94 | IAASTD Global Report Increasing consolidation of the private sector

The changing face of the seed industry. In the context of newly emerging IPR regimes and the development of biotechnology (e.g., identification, cloning and transferring of individual genes), a major theme of consoldiation in the agricultural plant biotechnology and seed industries has emerged (Pingali and Traxler, 2002; Pray et al., 2005). This consolidation significantly altered the course of germplasm management and marked a major shift in the relationship between the public and private sector.

     Consolidation of the industry began with mergers of family-owned seed companies by multinational chemical firms to capitalize on synergies between seeds and chemical inputs (Thayer, 2001; Falcon and Fowler, 2002). Consolidation in the seed industry had been ongoing since the 1970s, but the unprecedented concentration in the 1990s resulted in an extreme vertical integration of the seed and biotechnology industries (Hayenga, 1998). This was followed by a horizontal integration of agriculture and pharmaceuticals into life sciences companies.

     The first trend was driven by (1) the stagnation of the agrochemical sector; (2) the changing knowledge base and innovations in chemistry and biotechnology; and (3) the policy environment, such as the increased burden of regulations (Hayenga, 1998; Falcon and Fowler, 2002). Between 1995 and 1998, in the US alone, approximately 68 seed companies either were acquired by or entered into joint ventures with the top six multinational corporations (King, 2001). An analysis for thirty UPOV member-countries identified a high degree of concentration in the ownership of plant variety rights for six major crops at the national level in the developed world (Srinivasan, 2004). The area with the greatest concentration intensity in the past decades has been genetic transformation (Pray et al., 2005; Box 2-6). Liberalized foreign investment policies and multinational structure have allowed agribusiness companies to provide upstream research, with the local seed companies providing the crop varieties developed for specific geographical markets. For developing countries, this concentration has implications for (1) the structure and autonomy of their domestic seed industries; (2) their access to protected varieties; and (3) the use of important breeding technologies (Srinivasan, 2004).

     Recent research demonstrates that the effects of the increasing concentration of control over agricultural biotechnology has had mixed yield, economic, social and environmental effects in the United States, Argentina, South Africa, India and China (Fukuda-Parr, 2007), with the differences caused in part by differences in technology adopted, the structure of farming, the organization of seed markets and in the regulatory and institutional contexts. For instance, Emergent, the third largest cotton seed company in India was recently acquired by the US based Monsanto (ETC, 2005), yet India maintains substantial domestic seed company interests in GM technologies (Ramaswami and Pray, 2007). Agricultural liberalization in East Africa has led to an increase in the number of seed companies and varieties on the market but this has not led to an increase of maize yields or production per capita since the mid-1980s (De Groote et al., 2005).


     Today, the top 10 agribusiness companies (all based in Europe, the US or Japan) represent half of the world's commercial seed sales (ETC, 2005). These ten firms increased their control of biotechnology patents to over 50% in 2000 (Pray et al., 2005); indicating that instead of negotiating for the rights to a competitor's technology, it might be simpler, cheaper, or more advantageous to acquire the competitor outright. Currently, patents on the foundational transformation technologies for grains are held by only three firms: DuPont, Monsanto, and Syngenta (Brennan et al., 2005).

Implications of concentration. A relatively stable market share may encourage corporations to invest in R&D, both in terms of current profitability and a reasonable expectation of future profitability. However, recent analysis suggests that we are seeing the beginning of negative impacts on innovation and competition through increased concentration within the private sector (Brennan et al., 2005). The major concerns are (1) industrial concentration reduces the amount and the productivity of research because R&D expenditures are consolidated and narrowly focused; (2) concentrated markets create barriers to new firms and quell creative startups; (3) concentration allows large firms to gain substantial monopolistic power over the food industry, making food supply chains vulnerable to market maneuvers (see 2.3.3; Pray et al., 2005). For instance, a recent USDA study suggests that consolidation in the private seed industry over the past decade dampened the intensity of research undertaken on maize, cotton, and soybeans crop biotechnology (Fernandez-Cornejo and Schimmelpfennig, 2004). This raises concerns that decreasing levels of research activity would stunt agricultural innovations, and brings into question whether large biotech firms can be relied on to conduct research with an eye on the public good as well as their own profit margins (Pray et al., 2005). There is additional concern that the anticompetitive impacts of concentration have led to higher seed prices. USDA data suggest that cotton seed prices in the US have increased 3-4 times since the introduction of GM cotton and that GM fees have substantially raised the price of cotton seed in developing nations, such as India (Iowa State Univ., 2007).

The dilemma of the public sector. The establishment and strengthening of IPR in agriculture has contributed to a shift in emphasis from public to private breeding (Moschini and Lapan, 1997; Gray et al., 1999). The public research sector is increasingly restricted because fragmented ownership of IPR creates a situation wherein no comprehensive set of IPR rights can be amassed for particular crops. In 2003, the Public-Sector Intellectual Property Resource for Agriculture (PIPRA) regime was introduced by several US universities in collaboration with Rockefeller and McKnight Foundations with the goal of creating a collective public IP asset database. This collective management regime would allow public sector institutions to retain rights to use the newest and best technologies of agricultural biotechnology for the public good when they issue commercial licenses (Atkinson et al., 2003).

     These creative IPR management regimes are needed for the public sector because many public breeding programs