Midwest Corn Growers Study Tours

Japan Beef Mission 2013 Highlights

2014-01-02T12:33:00.000-06:00

Wagyu on the Hoof—and Tons of Tongue!

2013-07-14T20:38:00.000-05:00

Wagyu beef cattle partake of rice straw at the feeding facility in Ishinomaki City.

SENDAI REGION (Saturday, July 13, 2013)— Packed our bags and left the Westin Hotel, headed to Ishinomaki City, about 40 minutes away.

On the way, we passed an area hard hit by the tsunami. In this case, a major highway actually served to protect one area, while the area on the other side closest to the coast was virtually wiped out. All of us have been astonished at the rapid rate of rebuilding—homes, businesses and infrastructure.

We arrive at Ushichan Farm, a Wagyu beef feeding facility with 600 head of high-end, black-hided Wagyu cattle. This facility purchases 600 lb. feeder calves at auctions for about $5,000 per head and feeds them out over a two year period.

The cattle are fed about 20 pounds per day on imported grains and rice straw, purchased from local farmers—typically on a barter basis in return for the manure. In fact, the feeding facility is virtually surrounded by rice fields. This company owns three feeding facilities with a total of 2500 head.

These animals can command up to $15,000 per head at finish, with an average of $9,000 to $10,000. Feeding costs are about $2,500—and death loss is about one percent.

Buck Wehrbein (left) and Patrick Knobbe (right) pose with
one of the managers of the Wagyu feeding facility.

We were not allowed to walk through the sheltered barns since our presence would disturb the animals.

The feeding system is a blend of automation and hand-feeding. Feed is delivered to the feed alley through automation, but is hand-fed to the animals by employees. When cattle are fat and ready for market, they are led by rope to the truck.

The majority of the cattle at this facility are sold to Starzen International, a representative of which accompanied us on the tour.

Tons of Tongue

We return to Sendai City for our last meal in Japan—lunch at Kisuke, a restaurant which features 30 different menu items—all using beef tongue (much of it from the U.S.) We had tongue gravy on tofu, tongue sausage, ground tongue, grilled tongue, tongue salad—it was reminiscent of the scene in "Forrest Gump" in which Bubba lists the various ways to prepare shrimp!

Ohgawara-san, chairman
of the Sendai Beef Tongue
Association and owner
of the Kisuke beef tongue
restaurant chain.

The chain has 25 restaurants, serving 1,000 tongues per day in total. Ohgawara-san, chairman of the Sendai Beef Association and owner of the Kisuke chain, joined us for lunch.

We are also joined by Kioshi Nagao and Miss Naomi Edo from Soma Relief 311, another non-profit organization formed to help disaster victims. This organization has focused on the area of Japan affected by the disaster trifecta—earthquake, tsunami and nuclear meltdown—with a special emphasis on assisting youth who lost one or both parents, family members and/or friends. Leiko Shimane from USMEF has worked closely with this group.

In the two-plus years since the disaster, Soma Relief 311 has provided summer camps for these young people including a wide variety of outdoor activities such as camping and hiking. USMEF has provided U.S. beef and pork to feed the campers—and continues to do so.

This will be the last year of the summer camps,

as the organization is now looking to establish

Leiko Shimane of USMEF and Kioshi Nagao of Soma
Relief 311 share a toast at lunch.

international exchange programs for the youth.

The first such program is taking place through Portugal—and there was discussion at lunch about working together to establish a program with Nebraska to bring young Japanese to Nebraska farms and ranches for an exchange experience.

After lunch, we have about 30 minutes to shop at a Sendai department store before heading to the Sendai airport for a short flight to Tokyo—and a looong flight home to the U.S.

Sayonara, Nippon!

Making People Well: Hip-Hop Heroes on Katsura Island

2013-07-14T12:05:00.000-05:00

Masahido "Masa" Oodo, the head of Bond and Justice, mugs for the camera as he grills
U.S. beef for our team and the residents of Katsura Island.

KASTURA ISLAND, JAPAN (Friday, July 12, 2013)—In the Japanese language, the phrase "to eat" is written using Chinese characters that literally mean "making people well"—and we saw the power of that phrase at work during a Friday afternoon visit that will become one of most memorable moments of this mission.

On March 11, 2013, the residents of Katsura Island had about one hour's notice that the tsunami was headed their way. None of them chose to leave. The younger folks on the island gathered the elderly and got everyone to the highest-most point on the island—an elementary school. From this vantage point, the villagers watched as the tsunami destroyed much of the island and wreaked havoc on the small boats, oyster beds and seaweed beds on which they relied for their livelihood.

Inside this bay, which is dotted with islands, the tsunami wave was not the 90-foot wave that hit the coast directly, but was no less devastating as water came in from every direction and brought waves 15 to 20 feet high that wiped out much of the housing on the island and damaged the piers and boats.

Residents of Katsura Island enjoy the meal
served during our visit.

Since the disaster, the younger people who used to live on the island have left—leaving only about 100 people, with the youngest being around 50 years of age. Many of this elderly population are living in temporary housing and just recently have been able to resume their seaweed and oyster operations.

Why did our mission visit this island? Because the Nebraska Corn Board and Nebraska Beef Council were the first U.S. organizations to be in Japan with support for the islanders and to other Japanese victims of the tsunami. Working with USMEF, these two Nebraska-based organizations helped provide beef and pork and other foodstuffs to the remaining islanders. USMEF partnered with a number of Japanese organizations to make that happen, including Hannan, the food processing company we visited earlier on Friday.

On Katsura Island

We traveled north from Sendai to Shiogama, from which we took a boat out to Katsura Island where were were greeted at the pier by a ragtag bunch of young men with small pickups who took us to the top of the island. It turns out that this group of fun-loving guys is making a huge difference to the people of Katsura Island.

When the disaster hit the island, Masahiro "Masa" Oodo, a well-known Japanese hip-hop record label executive, decided something needed to be done. So he reached out to his music industry pals across Japan to join him in a relief effort for this island—and they came from near and far. (Even American rapper Snoop Dogg provided financial support.)

Residents of Katsura Island enjoyed the meal and having visitors
from Bond & Justice and Nebraska.

Masa wears a tattoo on each arm. On his right arm is artwork with the word "bond", denoting that his handshake is his word and bond. His left arm bears a tattoo with the word "justice"—placed there since that is the arm closest to his heart. When the quickly-organized group of musicians was formed, they were looking for a name—and "Bond and Justice" was a logical and meaningful choice.

USMEF partnered with Bond and Justice to bring in meals to the island residents. Leiko Shimane from USMEF was integrally involved in this effort, helping coordinate support from a number of partners.

The Bond and Justice posse visits the island about twice per month, coming from all across Japan to help continue the clean up, prepare meals and provide the social interaction and connection with the world that the remaining residents crave and need. And it is clear that this bunch of mostly 30-somethings enjoys being around each other—and the islanders enjoy having them around.

A member of Bond & Justice proudly displays his Nebraska
Cattlemen lapel pin—in a unique way!

Setting up shop on the steps of the elementary school during our visit, this crew grilled U.S. beef, prepared salads and vegetables and poured libations. It was a festive and fraternal atmosphere—and even though the residents and most of the Bond and Justice team did not speak English, there was plenty of "conversation" and camaraderie among all.

It amazed all of us how quickly we connected with the selfless young musicians and the courageous people who live on the island–and there were teary eyes and lumps in throats as we boarded our boat back to the mainland. Clearly, we had all had a very powerful and personal experience—and were touched at the dedication and selflessness of a group of young hip-hop musicians.

The Nebraska beef and corn team on Katsura Island with members of Bond and Justice
and several residents of the island.

We only spent about three hours on the island with the Bond and Justice team and the villagers they are serving—but the memory and the connection with this place and the people will last a lifetime.

Making people well—in both their stomachs and their souls. That's what Bond and Justice is doing, thanks in part to USMEF and the generosity of Nebraska corn and beef producers.

Off to Sendai by Bullet Train

2013-07-13T15:19:00.000-05:00

A Wagyu beef carcass is auctioned off at the Sendai meat market.
We saw one carcass command a $12,000 price.

SENDAI REGION, JAPAN (Friday, July 12, 2013)—Up very early to catch the bullet train north to Sendai, about 180 miles from Tokyo. Some interesting countryside to see—rice fields, mountains, rural areas—as we sped along at some 160 mph!

First stop this morning was a packing plant that was damaged in the earthquake in 2011. During that year, their slaughter rate dropped by 50% due to structural damage, followed by the radiation scare a few weeks later.

Workers at Hannan prepare short plate strips
for ready-to-cook meals.

We had a rare opportunity to be invited into a Wagyu beef processing facility. Consider that those of us promoting American beef are actually their competitors, so this was quite a coup to be shown around the plant. (Thank you, Yama!)

This plant processes a high volume of Wagyu beef, and we were privileged to witness that morning's auction of Wagyu carcasses—fetching as much as $12,000 US for a 950 lb carcass! The plant processes 23,000 head per year—not all of it Wagyu.

The Sendai region is known for its Wagyu beef and has established a brand called Sendai Beef. They say the secret is the "Miyagi nature"—the cool, clear water of the region, coupled with feeding straw leads to the highly marbled meat.

Wagyu beef is graded on a scale from A1 to A5—with A5 being the highest quality.

After the Japanese BSE incident in 2001, the Japanese government required that all cattle—100%—be tested for BSE. That changed this month, as the testing is now required only for cattle 48 months or older. Since most Wagyu beef is 30 month, this has eliminated the need for BSE testing for this product.

Hundreds of beef tongues
thaw at the Hannan food processing
plant.

The next stop was Hannan, a food processing company, where our host greeted us wearing a "Nebraska" shirt and socks with stars and stripes. A real card, this guy!

Hannan specializes in a wide variety of food products. We saw them cutting short plate into strips and packaging the beef along with vegetable and sauce for a ready-made meal. Hannan was a partner with USMEF in providing the bento box meals to the disaster victims in 2011.

They are also huge purveyors of beef tongue, processing 3,000 tongues per day. That's right—per day!

We headed toward the coast, where we saw some of the damage and rebuilding that has occurred since the earthquake and tsunami in 2011. Trees are leaning every which way from the force of the water—and their branches are stripped some forty to fifty feet up from the ground. Much rebuilding going on, but you can still see considerable damage.

Yama (left) and John Hinners from USMEF talk with
Mr. Eiichi Nakayma, managing director of the
Higashiyama Korean barbecue restaurant chain.

Friday night we had Korean barbecue at Higashiyama restaurant, one of a 40+ chain that has worked closely with USMEF to offer their customers U.S. beef and pork. Mr. Eiichi Nakayama, managing director for the company, joined us for dinner. The company has been incorporating more U.S. beef into their dishes.

You may note that there is no information about what we did Friday afternoon. That experience merits a blog post all its own—and will be coming soon.

Catering to a Roomful of Customers

2013-07-12T08:40:00.001-05:00

Some 640 meat buyers enjoy samples of U.S. beef and pork during the USMEF
seminar and tasting session

TOKYO, JAPAN (Thursday, July 11, 2013)—This afternoon/evening, USMEF hosted some 640 key Japanese meat buyers at a U.S. Meat Seminar & Tasting Session held at Hotel Okasa.

USMEF President & CEO Phil Seng welcomed the group, as did David Miller from the U.S. Embassy. Both pointed out the change to the availability of 30-month US beef and thanked those in the room for their support of U.S. beef and pork.

Dr. Ron Plain, University of Missouri, brought the group up to date on the state of key ag production figures:

CORN OUTLOOK: Forecast for this year: 14 billion bushels—a record by one billion. If it happens, it would ould lead to lower corn price, lower feed costs, lower meat production costs. USDA forecasts a $2 drop in corn prices, the biggest year-to-year drop in history.

BEEF OUTLOOK: Beef production grew rapidly in 50s and 60s. Peaked in 1975, but not a lot of growth since then. The number of cattle in the U.S. continues to decline...we know have the smallest cattle herd in U.S. since 1952. So how are we producing more beef with fewer cattle? Producers are getting better at what they do. Improved Calf health. Less death less. Slaughter weights up. It all helps increase the amount of meat from a smaller cattle herd.

Over the past two years, there has been a relatively high percentage of slaughter of herd (mother cows). If that percentage drops, more mothers, more calves.

If we get better weather (i.e. rain), we'll have better pasture. This should lead to a sharp drop in slaughter of mother cows. While there will be a short term drop in supply, there should eventually be more cows which leads to more calves which leads to more beef on the market—and that should put downward pressure on price.

Meat buyers and purveyors listen intently to
presentations on marketing, promotion, quality
and availability of U.S. beef and pork.

PORK OUTLOOK: Pork has been the most stable meat in the U.S. Essentially a 1.5% annual growth since 1930. More dependent on exports. Hog farmers are getting better at what they do, more pigs per sow per year. More than doubled production per sow since 1930.

Better production in beef and pork makes price increases less than cost of living increases—making both products a good value.

MAJOR UNCERTAINTIES: Cost of feed and weather. Economic growth. Growth in breeding herds if feed supplies increase. Exchange rates. But the yen is getting weaker, which should make U.S. products more attractive to Japan.

REIKO OGATO of Dentsu, Inc. , Japan's largest advertising agency, spoke about branding. The volume of information available to consumers has exploded. What was the information contained on one sheet of paper in 1996 will become 100,000 pages (the height of a six-story building) by 2025.

It used to be that information to consumers was driven by manufacturers. But with social media, the consumer has become a significant driver as they search for information and then share what they have learned through experience. That cycle repeats over and over—and the manufacturer has less influence as a result. "The consumer cannot be controlled by the message sender," she said.

Taz from the USMEF Japan office presents
information on the "juku" campaign to promote
the increased availability of U.S. beef.

(The blogger event yesterday fits in well with this consumer-driven marketplace. Some of the bloggers have 20,000 readers—every day!)

This "differentiation" message was echoed by Susumu "Sam" Harada from USMEF, as he spoke about the opportunity to set American beef and pork apart in the marketplace.

USMEF's Takemichi "Yama" Yamashoji and presented information on American beef and pork, pointing out the aggressive consumer information and chef training programs that USMEF is implementing. Home runs such as the Dean & Deluca decision to use American beef and the promotion of "chunk" beef and pork for family dining were presented—as well as a number of cooperative promotional opportunities which those in the room could take advantage of. The underlying message was that USMEF is here to help these buyers succeed in reaching their customer and in reaching consumers.

A couple of interesting notes:

Outdoor barbecuing (grilling) is on the rise in Japan, to some degree because camping out is becoming more popular.
July 22 is a date on which most Japanese prepare grilled eel for dinner, as it is believed that eel helps increase one's stamina in the hot summer weather. But eel prices are high, so USMEF is promoting the use of soy sauce-sauteed American pork as a substitute—that can also provide the energy and stamina Japanese people need to withstand the oppressive weather this time of year.

Mark Jagels of Davenport, Nebraska Corn Board director
and Chair-Elect of USMEF, addresses the crowd of 640
meat purchasers prior to the beef and pork tasting session.

Following the seminar, the 640 attendees were treated to a tremendous spread of American pork and beef prepared in a variety of ways. USMEF Chair-Elect Mark Jagels welcomed the group and thanked them for their support of American beef and pork—and assured them that American producers would continue to provide safe, wholesome and delicious products.

Our team remarked on the incredible impact USMEF activities had in just over 24 hours—from reaching 40 influential food bloggers the previous day to educating 640 key meat buyers (at every market level) at a trade and tasting seminar. A pretty impressive couple of events, to be sure.

Busy Ports & Cold Storage

2013-07-11T02:20:00.000-05:00

Members of the Nebraska beef team proudly display beef from Nebraska Beef
from the Nippon Ham cold storage facility.

TOKYO, JAPAN (Thursday, July 11)—We went a bit further up the "food chain" this morning to see where American beef comes into Japan—and where it goes into storage before heading out into the marketplace.

The entire USMEF mission group–including both the beef team and the pork team—boarded a bus for a 30-minute trip to the Yokohama port on the Tokyo Bay, into which a large volume of beef and pork

The APL facility at Yokohama port.

arrives in containers on seagoing vessel. We met with APL, a shipping and logistics company, which ships and transports a wide variety of products from foodstuffs to electronics to industrial items.

It takes about two to three days for American beef to move from the Midwest to the West Coast ports—and about two weeks to travel on ship before arriving in Yokohama.

APL prides itself on its technology, which includes sophisticated atmosphere control and monitoring inside refrigerated containers (reefers) to ensure product integrity and quality.

Omaha-based Nebraska Beef
is a company/brand owned
by Nippon Ham.

Then we visited the largest cold storage facility in Japan, owned by Nippon Ham, which is the largest importer of beef in the nation. (Ito Ham is second.)

Decked out in hardhats and parkas (hard to complain about the sub-zero cold when we've been dealing with 95-degree temperatures and stifling humidity!), we took a tour of this huge facility and saw beef from not only the U.S. and Australia, but also New Zealand, Chile, Mexico and other nations.

We saw a number of products produced in Nebraska specifically (Lexington, Dakota City, etc.) Interestingly, Nippon Ham owns a company (and a retail brand) called Nebraska Beef, which is headquartered in Omaha.

The major takeaway from today's tours was a better understanding of the sheer volume of meat products coming into Japan—and the infrastructure in place to handle increased supply of both beef and pork from the U.S.

A Visit with High-End Retailers—and a Taste of Wagyu Beef

2013-07-10T08:13:00.001-05:00

TOKYO, JAPAN (Tuesdauy, July 9)—We met with representatives of Ito Ham in the USMEF offices this afternoon. With almost $4 billion in sales last year, Ito Ham is the second largest Wagyu beef company and the second largest ham and sausage provider in Japan. Ito Ham is one of the largest

Members of the beef mission meet with officials
from Ito Ham in the USMEF offices in Tokyo.

importers and processors of US fresh beef. They also sell everything from pizzas to burger patties.

U.S. beef suppliers are JBS (Texas and Pennsylvania), National Beef in Dodge City, Tyson in Lexington, Nebraska, and PM Beef in Minnesota. They have a relationship with two plants in Australia, from which they source their Angus beef. They own a feedlot and plant in New Zealand.

As a company, 60% of their imported beef is from Australia, 30% U.S. and 10% New Zealand.

Ito Ham expressed concern about shelf life and color with U.S. beef. Aussie beef has a 75-day shelf life, while U.S. is just 60 days. Ito Ham is asking why there is a difference. The USMEF team and the producers pledged to work in partnership with Ito Ham determine what research as been done on this issue and arrive at solutions and answers that satisfy our important Japanese customers.

A chef at the Ito Ham store in the
Shinjuku area prepared Wagyu
beef for our team to sample.

Later in the afternoon, we visited Ito Ham's boutique beef store in the trendy Shinjuku district of Tokyo, where we were treated to a sample of melt-in-your-mouth Wagyu beef—including some with fois gras, butter and wine. "Wow!" was the reaction of most of the team. (One man's opinion: The first bite is pretty special. But the next one, not so much; as the richness and high fat content starts to get very heavy very quickly.)

Some meat in the counter was north of $180/lb.

The second store chain we met with was Tokyu, which caters to a higher end consumer. With 90 outlets, Tokyu began selling U.S. beef in February 2012, and sales have been rising, especially beef tongue.

Tokyu also has convenience stores, shopping center, and a super-high-end store called Precce. Precce is practically across the street from the Tokyu store we visited, but the prices and selection were vastly different. Example: Pressa was selling tomatoes for $2 each, peaches for $5 and watermelons for $58. A cut of Wagyu beef of 2.5 kilos (about five pounds) was priced at $85.

The exchange rate is making it difficult for these stores to justify increasing their use of American beef.

Over the past two days, we have seen a wide range of retail outlets for American beef—and all of the companies are pleased that American beef is now more available in their market. It's important, however, that the product fit within their business model and is matched to their consumers' taste.

The fact that American producers are here meeting with them face to face, however, is greatly appreciated and is having a very positive effect. We also have heard appreciation and kudos from all the companies regarding their relationship with USMEF and the support and service this organization provides.

Mark Jagels and Dale Spencer
inspect American beef available at
the Tokyu store.

The general takeaway is that these Japanese buyers and retailers are sharp—and they know what they want. At the same time, we need to educate them. Just as there has been almost a generation of Japanese consumers who have not been exposed to the value and benefits of American beef, there is almost a generation of buyers as well.

Most, if not all, of the retailers and purveyors we met with were in their late 20s or early 30s—and were teenagers or young adults when American beef disappeared from the Japanese market ten years ago. They need to be brought up to speed and quickly.

Food Blogger Event a Grand Slam Home Run for U.S. Beef and Pork

2013-07-10T00:08:00.000-05:00

Food bloggers rushed the stage, cameras in hand, to take photos of dishes featuring U.S. pork and beef.
Food TV star Rika Yukimasa shows off the dish.

TOKYO, JAPAN (Wednesday, July 9)—A tremendous USMEF-sponsored event today. Some 40 food bloggers from across Japan met with the full American beef and pork teams for lunch. Phil Seng, president and CEO of USMEF, said the bloggers represented the "fresh voice of the consumer"—and it was important that they learn about the value of American pork and beef and how to help Japanese consumers learn how to enjoy it to the fullest.

Japanese TV star Rika Yukimasa shares
tips on preparing American beef & pork
with Japanese food bloggers.

Rika Yukimasa, a charismatic up and coming "foodie" television star and mother of two, gave a fabulous presentation on preparing American beef and pork. Her English was impeccable thanks to five years in the U.S. attending Cal Berkeley. She switched easily between two languages as she extolled the virtues of U.S. beef and pork—and showed how to properly season and cook these premier American products.

She noted that Japanese tend to slice meat very thin and then cook it. American beef and pork require a different preparation method to take full advantage of the robust flavor and tenderness—so she showed the foodies in the audience how to best prepare these products, with an emphasis on slow cooking and thin-slicing the product after it is cooked, rather than before, which is the traditional Japanese method.

As each prepared final dish came out of the oven, the bloggers (primarily female) rushed the stage with cameras to take dozens of photos. It was a frenzy repeated each time a new dish was finished.

Samples of all dishes were served as lunch to all in attendance—and the American producers in the audience took the opportunity to share photos of their family farms and converse as well as they could about the quality of American red meat. It was a great and rare opportunity for influential Japanese social media leaders to put a face on American beef and pork.

Nebraska Corn Board member Tim Scheer (left) talks with
food bloggers during today's lunch event.

USMEF will monitor the Japanese foodie blogosphere following today's home run event. The bottom line is that dozens of food writers went home satisfied and better informed about American beef and pork.

Major Beef Packers & A Major Ad Campaign

2013-07-09T21:00:00.000-05:00

The Nebraska Corn Board-sponsored team stands in front of one of the
USMEF ads promoting U.S. beef in Tokyo Station. From left to right:
Tim Scheer, Dale Spencer, Doug Parde, Kyle Cantrell and Mark Jagels.

TOKYO, JAPAN (Wednesday, July 10)—This morning opened with a breakfast meeting with key Japanese packers including ISO, Cargill, Tyson and National. The entire USMEF mission team—representing corn, soybeans, beef and pork from nine states—had informal discussions with these representatives.

USMEF President and CEO Phil Seng
thanks the packers
for joining us for breakfast.

USMEF CEO Phil Seng opened the meeting by thanking the packers for joining us, noting that "These folks are the pathfinders and we thank them for being with us, even when the going got tough."

The Cargill representative noted that while China gets a lot of attention, "don't forget Japan; we're back after 10 years."

During the conversation with the Tyson rep, he noted that there is a focus on the top hotels across Japan—working hard to get them to reintroduce American beef to their menus, especially for the large and lucrative catering business. Essentially, they focus on the premium hotels, considering them as "bell cows" which other hotels will follow.

He also said that, now that American beef is back in the Japanese marketplace, the next stage will be brand differentiation, perhaps including store-level private brands of American beef.

Kyle Cantrell listens to a Japanese
packer representative.

Following breakfast, we took a quick trip to Tokyo Station, one of the largest public transportation hubs in Tokyo, through which some 400,000 people pass each day. USMEF has place a high-profile saturation advertising campaign in the main pedestrian throughway, with repeated ads for American beef. Several dozen ads appear on columns throughout the area—promoting the "juku" campaign and soliciting entries in the sweepstakes noted in an earlier blog.

Next up: One-on-one conversations with several dozen of Japan's leading food bloggers.

Japan Optimistic, But Faces Challenges

2013-07-09T16:17:00.002-05:00

TOKYO, JAPAN (Tuesday, July 9)—A visit to the U.S. Embassy in Tokyo today, which included a brief appearance by Ambassador Roos. (Photo equipment not allowed inside the Embassy, so you'll have to imagine!)

Some interesting tidbits from the various presentations we heard:

Upcoming Election Could Lead to New Initiatives
There is an election July 21 for the Upper House of Japan's two-house Diet (their legislative body). Japan is a parliamentary democracy. The Lower House, which is in the hands of the ruling party, is the most powerful of the two; but the Upper House, which has been in the hands of the opposition party, has stifled the leadership's economic, fiscal and growth initiatives. There is every indication, however, that the ruling party will gain control of the Upper House, thus enabling proposed legislation to become a virtual slam dunk through both houses of the Diet.

The Tokyo metro area has a
population of more than 30 million.

Japan has suffered through two decades of economic doldrums and has been a bit forgotten as it has fallen in the shadow of China's growth. Still, Japan is the third largest economy in the world. Japan has $47,000 per person GDP, compared to $6,000 per person GDP in China; so the purchasing power in Japan is enormous—and they are used to spending dollars to get what they want.

The March 2011 Earthquake & Tsunami
The March 11, 2011 tsunami caused over $30 billion in damage and took more than 64,000 acres of agricultural land out of production. Some 315,000 refugees remain—and about 38% of the farmland has been restored. Cost for reconstruction in FY2013 alone is $44.7 billion.

Japan was just crawling out of its economic hole when the earthquake and tsunami hit in 2011. One significant outcome of the disaster: Prior to the incident, 30% of Japan's energy was generated through nuclear power; since the disaster, that has fallen to less than 1 %—so Japan finds itself paying big yen to import oil and natural gas.

Additionally, the public debt in Japan is 235% of GDP, the highest in the world. There has been a slow but steady population decline. Japanese women have 1.4 children on average. By 2050, more than 38% of the population will be over age 65.

Japanese consumers are affluent and are willing to
pay for what they want, but they are also concerned
about safety and peace of mind.

Food Security
Food self-sufficiency is a huge concern in Japan—and several recent food threats, including the nuclear disaster, have done nothing to quell those fears. Japan is the #1 customer for U.S. corn, pork, feeds, frozen vegetables, and fresh citrus. As noted in an early post, they will also soon regain their position as the #1 customer for U.S. beef.

As U.S. beef exports to Japan rise back to previous levels and beyond, we will need to keep an eye on the "safeguards" Japan has in place. If imports reach theses safeguard levels, tariffs increase significantly.

However, these safeguard levels are programmed to rise steadily over time.

Mark Jagels (L) and Dale Spencer stand
under a large ad for U.S. Beef
placed in Shinagawa Station by
USMEF. The headline says: "People
who appreciate great food love
U.S. beef."

Conclusions

Japan remains a strong market dependent for imported food.
Japan is a relatively affluent population with diverse palates, not a stagnant market.
Japanese consumers are willing to pay a higher price for quality and convenience.
They are especially interested in "Anzen" and "Anshin"—safety and peace of mind.

U.S. Beef Positioned for Success in Japan

2013-07-09T09:22:00.001-05:00

Dale Spencer inspects beef on display at the Seiyu supermarket in Tokyo.

TOKYO, JAPAN (Tuesday, July 9)—Sumikin Bussan is a major importer of U.S. beef, working with Greater Omaha Pack, Tyson and others to bring American beef to Japanese consumers. They are very excited about the change in regulations allowing beef 30 months or younger into the marketplace.

During a one-hour discussion in the Sumikin Bussan offices today, their representatives spoke enthusiastically about U.S. beef. They also agreed with what we heard from USMEF officials: It's

"Tim" (left) and "Lucky" of Sumikin Bussan
talk about their imports of U.S. beef into Japan.

going to take some time and effort to re-educate Japanese consumers about the value and taste of American beef. "The proof is in the taste," said "Tim", the American beef manager for the company.

The importers were especially interested to hear from the U.S. team about projections for the U.S. corn crop—both production and price. They said they were looking for "what is true", but even our group couldn't agree on what will or might happen.

If the record corn acres and record harvests (14 billion) are to be believed, then corn prices could fall as much as $2, leading to lower feed costs and more competitive beef prices.

But then again, maybe not...

After this meeting, we visited a Seiyu store, which is Wal-Mart's brand presence in Japan. (And yes, they do wear blue vests!) We met the person responsible for buying beef not only for this store, but for all 372 Seiyu stores in Japan. (Obviously a man we want on our side...) He, too, is optimistic about the potential for U.S. beef in his stores, seeing it as a price-competitive, high-quality option for his customers.

Tim Scheer (right) talks with the beef buyer for
Seiyu stores (left), while an Oregon beef producer
listens in.

Beef displays in Japan are interesting in that the portions are smaller and very consistent in terms of size. U.S. beef is being displayed at the Seiyu store we visited, some with the "We Care" sticker, which is part of the USMEF campaign.

We also saw Wagyu beef on display—highly marbled beef that is typically higher priced than U.S. product.

We observed Japanese consumers carefully perusing the beef products on display, inspecting several for appearance, quality, price, etc. Not much different than American grocery shoppers.

Japanese Wagyu beef is highly marbled.

USMEF Aggressively Marketing U.S. Beef in Japan

2013-07-09T08:47:00.000-05:00

TOKYO, JAPAN (Tuesday, July 9)—The day began with a briefing from the USMEF Japan staff on the marketplace and the renewed potential of American beef since the "less than 30 month" regulation went into effect and dramatically increased the supply of U.S. beef to Japan.

Taz Hijikata, USMEF Consumer Affairs Senior Manager, shared some interesting facts:

Taz Hijikata of USMEF shares insights on the
Japanese consumer marketplace for beef.

More than 80% of Japanese consumers shop at the grocery store either every day or every other day, with 23.5% shopping every day for food.
50% of women have jobs outside the home.
Japanese in Tokyo typically live in very small apartments with small kitchens, with little food storage and limited food preparation space/capability.
Beef commands only about 10% share of the meat market in Japan. Seafood (49%) is number one, with pork (21%) and chicken (20%) taking second and third.
Japan's per capita use of red meat is roughly one-tenth of that in the U.S., so there is plenty of upside potential.

Since the regulations allowing the import of 30 month or less beef from the U.S. were lifted in February 2013, Japan is on track to regain its position as the Number One importer of U.S. beef. In fact, imports are expected to exceed $1 billion in value in 2013—up from practically zero in 2006.

In the ten years since the incidence of BSE in the U.S., there has not been an adequate and reliable beef supply from the U.S. to Japan. Consequently, the Japanese consumer has forgotten the delicious difference of U.S. beef. (Consider that a 26-year-old female consumer today was a teenager when American beef virtually disappeared from the marketplace.)

Kyle Cantrell and Doug Parde look over some of the U.S.
beef promotional materials that have been
developed by USMEF.

While U.S. beef was essentially shut out of the Japan market, the Australians have established a strong foothold in the marketplace. "Aussie" beef has become the standard, so the U.S. has a re-education process to implement. Part of the problem has been the inconsistency of supply while the U.S. was operating under the 20-month-or-under rule, due to fewer cattle in the system. Now with more cattle available, the U.S can again become a reliable and consistent supplier to the world marketplace.

When put to the taste test, American beef wins every time. In November 2007, only 22.9% of consumers said they would buy U.S. beef. In March 2013, that number had risen to 65.1%.

Capturing the female consumer is key to success of regaining the U.S. beef market in Japan. USMEF has been aggressively promoting the increased availability through its "juku" campaign—a word that means both "delicious" and "immediately available/ready." The USMEF campaign declares the advent for more U.S. beef as a "wonderful moment" for the Japanese consumer.

To that end, USMEF has been extremely successful in gaining attention for U.S. beef. Media news coverage has been very positive, resulting in the equivalent of more than $1.5 million of exposure. A sweepstakes campaign, running from June through August in partnership with 1500 retail outlets, is gaining widespread involvement—with the winners receiving American beef products.

Dean & Deluca, a high-end retailer, has switched from Aussie beef to U.S. beef. Several large retailers have begun to add more beef to their meat cases. In fact, the top three grocery stores in Japan carry U.S. beef.

USMEF is also attempting to change the beef serving habits of Japanese consumers. Currently, Japanese families typically slice beef into very thin strips and cook it with vegetables and other ingredients to serve. USMEF is working to get consumers to buy larger, thicker cuts of American beef, cook those cuts in one piece, and then slice and serve at the dinner table.

USMEF is also pointing out that the U.S. has a grading system for its beef, unlike any other major beef supplier to Japan. With the new 30-month rule, they are promoting that the best of the best of U.S. beef—and more of it—is now available to Japanese consumers.

Another important point: Japan readily takes cuts of beef that do not sell well in the U.S. Tongue, intestines, and other "variety meat" cuts are desired in Japan—
and that adds considerable value to a U.S. beef carcass.

Mark Jagels, Nebraska Corn Board director
and chair-elect of USMEF, addresses
a group of 50 Japanese beef buyers.

For example, beef tongue, which brings about $1.50/lb in the U.S., will garner $7 in Japan. Intestines that go for 50 cents/lb. in the U.S. will command $2 in Japan. Together, these two products alone can account for $330 million in export sales to Japan—and more cattle available will mean American beef producers can meet that demand.

The mission team also sat in briefly at a "purveyor" information session sponsored by USMEF, which attracted some 50 beef buyers who sell to restaurants and hotels. Attendees included Cargill, Tyson and other major companies. Mark Jagels of Davenport, member of the Nebraska Corn Board and chair-elect of USMEF, made brief remarks to the group—thanking them for their support of and confidence in U.S. beef.

The Nebraska group felt that USMEF has a great plan to recapture the Japan market for U.S. beef—and that USMEF is very fired up about the potential. The numbers are playing out as Japan looks to again become the largest importer of great-tasting U.S. beef.

Arrival in Japan

2013-07-08T18:08:00.000-05:00

TOKYO (Tuesday, July 9, 2013)—The Nebraska contingent arrived in one piece on Monday evening (July 8) after a 12-hour flight from Chicago and a 2-hour bus ride from Narita Airport to the ANA Intercontinental Hotel. Checked in and had about 20 minutes to get cleaned up before walking to dinner about 15 minutes away.

USMEF folks ordered on our behalf. The restaurant featured "Japanese Fusion" cuisine and our menu included grilled edimame (soybeans), pork belly, smoked vegetables, fried chicken, bean curd, sushi and several other unique dishes, all requiring us to hone our chop sticks chops.

An early evening for everyone as it had been a veeerrrry loooong day. But up and at 'em this morning as we get briefings from USMEF at the U.S. Embassy, meet with an importer who does business with Greater Omaha Pack, and take a tour of Seiyu, which is Japan's version of Wal-Mart. (Wondering if we'll see blue vests?)

More to come—including photos—as we begin our Japan mission in earnest within the hour.

By the way, we are 14 hours ahead of Central Daylight Time, not 13 as originally thought.

Stay tuned....

Nebraskans Prepare for USMEF Japan Beef Mission

2013-07-03T10:17:00.000-05:00

LINCOLN, NE—A group of Nebraskans is packing its bags for Japan as part of a mission coordinated by the U.S. Meat Export Federation (USMEF). The group departs on Sunday, July 7 and will return Saturday, July 13. The Nebraska Corn Board is sponsoring the Nebraskans on the mission.

The focus for this mission is an opportunity for U.S. beef and corn producers to assist in U.S. beef promotions and trade activities in the one of the busiest meat purchasing seasons.

Participants will have meetings with the U.S. Embassy, retail and importer discussions, interaction with over 500 meat buyers at a meat symposium, and a U.S. beef activity in the Sendai region of Japan. Main talking points will include the continued safety of U.S. beef that is LT 30 months and younger, as well as promotion of the quality of U.S. corn fed beef.

Nebraskans on the mission will include:

- Mark Jagels of Davenport, a corn farmer and beef producer. Mark is on the

Nebraska Corn Board and is the chair-elect of the U.S. Meat Export

Federation.

- Tim Scheer, corn producer from St. Paul. Tim is chairman of the Nebraska

Corn Board.

- Dale Spencer, a beef producer from Brewster, and president of the Nebraska

Cattlemen

- Kyle Cantrell, corn and beef producer from Anselmo

- Doug Parde, corn and beef producer from Sterling

- Dave Buchholz, president of David & Associates in Hastings, who is handling communications and media services during the mission

The mission of USMEF is to increase the value and profitability of the U.S. beef, pork and lamb industries by enhancing demand for their products in export markets through a dynamic partnership of all stakeholders. Simply put, USMEF is "Putting U.S. Meat on the World's Table."

The Nebraska Corn Board provides funds to USMEF since beef exports are critical to the success of Nebraska beef producers—and beef production is one of the largest customers for Nebraska corn and the distillers grains co-product from ethanol production.

If you're interested in receiving updates from this blog during the trip, please enter your email address in the upper right of this page.

Significant Takeaways

2012-03-28T07:29:00.000-05:00

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

2012-03-24T16:16:00.001-05:00


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...

2012-03-24T01:11:00.000-05:00

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

2012-03-23T00:47:00.000-05:00

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.

2012-03-22T15:16:00.002-05:00

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.

2012-03-22T11:41:00.000-05:00

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."

2012-03-20T17:19:00.001-05:00

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

2012-03-19T17:22:00.002-05:00

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

2012-03-18T11:39:00.004-05:00

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

2012-03-16T06:47:00.001-05:00

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.

Home At Last

2009-01-26T08:53:00.006-06:00

One last "team photo" after we landed on Gustavo's
grass runway near San Andreas de Giles.
Naturally, we had to include our pilots, Carlos and Leandro,
who not only flew us safely across South America,
but kept us entertained and opened many doors for us.
P.S. Pay no attention to the dog in the background.
He's NOT doing what it may appear he's doing...

As far as we know, everyone made it home safely on Friday, January 23. Our plane left Buenos Aires as scheduled and once we hit Miami, we all went our separate ways to our respective states—better educated about the dynamics of Brazilian and Argentine grain production, biofuels, deforestation, government policy and socioeconomic issues. We'll be developing a summary of the mission, but more importantly, a series of action items related to the visit that will help our corn-producing states address some serious challenges related to land use change, exports, food and fuel, and international cooperation and competition.

Stay tuned for future updates to this blog as we fill in the blanks. Thanks for reading. Hope you enjoyed it. Adios!