Patents, Profits, and the Transformation of the Seed Business

Written By: Stefanie Schneider

The two most dominant crops in American agriculture are soybeans and corn. Together they cover more acreage in this country than all other crops combined. The U.S. produces over fifteen billion dollars’ worth of soybeans, and over twenty billion dollars of corn each year.

Both crops are extensively used as animal feed, but they are also pervasive in processed foods. Derivatives of soybeans and corn can be found in the majority of processed food products; everything from bread and pasta, sauces and frozen pizzas, to chocolate and ice cream.

One notable distinction between these two powerhouse crops is the practice of seed saving. Soybean seeds retain roughly their same vigor year after year. This is why the seed business had always been a low profit venture. Farmers don’t need to buy as many seeds if they can save some from their crop each year.

Corn is different. Corn loses its vigor in the next generation so farmers have to buy new corn seed every year just to keep their yields high. It’s not clear why inter-breeding two weak purebred lines produces a noticeably robust and vigorous offspring, but it does.

Expanding knowledge about the increased vigor of hybrid corn seed gave the seed business its first big boost. Foundation corn is the parent seed from which hybrid varieties are made from and therefore essential to developing new varieties of corn.

Prior to the 1920s the Department of Agriculture was the primary funder of hybrid research. Farmers still had to buy corn seed every year, but advances in corn hybridization was creating crops with greater yields and bigger profits.

When the United States Supreme Court ruled in 1980 in favor of awarding a patent for a microorganism – the first time a patent was awarded to a living organism, the seed business got its next big boost. The decision; Diamond V Chakrabarty, opened the door for corporations to own the very building blocks of our food supply.

As the seed business became a more profitable venture thanks to genetic engineering and patents, corporations previously focused on chemicals and pharmaceuticals began investing in agricultural biotechnology. Dow, DuPont, and Monsanto, three of the top chemical companies in the United States, all formed biotechnology divisions and had products on the market before the end of the 1990s.

The story was pretty much the same in the European Union. Mergers and acquisitions swept through the industry. Within a decade a majority of the seed business had been consolidated into a handful of giant multinational corporations.

No corporation pursued the potential profits of agricultural biotechnology with more zest than Monsanto. With such notable chemical products as saccharin (Nutrasweet), polycholorinated biphenals (PCBs), and Agent Orange in their product portfolio, executives at Monsanto began transforming the company from a chemical giant to a giant in agricultural biotechnology. Their goal was to become the Microsoft of the industry. Their strategy was to fund research in genetic engineering, pursue patents, and acquire seed companies.

In their initial spending spree Monsanto acquired a significant minority stake in DeKalb Genetics, the second largest corn seed company in North America at the time. Then they purchased Calgene, a California company known for developing the first genetically modified tomato before becoming a leader in oilseed technology. Asgrow Agronomics, a major soybean seed supplier, was also acquired.

Then in 1996 executives at Monsanto made a move demonstrating just how serious they were about agricultural biotechnology; they sold their chemical division for three billion dollars. The sale allowed Monsanto to continue their spending spree.

Holden’s Foundation Seeds was one of the largest foundation corn seed suppliers in North America when Monsanto paid just over a billion dollars for it in 1997. Suddenly Monsanto was the biggest producer of foundation corn seed in the United States. They also had an impressive portfolio of patents to wave in front of their competitors.

Monsanto’s rise to the top of the agricultural biotechnology industry was facilitated by patent law, but it was also fueled by billions of dollars and faced little opposition from regulators. Success has also been possible because most Americans don’t know they’re consuming genetically modified food.

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