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The Lid Is Off

April 7, 2010
By: Jeanne Bernick, Top Producer Editor
 
 

The rush of standing next to hundreds of farmers chanting "Bust up big ag” was worth the 2½-hour drive to Ankeny, Iowa, says Garry Klicker. He hates the idea of a few companies controlling the market, so he joined other like-minded farmers at a rally the night before the first-ever hearing on competition in agriculture.

"If we continue to consolidate agriculture, eventually only one person is going to own all the beef and hogs,” says Klicker, a small grain and beef producer from Bloomfield, Iowa. "A few packers are already setting prices for us. There is no free market anymore.”

Corn and soybean grower Ken Fawcett feels the same way about the seed industry, where Monsanto Company and DuPont's subsidiary Pioneer Hi-Bred control the market share for biotech seeds. He believes lack of competition has led to a rise in seed prices, which have tripled in four years.

"Farmers need to have choices about what they grow, free from corporate control,” says Fawcett, who farms in eastern Iowa.

The brewing pot of anger, fear and confusion about concentration in agriculture has finally boiled over, and the Barack Obama administration is taking the lid off the divisive issue. More than 700 farmers, food processing workers, politicians and executives gathered in March for a hearing that begins the process of recreating antitrust policy in agriculture. The public meeting was the first of five to be held across the U.S.

"Big is not bad, but it can be bad if the power that comes with it is misused,” says Eric Holder, Attorney General, U.S. Department of Justice (DOJ), who attended the hearing to learn about agriculture. "That is not something this department will stand for.”
 
Is It Monopoly? American Soybean Association vice president and Iowa farmer Ray Gaesser was keyed up before speaking at the hearing on a panel regarding the seed industry. He's watched corn seed prices rise nearly 30% and soybeans rise 20% in 2009. "There is a responsibility for the seed companies to play fair,” Gaesser says.

The seed industry is a complex, consolidating structure, says panelist Diana Moss, vice president and senior fellow at the American Antitrust Institute. "If you look upstream at the trait markets, there is a monopolist, and it is Monsanto,” Moss says.

While Monsanto has broadly licensed its technology, and that is good, "what is deceptive is that it gives the illusion of choice,” Moss says. She argues that Monsanto's licensing agreements prohibit competition and give the company too much control of the seed industry.

The American Antitrust Institute receives funding from DuPont, which is in litigation with Monsanto over licensing agreements with its subsidiary, Pioneer.

Jim Tobin, Monsanto's vice president for industry affairs, defends his company's market dominance in the seed industry, saying its success is due to strong demand for Roundup Ready seeds. "That's why we have such a high market share,” he says. "It's only because farmers choose to have Roundup Ready soybeans.”

Patent Fears. Gaesser also voiced concern about ensuring that foreign registrations for biotech traits are maintained once Monsanto's Roundup Ready trait goes off-patent in 2014 and becomes generic. He worries he may not be able to export his soybeans without registrations and that innovation and competition among independent seed companies may suffer.

Tobin assures farmers that Monsanto will continue registrations around the world for at least three years after Roundup Ready patents expire. Beyond that, Monsanto is proposing that whoever wants to use Roundup Ready off-patent can do so if they share the cost of registration around the world. It costs $1 million to $2 million a year to keep up registrations, he adds.

In January, the DOJ launched an investigation seeking to confirm that Monsanto will continue to offer seed companies and private farmers access to the first generation of its Roundup Ready trait upon patent expiration. This investigation is a result of claims by DuPont about the anticompetitive use of genetic licenses by Monsanto.

DuPont and its Pioneer subsidiary were invited to speak at the hearing but declined, according to Pioneer spokesperson Jerry Harrington.

"Patents have been used in the past to maintain and extend monopolies, and that is illegal,” says Holder's chief antitrust enforcer, Assistant Attorney General Christine Varney. "We will be looking closely at patent issues in agriculture.”

Market Transparency.
The remainder of the hearing focused on market transparency and buyer power, including the costs, benefits and prevalence of production and marketing contracts in grain crops and hogs.

Sam Carney, president of the National Pork Producers Council, says he attended the hearings to make sure that livestock farmers continue to have access to risk management tools. He also wants to see livestock industry price reporting reauthorized.

"We need livestock price reporting, or we have no guarantees that packers will be transparent with prices paid,” Carney says.

The livestock industry must come to a consensus on where price discovery is going to occur if there is to be transparency, states panelist John Lawrence, Iowa State University economist.

Market transparency goes hand in hand with the decline in real farm prices and steady increase in retail prices, adds Patrick Woodall, research director for Food & Water Watch. This is happening because large companies are able to exert more buyer power.

"Farmers get a little less every year, consumers pay more every year and the fewer and fewer companies in the middle are taking a bigger bite,” Woodall says.

Beefing Up Antitrust. USDA Secretary Tom Vilsack says it's not yet clear what actions may come of the public hearing sessions.

Many farmers, such as Jim Foster of Montgomery City, Mo., were pleased with the first hearing. "I'm convinced this was not just a dog and pony show,” Foster says. "These folks mean business.”

Sen. Charles Grassley (R-Iowa), who has been critical of the DOJ for not having enough institutional knowledge of agriculture, says what goes on at these hearings needs to be formalized in legislation. "That would help beef up antitrust enforcement,” Grassley says.

Iowa Attorney General Tom Miller agrees there needs to be more developed antitrust laws. "The interpretation of the antitrust law swings,” he explains. "In the 1970s, it swung to be a very broad interpretation, and now it's swung back to be a very narrow interpretation.”

From USDA, farmers can expect "pretty quick action on tightening regulations and pursuing the Packers and Stockyards Act,” Vilsack says. The sticking point, he says, is how to beef up antitrust in agriculture without stifling innovation.

These hearings should at least serve to turn up the heat on an issue that some believe has been on the back burner far too long.

Competition in Agriculture Workshops Schedule

The U.S. Department of Justice, Antitrust Division, and USDA will continue their public workshops to explore competition issues affecting agriculture.

May 21, Normal, Ala.:
Poultry industry
June 7, Madison, Wis.: Dairy industry
Aug. 26, Fort Collins, Colo.: Livestock industry
Dec. 8, Washington, D.C.: Margins

 



Top Producer, Spring 2010
 

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FEATURED IN: Top Producer - SPRING 2010
RELATED TOPICS: Trends, Economy

 
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