Healthy soil and sustainable growing

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Rapid Rise in Seed Prices Draws U.S. Scrutiny
By WILLIAM NEUMAN March 11, 2010
http://www.nytimes.com/2010/03/12/business/12seed.html

During the depths of the economic crisis last year, the prices for many goods 
held steady or even dropped. But on American farms, the picture was far 
different, as farmers watched the price they paid for seeds skyrocket. Corn 
seed prices rose 32 percent; soybean seeds were up 24 percent.

Such price increases for seeds — the most important purchase a farmer makes 
each year — are part of an unprecedented climb that began more than a decade 
ago, stemming from the advent of genetically engineered crops and the rapid 
concentration in the seed industry that accompanied it.

The price increases have not only irritated many farmers, they have caught 
the attention of the Obama administration. The Justice Department began an 
antitrust investigation of the seed industry last year, with an apparent 
focus on Monsanto, which controls much of the market for the expensive 
bioengineered traits that make crops resistant to insect pests and herbicides.

The investigation is just one facet of a push by the Obama administration to 
take a closer look at competition — or the lack thereof — in agriculture, 
from the dairy industry to livestock to commodity crops, like corn and 
soybeans.

On Friday, as the spring planting season approaches, Eric H. Holder Jr., the 
attorney general, and Tom Vilsack, the agriculture secretary, will speak at 
the first of a series of public meetings aimed at letting farmers and 
industry executives voice their ideas. The meeting, in Ankeny, Iowa, will 
include a session on the seed industry.

“I think most farmers would look to have more competition in the industry,” 
said Laura L. Foell, who raises corn and soybeans on 900 acres in Schaller, 
Iowa.

The Iowa attorney general, Tom Miller, has also been scrutinizing Monsanto’s 
market dominance. The company’s genetically engineered traits are in the vast 
majority of corn and soybeans grown in the United States, Mr. Miller said. 
“That gives them considerable power, and questions arise about how that power 
is used,” he said.

Critics charge that Monsanto has used license agreements with smaller seed 
companies to gain an unfair advantage over competitors and to block cheaper 
generic versions of its seeds from eventually entering the market. DuPont, a 
rival company, also claims Monsanto has unfairly barred it from combining 
biotech traits in a way that would benefit farmers.

In a recent interview at Monsanto’s headquarters in St. Louis, its chief 
executive, Hugh Grant, said that while his company might be the market 
leader, competition was increasing as the era of biotech crops matured.

“We were the first out of the blocks, and I think what you see now is a bunch 
of people catching up and aggressively competing, and I’m fighting with 
them,” Mr. Grant said. He said farmers chose the company’s products because 
they liked the results in the field, not because of any untoward conduct on 
Monsanto’s part.

Yet in a seed market that Monsanto dominates, the jump in prices has been 
nothing short of stunning.

Including the sharp increases last year, Agriculture Department figures show 
that corn seed prices have risen 135 percent since 2001. Soybean prices went 
up 108 percent over that period. By contrast, the Consumer Price Index rose 
only 20 percent in that period.

Many farmers have been willing to pay a premium price because the genetically 
engineered seeds that make up most of the market come with advantages. 
Genetic modifications for both corn and soybeans make the crops resistant to 
herbicides, simplifying weed control and saving labor, fuel and machinery 
costs. Many genetically engineered corn and cotton seeds also resist insect 
pests, which cuts down on chemical spraying.

Lee Quarles, a Monsanto spokesman, said the price increases were justified 
because the quality of the seeds had been going up, and new biotech traits 
kept being added. For example, he said, many corn varieties now include 
multiple genes to battle insect pests, raising their value.

Mr. Quarles said higher prices were justified because the traits saved 
farmers money and made their operations more efficient.

Monsanto began investing heavily in biotechnology in the 1980s — ahead of 
most other agricultural companies. In the mid-1990s, it became the first to 
widely market genetically engineered seeds for row crops, introducing 
soybeans containing the so-called Roundup Ready gene, which allowed plants to 
tolerate spraying of its popular Roundup weed killer. Soon after, it began 
selling corn seed engineered with a gene to resist insect pests.

The number of biotech plant traits has grown since then, and other large 
companies — including DuPont, Dow Chemical, Syngenta, BASF and Bayer 
CropScience — have gotten into the business. But Monsanto has taken advantage 
of its head start. Today more than 90 percent of soybeans and more than 80 
percent of the corn grown in this country are genetically engineered. A 
majority of those crops contain one or more Monsanto genes.

As biotechnology has spread, Monsanto and its competitors have bought dozens 
of smaller seed companies, increasing the concentration of market power in 
the industry.

Monsanto sells its own branded seed varieties, like Dekalb in corn and Asgrow 
in soybeans, to farmers. But it has expanded its influence and profits by 
licensing those traits to hundreds of small seed companies, allowing them to 
incorporate the traits in the seeds they sell. It has also granted licenses 
to the other large trait developers, allowing them to create combinations of 
engineered traits in a process known as stacking.

Monsanto says that its licensing shows it is the opposite of a monopolist, 
encouraging rather than hampering competition.

But critics say the licenses give Monsanto excessive control. Seed company 
executives said the licenses were sometimes worded in a way that compelled 
them to sell Monsanto traits over those of its competitors. Mr. Quarles 
denied that, saying the contracts contain sales incentives typical of the 
industry.

Some of the most pointed accusations have come in a court battle between 
Monsanto and DuPont. Last year Monsanto sued its rival, saying DuPont had 
used a Monsanto trait to create a gene combination that was not permitted in 
its licensing agreement.

DuPont countered by charging that Monsanto was using its market power to 
strong-arm competitors and quash innovation that would benefit farmers and 
consumers.

In January, Monsanto won a partial victory. A federal judge ruled that the 
license barred DuPont from creating the gene stack. But the judge said that 
DuPont could move ahead with its antitrust claims, which, if successful, 
could potentially nullify the stacking ban.

DuPont made another accusation that caught the attention of farmers and 
regulators, saying that Monsanto was trying to head off the eventual entry 
into the marketplace of generic Roundup Ready seeds.

The company’s patent on the Roundup Ready trait in soybeans expires before 
the 2014 planting season, meaning that, just as in the pharmaceutical 
business, rivals would be free to sell a cheaper version. Farmers would also 
be free to save seed from one year to the next, a money-saving step they are 
now barred from taking.

But DuPont charged that Monsanto was trying to force seed companies to switch 
prematurely to its second-generation Roundup Ready soybeans and taking other 
steps to make the entry of generics more difficult.

Monsanto responded by announcing that it would not block companies from 
selling a generic version of Roundup Ready seeds. But farmers have continued 
to fret that cheaper generic seeds may be at risk.