US seed industry concentration continues

Further to the CAS-IP submission to the DoJ on seed industry concentration, DuPont Pioneer Hi-Bred has acquired two of its distributors – Ohio-based Seed Consultants and Louisiana-based Terral Seed.  This brings total distributor acquisitions for December 2010 to five.  And on January 3^rd the purchase of MECS, a technology company specializing in agriculture, was completed.  

Perhaps more disturbing, in 2010 there were several large takeovers in the fertilizer production business, and on December 20^th Russian potash producer Uralkali announced that it was buying Silvinit, a smaller competitor, for $7.8 billion.

According to Business Week, the new entity will control 17% of global potash output.

While this is by no means an exhaustive listing of recent acquisitions, it is a reminder that the trend we wrote about a year ago, and which the DoJ planned to “investigate”, is ongoing.

On December 10^th the DoJ held the fifth and final workshop on competition and concentration within the US agricultural sector (full transcript available here).  Francesca Re Manning reviewed the transcript (thanks, Francesca!) and observes that:

“In his presentation, Agriculture Secretary Tom Vilsack reminded the audience that a fair and competitive marketplace is important not only for producers, but also for consumers. John Crabtree of the Center for Rural Affairs urged the Ministry of Agriculture and the Department of Justice to stand up to industry and to stop the increasing concentration and vertical integration in farming, ranching, livestock production and meatpacking as this could only help revitalize rural America. 

 The organizers of the workshop series were praised for their efforts to engage with farmers, producers and retailers and for opening a dialogue to better understand the issues behind competition in U.S. agriculture. The role that intellectual property, in particular the patenting of seeds and genetic material, has on competition was indeed mentioned. And it is true that last October the Department of Justice opened investigations into Monsanto’s alleged violation of anti-trust rules in the GM crop market.  However, to my disappointment, the use and abuse of intellectual property rights was touched only marginally.  The focus seemed more on the availability to US consumers of healthy and varied food, perhaps due to Michelle Obama’s campaign on reducing obesity in children.

 I can only commend the workshop if, as a few people from the audience rightly urged, the Government will take the matter seriously and take action. In Mrs. Obama’s words, “Let’s Move”!”

Based on this, I get the impression that the DoJ investigation – which started 18 months ago – is probably not going to have much impact, and that global seed production and distribution will be controlled by fewer and fewer companies.  This will inevitably impact developing countries and further reduce farmer options.  Given the focus of USAID and other donors on food security, perhaps it is time for these organizations to involve themselves in the discussion – before it is too late.

Post written by Peter Bloch

“How can Africa grow more food?”

The Guardian reports on, yes, more reports about food security in Africa, “How Can Africa Grow More Food?”

I was struck by an observation about agricultural technology that nails one of the crucial challenges faced by the new, improved CGIAR:

One old hand in the field told me the other day that, on average, it takes 46 years for agricultural innovations to get from the laboratory to widespread use in the field in Africa; it’s not lack of technology that is the problem but effective means to disseminate practical solutions. Technology might be able to achieve quick fixes in health on the continent, but they might be elusive in agriculture because it entails much more complex issues of land rights and power.

The Guardian coverage was prompted by the publication of a new book, The New Harvest: Agricultural Innovation in Africa, a product of the Agricultural Innovation in Africa Project.

Reader comments at guardian.co.uk are passionate and well worth reading.  One blogger, pngahgita, ends a lengthy comment with an observation:

Now, he who controls the seed industry is master over life and death in the long run!

That reminded me why CAS made such an investment in trying to get the DoJ to broaden the scope of their enquiry into concentration in the seed industry to include developing countries.  Read the paper “Potential Impact of U.S.-Based Seed Company Competition on Access to Seed in the Developing Country Context”.

Post written by Peter Bloch

Crop insurance for small-holders farms

Kay Chapman sent me this link to a recent article in The Economist; “Security for shillings” which observes that:

One of the things holding back agriculture in developing countries is the unwillingness of farmers with small plots of land to invest in better seed and fertiliser. Only half of Kenyan farmers buy improved seed or spend money on other inputs. Many use poor-quality seed kept from previous harvests. That is understandable when drought or deluge can destroy their crop, but it has the effect of reducing yields. A new microinsurance scheme promises to help.

Sebastian Derwisch    , a consultant to CAS-IP who works on our System Dynamics Modelling research project, commented that:

It is smart of seed companies like Syngenta that are operating in many African countries to step out of their core business and help farmers to manage their cash flow. Seed adoption rates of 5%- 30% in most Africans countries provide for some business opportunities but innovation needs to target the other 70%-95%. To start and expand business in developing countries, multinationals must realize that their customers work under very different conditions than their customers in Iowa or Switzerland. Ensuring that farmers won’t be hit as hard by crop failure is one way to enhance seed adoption and we hope to see other ways to improve crop yields for African farmers by ensuring that they use better inputs. This should happen in cooperation with the national and international public sector as well as national private sector companies.

Farmers in the West have access to a number of instruments designed to manage risk; futures trading (which guarantees a price at harvest) and crop insurance are two of the most important.  And the use of trade marks – and enforcement of these – is a factor that can help to protect farmers from buying counterfeit seed which does not perform.

The pilot crop insurance program was launched by the Syngenta Foundation for Sustainable Agriculture in Kenya, and enables farmers to use their cell phones (see recent post on cell phones) to register and insure seed and input purchases.  Although there are several other comparable programs, insuring any link in the agricultural value chain is problematic because high and varied risks and the size of most farms (<1 ha) make it difficult to built actuarial models.

Post written by Peter Bloch    , consultant to CAS-IP

Africa Seed Institute to be established in Nairobi

According to a soyatech press release:

Through AGRA’s $4.49 million grant over three years, Iowa State University’s (ISU) Seed Science Center, the University of Nairobi (UoN), the International Maize and Wheat Improvement Center (CIMMYT) and private business experts are establishing a Seed Enterprise Management Institute at the College of Agriculture and Veterinary Sciences in Kabete, Kenya.

ISU will contribute its considerable expertise in seed and seed related technologies, and its experience in developing seed policy and regulation.  Seed is considered by many to be a key to increasing agricultural output across Africa, and enabling the free movement of seed between countries – especially within regions – is of great importance.  Regulatory reform is on the front burner for initiatives like WASA, which is linking seed companies in India with seed companies in West Africa as part of an effort to expand crop and variety availability.

This AGRA investment promotes a triple bottom line:  technology transfer (from SSU and CIMMYT); capacity-building (in Kenya and further afield) and sustainability.

Post written by Peter Bloch, consultant to CAS-IP

Genetic markers for seed purity

ICRISAT, with the support of Irish Aid, is taking a comprehensive approach to seed sector development.  My recent post on Tanzania identified poor quality foundation seed as a significant factor in the supply chain.

Recently, I met ICRISAT Biotechnology scientist Santie de Villiers in Nairobi.  She is leading the development of a genetic fingerprinting initiative as part of the ICRISAT-Irish Aid Malawi project.  When she told me about her work, I asked her if she would write something for us.  This is what she sent (thanks, Santie!):

When crops are sold as seed, it is very difficult to differentiate seed from grain.  This is problematic since seed has  to be of high quality and genetically “true to type” to ensure that farmers achieve good yields. To test seed purity conventionally, seed samples are drawn from seed lots and grown out so that the morphological features of the plants can be compared against a set of descriptors. But this takes time and is expensive.

Alternatively, similar samples of seeds drawn from lots can be tested for purity by using a small set of molecular markers that can “genetically fingerprint” varieties. Such markers can be used directly on the seeds or on very small seedlings, and can therefore be applied at any time of the year. There is no need to grow plants to maturity to tell whether they are true to type. This method is not only quicker but also cheaper and can be done anywhere in the world where the appropriate technology exists. A farmer, breeder or seed company can send a few seeds to be analyzed for a small fee per sample and the results will be available within a few weeks, compared to a full growth season for conventional purity testing.

In a project funded by Irish Aid in Malawi, ICRISAT is now testing available molecular markers to determine which are suitable to use for genetic fingerprinting of groundnut and pigeon pea .  This will assist both breeders and seed regulatory agencies in ensuring that seed quality standards are maintained through maintenance breeding.

This is a modest intervention – relatively inexpensive, and launched in response to observed needs “on the ground”.  The outputs of this research are scaleable – the technology can easily be made available in other countries.  At this time of increased need to address food security with limited funding, this is one of several models which have been incubated by the ICRISAT-Irish Aid Malawi project.  I’ll be writing a post on a comparable software project in the near future. These are what I’d describe as smart investments in scaleable, need-driven interventions.

Post written by Peter Bloch, consultant to CAS-IP

Challenges for Tanzanian seed sector

As part of our ongoing market development support for ICRISAT’s seed sector mission in Africa, over the last week I met with public and private sector actors in the Tanzanian seed sector.  Building a viable private sector presents a number of challenges and the situation is quite complex. This is intended only as an overview. After 30 years in power, Julius Nyere’s socialist regime collapsed in 1997, and the market-driven economy is still in the process of evolution.  Under the socialists there was no private seed sector.  A parastatal seed company – Tanseed – had a monopoly on seed production and distribution in Tanzania.

The remains of the old structures can be seen in ASA – the Agricultural Seed Agency – a government agency which promotes itself as “The Source of High Quality Agricultural Seeds”.  ASA’s mission is:

To produce, process and market sufficient high quality agricultural seeds for the local and international farming communities by using modern management and appropriate technologies to enhance food security.

ASA is the sole source of public variety foundation seed.   There are failures, and our interviews revealed that:

• ASA’s foundation seed production is unable to meet demand;
• ASA’s certified seed production and marketing (which, according to ASA, is intended only to address orphan crops which are of no interest to the private sector) competes with the private sector;
• As a result of financial constraints, there is only limited public sector breeding in Tanzania, and no maintenance breeding; this has resulted in the loss of a number of valuable public lines.
• Foundation seed produced by ASA for both the public and private sector is of poor quality, which does not bode well for the future food security and economic development of Tanzania.

From left to right: Paul Nandila (Workshop Manager), Bob Shuma (Executive Director, TASTA) and Zawadieli Mrinji (ASA farm manager) examining maize foundation seed at the ASA farm in Arusha

Bob Shuma with ASA maize foundation seed; true to type on left, defective on right.

Bob Shuma, Executive Director of TASTA (Tanzanian Seed Trade Assn.) estimates that only 15% of seed planted in Tanzania is certified.

With a land area of 947,000 sq. km. and four quite different farming ecologies few roads are suitable for trucking. Of the 79,000 km of roadways, less than 7,000 km are paved.[1] This exacerbates an already fragile distribution chain for certified seed by increasing retail prices to the point at which many farmers cannot afford to buy.  Conventional financing is not an option; with a banking sector that is risk averse, does not understand farming, and with interest rates in the 20%-25% range, even a medium sized and profitable regional company such as East Africa Seed finances expansion from retained earnings.

Drought is yet another factor and explains why the private sector has been unable to meet demand from farmers for certified seed, and is one factor in ASA’s inability to meet private sector demand for foundation seed.  The government is now investing in the installation of irrigation systems for the ASA seed farms, and this should enable an increase in output. All of the seed companies interviewed seemed highly aware of the need to establish and maintain a strong brand identity to distinguish themselves from competitors who, for the most part, are selling identical product (foundation seed provided by ASA and AVRDC is available to all buyers). The options for developing unique branding strategies are, however, limited and the common focus is on quality and reliability.  The disparity between supply and demand – no seed company has been able to satisfy demand – explains why marketing is not a critical issue for the private seed sector. Bob Shuma observes that:

When Tanzania’s seed laboratory is finally accredited to ISTA and OECD it will stimulate the availability of new varieties, new crops and new lines and export opportunities will open up; unfortunately budgetary restraints have slowed this process.  With all of these constraints, what will attract local investors and entrepreneurs to invest in private sector seed activity?  And how can farmers access improved technologies?  These are challenges to be addressed by Tanzania, its partners and by the development community.

Many thanks to Bob Shuma for his invaluable assistance on this trip, and to TASTA and Wageningen International for their support.

Post written by Peter Bloch, consultant to CAS-IP

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[1] CIA Factbook; this data is at least five years old and paved roadway has probably increased by 20%.

Of groundnuts, watersheds and technology transfer

This week I spent three days on a farm owned by Nigel and Janey Leakey near Nakuru in Kenya’s Rift Valley.  They run a small company (Leldet) that grows and distributes certified seed, and the recent droughts led them to the conclusion that if they did not irrigate they would not be able to expand.  You can read about them at:

http://www.agra-alliance.org/content/story/detail/1035 (the last story on the page)

The topography of their farm and the surrounding land suggested that a small scale watershed management project might enable them – and the s/h farmers surrounding their farm – to store runoff for irrigation in the dry season.  With the support of ICRISAT, Sefia Jetha, an agronomy Masters candidate from HEPH-Condorcet University, is in the process of conducting a watershed study using techniques that were developed and used with great success in India. 

This followed on the heels of my visit to Malawi, where small seed growers had expressed concern as to how they would shell certified groundnut seed (this must be done with care, as broken seed will not germinate).  In all probability a mechanical groundnut sheller provided by ICRISAT and developed in India will be deployed.

And the WASA team has been working closely with several Indian seed companies to evaluate hybrids developed in India in collaboration with national agricultural research systems and local seed companies. If these prove successful, they can be released and then commercialized across the region as a result of the regional variety release system approved by ECOWAS.

Technology transfer between India and Africa is a happening thing, especially in the agricultural sector;  these are just three of many examples, and yesterday I heard about an upcoming forum on the subject:

EMRC Announces Inaugural Africa-India Economic Mission

EMRC promotes the development of Africa’s agricultural sector with Africa-India exchange .

http://www.africanexecutive.com/modules/magazine/articles.php?article=4953&magazine=265

The Economic Mission aims to foster partnerships between Africa and India in the sectors of Agricultural Research, Soil and Water Conservation and Management, Biofuels, Fresh Produce Management, Knowledge Parks, Seed Value Chain and Equipment.  

Post written by Peter Bloch, consultant to CAS-IP

CAS-IP submission to DoJ’s exploration of seed industry concentration

In August 2009, the US Department of Justice (DoJ), together with the US Department of Agriculture (USDA) announced a series of workshops intended to “explore competition and regulatory issues in the agriculture industry”. –  Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy – will enquire into agriculture and into the dairy, poultry and livestock industries.  One of several workshops that has been scheduled will take place in Iowa and address “…seed technology, vertical integration, market transparency and buyer power”.

These hearings will ask if mergers and acquisitions have reduced competition in the US seed industry.  While this enquiry is US centric, CAS-IP, in its role to assist the CGIAR and its constituency of resource-poor farmers, argues that the availability of seed to poor farmers is critical to current and future food security.  This is no longer a national issue, and the food security of developing nations is of great concern to the US and to other developed nations.  By way of example, at the July, 2009 L’Aquila Summit President Obama made a powerful statement of support for agricultural development in developing countries:

“We have committed to investing $20 billion in food security — agricultural development programs to help fight world hunger.  This is in addition to the emergency humanitarian aid that we provide.  And I should just note…we had agreed to $15 billion; we exceeded that mark and obtained an additional $5 billion of hard commitments.  We do not view this assistance as an end in itself.  We believe that the purpose of aid must be to create the conditions where it’s no longer needed — to help people become self-sufficient, provide for their families, and lift their standards of living.”

Based on 2006 revenues the ETC Group estimates that the top ten global seed companies control 47% of the global proprietary seed market.  Of the top 10, three are US based and control 40% of the global proprietary seed market.  Any reduction of competition within the US will impact agriculture and, potentially, food security in the developing world.  Our submission to the DoJ argues, therefore, that the investigation be expanded and reference the impacts of reduced competition and the concentration of IP ownership within the US seed industry on developing countries.

Over the last year, our System Dynamics Modeling team has been studying the seed sector in several African countries and prepared a case study of the seed sector in Malawi.  This analysis, which supports our contention that reduced competition may have negative impact on agriculture in developing countries, is an integral part of the CAS submission to DoJ.

With support from PIIPA, Pillsbury Law provided pro bono legal consultations on the preparation of the submission, which was delivered on December 31st.  The document can be downloaded at http://www.cas-ip.org/resources/publications/publications-impact-of-seed-company-competition-on-access/

The paper is authored by Guat Hong Teh, Sebastian Derwisch, Victoria Henson-Apollonio and Peter Bloch of the CGIAR Central Advisory Service on Intellectual Property (CAS-IP).  The authors would like to acknowledge the contributions of Donna O. Perdue of Pillsbury Winthrop Shaw Pittman LLP.

Post written by Peter Bloch, consultant to CAS-IP