{"id":71500,"date":"2018-08-06T12:14:04","date_gmt":"2018-08-06T17:14:04","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=71500"},"modified":"2018-08-06T12:15:00","modified_gmt":"2018-08-06T17:15:00","slug":"opinions-differ-on-how-merged-bayer-monsanto-affects-some-seed-businesses","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/opinions-differ-on-how-merged-bayer-monsanto-affects-some-seed-businesses\/","title":{"rendered":"Opinions Differ on How Merged Bayer-Monsanto Affects Some Seed Businesses"},"content":{"rendered":"

By Yanchun (Roxanne) Liu<\/strong>
\nMedill Reports<\/em><\/p>\n

Academics and independent seed companies have divergent outlooks on whether the merger between agrichemical giants Monsanto Co. and Bayer AG will drive away potential customers from companies that sell organic seeds and seeds that aren\u2019t non-genetically modified.<\/p>\n

German drug maker Bayer said in a press release on June 7 that it completed its $63 billion acquisition of Monsanto, the St. Louis-based provider of genetically modified organism seeds and crop protection chemicals. The tie-up further consolidates the global agrichemical sector, after Dow Chemical Co. merged with DuPont Co. in August and China National Chemical Corp. purchased Swiss biotechnology company Syngenta AG in June 2017.<\/p>\n

The new company is likely to continue Monsanto\u2019s strategy of increasing the prices of GMO seeds with new genetics each year, but the price increase will not be as aggressive as it was five years ago because of declining crop prices, said Chris Shaw, a senior analyst at Monness Crespi Hardt & Co., a New York-based equity research and trading firm. Prices have dropped and stayed at relatively low levels over the past few years, reducing farmers\u2019 incomes and undermining seed companies\u2019 ability to increase prices, Shaw said.<\/p>\n

\u201cIf the price of GMO seeds rises as a result of the merger, that can sort of open up an opportunity for non-GMO seed producers to raise their prices a little bit, because their product will be more attractive if the rival product is more expensive,\u201d said John Bovay, an assistant professor in agricultural economics at the University of Connecticut.<\/p>\n

<\/p>\n

Josh Richey, President and CEO of Spectrum Seed, a non-GMO seed firm in Lafayette, Indiana, said the merger doesn\u2019t give Monsanto enough power to drive non-GMO farmers back to bioengineered seeds. Monsanto\u2019s seeds have become less attractive to farmers in recent years with the emergence of weeds that are resistant to glyphosate, the key ingredient in Monsanto\u2019s herbicide Roundup, while the decrease in the insect infestation has rendered insecticide-resistant traits unnecessary, Richey said.<\/p>\n

\u201cEven if [the new company] were to cut the [seed] price significantly, I don’t know that the price gets close enough to where the farmer goes back to using the technology if the technology isn’t necessary,\u201d Richey said.<\/p>\n

The merged company may threaten non-biotech seed companies if it decides to address the increased demand for GMO-free and organic seeds by expanding Monsanto\u2019s non-GMO business, Bovay said. The new company has sufficient capital that can back up innovative research and the tactic of selling seeds at a lower price than smaller competitors, Bovay said.<\/p>\n

Domestic organic commodities sales reached $7.6 billion in 2016, a 23 percent increase compared with the prior year, according to the latest report released in September by the Agriculture Department. Organic retail food sales for 2016 was $40 billion, accounting for more than 5 percent of the total at-home food consumption in the U.S., the report said.<\/p>\n

In 2005, Monsanto paid over $1 billion to buy Seminis Inc., a market-leading producer of vegetable and fruit seeds. Seminis continues to invest over 98 percent of its research and development into non-GMO programs after the acquisition, according to the Monsanto subsidiary\u2019s website.<\/p>\n

Having abundant cash to fund non-biotech research doesn\u2019t mean the new conglomerate is bound to lure customers away from smaller non-GMO seed companies, said Philip Howard, an associate professor at Michigan State University. Lots of organic seed suppliers dropped seed varieties from Seminis out of their dislike for Monsanto, which to some extent steered more business to smaller companies, Howard said.<\/p>\n

Mac Ehrhardt, owner of Albert Lea Seed House, a family-owned organic seed store in Albert Lea, Minnesota, said he doesn\u2019t expect that the merged company\u2019s ability to expand in the organic seed realm will jeopardize his business.<\/p>\n

\u201cMonsanto has the resources to say \u2018Well, we feel like this organic thing is going to continue to grow so let\u2019s start a little organic seed company,\u2019 but they couldn\u2019t do it in three months,\u201d Ehrhardt said. \u201cIt would take them three years.\u201d<\/p>\n

Despite less funding for research programs compared with the new Bayer, small seed companies can adjust the direction of their research much quicker to respond to farmers\u2019 ever-changing needs, said Stephen Gray, President and CEO at Sentinel Seeds, an Ashkum, Illinois-based firm that sells non-GMO hybrid corn seeds.<\/p>\n

\u201cIt’s the difference between trying to change the direction of a battleship and trying to change the direction of a rowboat,\u201d Gray said. \u201cIt takes miles for [Bayer-Monsanto] to get that battleship turned and everything working together, where it takes us one staff meeting.\u201d<\/p>\n

However, big agrichemical companies can hamper the innovation of small non-biotech seed firms by overusing patent protection, Michigan State University\u2019s Howard said.<\/p>\n

\u201cThere was one example where Monsanto was trying to file a patent on any variety of broccoli that was easier to harvest, even without knowing the exact genes responsible for those traits.\u201d Howard said.<\/p>\n

Howard said he expects the new company, more powerful than the two firms alone, to continue to make broad patent claims, increasing the costs for smaller players to access genetics to develop new seeds.<\/p>\n

The intellectual property barrier set by seed giants is especially grim in hybrid corn production, where smaller companies usually license from bigger firms the inbred lines, which are used to produce seed of finished hybrid corn varieties, said Kiki Hubbard, director of advocacy and communications at non-profit organization Organic Seed Alliance.<\/p>\n

The largest corporations, without incentive to support organic agriculture, provide relatively few corn inbreds that meet the standard for organic production, making it difficult for smaller firms to develop seeds for organic farmers, Hubbard said. The Monsanto-Bayer merger amid the consolidation trend in seed industry will likely worsen the situation, she said.<\/p>\n

Small non-biotech seed companies may consider doing mergers among themselves to confront the possible threat from the consolidated giants, said Peter Goldsmith, an agricultural economics professor at University of Illinois. It takes scale and capital for small seed firms to increase production to supply larger numbers of organic farmers and develop closer partnership with retailers like Whole Foods and Amazon to reach consumers who really want GMO-free products, Goldsmith said.<\/p>\n

\u201cThey probably can survive small and local,\u201d Goldsmith said. \u201cBut if they really want to grow and really want to take advantage, there’s some real opportunities here for them to act bigger.\u201d<\/p>\n

Photo at top: Department of Agriculture National Organic Program, Agricultural Marketing Specialist Lee Cliburn prepares seedling. (USDA)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Yanchun (Roxanne) Liu Medill Reports Academics and independent seed companies have divergent outlooks on whether the merger between agrichemical giants Monsanto Co. and Bayer AG will drive away potential customers from companies that sell organic seeds and seeds that aren\u2019t non-genetically modified. German drug maker Bayer said in a press release on June 7 […]<\/p>\n","protected":false},"author":449,"featured_media":71504,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,4227],"tags":[],"class_list":["post-71500","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-spring-2018"],"yoast_head":"\nOpinions Differ on How Merged Bayer-Monsanto Affects Some Seed Businesses - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/opinions-differ-on-how-merged-bayer-monsanto-affects-some-seed-businesses\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Opinions Differ on How Merged Bayer-Monsanto Affects Some Seed Businesses - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Yanchun (Roxanne) Liu Medill Reports Academics and independent seed companies have divergent outlooks on whether the merger between agrichemical giants Monsanto Co. and Bayer AG will drive away potential customers from companies that sell organic seeds and seeds that aren\u2019t non-genetically modified. 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