Channeling, Identity Preservation and the Value Chain: Lessons from the Recent Problems with Starlink Corn

Biotech grains hold great promise for both producers and consumers but a thorough understanding of the value chain will be vitally important in realizing that potential. Biotech grains with input traits not approved for all uses can pose a serious problem for the grain handling and processing industry as they move through the value chain. This problem occurs because there is no premium to cover added costs of segregation and handling input trait grains after harvest. In the case of Starlink the manufacturer is currently providing a defacto premium to producers and elevators to make the channeling effort effective.Output trait grains not approved for all uses may also create a problem if due care is not used. However the existence of a premium over the market price for commodity grain provides a positive incentive to create a separate and distinct logistics channel for these products. Experience with Starlink indicates that attempting to channel a product that is not acceptable for all uses without a premium can inflict significant uncompensated costs on the output side of the value chain. These costs may include market discounts and are typically incurred by firms who do not receive any meaningful gain from the sale of the trait.