified.

Bags of seed corn in Hungary
are smaller than those in the U.S.

Corn is the Number One crop in Hungary, with 1.2 million hectares planted. Wheat is a close second, with sunflower and oilseed rape in third and fourth respectively. All of their seed product is non-GMO by law. But they are working with Monsanto US to use the fundamental genetics to create more drought tolerant hybrids.

Because of the regulatory environment, there are government inspectors on site at the plant every day. Each bag of seed must be individually government certified.  Inspectors also visit the seed corn fields to audit the production process from planting to detasseling to harvest.  Typically, government inspectors will visit a field four to five times during the season.

This seed production plant burns corn cobs for the power required to dry the corn and generally operate the plant.  And they still have cobs left over to sell or dispose of.  So essentially they are 100% self-sufficient in terms of thermal energy.

Members of the group listen as Andras Mészaros, general
manager (far left), gives a tour of the Monsanto/Dekalb
seed corn processing facility.

Hungary ranks fifth in EU corn production behind France, Romania, Germany and Italy. Less than one percent of Hungarian corn is irrigated. Hungary lies in roughly the same latitude and maturity zone as Minnesota.

About 51% of Hungarian corn is exported with Italy, Romania, Holland, Germany and Slovakia as the top five customers. The Danube is a critical transportation corridor to many of these markets, with rail and truck serving other market areas.

Members of our team talk among the stacks of seed corn
with the Dekalb director of marketing & sales.

Hungary has a 27% value added tax on all purchases by an end user/consumer, which dramatically increase the cost of fertilizer, seed and other inputs for farmers.

Get a farmer around new iron and he takes pictures!
Dean Taylor of Iowa snaps a photo of one of
the harvesters used by Dekalb in its
Hungarian seed corn operation.

Tomorrow we'll be visiting with a farmer who owns the record for corn production in Hungary—an impressive 302 bushels per acre on non-irrigated land. (Of course, the Dekalb sales manager likes to take some credit for the hybrids the farmer grew!) We'll also be traveling to a port facility on the Danube, which was characterized by one of the Toepfer officials as "the Mississippi River of Europe."

Regulations. And more regulations.

WEDNESDAY, MARCH 21, 2012: Our second meeting on Wednesday was with Andreas Feige, managing director of the International Sustainability Carbon Certification (ISCC) in the EU. Essentially, this system (or "scheme" as it is called in the EU) is a sustainability certification system. Proof of sustainability is required for biofuels to qualify for fulfillment of quotas or to be entitled for financial incentives.

Andreas Feige of ISCC discusses
the biofuels certification program
in the European Union.

Fiege's company MEO actually created the ISCC system. And then they were hired by the EU to manage and implement the system they created. (In the words of the SNL Church Lady: "How conveeenient!")

The ISCC received full recognition by the EU Commission in July 2011. Within one year, the number of users grew from 400 to 1200. ISCC covers all types of biomass and is used by in 52 countries, with the share of users outside the EU growing.

More than 70 registered companies are in the U.S. Certification basically comes down to three criteria: 1) A minimum savings of 35% in greenhouse gas emissions vs. fossil fuels; 2) No areas with high biodiversity adversely affected; and 3) no areas with high carbon stocks affected (wetlands, forests, etc.)

The big kicker for American corn producers is that indirect land use change (ILUC) imposes a huge penalty on corn-based ethanol, essentially making it virtually ineligible for certification by definition. Oddly, one can use corn residue without an emissions penalty because, in their definition, there is no land use change. Hmmm.

In the EU, everything is moving toward "decarbonization." So there are talks of creating ISCC programs for specific areas such as chemicals, bioplastics, feed, food and biodiversity. (Imagine having a phalanx of government inspectors counting insects and native flowers on your property!)

Fiege noted that an analysis of the effect of the ISCC effort on biofuels was due by the end of 2012, with possible changes made in 2013. But when pressed regarding whether some regulations may go away as a result, he essentially said "no"—and noted that more regulations may actually result from the analysis.

Frankly, this meeting left all of us a bit glazed over as we marveled at the amount of effort and resources devoted to creating regulations and the auditing functions required to implement and police them. Just how much GDP does that create, do you think?

We pick their brains. They pick ours.

WEDNESDAY, MARCH 21, 2012: Just a ten minute walk from our hotel on a gray day in Hamburg to the international headquarters of Alfred C. Toepfer International, where we met today with grain market experts and economists. Toepfer is a large grain trading company originally founded in 1919 in Hamburg. The company has 37 offices and 2100 employees worldwide, with 300 of those at the Hamburg headquarters. ADM became 80% owner of the company in 1983. The other 20% is owned by a French farmers cooperative, In Vivo.

Just so you know we're all still alive, here's a team photo
taken in the entry of Toepfer International.
We clean up pretty well, no?!

Toepfer deals in grain, oil seeds, oils, feedstuffs, biomass (agricultural and woody) and fertilizers. The company handled a record 45 million tons of product in 2011. Toepfer staff briefed our group on the EU's import demand needs for feed grains in 2012. We also discussed the EU's biotech policies and their effects on corn co-product imports from the U.S. 2011 was a record yield year for corn in the EU.

The Toepfer officials underscored the emerging power of Ukraine in global agricultural production. Roughly the size of Texas, Ukraine is the world's second largest exporter of grain and will only gain in importance and impact in the coming years. There is very little corn processing in Ukraine at this point–no HCFS, no ethanol. But that may change as well. This is tempered by the fact that the entire nation of Ukraine has the same GDP as the city of Hamburg. In spite of high winter kill rates, Ukraine is expected to have a large wheat crop (13-15 million tons). And many winterkill areas will likely be replanted into corn.

In the EU north and west, winter crops are well developed, thought there was some winter kill in Germany, France and Poland. Spain continues to be too dry, affecting wheat and barley crops. In the south and east, there was lower rapeseed planting due to fall drought, but grains have been less affected.

The EU intends to shut down all nuclear plants over the next eight years, and at this point, coal is the primary energy source. Biogas is growing like the ethanol industry in the U.S. Germany has 20% renewable energy, which like ethanol in the U.S., has brought wealth to rural areas of the nation. In fact, it has one of the lowest rates of energy consumption per GDP.  Toepfer buys and sells carbon emission certificates among its portfolio.

Phil Thornton of Illinois listens as
Ludwig Striewe of Toepfer shares his
insights on the impact of Ukraine on
world grain markets.

The GMO issue was discussed at length, and Toepfer does not see a breakthrough in GMO acceptance in the EU. But if such a breakthrough occurred, the impact on profit margins for ethanol producers could be dramatic as markets for DDG and corn into the EU would explode.

An interesting insight from Toepfer: Argentina is building up its ethanol industry. "If they are smart, they will create distillers grains and corn gluten feed that are GMO-free," one staffer noted. Clearly, the opportunity lies in the development of second generation biofuels under the current scenario.

While we were there to pick the brains of Toepfer top brass, they were just as interested to hear from the farmers in our group regarding planting intentions and how they aligned with estimates. Our group was relatively consistent in terms of potential corn acres planted. An interesting comment from one farmer in our group: High cash rents are going to continue to drive farmers to plant corn in order to make farming profitable.

"Iowa, Nebraska and Illinois are key regions in the world in terms of corn production," said Stefan Vogel, head of the Toepfer economics department. "You will always be competitive." 

"Tell what you do. Do what you tell."

MARCH 20, 2012: Today was "pork" day for the mission. An early departure from Amsterdam to a Dutch swine farm about 3 km from the German border. Farmer Jan van Schijndel was joined by a representative from VION, a Netherlands-based farmer-owned cooperative that is among one of the largest meat processors and distributors in the European Union. They are the European leader in fresh beef and second in pork.

A wide shot of the new pork production facility at
Jan van Schijndel's farm

On January 1, 2013, new regulations will go into effect prohibiting the use of sow gestation crates. When the UK passed similar legislation in 1999, pork production in that country fell by 50%. The effect on EU pork production with the pending legislation is uncertain, but at least 15 EU states say they will not be in full compliance by 2013. Some project a 10% drop in production, roughly equivalent to the percentage of pork the EU exports.

A closer look at one of the stalls in Jan's new facility.

However, others point out the increase in pig production due to genetics and management, which has increased the annual production to 28 from 25 pigs just a few years ago, with some achieving even higher production rates. An increase of 10% in the number of pigs born to the same number of sows would effectively maintain status quo.

The cost to convert barn space to meet the new regulations will cost a 100-sow unit some 150,000 Euros (nearly $200,000 US). It is expected that many farmers, especially those approaching retirement age, will simply close up shop since they cannot see a return on that investment in their remaining years. Adding further challenge, the cost of production in the EU is driven higher due to the ban on GMO feed sources, which in turn leads to higher feed prices.

The "Good Farming" star logo is proudly
displayed on Jan's new building.

Jan built a pork facility that conforms to the new animal space regulations. Sawdust floors allow the animals to root around as comes naturally to them. Normal hours of daylight are provided. And, as specified, each animal has at least one square meter of space available (compared to 0.8 previously).

His farm participates in the "Good Farming" program, essentially a certification program that allows his pork to carry a seal in the grocery store. While this does not necessarily bring a significant premium, he believes it is a difference maker and will increase in value over time.

Jan has also built a viewing area that overlooks the new facility, complete with posters and other information outlining his methods of handling animals and promoting the animal welfare programs he is instituting. He invites visitors to stop in and view his farm (even unannounced!)...and he has about 150 people per week stop by, from school groups to media to interested travelers. He is very open and transparent about what he's doing. "Tell what you do. And do what you tell" is his motto.

The development of animal welfare regulations has come from NGOs within the Netherlands and throughout the EU. And consumers have also become concerned about how their food animals are produced. But Jan believes that collaboration and cooperation are necessary in order for pork producers to be involved in the conversation about changes that govern their business. According to Jan, this is a changing consumer marketplace and pork producers must find ways to adapt and change in order to stay competitive. It's clear that he has embraced this change and is quite proud of what he is doing.

A 2.5-hour bus ride to Emstek, Germany where we visited a VION pork processing facility. Built in 1992, this facility has 650 employees and has the capacity to process 3.6 million pigs per year or 70,000 per week. Currently, they are processing 45,000 animals weekly but are working to get to full capacity (two shifts) in all departments of the plant. While this is VION's largest pig slaughter facility in Germany, there are several other competitors who do as much or more—up to 120,000 pigs per week.

Members of the team visit with the
manager of the VION pork production
facility in Emstek, Germany.

This VION plant is sourcing 73% of its live pigs within 50 km of the plant...and all pigs are part of a Quality Assurance program. Italy is their largest market, with Denmark second. (In spite of the fact that Denmark is one of the world's largest pork producers, they export huge amounts and thus create a need for imports to meet in-country demand.) Company wide, VION produces beef, pork, poultry and lamb. They also have an "ingredients" division which processes and markets hides, gelatin, offal and other co-products. A division called Basics does custom mixing of ingredients for use by other processors.

NOTE: The EU bases its pork price on slaughter weight, while the U.S. uses live weight as that basis. Farmers at the VION plant are paid on the percent of meat and the carcass weight. VION uses a couple of technologies to assess the carcass, including ultrasound to identify the yield from the animal.

We had the unique opportunity to tour the entire facility from the final product all the way back to pig delivery and slaughter. While no photos were allowed, we were impressed with the efficiency of the operation. VION has special lines that prepare pork to specification for Korea and Denmark, two nations that have specific product and processing requirements.

Tomorrow we get back to the grain business with discussions on the 2012 supply and demand situation on feed grains in the EU.  We'll also be meeting with the managing director of the International Sustainability Carbon Certification program in the EU, with an emphasis on ethanol plant certification within Germany's sustainability certification regulations.

A couple of hours of free time before boarding the plane to Munich and then on to Budapest, with a late arrival tomorrow night.

Nice to Meat and Zanderbergen

John Brook of USMEF shares information
on beef markets in the European Union.

MONDAY, MARCH 19, 2012: A day of "meatings" as we are joined by John Brook of the U.S. Meat Export Federation (USMEF) who introduced us to a couple of companies that are leading the way for U.S. beef in the European Union.

Our first stop this morning was to a company called Nice to Meat, a niche marketer of premium meat products, including high quality U.S. beef. This is a relatively small company making a big impact in high-end beef markets. They obtain their Black Angus beef from Creekstone in the U.S. They recently obtained the contract to provide beef for Hilton Hotels throughout Europe, including the hamburger that appears on Hilton's "Classics" menu in all EU hotels—a contract that took two years to negotiate

Employees at Nice to Meat hand trim meat to provide its
customers with the high-end products the company is known for.

In cooperation with USMEF, the company is training Hilton chefs on how to make delicious meals from cuts of American beef that they typically have not used in the past. According to the company, 90% of the chefs only use about 15% of the beef carcass, concentrating on the strip loin, filet and rib eye. They are teaching chefs how to incorporate "secondary" cuts such as flank and short ribs to create great culinary dishes that are also affordable. They are also supplying the #1 TV celebrity chef in The Netherlands with U.S. beef for his show that reaches 1.5 million people.

According to John Brook, there is a significant focus on educating the marketplace about the value of marbling and its effect on the flavor, texture and enjoyment of beef. Europeans are rediscovering the taste of marbled beef and are starting to demand it.

Joris Zanderbergen speaks to the group about
his company's position as the largest
importer of beef into the EU.

Our second stop was at Zanderbergen, a family-owned company that is the largest importer of beef in the EU. This company imports some 65% of US. beef into Europe, and they also bring in beef from several other nations including Argentina and Brazil. They also distribute pork, lamb, sheep and poultry. Established 37 years ago as a butcher shop, Zanderbergen has grown into a huge company that imports, distributes and stores meat across the EU. They have an impressive cold storage unit that has a 30,000 metric ton capacity.

Interesting to note that European meat grading is based on the yield from a carcass. In other words, it's about how much lean meat can be produced from an animal. As a result, beef production in the EU has focused on leaner animals that produce lots of muscle and little fat. In the U.S., grading is focused on how the meat "eats"—a factor that is influenced by the level of marbling in the beef.

According to the Zanderbergens, high quality U.S. beef has "reawakened" interest in quality beef. Interesting that Sweden has the deepest market penetration of U.S. beef in Europe.

South American beef is more of a commodity. In fact, U.S. beef represents about 10% of the volume at Zanderbergen and about 25% of the value in terms of sales. Yet, they figure they invest about 75% of their time and effort in promoting U.S. beef to their customers. "We are happy with American beef!" they say.

Zanderbergen sources all of their U.S. beef from the IBP plant in Lexington, Nebraska.

A few key takeaways from today's visits:

One of the huge cold storage
units at Zanderbergen.

• Both companies stressed quality and consistency with U.S. beef that is important to their customers. The fact that this beef is corn-fed is a huge factor to these customers—and in their minds, a significant difference-make in terms of quality and flavor.
• Traceability came up at both locations. It's pretty clear that EU customers are looking for traceability—and marketing is all about providing what the customer wants. Other countries can provide it, and in doing so put the U.S. at a disadvantage. For example, we heard today that Chile and Uruguay are considered to be 100% reliable in what they do and how they report it.
• Trade issues have a dramatic effect on meat imports into the EU. John shared some insights on what is happening in talks between the EU and the U.S. that have dramatic implications on beef imports. More on that in a later post.

An early wake-up call as we hit the road at 6 a.m. to head to Hamburg, Germany—with a visit to a swine farm and a pork production facility on the way.

Getting Grounded

SUNDAY, MARCH 18, 2012: Arrived in Amsterdam about 8:30 am local time. Taxis to the hotel where we meet up with our host Cary Sifferath, director of Mediterranean and Africa initiatives for the U.S. Grains Council.

Cary gave us a briefing on the grain and commodity markets in the European Union, which is comprised of 27 nations. Some highlights and points of interest:

• Due to its geographic size and diversity, the EU is frequently an importer and an exporter of grain, depending on the EU member involved. A sale of grain from one EU nation to another is not considered an "export" but is deemed an "internal" trade.

• The largest corn producing nations in the EU are France, Romania, Italy, and Hungary.

• Spain, Portugal and the Netherlands are feed grain deficient.

• Ethanol and biodiesel production are on the grow in the EU. Many ethanol plants switch feedstocks frequently between corn, wheat, barley and sorghum based on commodity price. An interesting aside: Rapeseed from the Chernobyl area is being used for biodiesel production. It's one of the few crops that can be grown in that former site of nuclear disaster because rapeseed does not take up radioactive materials.

• A new Syngenta event (MIR162) is now in the approval process and its presence in the U.S. corn supply has halted corn and corn co-product exports to the EU. While this typically would only involve imports from the U.S., MIR162 has been found in corn from Brazil and Argentina as well. These countries would usually be the first alternative for corn buyers in the EU, but now these two major suppliers are also shut off—and the result is that trade in corn and corn co-products to the EU has essentially halted. The review process for MIR162 is underway, and while it is technically supposed to occur within six months of the request, the clock stops frequently as questions are asked, challenges made and information compiled. Cary believes that it could be early 2013 before MIR162 completes the process. But in the meantime, more events will be introduced—and the cycle will continue.

• Approval of single biotech events has led to de facto approval of some stacked trait corn. After all, once the corn is ground through processing (or even ground for biotech testing), it is impossible to tell if the events present are there individually or as a result of a stacked hybrid.

• Cary characterized the trade of U.S. corn and corn co-products (DDG and corn gluten feed) as "tricky" since they are heavily dependent on biotech issues. In November 2009, the approvals of several individual biotech events (and the de facto stacked traits) opened trade on corn and corn co-products. This had a significant impact on U.S. exports of corn and corn co-products to the EU. For example, exports of distillers grains to the EU were about 124,000 metric tons in 2009. After the approvals, that number rocketed to more than 451,000 in 2010...and grew to nearly 550,000 through October 2011. Then MIR162 came along—and there has been no DDG exports to the EU since. None!

Corn exports stood at 61,000 metric tons in the 2009/10 crop year—and then soared to 972,000 in 2010/11. Since the advent of MIR162, only 1,100 tons have been exported in the 2011/12 year (through March 8.)

• The Ukraine is expected to export a significant amount of corn this year. A dry fall and a killing winter took out much of their wheat crop...and Ukrainian farmers are expected to replant to corn, and plenty of it. Additionally, U.S. wheat is being imported for feed use.

• Despite its best efforts, the EU will likely see more evidence of GMOs in its grain supplies. One reason is that illegal GMO seed is being smuggled, which could easily being to affect a larger percentage of production in some countries in which this smuggling is rampant.

• GMOs and biotechnology are convenient whipping boys in political rhetoric and bravado—with non-issues becoming frontpage news as a result. On the other hand, many feel as though the EU is being left behind in terms of agricultural production and economic success due to its reluctance to embrace technology that is being used in other areas of the world.

We begin our mission in earnest on Monday as John Brook from the U.S. Meat Export Federation joins the group and we visit two large importers of U.S. beef.

EU Mission 2012 About to Kick Off

Preparing for a mission to the European Union involving corn farmers from Iowa, Illinois and Nebraska. The mission, which is being coordinated by the U.S. Grains Council, runs from March 17-26, 2012, and takes the team to The Netherlands, Germany and Hungary. During the mission, the team will visit with representatives of the beef and pork industries (arranged in part by the U.S. Meat Export Federation), biofuels, policy makers, seed corn production, grain handling, and other areas.

Some key issues to be discussed with these audiences will include animal welfare regulations, biotechnology, ethanol imports, and sustainability regulations. Like the United States, the EU is also creating a new version of its "farm bill" (CAP 2013), so we expect conversation on the expected effects of each on agricultural trade and production.

Watch this blog for periodic updates from the mission. You can sign up for automatic email updates in the upper right of this blog's home page.