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The Spy Effect

January 29, 2014
By: Jeanne Bernick, Top Producer Editor
seed heist
  
 
 

Chinese seed spy case scratches a prickly trade

From September 2011 to October 2012, Mo Hailong was busy. Working for Kings Nower Seed out of China, the supposed corporate spy allegedly engaged in a scheme to steal special inbred corn seeds worth millions of dollars from Iowa farms.

Mo Hailong used a fake name to tour DuPont Pioneer and Monsanto Company, and in December 2013, his alleged associates were caught smuggling corn seeds out of the country.

Mo Hailong has been charged with corporate espionage, facing 10 years in prison and $5 million in fines. His associates face additional charges. Monsanto and DuPont say they are cooperating with authorities.

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Separately, U.S. officials also charged two other Chinese men in Kansas—one a USDA scientist—with conspiring to steal a "variety of seeds," including research and development products by Ventria Bioscience. Read more details about these espionage cases at www.agweb.com/tech_heist.

These charges come at a time when the U.S. has pushed to increase trade with the communist country. In October, companies from Iowa and China’s Hebei Province signed trade agreements worth about $1 billion. China also has been accelerating its development of seed technology.

"It’s not unusual for Chinese loyalists to come here and get educated; they keep their Chinese
contacts and take information back," says Kent Schulze, an independent seed consultant, based in Minneapolis, Minn. "They’re after the genetics … once you have the inbred line with a dominant technology trait, you can put it with any male or female, and away you go. Their policing is better, but it’s not good."

According to DuPont, the loss of a line of specialty seed could mean five to eight years’ lost research and financial losses of $30 million to $40 million, at a minimum.

Corn Essential. Despite record harvests, China can’t grow enough corn. Chronic water shortages, less arable land and other constraints pressure production. In December, China reported more than 8 million acres of land too polluted to farm.

As a result, China is buying more corn. By 2022, USDA forecasts that China will import six times the amount of corn it does now.

Ironically, while China is expected to be a major U.S. corn buyer, it has rejected more than 26 million bushels due to the presence of an insect-resistant genetically modified (GM) strain of corn that is permitted in the U.S., Japan and Europe—but not China. It also rejected about 2,000 tons of distillers’ grains with solubles due to the same GM event.

Seed Drive. Experts believe the drive for seed espionage stems from China’s vow to commercialize its seed industry. Many multinational breeding and crop-biotechnology companies rushed to compete for a piece of the budding market.

While China is home to thousands of breeding companies, many are too small to lead the market. Most of the new technologies are still experiments in university or research laboratories, and the transition from science to businesses takes at least 10 to 15 years. The latest available figures show China’s central government allocated 1.64 billion yuan from 2006 to 2010 for R&D on breeding crops.

How big a deal is this attempted theft? "Very big," says Andy LaVigne, American Seed Trade Association (ASTA) president and CEO. "It’s a product that has taken years to research and develop. If a country steals and multiplies it to sell in another country, will they register that product in other countries and steward that product like the U.S.?  I doubt it. That should be a concern."

Iowa Gov. Terry Branstad told reporters that the apparent theft could affect the state’s relationship with China, which the governor has sought for decades to forge.

Regarding any impact on the markets, there will most likely be no immediate effect, says Mark Gold of Top Third Ag Marketing. "However, this event is a piece of ammo for further trade negotiations and  discussions," Gold says. 

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FEATURED IN: Top Producer - February 2014
RELATED TOPICS: Farm Business, News, Seed, Tech Heist

 
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