Grand Forks Herald

June 26, 2002

DEAL MADE IN DOUGH; MONSANTO, SPRING WHEAT BAKERS SIGN PACT TO PERFECT SYSTEM TO SEGREGATE
WHEATS, ESPECIALLY GENETICALLY MODIFIED VARIETIES

By Mikkel Pates, Herald Staff Writer

FARGO - Spring Wheat Bakers has scrapped a business plan that hasn't worked
and hired a new chief executive. It has also signed a pact with Monsanto
Inc. to jointly perfect a system that could effectively segregate wheats in
the marketplace - especially genetically-modified wheats.

Michael Warner of Hillsboro, N.D., the chairman of the board of the
four-state cooperative, is announcing the joint initiative with Monsanto as
part of six grower district meetings that end Thursday in Dickinson, N.D.

One of those meetings was in Grand Forks on Tuesday and Warner agreed to
talk about his presentation after a member contacted the news media about
the deal.

Warner confirmed the co-op and Monsanto work to discover the advantages and
disadvantages of biotechnology and how we can deal with those advantages
and disadvantages in a responsible and proper manner.

He said the wheat industry has a stake in biotechnology and everyone
involved should be studying the advantages and disadvantages. The issue has
been politically-charged because some major wheat customers say they won't
buy genetically-modified wheat, and it hasn t been proven that a country
that commercializes it can keep it separate from conventional wheat. It s
far too important to our industry to allow it to hang in some unresolved
limbo, Warner said. We look at biotechnology as a genuine shift - a
paradigm shift - from where we are going to an entirely whole new way of
marketing new products. And it isn't going to be the old commodity grind.

The two will study a so-called identity-preserved system that could be used
for keeping genetically-modified products separate in the marketplace - a
key to marketing success.

You have to have a way to make sure those who want it, get it and those who
don't want it, don't get it, Warner said.

Some markets in the world are strongly averse to consuming crops and
products developed through biotechnology, even though many common medicines
have been developed through artificial gene manipulation.

Monsanto makes Roundup, a herbicide. Soybeans and other crops have been
developed with an immunity to the herbicide. These Roundup-ready crops are
the most widely-commercialized form of genetic modification.

MONEY NOW?

Warner declined to confirm a member's report from a meeting in Grand Forks
on Tuesday that Monsanto already has paid $500,000 to the co-op for some
part of the deal.

Todd Leake of Emerado, N.D., and a vice chairman for a Grand Forks County
affiliate of the Dakota Resource Council, said members were concerned the
co-op is going to be a public relations pawn for Monsanto and said that
logistics prevent segregation of GMO and conventional wheats.

Leake said the co-op already has received $500,000 from Monsanto. Warner
declined to confirm that amount, saying members should hear any financial
information in the district meetings and not in the news.

We're just starting, starting the process of being responsible, Warner
said. He said there is a lot of hysteria, misinformation, half-truths and
just plain trade positioning in some of the worldwide problems with GM crops.

Three Years

In an interview Tuesday evening in Fargo, Warner said Monsanto approached
the co-op board three years ago. The board agreed on the deal in May, which
includes a time period, a review and, perhaps, extensions.

They've come to the conclusion that a system of segregation and identity
preservation (IP) holds the promise of a very important part of getting the
benefits of biotechnology established in the wheat market. This goes way
beyond Roundup-ready, which is the issue at hand, into what I call the new
wheats,'" Warner said.

Those include wheats that offer better nutrition or solve allergies some
consumers have to wheat products, or for products for diabetics or for
those who need to control cholesterol.

We're in the business of adding value to our customers, Warner said. All of
that holds the promise of developing whole new crops that will take our
members out of the unprofitable grind of commodity wheat farming.

Warner described the deal with Monsanto as akin to a consulting role.
Monsanto came to us because we are generally considered the only
wheat-based business that has successfully put together a
highly-sophisticated identity-preservation system.

Spring Wheat Bakers invested $1.5 million in a system to track and
segregate members wheat, but put it on the shelf a year ago for financial
reasons.

What you're hearing is that a major, multi-billion-dollar corporation wants
to take part in the establishment of an entirely new way of marketing
wheat, Warner said.

For more than two years, the co-op ran an IP project to add value to its
members wheat that offered customers access to wheat of specific varieties
and characteristics.

That IP program operated three years, but ended last spring, even though
the co-op identified 40 cents a bushel in extra value, and customers paid
premiums for it. But the system cost money to operate and Spring Wheat
Bakers was having trouble with its bakery it owns near Atlanta. The bakery
produces partially-baked and frozen bread dough products.

We underestimated the amount of capital it was going to take to establish
the system, and now that value has increased, partly because of food safety
concerns, Warner said.

Warner said the IP system will be restarted by the co-op and will track
some of the same characteristics it did before.

Not released

Genetically-modified wheat is being studied in research plots but is not
released commercially in the U.S. Warner did not say whether or how the
system will simulate keeping genetically-modified characteristics separate.

Warner confirmed that John Parr of the Denver area is acting president and
will head operations and sales. Parr, a president of Jeno's Pizza in the
1980s, had been the No. 2 choice for a chief executive in 1997 when the
company hired Gary Lee.

Lee put the company on a course to develop several large plants in regional
population centers and make deep connections with a few customers, who
would market the products.

Lee left the company a year ago. He was succeeded by Mark Krivoruchka, who
left the company in April and has left the food industry, Warner said.

Warner said Parr will move forward a strategy of multiple customers,
incremental volume and Spring Wheat Bakers labeling.

The co-op switched their annual meetings from December to February or early
March. The annual meeting didn't happen, however, because members had just
heard extensive financial information in stock offering meetings in
November and December.

In those meetings, the co-op raised $2.9 million, with commitments for
another $4.2 million. Krivoruchka had projected profitability by April to
June.

We have a budget that says we can be profitable within the next eight
months, Warner said.

Warner described reaction at the meetings this way: I would characterize it
as the reaction of commercial farmers, Warner said. (They want to know)
what are the advantages? What are the disadvantages? What is the potential
for profit? How can it help my farming operation? '"

He said members approach the ideas cautiously.

The farmer-owned cooperative is owned by 2,800 farmers in the Dakotas,
Montana and Minnesota. It is one of the largest of the region's
farmer-owned co-ops by membership and its members produce some 20 percent
of the spring wheat grown in the region.

Warner said members who leak confidential co-op information to the media
run the risk of damaging our position in the marketplace and the value of
its stock for their fellow members.