Monsanto has a lock on the soy and corn seed market.

Editor’s Note: The Farmer to Farmer Campaign on Genetic Engineering recently released a report on the seed industry. (Farmer to Farmer is a coalition of 34 farm organizations.) The full report, “Out of Hand,” can be found here. Below are excerpts we’ve selected:

[imgcontainer right] [img:seed2.jpg][source]Out of Hand[/source] Monsanto has a lock on the soy and corn seed market. [/imgcontainer]

The concentration of economic power in agriculture has led to grave consequences for American farmers and rural communities. Today, reduced competition in agricultural markets means farmers face increasingly high input prices and diminished choice and innovation….

For example, four firms control more than 80 percent of beef packing; three firms control about 70 percent of soybean crushing; and three firms handle 55 percent of flour milling.  Farms themselves have quickly consolidated since the 1930s. The number of farms has decreased over the years, while the size of farms and the average age of farmers have steadily increased….Input industries are included in the trend and in fact demonstrate even higher levels of concentration in some sectors. Six companies account for 75 percent of the agricultural chemical market worldwide.

The seed industry is one of the most concentrated in agriculture. The top four firms account for 43 percent of the global commercial seed market, which includes both public and proprietary varieties sold. They also account for 50 percent of the global proprietary seed market. (The term proprietary refers to branded seed subject to intellectual property protections.)

The prevailing leader, the Monsanto Company, accounts for about 60 percent of both the U.S. corn and soybean seed market through subsidiaries and technology (i.e., genetically engineered traits, such as Roundup Ready and Bt) licensing agreements with smaller companies. When looking specifically at genetically engineered traits in the U.S., more than 90 percent of the soybean and cotton acreage, and more than  80 percent of corn acreage, is planted with one or more of Monsanto’s traits.

How We Got Here

Several factors facilitated seed industry concentration. Though once a public resource, seed has become increasingly privatized to the point where a handful of large firms now control much of the supply. In the face of weak competition law enforcement, biotechnology and agrichemical firms acquired and merged with dozens of smaller competitors. The rapid expansion of agricultural biotechnology, and the Supreme Court decisions that allowed these plant products to be patented, led to unprecedented ownership and control over plant genetic resources. 

The defunding of public plant breeding programs also eliminated many public seed varieties from the marketplace, and shifted research efforts to meet the needs of private firms investing in their work. Coupled with the 1980 Bayh-Dole Act, which allows universities to patent publicly funded research and products, university-industry relationships accelerated the privatization of important plant genetics that would otherwise be publicly available to farmers and other breeders, and therefore compete with private products….[imgcontainer left] [img:seed3.jpg] [source]Out of Hand[/source] The price of genetically engineered seed has risen relentlessly. [/imgcontainer]

Farmers were the first true plant breeders. Throughout the 19th century farmers conducted extensive crop breeding with new seeds provided free of charge from the U.S. government, many of which came from overseas. Most farmers depended on seed saved from their own harvest or a neighbor’s harvest, and did not buy large quantities from commercial suppliers. At the time these were small-scale, family-owned operations that grew varieties produced in the public domain.

The public sector eventually took on more breeding efforts and provided new seed varieties to farmers and small independent seed companies at affordable prices. Public breeding programs advanced American agriculture tremendously. They effectively increased yield in major crops, and were the strongest base of scientific knowledge with the best research facilities. Private firms at the time were small in number and offered few products. 

The Arrival of Hybrid Seed

The 1930s ushered in a game-changing seed development: hybrid corn. Before the 20th century, seed corn consisted almost entirely of open-pollinated varieties that farmers saved. Despite the inability to save and re-propagate the new hybrid varieties, farmers quickly adopted the high-yielding seed. Private seed companies capitalized on the feat and expanded in the commercial marketplace, largely because farmers who planted hybrids bought all new seed each year.

New seed companies entered the scene solely to produce hybrid corn. While most produced and sold hybrid seed corn developed by larger firms or the public sector, some established their own research and breeding programs. By 1965, more than 95 percent of U.S. corn acreage was planted to hybrids.

The private sector expanded rapidly in the 1960s and 1970s, especially after plant variety protection legislation stimulated commercial breeding of major crops, such as soybeans. The 1970 Plant Variety Protection Act (PVPA) provided the private sector an incentive to expand in the seed marketplace. Many seed companies did not have proprietary rights on the seed they sold but the PVPA provided a temporary, legal protection of plant products – with a few exceptions – to plant developers. 

The PVPA represented a compromise by Congress, which had long argued that sexually reproducing plants should not be awarded utility patents – “patents for invention” – for fear of curtailing innovation, threatening the free exchange of genetic resources, and increasing market concentration. But in 1980, the Patent and Trademark Office (PTO) awarded the first utility patent on life in the landmark case of Diamond v. Chakrabarty. The Supreme Court upheld this decision in 2001.

This decision provided the budding agricultural biotechnology industry with enforceable intellectual property protections. These firms rushed to patent genetic resources and plant breeding technologies – including those developed in the public domain – making it difficult for other companies to compete and ultimately slowing innovation. New restrictions on seed saving were also enforced. For example, soybean farmers only recently stopped saving most of their seed. In 1982, purchased seed made up about half of soybean acreage. Today nearly all the soybeans planted are patented varieties with seed saving restrictions.

The University-Industry Complex

Legislative changes transformed how industry and universities do business. In 1980, Congress passed the Bayh-Dole Act, which, for the first time, allowed universities to patent technologies and other products that result from publicly funded research projects. Universities had previously regarded patents as at odds with their non-profit educational mission, but following Bayh-Dole, they began to earn royalties in exchange for licensing their inventions to private companies. Industry funding for academic research surged after Bayh-Dole as public support diminished, increasing from $850 million in 1985 to $4.25 billion in less than a decade.

Coupled with changes in patent law, Bayh-Dole has allowed private firms to gain monopolies through patents on research results discovered through their donations to public breeding programs…. Ironically, the biotechnology industry would not exist if not for the free exchange of basic research done independently from market constraints.

Clearly, both sectors of plant breeding – private and public – depend on the other for resources, be it financial or agronomic. In the face of consolidation, the need for public plant breeding programs to produce cultivars for the public domain is more important than ever. While larger firms typically only produce seed for which there is a large market, public plant breeding programs have historically focused on local or regional markets – markets that have been abandoned as companies consolidate, public breeders vanish, and local seed production and distribution infrastructures are lost.

Fewer Companies = Less Innovation

Discussions on seed industry concentration typically center on the dominant firm, the Monsanto Company, which achieved the No. 1 position through a series of acquisitions, mergers, and partnerships with competitors in its industry. It took less than a decade for the company to capture the corn, soybean, cotton, and vegetable seed markets. Today, its GE traits are planted to more than 80 percent of U.S. corn acres and more than 90 percent of soybean acres.  In the company’s 2009 third-quarter report, $1.4 billion of its $1.8 billion pre-tax profit came from seeds and genetics.

Monsanto stands out as the most aggressive player in expanding market power and enforcing intellectual property rights. It owns the most widely adopted seed technologies, maintains substantial market power, and leverages this success by increasing prices at historic rates and implementing strategies to steer farmers toward expensive seed options…

Utility patents have not spurred innovation in plants. In fact, the opposite seems true, as evidenced by USDA reports that document a downward trend: “Calculations for corn, soybeans, and cotton indicate that as the seed industry became more concentrated during the late 1990s, private research intensity dropped or slowed.”  As opposed to driving innovation, utility patents on plants have provided an incentive to expand control over genetic resources, limit access to them, and make access expensive.  

The number of independent seed companies, especially small, family-operated businesses and research firms, has dramatically declined over the last few decades. As mentioned earlier, the Independent Professional Seed Association says there are only about 100 independent seed companies left, compared to more than 300 total (independent and consolidated) thirteen years ago.

Fast Adoption

U.S. farmers adopted crops with GE traits faster than any other technology in agricultural history. Introduced in 1996, soybeans genetically engineered to tolerate Monsanto’s Roundup herbicide covered more than half of U.S. soybean acreage by 2000 and 91 percent in 2009. Farmers in the South adopted herbicide-tolerant and insect-resistant (Bt) cotton as quickly, growing from 61 percent of U.S. acreage in 2000 to nearly 90 percent in 2009. While GE corn had a slower start, genetically engineered varieties now cover 85 percent of U.S. corn acreage. Monsanto’s dominance in the trait industry is unrivaled. 

Seed companies and dealers responded accordingly, growing and stocking more Roundup Ready and Bt varieties of major crops. Though conventional varieties matched and sometimes out-yielded crops with GE traits, the new technology was “like a drug,” says one farmer, and each year farmers came back for the higher priced seed that allowed for unprecedented conveniences in farming. 

Three Major Trends

The rapid adoption of GE traits in U.S. agriculture has led to three major trends in the seed marketplace that impact farmers: 

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

2) Biotechnology firms’ push for greater market penetration of stacked traits in corn; and

3) Lack of conventional corn and soybean seed options.

Roundup-Resistant Weeds

If you are a corn, cotton, or soybean producer in the Southeast or Mid-South, effects of glyphosate’s prolific use is seen in fields and felt in pocketbooks. (Glyphosate is Round-up.) Glyphosate-resistant weeds are now established in 19 states and deemed a serious economic problem, at times adding more than $20 per acre.  Weed specialists refer to resistant weeds as a “train wreck” making their way across the country.

The International Survey of Herbicide Resistant Weeds lists nine weeds resistant to glyphosate in the U.S., including: common ragweed, common waterhemp, giant ragweed, hairy fleabane, horseweed, Italian ryegrass, johnsongrass, palmer amaranth, and rigid ryegrass. [imgcontainer] [img:seed4.jpg] [source]Out of Hand[/source] The amount of Roundup herbicide (glyphosate) being used on American fields has increased dramatically. It use has spawned new weeds that are resistant to the chemical. [/imgcontainer]

Some of the worst resistance is found in pigweed (Palmer amaranth). Resistant pigweed now infests hundreds of thousands of acres in the Southeast. For example, 70 to 80 percent of Macon County, Georgia, dubbed the “epicenter” of glyphosate-resistant Pigweed, is infested with the weed, and farmers were forced to abandon 10,000 acres in 2007.151 

Purdue University weed scientist Bill Johnson explains that, “Farmers do not think resistance is a problem until they actually have it.” Johnson points out that new innovation and choice in herbicides has diminished over the years, so farmers have fewer chemical options. He says farmers “think the chemical companies can turn on the spigots and produce a new herbicide whenever they want.” But with Roundup’s success, money has not been invested in new herbicide research.

Weed resistance clearly diminishes the value of glyphosate and Roundup Ready systems, evidenced by the fact that farmers with resistance problems routinely mix glyphosate with other conventional herbicides. “Spreading weed resistance is rapidly relegating the Roundup Ready system to the list of yesterday’s herbicide systems,” says North Dakota farmer, Todd Leake. “When a farmer looks down the weed guide list and sees ‘poor control’ for glyphosate on so many problem weeds, he has to wonder if the Roundup Ready system is worth his time and money.”

Privacy and Property Rights

Farmers who use seeds containing genetically engineered traits are required to enter into onerous agreements that, among other things, remove their traditional right to save seed on their farm (a right, remember, provided under the PVPA). 

The pursuit of farmers for patent infringement (i.e., illegally saving patented seed) has affected rural communities beyond the drain of expensive attorney fees and judgments. These investigations, lawsuits, and most often, out of court settlements, have created a culture of fear in communities where farmers are targeted, as Monsanto’s private investigators are known to harass and intimidate families and businesses under investigation. 

No other company is enforcing its plant patents as aggressively as Monsanto. The company hosts an anonymous toll-free hotline that farmers can call to snitch on neighbors suspected of saving patented seed. This has bred distrust, suspicion, and less information sharing among farmers. Not to mention false leads…. Hundreds of farmers are investigated each year. As of 2006, Monsanto had initiated up to 4,000 “seed piracy matters” against farmers in 19 states.

Farmers have paid an estimated $85,653,601 to $160,594,230 in settlements and the number of settlements is 20 to 40 times the number of lawsuits in public court records. In response, several states have passed Farmer Protection Acts to level the playing field in patent investigations, including North Dakota (2001), South Dakota (2002), Indiana (2003), Maine (2008), and California (2008).

What Should Change

Our policy recommendations include:

1. The Department of Justice should closely examine anticompetitive conduct in the industry.

Biotechnology firms have merged with or acquired a significant number of competitors, and though some have drawn antitrust scrutiny, no meaningful action has been taken to deal with anticompetitive players. Farm commodity prices are falling and will not sustain escalating seed prices, which continue to put these firms’ primary customers – American farmers – at a disadvantage. Independent seed companies say that the licensing agreements they sign to access GE traits unreasonably restrain competition. Because independent seed companies are important distribution channels for new seed varieties, this market needs to be protected from predatory practices. 

2. Change patent law and establish Plant Variety Protection Act as sole protection.

By establishing the PVPA as the sole means of intellectual property protection over plants, farmers could regain the right to save seed and the right to choice, as plant breeders would have better access to plant genetics that are currently off limits to innovation because of patents.

3. Change the Bayh-Dole Act (Patent and Trademark Law Amendments Act). 

The Bayh-Dole Act as applied to seed patenting and agricultural innovations should be re-evaluated and reformed to prohibit mandates for seed patenting and exclusive licenses relating to technologies and innovations developed through publicly funded research, because such patents and exclusive licenses are reducing farmer choice, reducing researcher access and directly contributing to this increasing trend of monopoly power, higher prices and/or other anti-competitive practices.

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