CHS updates

From cornfields to cornstarch

Japan Corn Starch Co. executives Vinh Quach, left, and Go Miyamoto traveled to West Liberty, Iowa, to see firsthand how Billie Danner, right, raises non-GMO corn for export to Japan.

Aug 22, 2018

Most farmers growing identity-preserved (IP) grain know where their crops are headed. But few have crossed an ocean to tour the plant where their corn is processed or invited those global customers to their farms. 

After growing IP crops for three decades, West Liberty, Iowa, farmer Billie Danner recently connected both ends of the supply chain for his non-GMO corn. In December 2017, he traveled to Tokyo as a guest of Japan Corn Starch Co., Ltd, which buys non-GMO corn from U.S. farmers marketing through CHS. The tour helped celebrate the company's 150th anniversary and the opening of a state-of-the-art wet-milling plant on the outskirts of the capital city. 

"It was the cleanest processing plant I've ever seen, inside and out," says Danner. "The company has very high standards that starts with the non-GMO corn they buy through CHS. They want to know exactly how it was grown and who's growing it."

CHS plays a key role in connecting Danner and other farmer-owners with leading global grain buyers. It has a stringent supply chain that helps companies, including Japan Corn Starch (JCS), meet their precise ingredient needs.

Meeting at Danner Farms in June were, left to right, Billie Danner, Kurt Kramer and Neil Johnke with CHS, and Japan Corn Starch representatives Vinh Quach and Go Miyamoto.

"JCS wanted to show its customers it buys corn from as close to the production source as possible," explains Neil Johnke, senior merchandiser, CHS Global Grain Marketing. "That makes CHS the perfect partner, since we can connect JCS directly to our owners."

Feeding the partnership

The biggest demand for IP grains is for food processing. CHS coordinates production, sales and shipment of those crops, including specialty soybeans to Japan for tofo, white corn to Latin America for tortillas and non-GMO corn to Japan for cornstarch. 

The CHS Davenport, Iowa, terminal is a key player in moving identity-preserved grain to export markets throughout the world. 

"CHS has one of the largest U.S. programs for handling non-GMO grains at our terminals along the Mississippi River," says Johnke. "All bushels contracted for export are segregated on barges that move down the river and are loaded out through the CHS Myrtle Grove (La.) terminal."

Japan is the second-largest customer of U.S. corn (behind Mexico), purchasing 10.3 million metric tons in 2016. About 25 percent of the corn is used to produce cornstarch, which in turn is used to make several types of syrups used to sweeten and thicken foods from candy and jellies to sports drinks, soda and beer.

"The new JCS plant was timed in part to accommodate beverage needs for the 2020 Summer Olympics in Tokyo," notes Johnke. "The company has developed a long-term relationship with milling researchers and experts at the University of Illinois at Urbana-Champaign, who helped design the facility."

To strengthen relationships and learn more about American agriculture, JCS representatives have spent several weeks in the U.S. each spring and summer over the past few years. Much of that time has been spent working at the University of Illinois and CHS headquarters in Inver Grove Heights, Minn. 

"They learn more about our company and the cooperative system and get to know our grain traders and see how they work," says Johnke. 

"We take them out to visit farmers who are growing their corn so they can see firsthand how and where it's raised," he adds. One of those visits was made to the Danner farm in early June. 

Specialty crop know-how
Danner Farms, specialty crops have been a mainstay since the mid-1980s. That’s when Danner returned from college to work with his parents, Louis and Sandy.

“There were some really dry years then and we wanted to try new crops,” he recalls. “We raised a lot of alfalfa in the late ’80s and ’90s. We grew white corn, waxy corn, tofu soybeans, and seed beans and corn. We started raising non-GMO corn as the Asia market for it grew.”

Over the last five years, he’s focused on seed corn, non- GMO soybeans and non-GMO corn, with 80 percent of the farm’s corn acres committed to non-GMO hybrids. This year it will be 100 percent. “We’ll be contracting 75 to 80 percent of our bushels for a set premium.”

Non-GMO corn contracts have netted premiums as high as 75 cents per bushel, says Danner, although now premiums are 15 to 25 cents per bushel on the river and 20 to 50 cents per bushel at the processor.

Danner also sells non-GMO corn to local processors who want food-grade corn to produce alcohol. “Premiums for corn that tests 99 percent non- GMO range from 10 to 25 cents per bushel,” he says.

While the premiums have moderated, last year they generated an additional $150,000 for the operation, says Danner. “That’s why we’re willing to take the extra time to clean out
equipment and bins and keep grain segregated.”

Reduced input costs can be another economic benefit of raising non-GMO corn. “We save $30 to $40 per acre on seed, which more than covers the additional $15 to $20 per acre
needed for insecticides. Over the last few seasons, our non- GMO hybrids have performed as well as GMO hybrids.”

Tracking Every Load

Most of the specialty crop agreements growers sign with CHS are delayed-price contracts, explains Kurt Kramer, grain merchandiser at the CHS Davenport, Iowa, terminal. “The contracts lock in only the number of bushels and a per-bushel premium. Delivery is usually done on a buyer’s call basis, and we give the farmer one to two weeks notice before we need the grain delivered to the terminal. The longest anyone would have to store the grain would be 10 months, but the bulk of our contract grain is shipped out in April and May.”

Every contract load of IP grain coming into the terminal is tested. That information is recorded and the grower signs off on each load, verifying that all the agronomic requirements were met and no prohibited chemicals were used in the field.

“That documentation and all scale tickets stay with each load of grain all the way through shipment, export and delivery to the customer,” Kramer says.

“By mid-summer, we will have contracted with growers for all the bushels of grain needed from the 2019 growing season. And we often have additional farmers interested in non-GMO corn contracts,” he notes.

Demand for IP grains has steadily increased over the past four years, both domestically and abroad, says Johnke. “It’s part of the consumer-driven desire to know where food comes from. We expect demand for IP grains to continue to grow.”

Japan’s Search for American Corn
Identifying and mitigating risk is a challenge for both Iowa corn growers and Japanese millers. For Soichiro Kurachi, president and CEO of Japan Corn Starch Co. (JCS), that meant finding a stable supply of non-GMO corn. JCS is the largest wet miller of corn in Japan. Since 1867, the six-generation family company has developed unique products from corn starch, including a patented high-fructose corn syrup specically for soft drinks.

When the JCS team met CHS grain marketers three years ago, they all knew the partnership would be a great fit.

“One of the best attributes of CHS grain marketing is the relationship with farmers,” says Kurachi. “It’s important for us to meet with farmers because our customers want to know who supplies the ingredients for our products. Our partnership with CHS allows us to bring the voices of the farmers to our customers.

“We do not consider starch a commodity,” he adds. “Japan Corn Starch products are necessary for life in Japan.”