I Wish I Were Far From the Madding Crowd

April 11, 2010

Monsanto and seed control – Joint USDA/DOJ Public Workshops on Agriculture and Antitrust Enforcement Issues

Genetic engineering may not be the only threat posed by Monsanto and other firms that are now dominating agriculture.  (See my previous post that, among other things, discusses the spread of resistance to glyphosate.)  Control of the seed supply through patents and licensing means that seed prices could become noncompetitive.  Higher seed prices will eventually result in higher food prices.  In addition, non-genetically-engineered crops will become more difficult to find.

Public Workshops on Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy

http://www.justice.gov/atr/public/workshops/ag2010/index.htm

Includes links to the Iowa Workshop agenda and transcript (348 pages!), prepared remarks, comments (over 15,000 were received!)

Press Release: Department of Justice and USDA Workshops to Explore Competition and Regulatory Issues in the Agriculture Industry to Begin March 12 in Iowa

Original – http://www.justice.gov/atr/public/press_releases/2010/255559.htm

From PR Newswirehttp://www.prnewswire.com/news-releases/department-of-justice-and-usda-workshops-to-explore-competition-and-regulatory-issues-in-the-agriculture-industry-to-begin-march-12-in-iowa-85082887.html

At the end of this post I have included excerpts from the Dec. 2009 report Out of Hand: Farmers Face the Consequences of a Consolidated Seed Industry, which discusses the ramifications of the use of biotechnology in agriculture.

Monsanto 7-State Probe Threatens Profit From Gene in 93% of Soy (Bloomberg News)

http://www.bloomberg.com/apps/news?pid=20601109&sid=aCK4Q3XZCpyw

March 10 (Bloomberg) — At least seven U.S. state attorneys general are investigating whether Monsanto Co., the world’s largest seed producer, has abused its market power to lock out competitors and raise prices.

Iowa and Illinois, whose antitrust probes Monsanto disclosed previously, have joined with Ohio, Texas, Virginia and two other states in a working group coordinating the inquiries, according to investigators, farmers and seed dealers….

“Rapid Rise in Seed Prices Draws U.S. Scrutiny,” NY Times

http://www.nytimes.com/2010/03/12/business/12seed.html

“Justice Dept. Tells Farmers It Will Press Agriculture Industry on Antitrust,” NY Times

http://www.nytimes.com/2010/03/13/business/13seed.html

Commentary

8 Steps the Department of Justice Could Take to Reform Farming « AllergyKids Blog
http://allergykids.wordpress.com/2010/03/12/8-steps-the-department-of-justice-could-take-to-reform-farming/

Part of a blog post by Robyn Smith, founder of the Allergykids Foundation (http://www.AllergyKids.com).  Emphasis added.
On Friday in an unprecedented move with the USDA, the Department of Justice  will launch an investigation into the farm business. The investigation begins a 7-state probe into how Monsanto treats its customers, our nation’s farmers.

I recently had the honor of presenting for our nation’s top producing farmers in Chicago at the Top Producer Seminar, sponsored by Cargill and Pioneer. I was scheduled to present with Monsanto’s VP of Sustainable Yield, but a few days before the presentation was told that he had moved to China and that there was no one to take his place. I then had the privilege of spending the afternoon in an incredibly insightful discussion with the farmers, many of whom are Monsanto’s customers, who are remarkable fathers, grandfathers and businessmen.

As I found the courage to take the stage, I shared that according to the USDA, farm income was down 35% in 2009. I then shared that Monsanto is reporting, in forward looking statements to Wall Street analysts based on projected sales that they have asked for from the farmers, that they are expecting gross margins in Q2 2010 of 62% and that they are expecting to drive up the price mix of their products, corn and soy, by 8-10%.  I also shared that according to these forward looking statements, Monsanto expects to expand their glyphosate revenue to an estimated $1 billion in gross profit by 2012, further enabling Monsanto to drive R&D into seeds and to price those seeds at a premium – further driving price increases on the farm.

And then I listened.

What I learned from these remarkable men and women is simply jaw dropping.

Due to Monsanto’s contracts with seed companies, farmers are now bound by the threat of a lawsuit if they speak out regarding farm practices.  As third and fourth generation farmers, inheriting their grandfathers’ lands, their corn crops are no longer regulated by the FDA but by the EPA due to the insecticidal proteins they now contain, and they are subject to rising, unregulated costs never beforeseen in farming – contractual fees, trait fees, licensing fees and royalty fees and germ plasm fees associated with a technology that has been engineered into seeds designed to enhance Monsanto’s bottom line.

As I listened to the farmers and learned about their trade practices, I could not help but think of AT&T and the Bell System which for years functioned as a regulated monopoly until an antitrust investigation resulted in its break-up, as the practices employed by Monsanto on the farm, rival the fee structure that the phone company once had in place…..

More background

Food’s Wake-Up Call to EPA: “The regulatory system is not working” « AllergyKids Blog
http://allergykids.wordpress.com/2009/11/06/foods-wake-up-call-to-epa-the-regulatory-system-is-not-working/

Out of Hand: Farmers Face the Consequences of a Consolidated Seed Industry
http://farmertofarmercampaign.com/Out%20of%20Hand.FullReport.pdf

A Report by the “FARMER to FARMER” Campaign on Genetic Engineering, Dec. 2009

From the Executive Summary

The seed industry has quickly consolidated. The U.S. Department of Justice (DOJ) announced in August 2009 that it would investigate alleged anticompetitive conduct in the seed industry largely because a few dominant firms now control much of the seed supply.

Ten companies account for about two-thirds (65 percent) of the world’s proprietary seed – that is, branded varieties subject to intellectual property protections – for major crops. Economists say that an industry has lost its competitive character when the concentration ratio of the top four firms (CR4) is 40 percent or higher. In seed, the top four firms account for 50 percent of the proprietary market alone, and 43 percent of the commercial market, which includes both proprietary and public varieties. This level of concentration has proven problematic, reducing choice and increasing prices for the average American farmer.

NOTE: The top four companies are Monsanto, Dupont/Pioneer Hi-Bred, Syngenta, and Bayer CropScience.

At least 200 independent seed companies have been lost in the last thirteen years alone.

Discussions on seed industry consolidation typically center on the dominant firm, the Monsanto Company, which achieved the No. 1 position in less than a decade by capturing the markets for corn, soybean, cotton, and vegetable seed. Its position is most evident when looking at acreage. Today, its genetically engineered (GE) traits are planted on more than 80 percent of U.S. corn acres and more than 90 percent of soybean acres.

Three major trends have emerged in the Monsanto-dominated seed marketplace that prove challenging to farmers.

1) Historic price increases in seed driven by royalty fees for GE traits

USDA figures show that the most substantial price increases occurred parallel to the rise in GE crop plantings, with the most significant price increases occurring within the last few years.  Corn seed prices in 2009 were more than 30 percent higher, and soybean seed nearly 25 percent higher, than 2008 prices. These mark the steepest year-to-year increases to date.

Monsanto’s dramatic price increases are unmatched. The company’s traits and the technology (royalty) fees tied to them stand out as the driving force behind increased seed costs. These fees vary by crop type, but all have increased substantially over the years. The Roundup Ready trait in soybeans added $6.50 per bag in 2000 and has nearly tripled since then, now costing $17.50 per bag for the same trait – sometimes attributing to nearly half the price of a bag of Roundup Ready soybean seed.

2) The biotechnology industry’s push for greater market penetration of stacked traits in corn

Higher seed prices have also resulted from Monsanto leveraging its market share to stack various traits into single varieties. In 2008, Monsanto executed an “expanded trait penetration” plan to increase sales of seed comprised of, or “stacked,” with three different traits. The strategy is aggressive and effective: First capture ample market share through attractive pricing structures and then increase prices once “penetration goals” are met. Because each trait fetches a separate royalty for Monsanto, as seed traits are stacked, prices grow.

3) Lack of conventional corn and soybean seed options

Monsanto also boosts triple-stack seed sales by effectively eliminating other options in the marketplace. As the industry consolidates, seed options narrow, and farmers lose access to important varieties they once relied on. Conventional (non-GE) options have diminished, and single and double trait corn varieties are also more difficult to locate. Farmers report that it is increasingly hard to Bt corn without the Roundup Ready trait.  Monsanto’s data confirms this trend.

To drive farmers toward triple stack varieties, Monsanto implemented more dramatic price increases for single trait and double stack varieties while reducing single trait and conventional options in its own brands and subsidiary companies. Little attention has been given to this emerging trend, where demand does not factor in as much as a lack of choice.

To be sure, there is great demand among farmers for GE corn and soybeans. Yet demand for conventional varieties is growing at the same time that farmers are seeing these varieties slip away as the industry consolidates. Higher Roundup Ready soybean seed prices have sparked  renewed interest in conventional soybeans. In 2009, numerous university extension agents reported that conventional soybean sales had doubled and demand could not be met. In fact, this year marked the first reduction of GE soybean acres since their introduction in 1996.

This report explores how the renewed demand for conventional soybeans is a result of various factors: high seed and glyphosate costs, glyphosate-resistant weeds, high premiums for conventional soybeans, and the ability to save non-patented varieties of conventional seed. Taken together, buying conventional soybean seed leads to cheaper production costs, access to more profitable markets, and the ability to save and improve seed.

“Antitrust Questions for Monsanto,” NY Times

http://www.nytimes.com/2010/01/15/business/15seed.html

“As Patent Ends, a Seed’s Use Will Survive,” NY Times

http://www.nytimes.com/2009/12/18/business/18seed.html

Videos on same topic at http://article.wn.com/view/2010/03/20/Expiring_patents_sow_seeds_of_battle/

“Crop Scientists Say Biotechnology Seed Companies Are Thwarting Research,” NY Times

http://www.nytimes.com/2009/02/20/business/20crop.html

Advertisements

Create a free website or blog at WordPress.com.

%d bloggers like this: