GMO ISSUES

As far as canola processing at Velva, ND goes, CANOLA IS CANOLA. Currently, there is no test for Roundup Ready or Liberty Link Canola, which are the two GMO (Biotech) canola varieties. However, within one week Strategic Diagnostic Inc. (SCIX) will have available the "quick check" for roundup ready canola. Then within another month Strategic Diagnostic Inc. will have the protocols down to do the "quick check" for Liberty Link canola. What they do is isolate the protein that makes the canola resistant to Liberty or Roundup. Once this is done, they search for the antibody to that protein. Once the anitbody is known, they introduce an antigen to the substance being tested that will produce that same antibody if the protein that produces the herbicide tolerance is present. Thus they can tell if that protein is present, which gives them the ability to segregate GMO from Non-GMO. Therefore, the possibility of truly segregating Non-GMO from GMO canola will be achievable through testing the canola before dumping. This quick check is supposed to be able to tell if one out of one thousand seeds has the trait that is being searched for. The test is supposed to take between 5 and 8 minutes. I’m not sure what the cost to administer these two tests would be. Yes, two tests would have to be done, one looking for the Liberty Link protein and the other for the Roundup Ready protein. In time, they may even be able to combine the test so that if either protein from the two GMO varieties, are present the test would show that the sample was a GMO canola.

However, one thing to remember about canola, is that US processed canola stays in the domestic US, Canada and Mexico, all of which embrace GMO technology. Thus, the concern for whether or not our canola products are GMO or Non-GMO is not relevant at this point in time. So just because within a couple of months we will be able to segregate GMO canola from Non-GMO, does not mean that we will be segregating. We have not, at this point and time, had any inquiries for Non-GMO canola oil or meal. It is always our concern to supply our customers with the products they desire, but with no interest to date, for Non-GMO canola oil or meal we do not plan to segregate seed or see the need for premiums or discounts related to GMO or Non-GMO canola.

Japan buys 1.8 MMT, China 1.4 MMT and Mexico .5 MMT of canola from Canada. Canada’s canola crop is about 60% GMO. That means that between Japan, China and Mexico, Canada exports 2.22 MMT of GMO canola. Half of what the Velva plant crushes comes from Canada, so that would mean that 25% of Velva’s total crush is currently GMO. If we contract canola for delivery and you have GMO seed, we will let you dump and you will be paid the contract price.

As far as labeling on GMO products goes, I feel that labeling is the first step to acceptance. The government bodies are just informing the consumers. And normally, products that are considered unsafe are not allowed to be labeled at all.

However, it is the position of ADM that farmers should, if they have the capability, segregate their Non-GMO grain, from their GMO grain, since the interest from Consumers for other Non-GMO products remain visible in the market place. And it just makes sense for the producer to segregate if the possibility exists to receive a premium, even if that possibility is small. ADM remains supportive of the science and safety of both biotech development and traditional plant breeding methods to improve crops and benefit consumers.

Another important thing to remember is that products of biotechnology are approved by regulatory agencies (FDA, IJSDA, and EPA) which are responsible for assessing the safety of the food supply. Any program to segregate these grains simply would provide the consumers with a choice.

My opinion is that once supplies get tight in the future the whole GMO issue goes away. There still may be segregating, for those who believe GMO is akin to organic. However, in time, the market and consumers will accept GMO grains as the norm.

LPD CALCULATION

Every canola producer should know how the LDP on canola is calculated. Every Friday morning the LDP rate for canola changes. We should be able to calculate the new LDP rate, almost exactly by the close Tuesday night. This gives the producer two days to see the direction the markets headed and to decide if he should take the LDP before it changes on Friday morning.

This is how it works;

1. Take the average daily Velva spot canola prices from Wednesday through Tuesday.
2. Subtract 31 cents per hundred weight for freight differential from average price.
3. This equals the posted county price.
4. Then the difference between the posted county price and the county loan price (10.01 in Ward County) equals the LDP.

Thus knowing this information, a producer should never take the LDP without knowing what next weeks LDP is going to be, unless he is delivering seed and losing beneficial interest. If the producer has forward contracted seed and retains ownership of the seed he can ride the LDP for several weeks until he sees a drop coming. See enclosed graph on the LDP.

With new crop cash prices about $2.00 per cwt under the loan value, I would not recommend contracting new crop yet. Any big weather scare in South America or in the US bean areas this spring could drive up soybean oil prices, which in turn would pull up canola values.

CGC ADM

Opening stocks 611,000 450,000

Production 8,798,000 9,000,000

Imports 100,000 115,000

TOTAL SUPPLY 9,509,000 9,565,000

Crush 3,000,000 2,900,000

Exports 4,300,000 4,100,000

Feed, Seed, Resid. 609,000 575,000

TOTAL DEMAND 7,909,000 7,575,000

ENDING STOCKS 1,600,000 1,990,000

1. The South American soybean crop is off to a good start.
2. The US intended soybean acres expected to be up 3 to 5% (about 75 million acres).
3. The US canola acres expected to be about 1.7 to 1.9 million acres.
4. Canadian canola acres will be 12 to 13 million because of no better alternatives.
5. The high canola carryout in Canada, (ALMOST 2 million MT).
6. The high US oil stocks, (2 billion lbs. plus, not including canola oil)

The above reasons almost assure that the new crop prices will be under the loan rate.

Canola trades on the Winnipeg Comd. Exchange as rapeseed futures from 9:30 am – 1:15 pm.

RSF January

RSH March

RSK May

RSN July

RSQ August

RSU September

RSX November These contracts trade in Canadian dollars/metric tonne (2204.6 lbs. = MT)

Canadian currency has four option months that trade from 7:30 am to 3:30 pm.

CDH March

CDM June

CDU September

CDZ December

1. The RSX is trading @ $262.30 (CND/MT)
2. Velva delivered basis is – 18 the RSH
3. The USD/CND exchange rate is @ .6899 (.6899 cents USD - $1.00 CND)

RSH 262.00 Winnipeg Futures in Canadian dollars per Metric tonne.

BASIS -18.00 RSH (ADM delivered basis)

244.00 Canadian dollars per Metric tonne

CDH x.6699 March USD/CND exchange rate

1. US dollars per Metric tonne

-22.046 Cwt’s per metric tonne

$ 7.64 USD per cwt.

_____2 (two 50 lb. Bushels per cwt)

$ 3.82 USD per bushel

Remember that the price of canola is subject to not only the Winnipeg Commodity Exchange futures contract, but also the USD/CND currency exchange rate and basis changes.

ADM Velva offers the following types of contracts:

1. Forward contact - contract price locked in prior to shipment.

2. Spot sale - cash market at the close of the day of delivery.

3. Delayed Price Contract - buyers option of 30 to 90 days free storage, with automatic

pricing on expiration.

4. Warehouse Receipt - open storage tickets. Seller retains ownership but has to pay

drop and storage charges.