Growing IP grains for profit
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by Owen Roberts and Kevin Hursh

One of the most promising developments in Canadian crop production is the growth of Identity Preserved or IP production. Producers are growing crops with special traits for specific end uses. These contracted crops must be segregated and there’s usually extra paperwork, but producers are finding that IP crops can often provide higher returns than the regular commodities.

“Canada is not going to be the low-cost producer against the likes of South America,” says John O’Brien, food products manager with Thompsons Limited, owner of the Hyland brand. “It behooves us as an industry to get more involved with IP, especially as traceability and food security become bigger issues.”

Ontario farmers have a long history of successfully growing corn and soybeans, so it follows that seed companies would introduce IP traits into those crops. To that end, corn for ethanol looks particularly promising especially with the provincial government’s new $520-million, 12-year ethanol Growth Fund, announced in June, designed to boost ethanol production.

Monsanto ran a successful corn for ethanol program and a corn for high extractable starch program over the past two winters, offering farmers a 10-cent-per bushel premium to deliver corn to the Commercial Alcohols ethanol plant and CASCO, in Ontario. Dan Wright, Trait Marketing and Stewardship Manager for Monsanto Eastern Canada, says a key to a successful IP program is to promote a value chain environment that supports premium payments. Whether it's segregation or special traits, such as high total fermentables in corn, it's worth more to farmers. He says value chain participants - seed companies, farmers, processors and elevators - must be willing to share the advantage.

Soybeans dominate Thompson’s IP offerings, with as many as 45 varieties available, for everything from soy flour and soy milk, to tofu and miso. IP varieties contributed significantly to the province’s 2.4-million soybean acres this year, one of the biggest crops of the new millennium.   

Soybeans are also the focus of one of the most exciting IP prospects, low linolenic acid soybeans. Their introduction is expected in Ontario in two years, and some say they have the potential to revolutionize the industry. Linolenic acid makes soy oil go rancid, so processors must hydrogenate it to make it stable. That process creates trans fats, which have become public enemy number one for health conscious consumers, because they boost bad cholesterol and reduce good cholesterol. Low linolenic acid soybeans counter this problem. “These may someday become the standard soybean,” says Pioneer’s Tim Welbanks, technical information manager. Monsanto’s low linolenic acid line, called Vistive, was introduced in the U.S. this year.

Increasing demand for vegetable oil that doesn’t result in trans fats within the food supply is also pushing the production of specialty canola varieties in western Canada. The companies don’t release information on their contracted acreage, but it’s no secret that the acreage is growing year after year and is now a significant portion of total production. Some observers expect up to 40 per cent of Canada’s canola acreage may be specialty varieties in the not too distant future.  

Both Cargill Specialty Canola Oils and Dow AgroSciences offer contracts for specialty canola varieties. They are not the highest yielding. Nor do they have the earliest maturity. But there are attractive premiums over the value of regular canola.

There  is also IP production within the grains marketed by the Canadian Wheat Board. Warburton’s is a bakery in the United Kingdom that produces high quality bread. Each year, it contracts with farmers on the eastern prairies to grow specific varieties of hard red spring wheat. The grain is tested at a research centre established by Warburton’s in Brandon, Man. IP production that meets the quality requirements is eligible for a $20 a tonne premium.

Navigator durum, a variety with high gluten strength is grown under contract with the CWB to service customers that want that quality for their pasta production. Bob Chapman, CWB area rep for Swift Current, Sask. says a SeCan durum variety called Strongfield is likely to be offered for IP production next year. Its main attribute is lower cadmium content.

For 2007, a variety called Commander from Saskatchewan Wheat Pool is likely to be offered for IP production. “It has significantly higher gluten strength than Navigator,” notes Chapman. “It will compete with Australian desert durum.”

Ontario farmers are also looking at other niches. For example, 25R26 — a Pioneer soft red winter wheat substitute for Kansas hard red winter wheat – did well last year, when there was a shortage of the U.S. product. In other crops, an extra 8,500 acres of malting barley is being grown in Ontario this year, with the introduction of Stratus and Newdale varieties adapted to the province’s comparatively wet, humid conditions. These varieties will fetch farmers an extra $10-$15 per tonne premium. And an initiative involving 230 farmers near Peterborough, growing Hyland’s Goslin oats (which have superior milling properties) for Quaker Oats, was so well subscribed that Hyland sold out of its seed February 8. Sales grew by 40 per cent over last year.

“It’s a matter of economics and good varieties,” says Ivan Warriner, Hyland sales manager. “We have people in our organization focused on developing IP.”

Pioneer’s Wellbanks says the future is clear: there will a slow, steady incline in IP acres, paralleled by an increased interest from farmers in growing crops with specific end-use traits for a specific market. That, of course, assumes value can be extracted from the grain because of that trait. At the day’s end, it still comes down to price.

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